The Russia – Ukraine Conflict in Foreign Investment Ecosystem


Bahadır Biçer

Legal Counsel at Arma Group and LL.M. Student at Xiamen University

[email protected]

Before the Russia-Ukraine War ended, countries began to impose economic sanctions on each other. These sanctions include non-transactions with opposing banks, freezing or confiscation of foreign investor assets in the host countries. World leaders says more than $300 billion valued assets held by the Russian central bank should be seized and given to Ukraine to aid in its reconstruction.

However, top officials in the Biden administration issued a warning that diverting those funds might be against the law and prevent foreign investors from using the United States as a haven for investment [1] but even so the most serious restrictions seem to be between the Russian Federation and the United States of America. The American companies leaved from Russia because of the war and it is not only freezing assets for them but includes seizure activities. After many companies, particularly retailers and manufacturers like McDonalds, Coke, P&G and IBM have decided to stop their operations temporarily due to labor and supply chain difficulties created by the war and some companies have committed to leave completely from Russia. As it is said that Russian prosecutors threaten to arrest foreign investors and confiscate properties [2]. Following these events, the United States announced that new investments in Russia and the provision of certain services were prohibited that is inconsistent with the principle of freedom of investment.

On the protection of foreign investment, it is a well-known fact that enforcement in international law is difficult. In particular, the political decisions that shape this field have pushed the actors to make some commitments we must trust. One of them is international investment agreements are designed to reduce political risks. Thus, the investor conducts investments on a legal basis rather than a political one. So, the country pairs under economic sanctions can be divided into two as those with valid international investment agreement (IIA) and those without.

There is an IIA between the Russian Federation and the United States of America signed in 1992, but still not in force that we can only understand their intentions from it. According to that, investment shall always be accorded fair and equitable treatment, shall enjoy full protection and security, and shall in no case be accorded treatment inconsistent with the norms and principles of international law. Furthermore, the Article 11 of the Federal Law on Foreign Investments of the Russian Federation guarantees to transfer earnings, profit and other lawfully gained funds out of the territory of the Russian Federation. Furthermore, considering the freedom of investment, all retaliatory activities of Russia seem to be against the law. The Russian Government seems to have ignored them.

The other interesting topic is about the International Monetary Fund (IMF). When looking at the Ukrainian side, its request for emergency financing is still supported by the IMF. However, activities of Russia in Ukraine do not breach Russia’s obligations under the agreement of IMF. In these circumstances, Russia is free to withdraw the entire $5 billion reserve tranche it has with the IMF. Reports reflect that over 1,400 Russian individuals and entities’ properties were frozen even in the United Kingdom alone and Russian investors started to file lawsuits in some host countries like Germany for seizure. Although it is thought that Russia may demand the reserve to reduce the burden of economic sanctions, it may be more comfortable economically than is thought. For example, Russia does not currently demand payment for the gas it sells to Turkey.

While the severity of the sanctions gradually increased, freezing activities began to give way to expropriation activities. Countries seem to be using war as an excuse to seize each other's property. If the legal side is examined, there is no final judicial decision yet. The number of investment disputes brought to the judiciary or arbitration in the future seems to be quite high. There are many investors who have not started the legal processes yet. For Example, ExxonMobil claims it is reserving the right to take Russia to arbitration for "expropriating" its interest in a multibillion-dollar oil and gas project [3].

An important issue here is who owns the assets to be sanctioned. A distinction should be made between public goods and individual goods. Needless to say, countries do not freeze or confiscate all Russian citizens' goods abroad. However, for individual investors or asset owners whose property has been freezed or confiscated, it is necessary to definitively prove that they are related to the conflicts in Ukraine to withstand the arguments of international security clause of bilateral investment agreements or domestic investment rules. It seems that countries should end these sanctions quickly and seek solutions in different ways, otherwise the level of insecurity in the foreign investment environment will continue to increase.

1 Alan Rappeport & David E. Sanger, (31.05.2022), Seizing Russian Assets to Help Ukraine Sets Off White House Debate, The New York Times, < assets.html >

2 Jennifer Maloney & Emily Glazer & Heather Haddon, (14.03.2022), Russian Prosecutors Warn Western Companies of Arrests, Asset Seizures, The Wall Street Journal, < prosecutors-warn-western-companies-of-arrests-asset-seizures-11647206193 >

3 Jack Ballantyne, (02.11.2022), Will Exxon bring a claim against Russia? Global Arbitration Review, < >


  • Ballantyne, Jack. (02.11.2022). Will Exxon bring a claim against Russia? Global Arbitration Review. <
  • Maloney, Jennifer & Emily Glazer & Heather Haddon. (14.03.2022). Russian Prosecutors Warn Western Companies of Arrests, Asset Seizures. The Wall Street Journal. < prosecutors-warn-western-companies-of-arrests-asset-seizures-11647206193
  • Rappeport, Alan & David E. Sanger. (31.05.2022). Seizing Russian Assets to Help Ukraine Sets Off White House Debate. The New York Times. < central-bank-assets.html

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