Investment disputes in Crimea

What is it about?

The events of the Euromaidan in the Ukraine between November 2013 and February 2014, resulted in the overthrow of the then Ukrainian government. It also led to territorial disputes within the country and ultimately led to Russia taking De facto control of Crimea, annexing it from Ukraine. These events boosted support for Crimean independence from Ukraine. A referendum for the same was released, too. Later, Crimea was incorporated into the Russian Federation. More changes followed. Property in Crimea was nationalized. The Crimean Federal System of Governance was established. However, there was one problem. Legal scholars agree that these acts violate international law. This was especially due to Russia's use of force during the invasion. This led to various international legal disputes, including investment claims. The Russian-Ukrainian bilateral investment treaty (BIT) governs the legal framework in these disputes. This chapter examines current legal challenges in light of the BIT.

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Photo by Jaunt and Joy on Unsplash

Photo by Jaunt and Joy on Unsplash

Why is it important?

In modern International law, the territorial integrity of a state is an important part of the international legal order. The ongoing occupation by Russia does not change the legal status of Crimea. It still falls under the sovereignty of Ukraine. These events have breached international norms without the consent of the involved states. Russia exercises de facto control over Crimea. But this control was established using force. This violates Article 2 of the UN Charter. Thus, all the member states are obliged to not recognize this change of control over Crimea in their relations with Russia. This leads to the redundancy of BIT in Crimea. So, investors face problems while setting up investment dispute settlement tribunals in the country. The safety of their property in Crimea is thus threatened. The gray area around BIT also leads to other economic and legal concerns. Current international law has failed to provide a solution to these. KEY TAKEAWAY: The issue of the application of BIT in Crimea is complex. The breach of the UN charter has activated the duty of member states. They are required to not recognize the change of control over Crimea. This prevents the application of BIT. And bars investors from having arbitral tribunals. International law needs to develop frameworks to fill these gaps.