CYIL vol. 14 (2023)

CYIL 14 (2023) ASSET FREEZING IN INVESTMENT ARBITRATION: LESSONS LEARNED … of monetary compensation. 16 So far, the legislative proposals are at early stages of drafting. As their discussions revealed, the path towards confiscation will be most likely paved through the expansion of the list of EU crimes rather than any alternative avenue. 17 3. Expropriatory claims against freezing and seizure orders By virtue of their nominally temporary nature, freezing and seizing orders are not traditionally qualified as measures tantamount to direct expropriation as they do not entail immediate transfer of a formal legal title to assets but instead interfere in their use and enjoyment without taking over physical control. Since such decisions belong to indispensable tools in the fight against organized crime, their review in investment arbitration remains highly limited. Respecting the sovereign prerogative of States to prosecute criminal offences committed in their territory, 18 arbitrators tend to adopt cautious approach in relation to damages claims brought by investors for similar interferences with their property rights. Where freezing and seizure of assets are well founded in criminal proceedings, such actions generally fall within the category of police powers of States 19 and are perceived as a standard response in compliance with international obligations under the applicable IIAs. As the tribunal in the unpublished Seventhsun and others award made clear, in the absence of any evidence on mistreatment by local authorities in the form of arbitrary, discriminatory or unfair prosecution, freezing and seizure of assets, which affected the claimants’ ownership of shares in Polish steelworks in this case, could not amount to any breach of the respective bilateral investment treaty (“BIT”). 20 In the event of procedural irregularities when tribunals refuse to defer completely to actions of local authorities in criminal investigations, the analysis of expropriatory effects of freezing and seizure orders focuses on three critical aspects, namely the degree of interference with disposal rights, duration of the measures, and their proportionality. Although the arbitral practice is scarce, there seems to be a growing consensus that the provisional character of such acts does not exclude them automatically from within the ambits of expropriation clauses. 16 European Commission, Proposal for a Directive of the European Parliament and the Council on asset recovery and confiscation, COM/2022/245 final, Doc. No. 52022PC0245, 25 May 2022. 17 European Commission, Proposal for a Council decision on adding the violation of Union restrictive measures to the areas of crime laid down in Article 83(1) of the Treaty on the Functioning of the European Union, COM/2022/247 final, Doc. No. 52022PC0247, 25 May 2022. 18 STOYANOV, M., EYSKENS, W., BOURGEOIS, V. and FERNANDEZ-BERTIER, M. (2018). Procedural interplay between investment arbitration and criminal proceedings in the context of corruption allegations. Belgian Review of Arbitration , Vol. 2018, No. 1, 7, p. 25; GOH, N. (2018). The Power of Tribunals to Enjoin Criminal Proceedings: A Widening Power or Converging High Bar?: Italba Corporation v Oriental Republic of Uruguay Hydro Srl and others v Republic of Albania Teinver and others v Argentine Republic. ICSID Review – Foreign Investment Law Journal , Vol. 33, No. 1, 88, p. 98; UILENBROEK, L. (2020). The power of investment tribunals to enjoin domestic criminal proceedings. Arbitration International , Vol. 36, No. 3, 323, p. 329. 19 For the exercise of police powers in criminal proceedings, see OBERSTEINER, T. (2020). Provisional Measures under ICSID Rules: The Power of Tribunals to Interfere with Domestic Criminal Proceedings. Journal of International Arbitration , Vol. 37, No. 5, 607, p. 617. 20 HEPBURN, J. (2016). Sekolec-chaired tribunal sees no investment treaty breach in relation to seizure of investor shares during criminal proceedings. IA Reporter , 2 August 2016, available at: .

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