Article: Collateral Damage Through Sanctions: The Role of ISDS for Third Party Investors Impacted by EU Sanctions Against Russia

The EU is considered the most active international organization in terms of sanctions. Since the start of the Russian aggression against Ukraine in 2014 alone, the EU has enacted twelve sanction packages targeting the economies of Russia and Belarus in specific sectors and established a list of over 1900 (As of January 2024, see https://eu-solidarity-ukraine.ec.europa.eu/eu-sanctions-against-russia-following-invasion-ukraine/sanctions-against-individuals-compa nies-and-organisations_en.) individuals and companies subject to assets freezes and travel bans. While those sanctions are targeted and specific, they nevertheless have an effect outside of Russia, due to their vast impact on important economic sectors, import and export and commodity pricing. To put it bluntly, it is virtually impossible to prevent a spillover effect beyond the Russian borders in times of a globalized, interconnected economic reality. The current sanction regime is not only widely impactful, but also a legal curiosity. EU sanctions are not ordinary countermeasures under public international law. They are coordinated acts by a group of States replying to the unlawful conduct of another State against a third. There is no connection strictu sensu between the EU and Russia’s aggression against Ukraine. These two particularities – the wide and partially unwanted effects of EU sanctions and their legal uncertainties – give rise to the question: Is there a way to check, balance and mitigate the impact of EU sanctions for those who find themselves to be ‘collateral damage’ thereof? This article argues that investment arbitration can answer this question in the positive. For this purpose, the article will first examine the effects of EU sanctions on non- Russian investors. Consequently, it will analyze the legal nature of EU sanctions under public international law, before turning to the role of investment arbitration and specifically the principle of proportionality to show how investment arbitration may mitigate unwanted results of EU sanctions without diminishing the desired effects of the regime.