Investor–State Arbitration 2025 Comparisons

Lithuania maintains a clear and consistent policy regarding investor–state arbitration, which broadly aligns with the legal and political framework of the EU. Lithuania recognises the importance of providing foreign investors with access to effective dispute resolution mechanisms, including international arbitration, while also adapting its treaty practice to reflect evolving EU jurisprudence and geopolitical realities.

Lithuania has not expressed a general reluctance to enter into treaties containing investor–state arbitration clauses. On the contrary, it has historically concluded numerous bilateral investment treaties (BITs) that include such provisions, reflecting its commitment to investor protection and legal certainty.

However, recent developments demonstrate a deliberate recalibration of Lithuania’s treaty policy, particularly in response to EU legal obligations and broader geopolitical considerations.

Following the Achmea judgment of the Court of Justice of the European Union, which held that intra-EU investor–state arbitration clauses are incompatible with EU law, Lithuania joined other EU member states (“Member States”) in signing the Agreement for the Termination of Bilateral Investment Treaties between the Member States of the European Union on 15 January 2019. As a result, these intra-EU BITs were officially terminated as of 4 September 2021.

Lithuania has also taken steps to terminate BITs with certain non-EU countries due to serious geopolitical concerns. Notably, Lithuania announced the termination of its BITs with the Russian Federation and the Republic of Belarus, citing incompatibility of treaty obligations with Lithuania’s legal and political stance following Russia’s aggression against Ukraine. These BITs will cease to be in force as of 15 October 2025.

Despite formal termination, the survival clause contained in both treaties ensures that their substantive protections remain effective for a period of ten years following termination, in respect of investments made prior to the termination date. Accordingly, qualifying investments made before 15 October 2025 will continue to benefit from treaty protections until 15 October 2035, and disputes arising from such investments may still be resolved under the terms of the respective BITs.

Furthermore, Lithuania signed the Energy Charter Treaty (ECT) in April 1995, and the Seimas (Lithuanian parliament) ratified it in June 1998. In line with the position adopted by several other Member States, Lithuania has decided to withdraw from the ECT, with the withdrawal scheduled to take effect on 8 August 2026.

Under the ECT’s sunset clause, the treaty’s substantive protections will continue to apply to investments made prior to the effective date of withdrawal for a period of 20 years. Thus, investments made before 8 August 2026 will remain protected under the ECT until 8 August 2046.

Despite these developments, Lithuania remains committed to safeguarding investor rights and ensuring access to dispute resolution. Article 6(2) of the Law on Investment of the Republic of Lithuania (“Law on Investment”) provides that disputes between foreign investors and the Republic of Lithuania concerning the violation of their rights and legitimate interests may be resolved by mutual agreement, through the courts of the Republic of Lithuania, international arbitration tribunals or other competent institutions.

Arbitration agreements contained in international treaties are duly recognised and implemented under Lithuanian law.

Importantly, Lithuania generally prioritises the amicable resolution of investment disputes and seeks to resolve such matters through negotiations with relevant government authorities before formal legal proceedings are initiated, reflecting a pragmatic and investor-friendly approach.

Lithuania became a contracting state to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“ICSID Convention”) on 6 July 1992, with the Convention entering into force for Lithuania on 5 August 1992. This accession underscores Lithuania’s support for investor–state dispute resolution mechanisms.

Furthermore, Lithuania ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) on 14 March 1995, which entered into force on 12 June 1995. These accessions reflect Lithuania’s support for the international legal framework governing the resolution and enforcement of investment and commercial disputes.

Investor–state arbitration is a recognised and increasingly preferred method of resolving investment disputes in Lithuania, particularly those involving foreign investors and the Lithuanian state. While investment disputes involving Lithuania are relatively rare, the country has been involved in several notable cases under international arbitration mechanisms, including ICSID and other treaty-based forums.

Foreign investors in Lithuania have access to multiple avenues for resolving disputes, including:

• Lithuanian national courts;
• international arbitration tribunals, particularly under BITs and the ICSID Convention; and
• other competent institutions, such as the Vilnius Court of Commercial Arbitration (VCCA).

In practice, foreign investors tend to avoid litigation before Lithuanian courts in disputes with the state. This is largely due to concerns about the challenges of establishing state liability and the perceived lack of neutrality in domestic proceedings. While claims for damages arising from the administrative actions or omissions of the state authorities are more commonly brought before Lithuanian courts, these are typically limited to straightforward legal or regulatory issues.

By contrast, investor–state arbitration is the preferred method for resolving disputes that fall within the scope of investment protection – particularly those governed by BITs and the ICSID Convention.

Lithuania does not exhibit a consistent pattern of investor–state arbitration. However, recent developments suggest heightened activity in the energy and transport/logistics sectors.

Energy Sector

The energy industry has seen increased arbitration activity, particularly in relation to municipal heating services, regulatory changes and foreign investment in utilities. A notable example is the Veolia v Lithuania case, where the French energy company initiated ICSID arbitration over alleged unfair treatment and contract interference in its district heating operations. This case reflects broader tensions around state regulation, environmental policy shifts and public-private partnerships in essential services.

Transport and Logistics

Disputes in this sector often involve state-owned infrastructure, such as railways, ports and transit corridors. For instance, a Belarusian state-owned company filed a claim against Lithuania over the termination of a fertiliser transport agreement, citing political motivations and seeking substantial damages. These cases underscore the sector’s exposure to geopolitical developments, EU sanctions regimes and national security considerations, especially when foreign investors are affected by decisions linked to Lithuania’s foreign policy stance.

Infrastructure and Public Services

Although less frequent, disputes have also arisen in areas involving urban development, waste management and public procurement, where foreign investors allege discriminatory treatment or breach of contractual obligations. These cases often stem from changes in local governance, regulatory reforms or shifts in political priorities, which can disrupt long-term investment arrangements.

Several factors contribute to the increased arbitration activity in these sectors:

• Strategic and political sensitivity: Energy and transport are closely tied to national security and foreign policy, making them more prone to regulatory intervention and political scrutiny.
• High capital intensity and long-term contracts: Investments in these sectors often involve significant upfront costs and long-term commitments, increasing the stakes when disputes arise.
• Geopolitical context: Lithuania’s position as an EU member bordering Belarus and Russia places it at the centre of regional tensions, which can affect foreign investments in critical infrastructure.
• Public interest and regulatory volatility: These industries are subject to evolving regulatory frameworks, environmental standards and public accountability, which can lead to investor claims of unfair or arbitrary treatment.

Such factors can elevate the risk of investor–state disputes, particularly when foreign investors perceive regulatory measures as discriminatory or politically motivated.

To date, Lithuania has participated in ten investor–state arbitration proceedings, with the majority of cases resolved in its favour. These disputes have arisen under various BITs and international arbitration rules, including those of ICSID, UNCITRAL, the PCA and the ICC. Lithuania has consistently demonstrated its commitment to international dispute resolution mechanisms while successfully defending its regulatory actions and public interest measures.

The following proceedings can be considered the most significant.

Veolia and Others v Republic of Lithuania (ICSID Case No. ARB/16/3)

• Facts:This is the most recent and arguably one of the most important investor–state arbitration disputes involving Lithuania. French multinational Veolia and its Lithuanian subsidiaries (UAB Litesko and UAB Vilniaus energija) initiated proceedings under the France–Lithuania BIT, alleging that Lithuania had retroactively changed laws and regulations governing municipal heating services. These changes allegedly undermined Veolia’s long-term contracts and investments in the energy sector.
• Disputed law:Veolia argued that Lithuania violated the fair and equitable treatment (FET) standard by creating an unpredictable and hostile regulatory environment. The claim centred on whether Veolia had a reasonable expectation that the legal framework would remain stable over the life of its investment and whether changed regulations deprived it of the economic value of its investments.
• Outcome: In July 2025, the parties reached a settlement agreement. Veolia agreed to pay EUR35 million to the Republic of Lithuania, ending the arbitration proceedings and related domestic litigation. This case is notable for its complexity, for the Lithuanian Supreme Court’s involvement in interpreting BIT counterclaims and for highlighting the never-ending tension between investor protections and public interest regulation in essential services.

Luigiterzo Bosca v Republic of Lithuania (PCA Case No. 2011-05)

• Facts:Italian investor Luigiterzo Bosca brought claims under the Italy–Lithuania BIT, based on his investment in the Lithuanian wine and hospitality sectors. The investment included the provision of know-how and services to a local wine-producing company, as well as contractual rights acquired through a successful public tender for the purchase of AB “Alita”, a sparkling wine manufacturing company.
• Disputed law: Bosca claimed that Lithuania failed to provide a stable and predictable legal environment and denied his access to justice.
• Outcome: The tribunal found Lithuania liable for breaching the FET standard, including denial of justice. However, no damages were awarded to the claimant. The UNCITRAL arbitration tribunal rejected the claim for damages of EUR230 million from the state actions of public authorities during the privatisation of AB “Alita”.

Lithuania has generally demonstrated a pro-arbitration and rule-of-law-oriented approach in its handling of investor–state arbitration proceedings. To date, no adverse arbitral awards have been rendered against Lithuania in investor–state disputes requiring enforcement or triggering annulment proceedings.

As of October 2025, Lithuania has signed 56 BITs. Of these, 30 remain in force following ratification. These active BITs are maintained with a diverse group of countries, including Albania, Argentina, Armenia, Australia, Azerbaijan, Bosnia and Herzegovina, China, Georgia, Iceland, India, Israel, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Moldova, Mongolia, Montenegro, North Macedonia, Serbia, South Korea, Switzerland, Tajikistan, Turkey, Ukraine, the United Kingdom, the United States, Uzbekistan, Venezuela and Vietnam.

In line with the the Court of Justice of the European Union’s decision in the Achmea case, Lithuania has terminated its BITs with Member States, aligning with EU law and co-ordinated efforts across the Union. Additionally, as of 15 October 2025, Lithuania has formally terminated its BITs with Russia and Belarus, reflecting broader geopolitical and legal considerations.

While there is currently no publicly available indication that Lithuania is actively pursuing new BITs, the geopolitical context suggests that further treaty terminations cannot be ruled out. In particular, Lithuania may reassess its investment treaty framework with other jurisdictions, as it did with Russia and Belarus.

Lithuanian BITs are generally based on the Model Agreement on the Promotion and Protection of Investments, which was approved by the Government of the Republic of Lithuania in 2005.

Key provisions of the Lithuanian model BIT include:

• Definition of investment: The term “investment” means any kind of asset that an investor of one Contracting Party invests in the territory of the other Contracting Party in accordance with the laws and regulations of the other Contracting Party, and includes, in particular, but not exclusively: (i) movable and immovable property and any other rights in re; (ii) shares, bonds and any other forms of participation in a company; (iii) monetary claims or claims for the performance of any act of economic value; (iv) intellectual property rights; (v) business reputation; (vi) any right to engage in economic activities granted by law or contract, including concessions to explore, extract and exploit natural resources.
• Ensuring investment protection: Each Contracting Party must treat investments from the other Contracting Party fairly and equitably, without discrimination or interference. Investments must receive treatment at least as favourable as that given to domestic or third-country investors, unless exceptions apply – such as participation in regional economic agreements or tax treaties (Article 3 of the Lithuanian model BIT). Issues of expropriation, compensation for losses, transfers and subrogation are also covered (Articles 4–7 of the Lithuanian model BIT).
• Investment dispute resolution: Before initiating investor–state arbitration in Lithuania, the investor must first attempt to resolve the dispute amicably and notify the host state in writing with detailed information. If the dispute is not resolved within six months and domestic remedies have been exhausted, the investor may submit the case to ICSID (if both states are parties to the ICSID Convention) or to ad hoc arbitration under UNCITRAL rules. Arbitral awards are final and binding, and both states must promptly enforce them. The host state cannot use the fact that compensation was paid under a guarantee or insurance policy as a defence against its obligations (Article 8 of the Lithuanian model BIT).

Lithuania is a Member State, and therefore participates in the EU’s extensive network of free trade agreements (FTAs) with third countries. These agreements are negotiated and concluded by the European Commission on behalf of all Member States, including Lithuania, and cover a wide range of trade and investment-related matters.

EU FTAs typically include provisions aimed at ensuring a stable, transparent and predictable investment environment. These provisions cover:

• non-discriminatory treatment of investors;
• FET;
• protection against unlawful expropriation; and
• free transfer of capital and returns.

In terms of dispute settlement, the EU applies a structured and evolving framework, as described below.

Investment Dispute Settlement

In recent agreements, the EU has introduced modernised investment dispute resolution mechanisms, moving away from traditional investor–state arbitration. Notably, agreements such as CETA (with Canada), EU–Vietnam and EU–Singapore incorporate provisions for a permanent investment court system. For example, once fully in force, CETA will offer robust protection for investments through a modern and transparent dispute resolution mechanism. It replaces the older Investor State Dispute Settlement (ISDS) system with a permanent Investment Court System (ICS), designed to address past shortcomings and ensure the highest standards of legitimacy, neutrality and transparency. This system includes a first-tier tribunal and an appellate tribunal, both composed of independent, highly qualified judges who are bound by strict ethical rules. The ICS also includes safeguards to prevent abuse of the process and ensure consistency in decisions, and allows the EU and Canada to guide the interpretation of CETA’s provisions.

Multilateral Reform Efforts

The EU is actively promoting the establishment of a Multilateral Investment Court, which would replace ad hoc arbitration with a permanent judicial body. This initiative reflects the EU’s commitment to reforming global investment dispute settlement practices.

In summary, Lithuania, through its EU membership, benefits from a comprehensive and modern legal framework for investor protection and dispute resolution. This framework reflects the EU’s commitment to upholding high standards of legal certainty, transparency and fairness in its trade and investment relations with third countries.

Lithuania does not publish official commentaries, exchanges of notes or other interpretive materials related to its investment treaties. Nevertheless, Lithuanian legal scholars and practitioners active in the field of investment arbitration contribute to the interpretation and development of investment law through monographs, academic publications and other soft-law instruments. In addition, foreign legal doctrine – such as commentaries on the ICSID Convention – is considered relevant and may be relied upon in the interpretation and resolution of investment disputes involving Lithuania.

Lithuania’s principal domestic legal instrument governing investment is the Law on Investment, originally adopted in 1999 and subsequently amended. This law establishes the legal framework for both domestic and foreign investments, outlining key substantive and procedural protections, dispute resolution mechanisms and strategic investment priorities.

Key Substantive Provisions

• Definition of investment: Article 2(1) defines investment broadly to include monetary funds, tangible and intangible assets, and financial instruments, provided they are directed towards generating profit, achieving social outcomes (eg, in education, culture, science, healthcare and social protection) or fulfilling state functions.
• Investor rights: Article 5 guarantees equal treatment for Lithuanian and foreign investors. It affirms that investors’ rights and legitimate interests are protected under Lithuanian law, and that investors are entitled to manage, use and dispose of their investment objects, as well as to receive income from them.
• Strategic investors: Article 2(5) provides for special arrangements applicable to strategic investors entering into agreements with the Government of Lithuania, allowing for tailored investment terms and conditions.
• State Investment Programme: Articles 12–15 set out Lithuania’s strategic investment priorities and establish mechanisms for financing and implementation through the State Investment Programme.

Key Dispute Resolution Provisions

• Domestic and international forums: Article 6(2) provides that disputes concerning the infringement of investor rights and legitimate interests may be resolved in accordance with Lithuanian law, including through domestic courts, international arbitration or other agreed-upon mechanisms.
• Access to international arbitration: Article 6(3) explicitly states that investment disputes shall also be resolved in accordance with international agreements. Foreign investors are granted the right to submit disputes directly to international arbitration institutions, including the ICSID.

Interaction With Investment Treaties

The Law on Investment operates in conjunction with Lithuania’s international obligations under bilateral and multilateral investment treaties. These treaties typically provide additional protections – such as guarantees of FET, protection against expropriation, and access to investor–state dispute settlement mechanisms. The national law expressly recognises the applicability of international agreements in resolving investment disputes, thereby reinforcing Lithuania’s commitment to international investment standards and ensuring coherence between domestic and treaty-based protections.

Contracts between Lithuania and foreign investors are not publicly accessible, which makes it difficult to determine whether direct arbitration clauses are commonly used or how investment protection provisions differ from those found in BITs. However, it is clear that an investor and a state may agree on additional rules to those provided in investment treaties to help the investor to secure its investment.

In the Lithuanian context, investor–state arbitration complaints most frequently revolve around allegations of direct and indirect expropriation, breach of the FET standard and the minimum standard of treatment (including denial of justice), violation of full protection and security, and breaches of national treatment and most-favoured nation treatment. Investors have also raised claims of arbitrary, unreasonable or discriminatory measures.

These grounds have been central to several high-profile disputes involving Lithuania. For example:

• In Gazprom v Lithuania, the investor alleged expropriation and discriminatory treatment in connection with the forced divestment of its stake in Lietuvos Dujos following EU-mandated gas sector reforms.
• In Veolia v Lithuania, claims were raised concerning discriminatory regulation and unfair treatment of Vilniaus Energija, a heat supplier controlled by Veolia.
• Russian Fund v Lithuania involved allegations of unlawful nationalisation of a bank.
• In Roščins v Lithuania, the investor claimed misappropriation of funds from bank accounts, raising concerns over denial of justice and lack of due process.
• Belaruskali JSC v Lithuania concerned the termination of contractual arrangements in the context of international sanctions, with claims of arbitrary and politically motivated conduct.

Overall, the most recurrent investor grievances in Lithuania relate to expropriation, breaches of FET, and discriminatory or arbitrary state conduct.

The Law on Commercial Arbitration of the Republic of Lithuania (“Law on Commercial Arbitration”) and the Rules of Arbitration of the Vilnius Court of Commercial Arbitration (“VCCA Rules”) strongly uphold the principle of party autonomy in the selection of arbitrators.

Parties are granted the right to agree on the procedure for appointing arbitrators. However, this autonomy is subject to certain limitations designed to safeguard the integrity of the arbitration process. Specifically, any agreement that enables one party to unilaterally appoint all arbitrators, or to appoint arbitrators who are biased, legally incapacitated or otherwise unfit, may be deemed invalid.

Arbitrators must be independent and impartial, and parties may also agree on additional criteria for independence and impartiality. These requirements are fundamental to ensuring a fair and balanced arbitration process.

The procedure for appointing arbitrators in Lithuania generally follows internationally recognised standards. Under Article 14(4) of the Law on Commercial Arbitration, if the parties have agreed on a method for appointing arbitrators but one party fails to comply with that agreement, the tribunal shall be constituted according to the default procedure outlined in paragraph 3 of the same article:

• If the tribunal is to consist of a sole arbitrator and the parties cannot agree on the appointment, the arbitrator shall be appointed by the President of the permanent arbitral institution upon request by either party.
• If either the claimant or respondent fails to appoint an arbitrator within 20 days of receiving the claim, the arbitrator shall be appointed by the President of the permanent arbitral institution within 20 days following the expiry of the initial deadline.
• If the two party-appointed arbitrators fail to agree on the appointment of the presiding arbitrator, the President of the permanent arbitral institution will appoint the third arbitrator within the same 20-day timeframe.
• In ad hoc arbitration, if a party fails to appoint an arbitrator, or if the party-appointed arbitrators cannot agree on the chair within 20 days of their appointment, the Vilnius Regional Court will make the necessary appointment within 20 days of the relevant deadline.

Regarding multiparty arbitration, Articles 14(5) and 14(6) of the Law on Commercial Arbitration provide a specific default mechanism:

• Co-claimants must agree in writing on the appointment of a joint arbitrator and submit this agreement either with the claim or within 20 days thereafter.
• Co-respondents must reach a similar agreement within 20 days of receiving the request to appoint an arbitrator.
• If either group fails to appoint a joint President within the prescribed timeframe, the appointment will be made by the Chairperson of the permanent arbitral institution (in institutional arbitration) or by the Vilnius Regional Court (in ad hoc arbitration), within 20 days of the deadline.

Under the Law on Commercial Arbitration, judicial intervention in the appointment of arbitrators is permitted, but only in narrowly defined circumstances, primarily in the context of ad hoc arbitration.

The Vilnius Regional Court may appoint arbitrators in the following situations:

• where a party fails to appoint an arbitrator within the prescribed timeframe;
• where the arbitrators appointed by the parties are unable to agree on the appointment of the chair of the arbitral tribunal; or
• where co-claimants or co-defendants fail to jointly appoint an arbitrator within the time limits set by the Law on Commercial Arbitration.

When exercising this authority, the court must consider:

• the nature and complexity of the dispute;
• any qualifications or criteria for arbitrators agreed upon by the parties; and
• factors ensuring the independence and impartiality of the arbitrator(s), as required under Article 14(7) of the Law on Commercial Arbitration.

Importantly, decisions made by the Vilnius Regional Court on these matters are final and not subject to appeal (Article 14(8) of the Law on Commercial Arbitration). This limitation reflects the court’s procedural role in facilitating arbitration rather than interfering with its substantive conduct.

The grounds for challenging an arbitrator are set out in Article 15(2) of the Law on Commercial Arbitration. An arbitrator may be challenged only if:

• there are reasonable doubts regarding their independence or impartiality; or
• the arbitrator does not meet the qualifications agreed upon by the parties.

In Lithuanian arbitration practice and legal doctrine, the evaluation of an arbitrator’s impartiality and independence is frequently guided by the IBA Guidelines on Conflicts of Interest in International Arbitration, which serve as a persuasive reference point in assessing potential conflicts.

The procedure for challenging an arbitrator is governed by Article 16 of the Law on Commercial Arbitration. Parties may agree on a specific procedure, including the right to appeal decisions on challenges. In the absence of such an agreement, a party must submit a written statement of reasons for the challenge within 15 days of becoming aware of the tribunal’s composition or of the relevant circumstances. If the arbitrator does not withdraw and the other party does not consent to the challenge, the matter is decided by the remaining arbitrators. Where the tribunal consists of a sole arbitrator or where all arbitrators are challenged, the decision is made by the arbitrator(s) themselves.

If the challenge is rejected, the challenging party may, within 20 days, request the Vilnius Regional Court to issue a ruling. The court’s decision is final and not subject to appeal. While the challenge is pending, the arbitral tribunal, including the challenged arbitrator, may continue the proceedings and render an award.

Under Article 15(1) of the Law on Commercial Arbitration, any individual approached regarding a potential appointment as an arbitrator is required to disclose, prior to accepting the appointment, any circumstances that may give rise to reasonable doubts concerning their independence or impartiality. This obligation extends throughout the arbitration proceedings: if such circumstances arise or become known after the appointment, the arbitrator must promptly disclose them to the parties, the permanent arbitration institution, the Vilnius Regional Court, or any other entity designated by the parties or applicable arbitration rules.

Similar rules are provided in Article 18 of the VCCA Rules. Specifically, when a person is approached regarding their possible appointment as an arbitrator, they must, prior to accepting the role, disclose in writing all circumstances that could give rise to reasonable doubts about their independence or impartiality. An arbitrator is also required to disclose such circumstances after their appointment or during the arbitral proceedings, if the disclosure was not made earlier or if the circumstances arose after the appointment or during the proceedings.

These disclosure requirements are designed to ensure transparency and uphold the integrity of the arbitral process, aligning with international standards and best practices.

Under the Law on Commercial Arbitration, arbitral tribunals seated in Lithuania are empowered to grant interim measures and issue preliminary orders (Articles 20 and 21 of the Law on Commercial Arbitration). Unless otherwise agreed by the parties, the arbitral tribunal may, upon a party’s request and after notifying the other parties, issue an order for interim measures aimed at securing the enforcement of the claim or preserving relevant evidence.

A decision of the arbitral tribunal on interim measures constitutes an enforceable instrument (Article 25(1) of the Law on Commercial Arbitration). If such decision is not voluntarily complied with, a party may apply to the Vilnius Regional Court for the issuance of a writ of execution in accordance with the procedure established in the Code of Civil Procedure (Article 25(2) of the Law on Commercial Arbitration). In contrast, preliminary orders are binding on the parties but are not enforceable documents (Article 21(7) of the Law on Commercial Arbitration).

The types of interim relief that may be granted include:

• prohibiting a party from performing certain acts or entering into specific transactions;
• requiring a party to preserve property relevant to the arbitration or to provide security, such as a monetary deposit, bank guarantee or insurance guarantee; and
• requiring a party to preserve evidence that may be material to the arbitration.

Such measures may be reconsidered and modified at a later stage of the proceedings.

Pursuant to Article 20(3) of the Law on Commercial Arbitration, a party requesting interim measures must satisfy the following conditions:

• The claims appear to be prima facie well-founded; however, this preliminary assessment does not prejudice the arbitral tribunal’s right to reach a different conclusion in the final award.
• There is a real risk that, in the absence of interim measures, enforcement of the arbitral award may be significantly impeded or rendered impossible.
• The requested measures are economical and proportionate to the objective pursued.

In the context of granting interim measures, national courts may intervene in two scenarios:

• When proceedings are pending before the VCCA and interim relief is sought from a national court rather than the arbitral tribunal – either because the tribunal has not yet been constituted or because the requested measures would affect third parties (eg, a request to freeze a bank account).
• When proceedings are pending before a foreign arbitral tribunal and interim measures are sought from a Lithuanian court, for instance, where only a Lithuanian court has jurisdiction to impose measures over assets located in Lithuania, such as freezing real estate, or when the assets are in Lithuania.

To date, Lithuanian courts have not developed case law on granting interim measures in investment arbitration cases. This is largely due to the specific nature of such disputes, where the respondent is the state. Under Lithuanian law and case law, the imposition of interim measures requires, among other things, a demonstration that there is a real risk to the enforcement of the arbitral award (eg, the respondent is unlawfully disposing of assets or acting in bad faith). However, such conduct is generally not expected from a state, and funds for satisfying claims arising from judicial or arbitral proceedings are allocated from the state budget.

In principle, interim measures could be applied against the state – for example, a prohibition on the transfer of specific real estate – if the dispute concerns that particular property. However, no such precedent has yet been established in Lithuanian case law.

The Law on Commercial Arbitration regulates security for costs within the framework of interim relief. In particular, it allows arbitral tribunals to order a party to provide a monetary deposit, bank or insurance guarantee as an interim measure, which serves the function of securing costs.

Security for arbitration costs is specifically addressed in the VCCA Rules. Under Article 341, in exceptional circumstances, the arbitral tribunal may, upon request and after hearing the parties, order a party to provide security for arbitration costs in a form it deems appropriate.

In making such a decision, the tribunal considers factors such as:

• the prima facie merits of the claims or defences;
• the claimant’s ability to satisfy a potential adverse costs award;
• the availability of assets for enforcement;
• the proportionality and fairness of the measure; and
• other relevant circumstances.

If a party fails to comply, the tribunal may suspend or dismiss its claims. Such decisions may be issued as an order or an award.

Third-party funding of investor–state arbitration claims is permitted in Lithuania. While national legislation does not expressly regulate such funding, the concept is recognised in the VCCA Rules, which define a funder as a non-party that finances arbitration costs and has an interest in the outcome.

Despite its permissibility, third-party funding – whether in investment or commercial arbitration – is not yet prevalent in Lithuania. Its use remains relatively limited, likely due to the still-developing market for arbitration funding and a general lack of awareness or familiarity with such mechanisms among local parties.

However, Lithuania does have examples of third-party litigation financing in practice. A notable recent case involved a 2017 claim brought by the Vilnius City Municipality and Vilnius Heating Networks against Veolia, seeking EUR560 million in compensation for managing the city’s heating system from 2002 to 2017, which was ultimately considered by the SCC.

In this case, the parties arranged for the primary costs of the dispute to be financed by the Luxembourg-based private equity fund “Profile Investment”. Under the terms of the agreement, the fund was to receive a success-based fee contingent on the amount awarded and recovered, potentially up to EUR20 million, while assuming the risk of receiving nothing if the claim was unsuccessful. The fund financed approximately EUR5 million of the litigation costs, with the Vilnius City Municipality covering EUR1.4 million.

There is currently no publicly available case law in Lithuania addressing third-party funding in the context of arbitration, including investor–state disputes. The concept is recognised in institutional arbitration rules, but it has not yet been tested or interpreted by national courts.

The VCCA Rules establish a disclosure framework for funded cases. Under Article 51, a party must disclose the existence of a third-party funding arrangement and the identity of the funder within seven days of signing the agreement. This disclosure must be made to the Secretariat, the arbitral tribunal and the opposing party.

If the disclosure occurs before the tribunal is constituted, the Secretariat informs the arbitrators and may request additional details. If the tribunal is already formed, each arbitrator must assess and declare any potential conflicts of interest within 15 days. Both the tribunal and the Secretariat may seek further information to evaluate impartiality concerns.

As third-party funding remains uncommon in Lithuania, there is no relevant case law addressing its impact on applications for security for costs.

Lithuanian national law does not prescribe mandatory pre-arbitration procedural steps for arbitration proceedings. However, such requirements may arise from BITs, multilateral treaties or conventions (eg, ICSID), contractual arrangements or institutional arbitration rules. Therefore, parties must assess the specific legal framework applicable to each dispute.

For instance, the Lithuania–Moldova BIT requires that the investor notify the host state in writing and that efforts be made to resolve the dispute amicably. If no settlement is reached within six months, the investor may submit the dispute either to the domestic courts of the host state or to international arbitration, including ICSID or UNCITRAL arbitration.

Thus, while Lithuanian law does not impose general pre-arbitration requirements, such obligations may arise under international instruments or party agreements and must be carefully reviewed in each case.

While investment arbitration generally adheres to the principle of confidentiality, increasing demands for transparency – particularly where public interests are involved – have led to evolving practices in Lithuania.

In cases involving the state, certain information is routinely disclosed to the public to ensure accountability without compromising the integrity of the proceedings. For example, in the ongoing arbitration between Lithuania and Belaruskali, publicly accessible information includes the identity of the parties’ representatives, arbitrators, the nature and origin of the dispute, the amount of the dispute, procedural orders and official press releases. This level of disclosure strikes a balance between confidentiality and the public’s right to know.

Similarly, in the high-profile Veolia case, which concluded in 2025 after nearly a decade of proceedings, the fact of the concluded settlement agreement, its key financial terms and the nature of the dispute were made public. The Lithuanian government also disclosed how the settlement funds would be allocated, further reinforcing transparency and public trust.

These examples illustrate how parties and institutions in Lithuania are navigating the tension between confidentiality and transparency in investor–state arbitration, particularly where public resources and interests are at stake.

Under Lithuanian law, the remedies available in arbitration are generally limited to those permitted by the applicable substantive law. Where Lithuanian law governs the dispute, the arbitral tribunal is limited to awarding remedies recognised under that legal framework. As Lithuania follows the civil law tradition, certain remedies – such as punitive damages – are not established or permitted under national law and therefore cannot be awarded.

The scope of available remedies is determined by the applicable substantive law, which defines the limits within which the arbitral tribunal may operate.

In Lithuania, the valuation of damages is governed by Order No. 1K-159 of 27 April 2012 of the Minister of Finance, “On the Approval of the Methodology for Asset and Business Valuation”. For the purposes of insurance and loss assessment, damages may typically be quantified using the following methodologies:

• market value, determined through an individual valuation;
• replacement (reinstatement) value of the property, determined through an individual valuation; or
• other valuation approaches prescribed by the International Valuation Standards, the European Valuation Standards or applicable legislation, determined through an individual valuation.

Accordingly, all internationally recognised valuation methodologies, including discounted cash flow, market-based and cost-based approaches, are considered permissible and feasible for quantifying damages in Lithuania.

Parties involved in arbitration proceedings are generally entitled to recover interest, legal fees, expert fees, and costs associated with the arbitral institution.

Under Article 48 of the Law on Commercial Arbitration, arbitration costs may include:

• fees and reasonable expenses incurred by arbitrators;
• reasonable expenses incurred by the permanent arbitral institution or other parties, as stipulated by agreement; and
• reasonable expenses incurred by the parties themselves in connection with the arbitration process.

The principle commonly applied in cost allocation is “costs follow the event”, whereby the unsuccessful party is typically required to reimburse the successful party for its arbitration-related expenses.

However, the arbitral tribunal retains discretion in determining cost allocation. Where a party’s claims are only partially upheld, the tribunal may proportionally reduce the awarded costs. In cases where both parties are partially successful, or where specific circumstances justify it, the tribunal may decide that each party shall bear its own costs.

Interest may also be awarded, typically in accordance with the applicable substantive law or the parties’ agreement. It is often calculated from the date the claim arose until the date of payment.

Whether an investor has a duty to mitigate losses depends on the applicable law. Under Lithuanian law, the Civil Code does not explicitly impose a duty on the creditor to mitigate losses. However, Article 6.259(2) provides that the debtor’s liability may be reduced if the creditor intentionally or negligently contributed to the losses or failed to take measures to reduce them. The Supreme Court has confirmed that this applies to both actual losses and liquidated damages, and that the creditor’s conduct is assessed when determining the scope of recoverable losses. If the creditor fails to act reasonably to limit the damage, the compensation may be reduced accordingly.

In practice, this means that while the duty to mitigate is not explicitly stated, it is implicitly required under the principles of fairness, reasonableness and good faith, which underpin Lithuanian civil law. Both parties to a dispute are expected to act in a manner that avoids unnecessary harm and promotes equitable outcomes.

Enforcement of Arbitral Awards in Lithuania

In Lithuania, arbitral awards rendered by domestic tribunals – such as the VCCA – are considered enforceable instruments. If not voluntarily complied with, the prevailing party may apply to the competent district court under the Code of Civil Procedure, which will issue a writ of execution. This writ must then be submitted to a bailiff for enforcement.

For foreign arbitral awards, the procedure of recognition of foreign arbitral awards is regulated by the New York Convention, the Code of Civil Procedure and the Law on the Commercial Arbitration. The applicant must submit to the Court of Appeal of Lithuania:

• the original or certified copy of the arbitral award;
• the arbitration agreement; and
• certified translations of both documents into Lithuanian.

As a party to the New York Convention, Lithuania observes the grounds for refusal of recognition and enforcement of arbitral awards established therein. Accordingly, a party opposing the recognition of an award (under the New York Convention) or seeking to set aside an award (pursuant to the Law on Commercial Arbitration) bears the burden of proving one or more of the following:

• invalidity of the arbitration agreement;
• breach of due process;
• ultra petita (award beyond the scope of the arbitration);
• procedural irregularities;
• existence of a set-aside award;
• lack of arbitrability;
• violation of public policy.

Upon recognition, the Court of Appeal issues a writ of execution, which may be enforced through a bailiff.

Awards Set Aside at the Seat of Arbitration

Lithuanian courts adopt a discretionary approach when dealing with arbitral awards that have been annulled at the seat of arbitration. Although Article V(1)(e) of the New York Convention permits refusal of recognition on this basis, Lithuanian jurisprudence does not treat annulment as an automatic bar to enforcement.

Lithuanian courts have historically followed the territorial approach when assessing the enforceability of arbitral awards annulled at the seat of arbitration. This was notably demonstrated in case No. 2T-1-881/2021, where the Court of Appeal of Lithuania stayed enforcement proceedings pending the outcome of annulment proceedings in Serbia. The court reasoned that if the Serbian courts upheld the annulment, the award would no longer be enforceable under Article V(1)(e) of the New York Convention, which allows refusal of recognition where an award has been set aside at the seat.

Following the Serbian Supreme Court’s confirmation of the annulment, the Lithuanian court refused to enforce the partial award, emphasising that the annulment itself was a sufficient ground for refusal. Although the court briefly acknowledged that annulment might not always be decisive – particularly where the respondent contests enforcement – it ultimately declined to assess the substantive grounds for annulment, reinforcing its territorial stance.

However, a 2023 judgment by the Supreme Court of Lithuania suggests a potential shift (case No. e3K-3-177-381/2023). The Supreme Court of Lithuania has clarified that under Article VI of the New York Convention, courts have discretion – but not an obligation – to suspend recognition proceedings of a foreign arbitral award when annulment proceedings are pending in the country of origin. Suspension is allowed only if it better serves the parties’ interests, which requires assessing (i) the good faith of the annulment request, (ii) the likelihood of its success, and (iii) whether suspension would cause undue delay. Courts must be cautious, as suspension conflicts with arbitration’s principle of speedy dispute resolution. To prevent abuse, courts may require the opposing party to provide security for enforcement. Ultimately, suspension is permitted only in exceptional cases, based on careful evaluation of all relevant circumstances.

As such, the Lithuanian approach is still evolving, with courts exercising discretion based on the specific circumstances of each case and the procedural posture of the annulment proceedings.

Sovereign Immunity at the Enforcement Stage

Lithuanian law recognises the principle of sovereign immunity from enforcement, particularly when enforcement is sought against property used for the state’s public functions (eg, military assets, such as warships). In such cases, enforcement is generally barred.

However, sovereign immunity may not be invoked where the enforcement targets property used for commercial purposes, or where the state has acted as a participant in civil law relations. This reflects the restrictive doctrine of sovereign immunity, which distinguishes between public and commercial acts of the state.

Both the New York Convention and the Law on Commercial Arbitration provide that violation of public policy constitutes grounds for refusing recognition and enforcement of arbitral awards in Lithuania, as well as for setting aside domestic arbitral awards. In practice, Lithuanian courts frequently invoke public policy when considering such applications, and the concept is applied with notable width.

Although the Law on Commercial Arbitration does not define “public policy”, its meaning and scope have been developed through case law and legal scholarship. In line with international arbitration doctrine, Lithuanian courts tend to interpret the notion of public policy as encompassing international public policy, which protects fundamental principles of due process, as well as mandatory legal norms that reflect universally recognised principles of law. The purpose of the public policy exception is to safeguard the fundamental values of the Lithuanian legal system from the effects of arbitral awards that threaten those values, even once final and binding.

When assessing whether an arbitral award contravenes public policy, Lithuanian courts do not re-examine the merits of the dispute, the factual findings of the tribunal, or the tribunal’s application of procedural or substantive law. Instead, the court confines itself to a prima facie review aimed at determining whether enforcement of the award would clearly and unambiguously violate fundamental mandatory legal norms or principles of paramount importance to the state and society, recognised at both the national and international levels. The public policy exception may therefore be applied only where the violation is manifest and affects values of the highest significance.

Since both EU and international law form an integral part of the Lithuanian legal system, a breach of public policy encompasses not only violations of Lithuanian fundamental legal principles but also those of EU and international law.

With regard to sovereign immunity, Lithuanian courts, consistent with general principles of international law, recognise the immunity of states from jurisdiction and execution. However, exceptions apply where a state has expressly waived its immunity or where immunity does not extend to assets of a commercial nature. Recovery against state assets is therefore limited to property not designated for sovereign or public purposes, aligning Lithuanian practice with the restrictive doctrine of state immunity prevailing in international law.

In Lithuania, enforcement of judgments and arbitral awards is carried out by bailiffs, who are vested with the authority to access various state registers in order to obtain information regarding the property owned by the debtor. Accordingly, information concerning state-owned assets may be identified through such registers. Where relevant information is held abroad, the competent authorities of the respective foreign state may be approached through the appropriate channels of legal assistance or co-operation.

Instances in Lithuania where recognition and enforcement of a judicial decision against a state are sought are relatively rare. Nonetheless, Lithuanian practice includes a notable case that subsequently gave rise to an investment dispute against Lithuania.

A Cypriot company successfully enforced in the Republic of Lithuania an international arbitration award rendered in 2004 by the London Court of International Arbitration (LCIA) against the Russian Federation (Kaliningrad Region). The subject of enforcement comprised two buildings owned by the Kaliningrad Region in Lithuania.

In 2006, the authorities of the Kaliningrad Region initiated ICC arbitration proceedings against the Republic of Lithuania, invoking the Lithuania–Russia BIT. The claim asserted that the Republic of Lithuania was obliged to compensate the Kaliningrad Region for losses allegedly arising from expropriation carried out in the course of implementing the LCIA award.

Accordingly, Lithuanian courts, by recognising and permitting the enforcement of the LCIA award – including the sale at auction of a building in Vilnius belonging to the Kaliningrad Region and the movable property contained therein – acted lawfully and without breaching the principle of state sovereignty. Therefore, Lithuanian courts have demonstrated a generally favourable approach towards international arbitration.

With respect to the doctrine of piercing the corporate veil, Lithuanian courts have not developed case law addressing its application in the context of state assets. As a result, there is no domestic judicial practice extending enforcement against state-owned enterprises or entities by disregarding their separate legal personality.