When Russia seized the Crimean Peninsula and other Ukrainian territory in 2014, Ukraine initiated a variety of international legal challenges against Russia in different fora in what Ukraine has called its “Lawfare Project.”Footnote 1 Ukraine’s terminology comes from a twenty-first-century body of thought by scholars, military strategists, and practitioners as to whether and how international law can be used as a weapon of war.Footnote 2 The repurposing of international dispute settlement mechanisms for national security interests is not new, but Ukraine’s inclusion of international investment law as an instrument of lawfare is.
Contemporary international economic law and institutions that are designed to protect foreign investors’ property rights were predicated on an unspoken but crucial assumption: The era of territorial conquest is over. Yet, interstate war has broken out between two states that are bound by treaty obligations to protect each other’s investors via the Ukraine-Russia Bilateral Investment Treaty (BIT). Even though international law still recognizes Ukraine’s sovereignty over Crimea, previously domestic Ukrainian firms in Crimea became internationalized overnight once Russia gained de facto control. Since 2014, private Ukrainian investors and the Ukrainian state via its state-owned enterprises have invoked the BIT to sue Russia for property rights infringement, a “lawfare” strategy that has led to dozens of arbitrations and amassed billions of dollars in binding legal awards to date. In this article, we examine the aftermath of Ukraine’s use of international investment law during wartime and ask whether adjudicating investment disputes while fighting is a viable strategy. After myriad complications of a decade of adjudicating while fighting, Ukraine has moved to unilaterally withdraw from the BIT effective in 2025, although a 10-year sunset clause will continue its relevance. In short, Ukraine appears to have dropped investment disputes as part of its lawfare toolkit.
The implications stretch far beyond Ukraine and Russia. During an active interstate war between treaty signatories, arbitration panels created to hear disputes have been walking a legal tightrope in ruling on damages to property while sidestepping issues of sovereignty. Arbitrators’ willingness to rule on these cases has overturned the principle of leaving decisions over reparations and compensation for wartime damage until after the violence ends. Ongoing wartime legal machinations are generating a series of consequences pertinent to scholars of international relations on both the economic and security sides, as well as scholars of comparative politics and public law concerned with war, peace, and the durability of institutional solutions to political problems. For one, the continuity of contemporary international economic law during wartime is up for debate, given both a deeply integrated global economy and the increasing prevalence of interstate war. Not just states but also investors might reasonably question whether embedding foreign investors’ property rights protections in international treaties is a preferrable means of solving time-inconsistency problems. When relations between would-be home and host states are volatile, why would states commit to institutions that insulate each other’s commercial actors from that volatility? The contemporary international investment treaty regime, consisting of some 2,600 active BITs and other international investment agreements (IIAs), is already controversial. The wartime operation of the Ukraine-Russia BIT amounts to a high-speed version of the unraveling of the contemporary treaty-based regime in a deglobalizing world.Footnote 3
Unfortunately, the wartime operation of the Ukraine-Russia BIT is of even wider scholarly and public interest, because investment arbitration during armed conflict could easily occur between other states. International Relations scholars keep track of militarized interstate disputes (MIDs), which are active militarized conflicts between states that have not risen to full-scale war (Maoz et al., Reference Maoz2019).Footnote 4 Since 2014, Russia has had a MID and a BIT with 13 states in addition to Ukraine.Footnote 5 Additionally, China has a MID and a BIT with five statesFootnote 6; Iran has a MID and a BIT with three statesFootnote 7; and there are six other dyads with a MID and BIT.Footnote 8 We hope that the treaty-based investment arbitrations between Ukrainian and Russian actors are the only ones ever between warring states, but others may very well materialize.
In what follows, we explore what has come to be known as the “Crimea cases,” the dozens of investment arbitrations brought by Ukrainian investors in the Investor-State Dispute Settlement (ISDS) process enabled by the Ukraine-Russia BIT, as well as the growing slate of post-Crimea cases that have emerged around Russia’s 2022 full-scale invasion of Ukraine. We contextualize these cases with primary source documents from both Russia and Ukraine and analysis from both legal and political science scholars. Among the myriad consequences of the Crimea cases, we highlight two. First, these cases have elevated Ukrainian domestic politics to the interstate stage, making domestic public–private tensions consequential for issues of international security and economic integration. Second, we explain how the symmetry inherent in treaty-based investment protections means that Russian interests, too, are filing “lawfare” cases against Ukraine under the BIT. The turmoil is so consequential that in 2023 Ukraine moved to unilaterally withdraw from the BIT. We then broach larger questions of what this case study in progress means for legalized economic integration, as well as a variety of literatures on institutional design, compliance, investor behavior, lawfare, and more.Footnote 9
The Contemporary Investment Treaty Regime
The Ukraine-Russia Bilateral Investment Treaty (BIT) is one of thousands of international investment agreements (IIAs) (Arias, Hollyer, and Rosendorff Reference Arias, Hollyer and Rosendorff2018; Bonnitcha, Poulsen, and Waibel Reference Bonnitcha, Poulsen and Waibel2017). A large body of scholarship documents how BITs skyrocketed in popularity in the 1990s as they became more than just a solution to time-inconsistency problems between foreign investors and host states and instead came to be seen the “global standard governing foreign investment” (Jandhyala, Henisz, and Mansfield Reference Jandhyala, Henisz and Mansfield2011, 1047). Signing them has been de rigueur whenever states were interested in deepening economic relations; indeed, many BIT texts are based on templates and have copy-and-paste qualities (Alschner and Skougarevskiy Reference Alschner and Skougarevskiy2016; Poulsen Reference Poulsen2015). The number of treaties approached three thousand at its peak in the 2010s, but the controversial system has seen increasing numbers of renegotiations and withdrawals, leaving around 2,600 active IIAs today (Huikuri Reference Huikuri2023; Thompson, Brouder, and Haftel Reference Thompson, Broude and Haftel2019).
Key to the controversy around contemporary investment treaties is Investor-State Dispute Settlement (ISDS), the system by which foreign investors alleging treaty violations have standing to sue the contracting host state for monetary compensation (Moehlecke and Wellhausen Reference Moehlecke and Wellhausen2022). Ad hoc three-person tribunals adjudicate disputes without a substantive appeals system, and arbitrators have considerable autonomy owing to the ambiguity of treaty language and the absence of binding precedent. Under international law, investors who win an award can pursue enforcement and recovery of sovereign host-state assets in a wide variety of domestic courts worldwide on their own initiative and on timelines determined by each tribunal. Because these processes are established in interstate treaties that give standing to investors, the state parties to the treaties have little recourse to limit investors’ use of ISDS when investors’ choices conflict with state interests.
Moreover, the dominant scholarly view has been that investment treaties apply in wartime.Footnote 10 In his book on the topic, Zrilič (Reference Zrilič2019) thoroughly examines treaty texts and documents only one clause stating that the treaty is suspended during wartime: It is in the Germany-Papua New Guinea BIT signed in 1980.Footnote 11 But the difficulties of enforcing investment law during peacetime become magnified during interstate conflict. If territorial jurisdictions are known and unchanging, it is straightforward to identify which property is foreign owned and which is not, and institutions designed to protect foreign property rights are easily overlaid on this stable foundation. However, since 2014 the Ukraine-Russia BIT has been appealed to and applied in a very different situation, in which interstate territorial war has broken out between the signatory states.
The Case of the Ukraine-Russia BIT
The Ukrainian and Russian economies have long been interdependent and both countries embraced integration into the global economy after the Cold War. Immediately after the dissolution of the Soviet Union a series of treaties created a legal foundation for the continuation and extension of their economic relationship. Those treaties were updated in the 1998 Ukraine-Russia BIT, which per its preamble seeks to “develop the basic provisions” established in a previous bilateral agreement signed in 1993 and intends to promote bilateral investment activity.Footnote 12
The diplomatic history around the Ukraine-Russia BIT negotiations has not been recorded, but the BIT is quite like the hundreds of other BITs enacted around the same time. The protections afforded to investors in the Ukraine-Russia BIT are typical of BITs; namely, expropriation, national treatment, most-favored nation treatment, and equal protection.Footnote 13 Its ISDS provisions are also typical: The BIT affords aggrieved investors from one state standing to file for investment arbitration against the other state in pursuit of compensation for violations of treaty protections. The investor must notify the host state where the investment is located, in writing, of its intention to file. In the subsequent six months, the parties are expected to “exert their best efforts” to negotiate a settlement.Footnote 14 Should they fail, the investor can pursue arbitration against the state at any of the fora outlined in the treaty.Footnote 15 A resulting arbitration award “shall be final and binding upon both parties.” Additionally, as is typical in investment treaties, investors with rights under the BIT can be natural persons or legal entities, including state-owned enterprises (SOEs).Footnote 16
Without any language to the contrary, the Ukraine-Russia BIT does not exempt state parties during war or include special provisions for the treaty’s operation in case of war.Footnote 17 Nor does the Ukraine-Russia BIT foresee the contestation of territory. The mention of “territory” applies the Ukraine-Russia BIT to investments “on the territory” of one of the contracting states, without more precise delineation.Footnote 18 Ad hoc tribunals applying the BIT text have therefore had to walk a fine line between the principles of investment protection and international law concerning sovereignty and nonrecognition. In very broad strokes, the various tribunals’ legal reasoning to date follows the logic that “an investment treaty is…able to be interpreted as to also apply to foreign territory under effective and relatively stable control by a State Party,” but absent international recognition, the occupying state “merely administers” BIT obligations (Ackermann Reference Ackermann, Gómez, Gourgourinis and Titi2019, 88, 76). Although again, because tribunals make ad hoc decisions and are not bound by precedent, it remains possible that interpretations of “territory” could differ in other cases involving Ukraine and Russia or, indeed, in another situation in which investments in contested territory between IIA signatories are at stake.
The Ukraine-Russia BIT’s lack of precision is unsurprising because, like other treaties of its time, the Ukraine-Russia BIT is short: In English, it runs around 2,300 words. To compare, the 2012 US Model BIT is more than 14,000 words. Such short treaties are notoriously ambiguous and incomplete. By design, they depend on arbitrators to adjudicate disputes in line with the overall goals of the treaty, which here are protecting investment and not specifically national security or the conduct of war. Legal scholars have taken up this issue, and a growing number argue that arbitral tribunals should incorporate international humanitarian law and other relevant international law in their decision making (e.g. Ackermann and Wuschka Reference Ackermann and Wuschka2023; Schreuer Reference Schreuer, Gómez, Gourgourinis and Titi2019, fn. 6; Zrilič Reference Zrilič2019, 40–47). In general, arbitrators with jurisdiction via the Ukraine-Russia BIT face a difficult task: They must interpret its vague definitions and commitments considering the peacetime intentions of the two states that are now in an active war.
Ukraine and Russia are both sophisticated users of international investment law, meaning that they and their investors are well positioned to leverage the Ukraine-Russia BIT. Each state has more than 60 IIAs in force. Russian and Ukrainian investors are among the most prolific users of ISDS, each ranking in the top 20 most-common claimant nationalities. Both countries are also in the top 15 most-common respondent states.Footnote 19 Russia has positioned itself as a champion of the status quo system.Footnote 20 And yet, it is widely viewed as the most persistent noncomplier when it loses in ISDS arbitration, with outstanding arbitral awards amounting to billions of dollars owed to investors and subject to scores of enforcement hearings around the world. Today, Ukraine’s reputation for compliance is strong, having complied in recent years with adverse awards to investors from Austria, the United States, the Netherlands, and Germany—although two adverse awards involving Russian-linked claimants, rendered before Russian aggression began, remain unresolved.Footnote 21
Adjudicating while Fighting
Here, we investigate the wartime operation of the Ukraine-Russia BIT and the progression of ISDS cases since the 2014 Russian occupation of Crimea and through mid-2024. As we show, over time and especially since the full-scale Russian invasion of Ukraine beginning on February 24, 2022, both Russia and Ukraine’s attitudes toward the BIT and ISDS have changed. After avoiding involvement in them, Russia has become an active participant in the Crimea cases since 2019, and Russian investors are also taking advantage of the BIT’s symmetry by filing cases against Ukraine. Ukraine’s attitudes have changed so much that it has rethought ISDS as part of its lawfare strategy and in 2023 Ukraine moved to unilaterally withdraw from the BIT (see the appendix for a fuller timeline of events and key nonacademic sources for news reporting and legal analysis).
Our portrayal of these cases highlights two sets of consequences that have emerged from the changing constellation of interests. The shared state and commercial interests that encouraged the 1998 Ukraine-Russia BIT have fallen out of alignment, to say the least. First, because treaty-based ISDS gives MNCs standing to pursue binding arbitration on their own timeline and without the involvement of state signatories to the treaty, ISDS as an international institution has elevated domestic politics to the international stage in ways that complicate war efforts. Second, each of the Ukrainian and Russian states has incorporated property rights issues concerning various commercial enterprises into its conduct of the war. The BIT’s symmetrical application allows ISDS by both sides, and Russia’s embrace of ISDS tactics has led Ukraine to reconsider it as a weapon. Ukraine’s experience may also lead Western states that have long championed ISDS to reconsider it as well.
As summarized in table 1, at least 51 Ukrainian investors have used the Ukraine-Russia BIT to sue Russia for compensation for expropriation of their property in Crimea since the Russian-controlled Republic of Crimea government canceled Ukrainian-granted property rights as of February 2014.Footnote 22 A swath of cases was filed quickly in 2015. The investments at stake in the various cases are immobile, meaning that their assets are locked into the territorial jurisdiction of Crimea and thus readily exposed to expropriation by the new government.Footnote 23 In fact, Russia tried unsuccessfully to prevent Ukrainian actors’ claims with a plan to force its passports on all residents of Crimea (Olmos Giuponni Reference Olmos Giupponi, Gómez, Gourgourinis and Titi2019). The Ukrainian government celebrated pro-investor jurisdiction rulings in the early cases and it called “on all companies that have lost their property in Crimea to actively fight for compensation for losses.”Footnote 24 Moreover, the Ukrainian state directly filed cases through its SOEs. Rulings to date have favored Ukrainian investors, and the Russian state owes billions of dollars in binding arbitral awards to investors, with USD 150 million enforced and myriad enforcement procedures ongoing regarding other binding awards at the time of writing. Several cases are still pending.
Table 1 Crimea Cases
Notes: As of March 2024. (K) = case involving Kolomoisky. (A) = case involving Akhmetov. * = award enforced; all other awards unpaid. All cases adjudicated at the Permanent Court of Arbitration (PCA) and brought under the Ukraine-Russia BIT. Jurisdiction upheld in all cases. See appendix for timeline and detail on sources.
The Problem of Commercial Actors as Wartime Decision Makers
As the Crimea cases have unfolded, cases filed by private Ukrainian claimants have become a burr in the side of the Zelensky government—specifically, the 2015 cases filed by investors linked to a then-pivotal, now-ostracized Ukrainian oligarch Ihor Kolomoisky. Kolomoisky was a top oligarch who played a key role in Zelensky’s rise as the owner of the television station that aired Zelensky’s hit show and as his key financial backer in his election campaign against the incumbent Poroshenko, with whom Kolomoisky had fallen out.Footnote 25 However, starting in late 2021, Kolomoisky himself fell out of favor with the Zelensky government. He was stripped of Ukrainian citizenship (July 2022), had the bulk of his Ukrainian assets nationalized (November 2022), and became the subject of active Ukrainian criminal investigations, including a headline-grabbing raid on his home (February 2023) and detention (September 2023). Prosecutions of Kolomoisky for fraud are ongoing not only in Ukraine but also in the United States, Cyprus, and the United Kingdom, the last of which enabled the freezing of USD 3 billion in Kolomoisky assets (February 2023).
The drama around one of the arbitrations in which an award is pending, PrivatBank v. Russia, demonstrates just how far the interests of Ukraine and its private investor pursuing ISDS can diverge. PrivatBank, founded by Kolomoisky and his partners in 1992, is a household name as one of Ukraine’s first commercial banks. It went on to fail spectacularly, and to abate a deep financial crisis, Ukraine nationalized it with the IMF’s blessing in December 2016—two years after its Crimean assets were expropriated. The tribunal in PrivatBank v. Russia found Russia liable for PrivatBank’s expropriation in Crimea and decided to only consider the context of fraud in the quantum phase, which is ongoing at the time of writing.Footnote 26 Claimants are seeking USD 1 billion. In terms of optics, the Ukraine-Russia BIT led to a legally binding ruling in favor of the Kolomoisky-owned version of PrivatBank, so mired in fraud that it nearly collapsed the Ukrainian economy. The size and timing of the announcement of the monetary award (if any) are in the hands of the tribunal, and if an award is rendered, Kolomoisky has standing under international law to enforce it, just as he already has standing to enforce his other outstanding awards against Russia.
The interactions between Ukrainian domestic politics and its international relations are multilayered here. Western pressure to reduce corruption helped sour Zelensky on Kolomoisky, even as Kolomoisky gained power with the accumulation of arbitral awards in his favor.Footnote 27 The enormous political pressure on Kolomoisky might encourage him to withdraw continuing cases, but completed cases with awards have legal implications that are virtually impossible to pull back. Further, Ukraine’s interests in the enforcement of Kolomoisky awards against Russia are complex: Successful enforcement during wartime might help drain the Russian war chest, but it would also increase the scarcity of Russian assets when it comes to settlement and reparations, and any moneys recovered would go to benefit an individual who is persona non grata. In any case, because Ukraine does not have standing in these processes, the state must persuade or coerce Kolomoisky to affect their outcomes. Ukraine’s Western backers, who also have an interest in the allocation of Russian assets, are yet another step removed.Footnote 28 The upshot is that, even from prison, Kolomoisky remains a relevant decision maker during the war.
The centrality of oligarchs to the Ukrainian (not to mention Russian) economy means that a few individuals can have an outsized impact on the compatibility of private-investor–driven arbitrations and the state’s national interests, for worse or better.Footnote 29 Rinat Akhmetov, currently Ukraine’s richest oligarch, has also pursued Crimea cases against Russia (see again table 1). Notably, Akhmetov kept his cases private for years, whereas Kolomoisky made his highly public. Again, ISDS elevates the relevance of commercial actors in international relations, taking control out of the hands of the home state that might prefer different choices over transparency (Hafner-Burton, Steinert-Threlkeld, and Victor Reference Hafner-Burton, Steinert-Threlkeld and Victor2016).
Akhmetov has been a strong supporter of the Zelensky government and its ongoing war effort, and shortly after the full-scale Russian invasion, he announced his intention to sue Russia “in all international and national courts,” consistent with Ukraine’s Lawfare Project (Djanic Reference Djanic2022). Akhmetov-linked claimants won a USD 270 million award in a Crimea case, with another still pending, and in 2023 filed the first public case over damage to property resulting from the war in eastern Ukraine (SCM Group v. Russia; see table 2). Although Akhmetov’s interests currently align with Ukraine’s government, the Kolomoisky-related Crimea cases serve as a cautionary tale of the difficulties states face reining in private investors if their use of a BIT should conflict with national interests.
Table 2 Post-Crimea Cases
Notes: As of March 2024. Criteria for inclusion are that claims have to do with the Ukraine-Russia war and that the investor has publicly stated its intent to file under the treaty referenced. See appendix for timeline and detail on sources. *German state ownership since Dec 2022.
The Problem of Symmetric Treaty Protections
In describing its Lawfare Project, Ukraine argues that on the “legal front…Ukraine (state bodies and state-owned enterprises) is fighting quite well.”Footnote 30 The parenthetical reference to state-owned enterprises connects back to Crimea cases initiated by Ukrainian SOEs that have resulted in billions of dollars in awards (see table 1). SOEs are covered investors under typical IIAs, including the Ukraine-Russia BIT, although their rise as claimants has been controversial (Moehlecke and Wellhausen Reference Moehlecke and Wellhausen2022).Footnote 31 We expect that a state can use ISDS to pursue political goals by choosing to have its SOEs file cases, settle, or waive awards. Given that the home state has managerial control over the business, SOEs should rarely have conflicts of interest with their home state during wartime, much less act on them. SOE-led “lawfare” is thus inoculated from the risks of misalignment between ISDS claimant behavior and national security that can arise when investments are privately owned.
Table 2 summarizes the post-Crimea cases: those ISDS arbitrations that were filed over property rights violations after the Crimean occupation. Since its full-scale invasion of Ukraine in 2022, Russia has faced several additional public cases, and at the time of writing, legal observers predict a wave of cases to come. Ukrainian SOEs have continued lawfare by filing new cases against Russia. Notably, so too have SOEs from Germany and Finland, which raises the possibility that SOE-led lawfare is another avenue by which Ukraine’s Western backers might support its war effort.Footnote 32
However, because BITs are symmetric, they can be used for lawfare by SOEs from both contracting parties. This is Ukraine’s situation because Russian entities have also leveraged the BIT to file claims against it, as summarized in the top of table 2. The 2019 case VEB v. Ukraine arose because of the enforcement of a Kolomoisky Crimea case. In its 2019 filing, Russian state-owned Vnesheconombank (VEB) claimed that, for years, Ukraine had taken “deliberate and successive steps to oust it from the country.”Footnote 33 Key to the timing of the filing, Ukrainian court rulings had just allowed VEB assets in Ukraine to be seized and turned over to Kolomoisky affiliates to enforce their USD 150 million award in the Crimea case Everest v. Russia (table 1).Footnote 34 VEB v. Ukraine is the most advanced of the Russian SOE-led ISDS arbitrations against Ukraine at the time of writing. In 2021, the tribunal ruled on jurisdiction. Ukraine argued, in broad strokes, that the context of Russian aggression meant that Russian SOEs are not covered as investors. However, the tribunal returned to the text of the BIT to reject that argument: SOEs are granted standing, and there is no wartime or aggression exception suggesting otherwise.Footnote 35
Ukraine’s exposure to Russian ISDS claims grew significantly with the Ukrainian parliament’s unanimous decision to expropriate (only) Russian-owned assets in Ukraine in the immediate aftermath of the full-scale Russian invasion.Footnote 36 The law instructs the Cabinet of Ministers to reassign ownership, liquidate Russian assets, or both, with proceeds going to the Ukrainian state budget for war financing. Shortly thereafter, both the Russian state-owned banks Sberbank and VEB (for a second time) announced that they had initiated the ISDS process against Ukraine over the seizure of their assets. Additionally, Ukraine’s decision to place a partially Russian-owned bank on its sanctions list, as well as the pursuit of criminal proceedings against one of its owners for financing Russia’s war, led to the case ABH Holdings v. Ukraine. Thus, Ukrainian state decisions about the treatment of enemy property, sanctions, and criminal law—all made in a wartime, national security context—are publicly being challenged under the auspices of the Ukraine-Russia BIT even as fighting continues.
Whatever the outcome of these arbitrations, it is costly to Ukraine to devote resources to defend against Russia and Russian interests on the “legal front” enabled by the symmetric BIT, whether politically, financially, or militarily. Indeed, the Security Service of Ukraine publicly advocated for the termination of the BIT. Ukraine moved to do so in April 2023, although it only finalized termination in August 2024 and did not make it effective until January 2025. Further, Ukraine announced it will abide by the BIT’s 10-year sunset clause, meaning protections are in place until 2035, virtually guaranteeing additional cases against it. Whether Ukraine’s formal withdrawal will have political force separate from its limited legal impact remains to be seen. Nonetheless, that Ukraine remains interested in abiding by the rules of international treaty law, even in these circumstances, suggests a remarkable durability of its commitment. As the state balances between rule of law commitments and national security, tracing Ukraine’s choices about the BIT are even more relevant to scholarship considering the trade-offs nations face in persisting in or exiting international institutions (Gray Reference Gray2024; Huikuri Reference Huikuri2023).
The other way in which symmetric treaty protections have come to compromise the usefulness of the BIT to Ukraine’s lawfare strategy is via the complications inherent in legalized dispute settlement. In the Crimea cases, Russia initially sent a letter to each tribunal rejecting jurisdiction and declining to participate whatsoever. Russia kept to that stance until around 2019, when the first awards emerged. It then appointed counsel and, in each instance, sought to reopen questions of jurisdiction, submit arguments, set aside awards, and generally make up for its years of nonparticipation. As a result, each tribunal has had to make decisions regarding the extent to which Russia’s newfound enthusiasm could reopen issues and delay proceedings. Variation in tribunals’ decisions about Russian participation is one factor in why Crimea cases have been completed on such different timelines (see again table 1). Legalization has made it possible for Russia to strategically drag its feet while still being technically in compliance with its treaty commitments.
Since the full-scale invasion of Ukraine, practitioners in the tight-knit investment arbitration community have by and large declined to represent Russia. In addition, under economic sanctions the Russian state has not had access to foreign currency to pay for legal representation. However, in a landmark decision, a Dutch court ruled that Russia was entitled to have counsel appointed for it if it is unable to find (or afford) representation. That Russia has both committed to economic integration and been willing to exploit commitments when doing so is of political interest is not new (Logvinenko Reference Logvinenko2021). What is new is that, although it is operating as designed, wartime adjudication through ISDS has provided Russia points of leverage in tension with the interests not just of Ukraine but also of Ukraine’s Western backers, the designers of the contemporary investment treaty regime (St. John Reference John2018). Indeed, Ukraine’s Western backers are broadly reconsidering their views on the inviolability of property rights protections, as evidenced by discussions about what to do with seized Russian assets, which could arguably be considered the kind of assets that the contemporary legalized approach to investment protection was designed to protect.
Implications for Scholarship
Although elements of the Crimea and post-Crimea cases may be unique to the Ukraine-Russia conflict, we expect the cases will resonate for years in ways that are important to scholars of political science and international relations. We focused on two key consequences of treaty-based commitments to foreign property rights protections: first, commercial actors as wartime decision makers, and second, the implications of symmetric treaty protections. Here, we expound on scholarship touched by these issues and broaden our discussion to at least some of the many literatures in political science and international relations for which the current case study carries implications.
First, the status quo in ISDS gives private commercial actors standing to pursue an interstate dispute and leaves their home state no institutional authority to forestall the process. Overlaying war on domestic political economies characterized by oligarchs and SOEs creates a perfect storm in terms of misalignment between not only private and public interests but also economic and security goals. And yet, this extreme setting reflects bigger questions about the antecedents and outcomes of divergent interests between home states and their private investors on the international stage (Bucheli and DeBerge Reference Bucheli and DeBerge2024; Maurer Reference Maurer2013). If institutions (like IIAs) that tie the hands of their state parties limit home states’ ability to overrule their own commercial actors’ competing interests on the international stage, then the durability of state commitments to those institutions is certainly at risk (Johns, Pelc, and Wellhausen, Reference Johns, Pelc and Wellhausen2019).
Second, the Ukraine-Russia BIT locked in the states’ mutual interests in reciprocal investment promotion, protection, and accountability for violations. From a national security point of view, that peacetime commitment to symmetrical protections seems absurd when the conduct of the war could benefit from strategic noncompliance. Perhaps more specific treaty language that reconsiders the protection of property rights in wartime is the way forward. Indeed, the broader investment treaty regime is already the subject of myriad reform efforts as states chafe at the deference to foreign investors over domestic interests that it implies (Peinhardt and Wellhausen Reference Peinhardt and Wellhausen2016; Roberts and St. John Reference Roberts and John2022). Many suggested reforms highlight the need to prevent claims that challenge legitimate public policy interests (Moehlecke Reference Moehlecke2020), and a significant literature has arisen on reclaiming state regulatory space in IIAs (Thompson et al. Reference Thompson, Broude and Haftel2019). Empirically, investment treaty negotiators in recent decades have carved out more and more precise exemptions, inspired especially by tensions between investor protections and environmental, health, and fiscal policy (Haftel and Thompson Reference Haftel and Thompson2018; Manger and Peinhardt Reference Manger and Peinhardt2017; Polanco Reference Polanco2019). Some newer IIAs contain more detailed language in Full Protection and Security (FPS) clauses, which can task host states with exercising due diligence for the physical protection of foreign investments (Zrilič Reference Zrilič2019, 99–106).Footnote 37 Separately, armed conflict clauses can set remedies for losses due to war and can circumscribe state immunity (107–20). However, any hopes that treaty revisions can resolve wartime disputes should be tempered by Alschner’s (Reference Alschner2022) finding that, even when thoughtful revisions have been included in IIAs, arbitrators often ignore them in favor of more established standards. As a result, we are pessimistic that contracting parties can wordsmith themselves out of wartime complications ex ante.Footnote 38
What if ISDS were simply suspended during war? Doing so would alleviate the tension facing Ukraine in that it is defending itself against Russian aggression while also incurring costs by participating in wartime arbitrations brought by Russian investors and choosing to respect the 10-year sunset clause of the BIT. On the Russian side, avoiding binding arbitral awards piling up during wartime would clearly be an advantage.Footnote 39 When given the option, it is unsurprising that warring states would prioritize national security and strategic considerations over peacetime commitments to each other’s commercial enterprises. And yet, the prospect of suspending ISDS in wartime brings forth perennial questions about the interrelationships among commercial interests, states, and war (Gartzke, Li, and Boehmer Reference Gartzke, Li and Boehmer2001; McDonald Reference McDonald2009; Morrow Reference Morrow1999). For example, McDonald (Reference McDonald2007) argues that the greatest hopes of a commercial peace dividend might rest on investments involving rivalrous home and host states. To design ISDS such that it is to be suspended during wartime would be to make property rights protections fragile for exactly investments between rivals.Footnote 40
What of foreign investors? Although international relations scholarship often portrays firms as objects rather than subjects when it comes to wartime behavior (e.g., Barry Reference Barry2018; Simonelli and Osgood Reference Simonelli and Osgood2024), with access to ISDS investors’ decision-making can become consequential for the fighting itself. We highlighted the impact of differing time horizons for compensation as a source of tension between investors and states in a system that requires states to turn to coercion or persuasion to influence the independent decisions of private investors. Broadly, the Crimea cases and their fallout demonstrate that one-time overlapping interests among investors, home states, and host states can cleave, form, and re-form in dramatic and unpredictable ways. Although political scientists have done much work on relationships among these three actors, we tend to overlook that their constellation of interests is an empirical question. Assuming stable alignment is problematic when pro-economic integration interests are challenged by more competitive, zero-sum approaches to foreign economic policy, such as those inherent in contemporary economic statecraft and the revival of industrial policy (Allan and Nahm Reference Allan and Nahm2025; Drezner, Farrell, and Newman Reference Drezner, Farrell and Newman2021). Although interests can change endogenously, they may also react to external shocks—the biggest of which may be the outbreak of violent armed conflict over territory. If investors come to believe that support for overseas economic activity is unstable, they may reduce their trust not only in international legal remedies but also in fallback principles of diplomatic protection, in which the home state directly fights for the investors’ claim.
Last, although we have taken Ukraine’s chosen term “lawfare” at face value, the boundaries of this concept are up for debate. For Ukraine, lawfare has meant pursuing formal, legal cases against Russia. More fundamental questions in international relations surround the ability of prewar commitments to these sorts of international legal institutions to survive in wartime, with international humanitarian law of special normative importance (Kinsella and Mantilla Reference Kinsella and Mantilla2020; Morrow Reference Morrow2007).Footnote 41 On the economic side, there is a long history of states using trade institutions in pursuit of national security goals that might fall under a lawfare umbrella.Footnote 42 The relative usefulness of different international fora as an avenue for lawfare is an open question. Further, defining lawfare via the use of formal institutions might be too limiting. The popularity of economic sanctions and economic statecraft suggests that legalized economic integration is being leveraged for foreign policy purposes in ways beyond lawfare in the courtroom.
Conclusions
To conclude, we reflect on the conceit of this article. As scholars, we all can and should leverage our respective comparative advantages when the literature becomes newsworthy—in this case, unfortunately. After Russia’s occupation of Crimea and parts of Donbas in 2014, and since the conflict has escalated with the 2022 invasion, investors from each side have been using the Ukraine-Russia BIT to pursue compensation for seized or damaged assets. Adjudicating commercial property rights claims of an enemy while fighting that enemy has become a reality. At the time of writing, the war drags on. So too do wartime property rights violations, and so too does the wartime operation of the investment treaty regime that is creating a myriad of binding rulings and awards that determine the fate of assets linked to each warring state.
A final reason to acknowledge and understand this unfolding case study is that virtually all prior compensation for property rights damage has occurred only after a conflict ends. Important scholarly literatures, not to mention practical experience by postwar negotiators, speak to the changing norms around peace negotiations and variation in postwar lump sum payments, the use of dedicated claims commissions, and other processes to determine compensation—although as Dolzer (Reference Dolzer2002, 302, fn. 15) notes, “Reparation is usually the most controversial aspect of peacemaking.”Footnote 43 Now, however, commercial claims are being adjudicated while fighting continues, potentially disrupting norms of postwar compensation and further complicating peace negotiations.
Supplementary material
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Acknowledgments
For comments, sincere thanks to Wolfgang Alschner, Yoram Haftel, Tarald Berge, Malcolm Langford, Andrew Lugg, Banks Miller, and participants in the 2024 International Political Economy Society conference, the 2024 COPIID workshop hosted by the University of Oslo, and the 2023 International Studies Association conference, where we initially presented these ideas. We are indebted to IAReporter for its real-time coverage and analysis of investment arbitration news. We have benefited from discussions at Washington Arbitration Week, on the Young-OGEMID/Transnational Dispute Management listserv, and in other forums since the Russian invasion of February 24, 2022. We highly recommend Jure Zrilič’s Reference Zrilič2019 book, The Protection of Foreign Investment in Times of Armed Conflict. For research assistance, we thank Artem Kvartalnov, A. J. Torok, and student researchers at Innovations for Peace and Development at the University of Texas at Austin. Information and data are accurate as of the time of writing (November 2024). This article was partly supported by the Research Council of Norway, Project Number 326269—COPIID.
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