Unexpected Consequences of Investment Treaties in Times of War

This research paper examines how outdated bilateral investment treaties (BITs), specifically the 1989 Belgium-Luxembourg (BLEU)–USSR treaty, are being used by Russian actors to challenge the European Union's financial support for Ukraine. It highlights the risk of investor-state dispute settlement (ISDS) claims against Belgium, which hosts Euroclear where immobilized Russian Central Bank assets are held, and argues that such treaties create a 'regulatory chill' that undermines collective security responses to aggression.

• The European Union's plan to provide a EUR 140 billion support loan to Ukraine, backed by immobilized Russian Central Bank assets, is being hindered by Belgium's fear of arbitration claims under the 1989 Belgium-Luxembourg (BLEU)–USSR bilateral investment treaty (BIT).
• Belgium is a primary target for arbitration because Euroclear, an international central securities depository located in Brussels, holds approximately EUR 185 billion in Russian Central Bank holdings, including EUR 176 billion in cash.
• 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, making it vulnerable to misuse in current security contexts.
• There is a growing trend of sanctions-related ISDS claims by Russian and Belarusian entities, with over two dozen known cases or threats involving billions of USD in claimed amounts, leading to a 'regulatory chill' where governments hesitate to take decisive action against aggression.
• 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 such as 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 enforcement of sanctions-related ISDS awards, the EU's 18th Russia sanctions package (July 2025) and new Swiss legislation aim to block the recognition and enforcement of judgments that undermine sanctions effectiveness.

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} }