Unexpected Consequences of Investment Treaties in Times of War

The research paper examines how the 1989 Belgium-Luxembourg (BLEU)–USSR bilateral investment treaty (BIT) is being used as a legal threat to prevent Belgium from supporting an EU plan to back a EUR 140 billion Ukraine loan with immobilized Russian Central Bank assets. It highlights a broader trend of 'regulatory chill' where Russian entities use investor-state dispute settlement (ISDS) claims to challenge sanctions. The author argues for the modernization of investment treaties and the implementation of domestic legal blocks to prevent the enforcement of arbitration awards that contradict international sanctions regimes.

• Belgium is currently withholding support for an EU proposal to use immobilized Russian Central Bank assets as collateral for a EUR 140 billion loan to Ukraine due to the risk of arbitration claims under the 1989 Belgium-Luxembourg (BLEU)–USSR bilateral investment treaty (BIT).
• Approximately EUR 185 billion in Russian Central Bank holdings, including EUR 176 billion in cash, are immobilized at Euroclear in Brussels, making Belgium the primary target for BIT arbitration claims as the host of the institution.
• The BLEU–Russia BIT lacks an explicit security exception that would allow parties to justify measures taken in response to armed conflict or threats to international peace and security.
• There is a growing trend of 'regulatory chill' where Russian and Belarusian entities use ISDS claims in BITs and the Energy Charter Treaty (ECT) to challenge sanctions; over two dozen such cases or threats exist, with claimed amounts reaching billions of USD.
• Sanctions-related ISDS claims generally fall into two categories: those challenging the freezing of private financial assets (including listing on sanctions lists) and those targeting broader economic measures like windfall taxes on energy producers or export restrictions.
• A significant legal ambiguity exists regarding whether state entities, such as the Russian Central Bank, can qualify as 'investors' under BITs to launch ISDS claims, as ICSID rules typically exclude state entities but other arbitration rules are less clear.
• To counter the misuse of investment treaties, the EU's 18th Russia sanctions package (July 2024) and new Swiss legislation aim to block the recognition and enforcement of awards from Russia-related disputes that undermine sanctions.

APA

Bernasconi-Osterwalder,, L. S. B. (2025). Unexpected Consequences of Investment Treaties in Times of War. International Institute for Sustainable Development. https://www.iisd.org/articles/deep-dive/investment-treaties-times-of-war-russia-ukraine

Chicago

Bernasconi-Osterwalder,, Lukas Schaugg,Isaak Bowers,Nathalie. Unexpected Consequences of Investment Treaties in Times of War. International Institute for Sustainable Development, 2025. https://www.iisd.org/articles/deep-dive/investment-treaties-times-of-war-russia-ukraine.

Wikipedia

{{cite report |last1=Bernasconi-Osterwalder, |first1=Lukas Schaugg,Isaak Bowers,Nathalie |title=Unexpected Consequences of Investment Treaties in Times of War |publisher=International Institute for Sustainable Development |date=3 December 2025 |url=https://www.iisd.org/articles/deep-dive/investment-treaties-times-of-war-russia-ukraine |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bernasconiosterwalder2025unexpected, author = {Bernasconi-Osterwalder,, Lukas Schaugg,Isaak Bowers,Nathalie}, title = {{Unexpected Consequences of Investment Treaties in Times of War}}, institution = {International Institute for Sustainable Development}, year = {2025}, month = dec, url = {https://www.iisd.org/articles/deep-dive/investment-treaties-times-of-war-russia-ukraine}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }