Investor–State Arbitration 2025
Latvia
Authors
Sorainen has a dedicated team of over 20 arbitration specialists – including five partners and 15 qualified lawyers – who advise global clients. The team comprises lawyers from Tallinn, Riga and Vilnius, working seamlessly with leading international law firms. Sorainen handles high-stakes commercial and investor–state disputes, including landmark and sports arbitration cases. Notable representations in ISDS include representing Windoor AS against the Republic of Kazakhstan, representing AS Tallinna Vesi and United Utilities (Tallinn) B.V. against the Republic of Estonia, and representing UAB E energija against the Republic of Latvia, among others. Sorainen’s specialists frequently sit as arbitrators for local, regional and international arbitration institutions (ICSID, ICC, SCC, DIAC and more), appear as experts (legal, tax, etc) in multi-jurisdictional arbitration proceedings and are represented in the EU Trade Agreements Arbitrator Pool. Sorainen is recognised for its depth, versatility and consistent excellence.
1. Overview
1.1 National Position
Latvia’s position concerning investor–State arbitration is pragmatic and aligned with its EU membership. Latvia participates in international arbitration frameworks and has used treaty-based arbitration (notably under bilateral investment treaties (BITs) and the ICSID Convention). Since EU accession (1 May 2004), Latvia has had to consider EU law limits on intra‑EU BIT arbitration (notably the CJEU’s Achmea judgment), and many EU-related issues have reduced reliance on intra‑EU BIT claims. The Latvian government has not pursued a wholesale denunciation campaign of its remaining BITs in 2024–25. Still, it has managed its treaty relationships in line with EU law and has been active in updating domestic arbitration rules to reflect international standards. Following the Russian full-scale invasion of Ukraine in February 2022, the BIT with Belarus was denounced and consequently was terminated as of 18 October 2023.
Latvia has terminated the following BITs because of the Achmea decision:
1. Latvia–France (agreement between the Republic of Latvia and the French Republic; signed 15 May 1992, in force 1 Oct 1994).
2. Latvia–Denmark (signed 30 Mar 1992, in force 18 Nov 1994).
3. Latvia–Netherlands (signed 14 Mar 1994, in force 1 Apr 1995).
4. Latvia–Estonia (signed 7 Feb 1996, in force 23 May 1996).
5. Latvia–Germany (signed 20 Apr 1993, in force 9 Jun 1996).
6. Latvia–Lithuania (signed 7 Feb 1996, in force 23 Jul 1996).
7. Latvia–Spain (signed 26 Oct 1995, in force 14 Mar 1997).
8. Latvia–Portugal (signed 27 Sep 1995, in force 17 Jul 1997).
9. Latvia–Greece (Hellenic Republic) (sig. 20 Jul 1995, in force Feb 1998).
10. Latvia–Slovakia (signed 9 Apr 1998, in force 30 Oct 1998).
11. Latvia–Belgo-Luxembourg Economic Union (BLEU) (signed 27 Mar 1996, in force 4 Apr 1999).
12. Latvia–Hungary (signed 10 Jun 1999, in force 25 Aug 2000).
13. Latvia–Romania (signed 27 Nov 2001, in force 22 Aug 2002).
14. Latvia–Bulgaria (signed 4 Dec 2003, in force 23 Jul 2004).
15. Latvia–Croatia (signed 4 Apr 2002, in force 25 May 2005).
The above Latvia BITs are listed in Annex A of the 2020 Termination Agreement and were terminated pursuant to that agreement (the instrument that implemented Achmea’s practical effect across signatory EU member states).
Latvia has terminated the following BITs via bilateral terminations/denunciations, where termination was done by mutual agreement or domestic denunciation:
1. Latvia–Norway (BIT signed 1992) – 27 March 2023, terminated via mutual termination/exchange of notes.
2. Latvia–United Kingdom (BIT signed 1994) – 26 January 2023, terminated by mutual agreement (termination instrument).
3. Latvia–Belarus (BIT signed 1998) – denounced by the Saeima (Latvian parliament) on 6 October 2022. The denunciation triggers expiry after the treaty’s notice period (Saeima press release states the agreement will expire in 12 months, and investment protections continue for 20 years under the usual sunset clause). In short, Latvia denounced the Latvia–Belarus investment agreement in October 2022 (expiry/denunciation timed per the treaty’s clause).
1.2 Arbitration Conventions
Latvia is party to the major arbitration conventions relevant to investor–State arbitration. It has ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) and is a Contracting State to the ICSID Convention. Latvia has also ratified the European Convention on International Commercial Arbitration. Therefore, Latvia accepts international recognition and enforcement mechanisms relied on by investors and States in treaty arbitration.
1.3 Prevalence of Investor–State Arbitration
Investor–State arbitration is a persistent, though not dominant, method for resolving disputes involving Latvia. Treaty-based arbitrations (ICSID, UNCITRAL and other institutional fora) have been used selectively – particularly in the energy and infrastructure sectors – and Latvia has defended several high-profile treaty claims. Domestic litigation remains important for contractual and administrative disputes, but investors with treaty protections commonly use arbitration where available because it provides neutral fora and enforceable awards under international conventions. Since 1 January 2021, Latvia has designed the Court of Economic Matters to be competent to hear intra-EU investment disputes against Latvia. However, this domestic instrument is yet to be tested.
1.4 Key Industries
Energy and municipal utilities (district heating, electricity), financial services and construction/infrastructure have seen the most investor–State activity. This is explained by: (i) significant privatisations and concessions in the 1990s–2000s that gave rise to long-term contracts and regulatory interaction; (ii) the strategic nature of utility assets, which can generate expropriation or regulatory-review claims; and (iii) complex valuation and stranded‑assets issues that typically produce treaty claims (for example, the UAB E energija electricity/heating dispute).
1.5 Major Arbitrations
The most legally significant investor–state arbitrations include:
- UAB E energija v Latvia (ICSID ARB/12/33), in which the tribunal found violations of the Latvia–Lithuania BIT (including under the fair and equitable treatment (FET) standard) and awarded compensation (the award and subsequent annulment/annulment-related proceedings were widely reported);
- Eugene Kazmin v Latvia (ICSID ARB/17/5), which resulted in the proceedings being discontinued and the claimant being ordered to bear costs after failure to comply with tribunal directions (including security for costs); and
- Staur Eiendom AS, EBO Invest AS and Rox Holding AS v Latvia (ICSID ARB/16/38), in which the tribunal decided that actions of the State-owned company were not attributable to the State, as it did not act as a de facto organ of the State or exercise governmental authority.
These cases are essential for applying FET and for determining jurisdictional and procedural issues (security for costs, non‑compliance with tribunal orders) against Latvia.
1.6 Reaction to Awards Made Against the State
Latvia has vigorously defended itself in cases where adverse awards have been rendered and has pursued available remedies under applicable rules and domestic procedures. Latvia has participated in annulment and post‑award proceedings in ICSID arbitrations (eg, seeking annulment or raising jurisdictional/procedural objections), and domestic courts have engaged with enforcement questions in line with the New York Convention and the Civil Procedure Law.
2. Investment Treaties, Free Trade Agreements and Investment Laws
2.1 Bilateral and Multilateral Investment Treaties
Latvia has concluded and ratified several BITs and participates in multilateral instruments applicable to investment protection (including the ICSID Convention and the New York Convention). The complete list of Latvia’s international investment agreements (IIAs) is maintained in the UNCTAD investment treaty database, which currently lists nine BITs in force with Armenia, Azerbaijan, Canada, Iceland, Kyrgyzstan, Moldova, Singapore, Uzbekistan and the United States.
Latvia’s treaty practice includes BITs with other Baltic states and a range of third countries concluded in the 1990s and 2000s. Some older intra‑EU BITs have been subject to scrutiny following the CJEU jurisprudence. Latvia continues to manage its treaty network pragmatically, but there has been no mass accession to new BITs in 2024–25.
2.2 Model Bilateral Investment Treaty
Many of Latvia’s BITs follow the classic 1990s Eastern European model BIT (broad protections for investors: FET, protection from expropriation, full protection and security, national and MFN treatment, and investor-state arbitration). While Latvia has not published a uniform ‘model BIT’ in recent years, its older treaties share those standard provisions. Recent practice and EU obligations have required careful revision in how those provisions are interpreted vis‑à‑vis EU law.
2.3 Free Trade Agreements
Latvia is an EU member state (since 1 May 2004). As an EU member state, it is a party to EU trade and investment frameworks. Intra‑EU treaty arbitration has been restricted by the CJEU jurisprudence (Achmea) and later EU policy developments. Investment protection for EU investors is often channelled through EU law remedies and state courts. For non‑EU investors, BITs and multilateral treaties (including the ICSID Convention) remain available where treaty language allows.
2.4 Interpretive Aids
Interpretive aids for investment treaties involving Latvia are limited to the standard diplomatic exchanges and the treaty texts. Latvia (like many states) publishes treaty texts on official channels, and the wider IIA community relies on tribunal decisions, UNCTAD and national foreign ministry materials as interpretive guidance.
2.5 Investment Laws
In the classic sense, Latvia does not have a standalone, comprehensive Foreign Investment Act. Investment protection in Latvia is provided through constitutional guarantees, sectoral laws, corporate law and treaty protections. Sectoral regimes (national security‑sensitive sectors, land rules, gambling, M&A screening in certain circumstances) interact with treaty protections. Where national law provides protections or restrictions, those interact with treaty standards and may be relevant to disputes, but do not replace treaty claims available to covered investors.
2.6 Arbitration Clauses in Investor–State Contracts
Latvian State-owned companies are typically cautious concerning arbitration, and many State-owned companies consider the law as prohibiting such engagement. For the State institutions, it is forbidden to conclude arbitration agreements. Nevertheless, some State-owned entities agree to the use of international arbitration, particularly in concession and procurement contexts, but their prevalence varies by sector. Such clauses can provide potent contract‑based remedies (including direct contractual damages and injunctive mechanisms) complementary to treaty protection. Treaty protections often offer a broader public‑international-law standard (eg, FET) plus access to international arbitration. In contrast, contract clauses create private law obligations enforceable under chosen arbitration rules and seats.
3. Substantive Protections and Breaches
3.1 Common Complaints
Common treaty complaints brought against Latvia include: (i) indirect or direct expropriation (including de facto dispossession following regulatory change); (ii) breaches of FET and legitimate expectations; (iii) breach of contract by state entities or improper interference with concession/lease arrangements; (iv) failure to ensure full protection and security (in narrower physical-security contexts); and (v) denial of justice or procedural irregularities. The relative importance of each depends on the sector and the factual matrix. Historically, in Latvia, regulatory decisions affecting energy/utilities and municipal concessions have been a frequent source of claims.
4. The Arbitral Tribunal
4.1 Limits on Selection
Latvian law permits broad party autonomy in selecting arbitrators. The Arbitration Law (and generally applicable rules) uphold party‑choice principles. There are statutory safeguards as to the number of arbitrators (an odd number defaults for three‑member tribunals) and specific professional requirements in domestic contexts. Still, no broad restriction prevents parties from choosing appropriately qualified arbitrators from outside Latvia for international disputes.
4.2 Default Procedures
The Arbitration Law and the rules of permanent courts of arbitration (for example, the Latvian Chamber of Commerce and Industry Court of Arbitration) provide default procedures for selecting arbitrators. These specify appointment defaults where parties fail to appoint and contain mechanisms for ad hoc panels (each party appoints one arbitrator; the two co‑arbitrators appoint the presiding arbitrator; failing agreement, appointment by an institution or court). Multiparty situations are governed by the applicable arbitral rules or, failing that, by the law providing institutional or court appointment mechanisms.
4.3 Court Intervention
Latvian courts can intervene in arbitrator appointments in limited circumstances, mainly where the parties’ agreed appointment mechanisms fail or where institutional rules call for court assistance. Such intervention is supportive (to preserve arbitration) rather than supervisory. Courts will avoid interfering with substantive tribunal selection except to secure the parties’ agreement or to ensure procedural propriety.
4.4 Challenge and Removal of Arbitrators
The Arbitration Law and institutional rules govern challenges or removals of arbitrators. Grounds mirror international practice: justifiable doubts as to independence or impartiality, failure to disclose circumstances giving rise to conflicts, incapacity, or serious misconduct. Procedural rules provide for challenge procedures and replacement mechanisms.
4.5 Arbitrator Requirements
The Arbitration Law requires disclosure of potential conflicts and upholds standards of independence and impartiality. Institutional rules (eg, ICC, ICSID, UNCITRAL practice for international seats) require arbitrators to disclose relevant relationships and potential conflicts at the outset.
5. Preliminary and Interim Relief
5.1 Types of Relief
The Arbitration Law provides that national courts can assist arbitration by granting interim and provisional measures to preserve assets, evidence or the status quo upon the parties’ request. An arbitral tribunal seated in Latvia and subject to the Arbitration Law does not have the right to award preliminary relief. Possible preliminary relief entails seizing property or funds, registering attachments in public registers (such as the Land Register) or prohibiting specific actions by the defendant (such as enforcing a bank guarantee).
5.2 Role of Domestic Courts
Domestic courts play a supportive but essential role in interim relief. They can grant interim measures in aid of arbitration where necessary. Courts generally act to facilitate arbitral measures to the extent that the finality of the enforceable decision can be substantiated. However, purely interim, provisional or protective (non-final) measures granted by a tribunal are unlikely to be recognised and enforced by Latvian courts.
5.3 Security for Costs
The Arbitration Law does not provide the tribunal with the power to issue a decision on security for costs in local arbitral proceedings. However, decisions of international tribunals on security for costs are allowed and may be enforceable if it can be substantiated that they are final and binding decisions on that particular matter.
6. Third-Party Funding
6.1 Prevalence of Third-Party Funding
Third‑party funding of investor–State claims is permitted and has become more common. Latvia’s procedural rules do not expressly prohibit third‑party funding. International tribunals hearing Latvian disputes have dealt with funding-related issues in the procedural orders.
6.2 Third-Party Funding Case Law
Domestic Latvian jurisprudence specifically addressing third‑party funding in investment arbitration is sparse. However, international tribunals involving Latvia have treated funding disclosures and related procedural consequences per standard international practice. The recent trend across the EU to require transparency about funding has influenced practice in Latvian matters.
6.3 Disclosure and Security for Costs
Tribunals and courts may require disclosure of third‑party funding arrangements where relevant to conflicts of interest or to applications for security for costs. While Latvia lacks a detailed statutory regime for funding disclosure, common practice – particularly in ICSID and other major institutional arbitrations – has been to require disclosure where funding affects fairness or the tribunal’s impartiality.
7. Other Procedural and Evidentiary Issues
7.1 Notice of Dispute and Consultation Period
Pre‑arbitration steps vary by treaty. Many Latvian BITs (and other IIAs) require notice and a cooling‑off/consultation period (often 3–6 months) before recourse to arbitration. Procedural preconditions in a treaty (eg, negotiation periods, exhaustion of local remedies in narrow circumstances) must be observed. Claimants typically follow the treaty’s notice requirements and attempt consultations before initiating arbitration.
7.2 Confidentiality and Transparency
Balancing confidentiality with transparency, Latvia follows the international arbitration norm of private proceedings. However, there is growing demand for transparency in investor–State disputes (public interest, environmental and human rights dimensions). Latvia‑related tribunals have released redacted documents or published awards when required by treaty or tribunal practice. Domestic reforms increasing public access to dispute information and the influence of multilateral instruments (eg, UNCITRAL rules on transparency for certain treaty disputes) are relevant.
8. Damages and Valuation
8.1 Remedies
Arbitral tribunals typically award compensatory monetary relief rather than punitive damages. Injunctive forms of relief are rare in treaty arbitration (and may be difficult to enforce against sovereign states). Still, tribunals can grant restitutory or declaratory relief within their competence and order specific performance only to the extent practically available. Punitive damages are typically not awarded, as this would be against the Latvian public policy and thus not recognised.
8.2 Methodologies for Quantum Assessment
Quantum methodologies commonly used in Latvia‑related disputes include discounted cash flow (DCF) for business valuation, market‑value approaches, and cost‑based methods for replacement or reconstruction. The DCF remains the leading methodology for claims of loss of profits, subject to careful assumptions about cash flows, discount rates and mitigation.
8.3 Recovering Interest and Legal Costs
Parties commonly recover interest on awards (pre‑ and post‑award interest). Tribunals regularly award legal and expert costs where the arbitration rules or governing treaty permit and where the tribunal finds appropriate. Cost allocation is case‑specific, but many tribunals follow a “costs follow the event” approach (loser pays) with adjustments for conduct. ICSID awards commonly allocate costs and may order the losing party to pay the winning party’s costs.
8.4 Mitigation of Damages
Investors have a duty to mitigate losses. Tribunals routinely assess whether claimants took reasonable steps to limit damages and may reduce awards where mitigation was lacking. This duty is a standard element of damages quantification in arbitration.
9. Enforcement of Awards
9.1 Enforcement Procedure
Enforcement of awards in Latvia follows the New York Convention and the Civil Procedure Law. A foreign award set aside at its seat will face significant enforcement hurdles in Latvia (courts will consider the set‑aside but apply the New York Convention framework and national rules). Latvian courts respect ICSID awards (enforceability under the New York Convention) and will follow statutory procedures for recognition and enforcement. In the face of pending set‑aside proceedings at the seat, Latvian courts may stay enforcement or assess enforceability under the ICSID Convention and domestic law. Sovereign immunity is limited with respect to commercial assets. Pure sovereign immunity claims may still be raised and have succeeded in narrow circumstances.
9.2 Approach of the Courts
Latvian courts adopt a pro‑arbitration approach consistent with the New York Convention and the UNCITRAL Model Law principles embedded in domestic law. Refusal of enforcement on public policy grounds is narrow and follows the New York Convention’s limited grounds (eg, invalid arbitration agreement, lack of due process, public policy violation). Latvian courts have considered domestic and international public policy in rare cases. In terms of sovereign immunity, courts distinguish between sovereign acts and commercial assets. Enforcement against commercial assets is generally permitted.
9.3 Asset Tracing and Recovery
Asset tracing and recovery follow standard civil‑enforcement techniques under the Civil Procedure Law (searches, seizures, attachment of assets). When State‑owned entities hold discrete commercial assets, tribunals and claimants have pursued enforcement against those commercial assets. Courts apply corporate‑veil principles reluctantly and cautiously, and will pierce the veil only in minimal circumstances where abuse or sham is shown.
Sorainen
Kr. Valdemāra 21-11,
LV-1010 Riga
Latvia
+371 67 365 000
latvia@sorainen.com www.sorainen.com
Trends and Developments
Authors
Sorainen has a dedicated team of over 20 arbitration specialists – including five partners and 15 qualified lawyers – who advise global clients. The team comprises lawyers from Tallinn, Riga and Vilnius, working seamlessly with leading international law firms. Sorainen handles high-stakes commercial and investor–state disputes, including landmark and sports arbitration cases. Notable representations in ISDS include representing Windoor AS against the Republic of Kazakhstan, representing AS Tallinna Vesi and United Utilities (Tallinn) B.V. against the Republic of Estonia, and representing UAB E energija against the Republic of Latvia, among others. Sorainen’s specialists frequently sit as arbitrators for local, regional and international arbitration institutions (ICSID, ICC, SCC, DIAC and more), appear as experts (legal, tax, etc) in multi-jurisdictional arbitration proceedings and are represented in the EU Trade Agreements Arbitrator Pool. Sorainen is recognised for its depth, versatility and consistent excellence.
The Future of Investment Disputes for Latvia: Trends and Developments in Investor–State Arbitration
Introduction: Latvia’s investment protection journey
In the three decades since regaining independence, Latvia has navigated a complex evolution in its approach to foreign investment protection and dispute resolution. From its initial post-Soviet efforts to attract international capital through bilateral investment treaties (BITs) to its integration into the EU’s comprehensive legal framework, Latvia’s investment regime has been shaped by shifting domestic priorities, EU harmonisation and increasingly volatile geopolitical realities. Today, Latvia stands at a critical juncture. The geopolitical tensions that have reshaped Europe’s security architecture are fundamentally transforming the landscape of investment protection. Russia’s war of aggression against Ukraine and Belarus’s complicity have forced a recalibration of treaty relationships, the introduction of unprecedented EU sanctions targeting investment arbitration, and a broader reassessment of how investment disputes intersect with national security and foreign policy. This article examines the current state of investor–state arbitration involving Latvia, analyses emerging trends and challenges, and offers perspectives, focusing on caseload dynamics, EU-led reforms such as the proposed Multilateral Investment Court (MIC), recent arbitral proceedings and domestic adaptations.
As of October 2025, Latvia’s investor–state dispute settlement (ISDS) exposure remains modest, with fewer than a dozen known cases since the early 2010s. However, evolving global and regional pressures signal a pivotal juncture for its investment dispute regime. These developments not only influence inbound foreign direct investment (FDI), which rose 4.4% to EUR26 billion in 2024, but also underscore Latvia’s active role in international reform dialogues.
It addresses fundamental questions: How is Latvia protecting its investors in increasingly hostile jurisdictions? What mechanisms remain viable for dispute resolution? And how is Latvia balancing its international legal obligations with the imperatives of EU solidarity and national security?
Building the foundation of Latvia’s investment protection framework: ICSID, the Energy Charter Treaty and bilateral investment treaties
Following the restoration of independence in 1991, Latvia swiftly established itself within the international investment protection architecture. Ratification of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“ICSID Convention”) in 1997 and accession to the Energy Charter Treaty (ECT) in 1998 signalled Latvia’s commitment to providing robust legal protections for foreign investors.
In parallel, Latvia pursued an ambitious BIT programme to attract foreign capital and provide reciprocal protections for Latvian investors abroad. These treaties typically include core investment protections, safeguards against expropriation without compensation, guarantees of fair and equitable treatment (FET), most-favoured-nation treatment and, critically, access to international dispute resolution through investor–state arbitration. Latvia’s BIT portfolio reflects both its geographic position and its economic priorities.
The country concluded treaties with European partners (including Germany, the UK, France and the Nordic countries), regional neighbours (Estonia, Lithuania and Poland), and, crucially, post-Soviet states, including Belarus, Ukraine and several Central Asian republics. Notably, Latvia never concluded a BIT with Russia, distinguishing its treaty network from that of some neighbouring Baltic states. This absence would later prove significant in shaping Latvia’s options for protecting investors with interests in Russia and determining the mechanisms available for dispute resolution.
While many intra-EU BITs have been terminated following the Court of Justice of the European Union’s landmark Achmea decision in 2018, which held that investor–state arbitration clauses in intra-EU BITs are incompatible with EU law, Latvia’s treaties with third countries remain a vital component of its investment protection framework.
EU integration: from Achmea to the Multilateral Investment Court
Latvia’s accession to the EU in 2004 fundamentally transformed its investment policy landscape. EU membership brought Latvia within a comprehensive legal and institutional framework that now shapes virtually all aspects of its investment regime.
First, Latvia is bound by EU trade and investment agreements with third countries, many of which contain substantive investment protection provisions and dispute settlement mechanisms. These include agreements with Canada (CETA), Singapore, Vietnam and numerous others negotiated at the EU level.
Second, EU regulations directly applicable in Latvia, such as Regulation (EU) 2019/452 establishing a framework for screening foreign direct investment, impose obligations regarding investment security review and co-ordination with other EU member states and institutions.
Third, and perhaps most significantly, EU-level political and legal developments increasingly determine the parameters of investment dispute settlement. Latvia’s ISDS framework is inextricably linked to EU law, where post-Achmea rulings have dismantled intra-EU BITs, confining viable claims to extra-EU treaties. The 2020 Termination Agreement, ratified by Latvia in January 2021, nullified 107 intra-EU BITs, including Latvia’s pacts with Lithuania and Sweden, with sunset clauses (ten to 20 years) offering residual protection for legacy investments.
As of October 2025, no new intra-EU ICSID or UNCITRAL claims against Latvia are feasible, though pending cases proceed unimpeded.
The EU’s reform agenda, spearheaded by the European Commission, pivots towards a permanent Investment Court System, evolving into the MIC proposal. Key documents from the EU Trade Directorate outline a two-tier structure: a first-instance tribunal and an appellate body, designed for transparency, predictability and appeal rights, addressing Achmea’s autonomy concerns under Articles 18, 267 and 344 of the Treaty on the Functioning of the European Union. Recent analyses question the MIC’s implications for existing forums like ICSID. An August 2025 study posits that the MIC’s appellate mechanism could compete with or “rebrand” ICSID, potentially weakening its dominance if third countries opt in.
Latvia, as an EU member, aligns with this trajectory. In January 2025, its Permanent Mission to the UN in Vienna actively participated in UNCITRAL Working Group III discussions, supporting “meaningful reforms” in ISDS processes. This engagement reflects Latvia’s dual role: defending against claims while promoting a rules-based global order conducive to its export-oriented economy.
Latvia’s innovative response: the Court of Economic Matters
In the absence of EU-level harmonisation on alternative mechanisms for resolving intra-EU investment disputes, Latvia took the remarkable step of designating its Court of Economic Matters as competent to hear intra-EU investment disputes against Latvia. This court, established as part of Latvia’s specialised judicial system, was given jurisdiction under the Latvian Civil Procedure Law to adjudicate investment claims that would previously have been subject to treaty-based arbitration. This represents an innovative attempt to address the post-Achmeagap. Rather than leaving investors with recourse only to ordinary administrative or civil courts, which may lack specialised expertise in international investment law, Latvia created a dedicated forum to handle complex investment disputes regarding international investment law principles.
The new framework is yet to be tested in practice. In 2023, a Dutch mink-farming investor notified Latvia of an intra-EU investment dispute, indicating its intent to file an intra-EU investment claim for EUR56 million at the Court of Economic Matters when Latvia’s mink-farming ban comes into force. Although the Court of Economic Matters is a relatively modern court with judges specialised in commercial matters, it falls within the general judicial system, subject to two-tier appeals; thus, it is yet to be seen whether Latvian judges would be up to the task of applying international investment law according to the well-settled principles.
The shadow of geopolitics
Global economic volatility: a surging caseload and reform imperatives
The ISDS ecosystem has expanded dramatically, fuelled by economic volatility, regulatory changes and investor assertiveness. According to the UN Conference on Trade and Development (UNCTAD), the total treaty-based ISDS caseload hit 1,401 by late 2024, with an analysis of trends slated for the forthcoming World Investment Report 2025. The ICSID alone registered 55 new cases in 2024, 53 under the ICSID Convention, predominantly based on BITs (52%) and concentrated in the oil, gas and mining sectors (38%). This uptick aligns with broader patterns: 78% of ICSID cases concluded in 2024 were decided by tribunals, up from 69% in 2023, indicating a shift towards merits-based resolutions over settlements or discontinuities.
Emerging trends reveal both opportunities and challenges. Tribunals increasingly award damages far below claimant demands, with ICSID data showing a median award of approximately 30–40% of claimed amounts, reflecting scrutiny over causation and valuation methodologies. Statistically, renewables and energy disputes have proliferated, comprising over 20% of new filings, as governments recalibrate subsidies amid climate transitions, a dynamic pertinent to Latvia’s green energy ambitions.
These trends amplify the need for strategic engagement for smaller economies like Latvia. With limited caseloads, Latvia benefits from global efficiencies, such as ICSID’s 2024 caseload statistics, which provide empirical benchmarks for risk assessment, while advocating for equitable reforms to prevent disproportionate burdens on developing or transition states.
Strategic decoupling: shadow of Russia’s war
Despite Latvian businesses’ historical footprint in Russia and Belarus, along with exports totalling USD1.12 billion to Russia and USD154.11 million to Belarus in 2024, Latvian investors contemplating or pursuing ISDS claims against Russia or Belarus face procedural hurdles in arbitration, along with enforcement barriers erected by geopolitical sanctions and regulatory countermeasures.
The geopolitical earthquake triggered by Russia’s full-scale invasion of Ukraine in February 2022 has had profound implications for Latvia’s investment treaty framework. Like its Baltic neighbours, Latvia has undertaken a strategic decoupling from Russia and Belarus across multiple dimensions: energy, transport, trade and, crucially, investment protection. Latvia has moved to terminate its BIT with Belarus, reflecting legal necessity and political imperatives. The absence of a Latvia–Russia BIT means that Latvian investors in Russia have historically relied primarily on the ECT rather than a BIT for protection.
The termination carries significant legal implications. Like similar BITs, the Latvia–Belarus treaty contains a “sunset clause” extending treaty protection for existing investments for 20 years after termination.
The EU’s 18th sanctions package, adopted on 18 July 2025, prohibits the recognition or enforcement of ISDS awards rendered in favour of sanctioned Russian or Belarusian entities within EU member states. Under Council Regulation (EU) 2025/1494, EU courts and authorities are compelled to reject such awards, overriding treaty commitments to arbitration outcomes and effectively nullifying the New York Convention’s uniformity in intra-EU contexts.
The regulations directly address concerns that Russian or Belarusian state-controlled entities might weaponise investment arbitration, using BIT protections and arbitral proceedings as economic and political pressure tools. By categorically prohibiting such claims and preventing enforcement, the EU has prioritised policy coherence and member state protection over traditional principles of investment protection and arbitration neutrality. However, these measures risk undermining the predictability and rule-of-law foundations that make investment arbitration attractive.
Nevertheless, the enforcement realities mean that claims against Russia and Belarus will remain expensive and practically unenforceable for a long time.
The Energy Charter Treaty: evolving protection in the energy sector
The ECT has historically provided critical protection for cross-border energy investments, particularly relevant given Latvia’s energy sector ties to the broader Baltic and post-Soviet region. The ECT offers substantive protections, against discrimination, expropriation and treaty violations, alongside access to international arbitration.
However, the ECT’s relevance is rapidly diminishing. Russia, which signed but never ratified the ECT, withdrew in 2009. Belarus signed the ECT in 1994 but never ratified it, and in 2022 suspended its provisional application. Latvia has decided to withdraw from the ECT, with withdrawal taking effect in August 2026, although ECT obligations will continue to apply for 20 years thereafter under its sunset provisions.
Latvia’s investment arbitration landscape: cases and experiences
Recent ISDS cases involving Latvia as respondent: modest volume amid jurisdictional battles
Latvia’s ISDS docket remains sparse, with eight known cases as a respondent since 2013, according to UNCTAD’s Investment Dispute Settlement Navigator. This low incidence, contrasting with neighbours like Poland (over 50 cases), stems from a stable regulatory environment and EU integration, though renewables and financial sanctions dominate recent filings.
Post-2020 cases underscore jurisdictional rigour. In R.S.E. Holdings AG v Republic of Latvia (II) (UNCITRAL, instituted 2021, ECT), a Swiss investor challenged Latvia’s alleged modifications to renewable energy incentives, including feed-in tariffs. Initially pending, the tribunal in June 2025 invoked the ECT’s denial-of-benefits clause, dismissing the claim for lack of a genuine link to the claimant, marking a rare jurisdictional victory for Latvia and signalling stricter standing requirements in ECT disputes.
The protracted AS PNB Banka, Alexander Guselnikov, Grigory Guselnikov and others (formerly AS Norvik Banka) v Republic of Latvia (ICSID Case No. ARB/17/47, instituted 2017, Latvia–UK BIT) persists into 2025. Claimants, including the sanctioned PNB Banka, allege breaches of FET via anti-money laundering measures. Despite rejecting intra-EU objections in 2020 (noting the UK’s pre-Brexit status), the tribunal in mid-2025 advanced to the quantum phase, with Latvia securing partial bifurcation. This case exemplifies enforcement tensions: EU alignment may complicate award recognition under ICSID Article 54.
The impact of UAB E Energija v Republic of Latvia
A critical case illustrating both the strengths and vulnerabilities of Latvia’s ISDS exposure is UAB E Energija v Republic of Latvia (ICSID Case No. ARB/12/33, instituted 2012, Latvia–Lithuania BIT). The dispute arose from Latvia’s revocation of permits for a Lithuanian investor’s cogeneration plant in Rezekne, leading to claims of FET breaches and indirect expropriation. In its December 2017 award, the tribunal found Latvia liable for violating the FET standard, ordering payment of EUR1.585 million in damages plus interest and costs totalling approximately EUR3.7 million. Latvia’s subsequent annulment application was dismissed in April 2020, upholding the award and affirming the tribunal’s reasoning on regulatory stability expectations under FET.
The case’s impact extends beyond its merits resolution, particularly in the post-Achmea era. As an intra-EU dispute under a terminated BIT, E Energija highlights enforcement challenges for legacy awards. Following the annulment denial, the claimant petitioned the US District Court for the District of Columbia in August 2020 to confirm and enforce the award under the ICSID Convention. Latvia moved to dismiss, arguing jurisdictional defects tied to Achmea’s invalidation of intra-EU arbitration clauses, but the proceedings underscore a key trend: while EU courts may resist recognition, third-country jurisdictions like the USA provide viable enforcement avenues.
Substantively, the decision has influenced subsequent Latvian cases by clarifying FET thresholds in energy sector regulations. It emphasised legitimate expectations in permit processes, prompting Latvia to refine administrative procedures to mitigate similar claims, as evidenced in renewables disputes like R.S.E. Holdings. However, the intra-EU dimension amplifies risks: the Termination Agreement’s sunset clause protects the investment until 2026, but Achmea’s shadow raises non-enforcement prospects in EU forums, deterring regional investors and reinforcing Latvia’s pivot to extra-EU treaties. E Energija exemplifies ISDS’s dual-edged role, vindicating investor rights while exposing systemic frictions in EU integration.
Earlier precedents inform trends. EBO Invest AS, Rox Holding AS and Staur Eiendom AS v Republic of Latvia (ICSID Case No. ARB/16/38, 2016, Latvia–Norway BIT) ended in Latvia’s favour in 2020, dismissing airport development claims and imposing EUR2.6 million in costs on claimants.
Discontinuities highlight settlement efficacy: Eugene Kazmin v Republic of Latvia (ICSID, 2017, Latvia–Ukraine BIT) over steel plant insolvency ended without an award, as did Indrek Kuivallik v Latvia (UNCITRAL, 2014, Estonia–Latvia BIT) on a wind energy takeover. A prior R.S.E. Holdings AG v Latvia (I) (ad hoc, 2014, Latvia–Switzerland BIT) on Parex Bank nationalisation settled amicably, while Bryn Services Ltd. v Latvia (ad hoc, 2013, Latvia–Switzerland BIT) was resolved via negotiation.
These outcomes reveal trends: tribunals favour states on jurisdiction (eg, denial of benefits) and merits (eg, regulatory deference), with Latvia winning or settling 75% of decided cases. Renewables disputes like R.S.E. Holdings align with global surges, while financial claims test AML–EU tensions.
Latvian investors as claimants in investor–state disputes
Information on Latvian investors initiating arbitrations against host states remains limited, mainly due to the confidentiality of many proceedings and Latvia’s modest outbound FDI profile, with an outward stock of approximately EUR2.5 billion as of 2024, primarily in neighbouring Baltic and Nordic markets. Nonetheless, Latvian entities have pursued claims in several jurisdictions, particularly within Eastern Partnership countries like Ukraine and Moldova, and further afield in Central Asia and Scandinavia. These disputes often stem from alleged contract breaches, abrupt regulatory changes, discriminatory treatment, or expropriatory measures in energy, finance, insurance and fisheries, highlighting emerging markets’ regulatory and political risks.
Latvian investors have invoked BITs and the ECT in several notable cases, yielding mixed outcomes that underscore the potential for recourse and enforcement challenges. A prominent early example is Limited Liability Company AMTO v Ukraine (SCC Case No. 080/2005), where the Latvian claimant alleged breaches of promotion and protection standards under Article 10(1) of the ECT arising from the Ukrainian state’s failure to safeguard AMTO’s minority shareholding in Ukrtansgaz, a subsidiary tied to contracts with the bankrupt Zaporozhye nuclear power plant. In its 26 March 2008 final award, the tribunal found a limited breach but rejected most claims, awarding only EUR3.5 million in damages plus interest, far below the EUR133 million sought, while emphasising the state’s margin of appreciation in commercial disputes.
In a more recent intra-EU context, Oļegs Roščins v Republic of Lithuania (ICSID Case No. ARB/18/37, often associated with the Latvian insurer RO-INS) challenged Lithuania’s 2018 revocation of the claimant’s insurance licence and subsequent liquidation proceedings under the 1992 Latvia–Lithuania BIT. The Latvian investor contended that these measures constituted unfair and inequitable treatment and indirect expropriation, driven by discriminatory enforcement amid solvency concerns. The tribunal’s May 2023 award acknowledged a breach of the FET standard due to procedural deficiencies. Still, it awarded no damages, deeming moral harm unquantifiable and the claimant’s losses non-attributable to the breach. While affirming partial liability, this outcome illustrates tribunals’ reluctance to impose financial penalties in regulatory-heavy sectors without clear causation.
Perhaps the most high-profile case is Valeri Belokon v Kyrgyz Republic (UNCITRAL, PCA Case No. AA518), initiated under the 2008 Latvia–Kyrgyzstan BIT. The Latvian investor alleged expropriation and denial of justice following the Kyrgyz authorities’ 2010 seizure and liquidation of Manas Bank on money-laundering suspicions. The tribunal upheld the claims in its 24 October 2014 award, granting USD15 million in compensation for the bank’s value. However, the Paris Court of Appeal annulled the award on 21 February 2017, citing public policy violations due to evidence of the claimant’s involvement in illicit activities, a decision upheld by the French Supreme Court in 2022. This annulment exemplifies the fragility of awards tainted by fraud allegations, particularly in politically volatile environments.
More recently, Latvian investors have targeted Norway over restrictions on snow crab harvesting in the Barents Sea, invoking the 1992 Latvia–Norway BIT. In Peteris Pildegovics and SIA North Star v Kingdom of Norway (ICSID Case No. ARB/20/11), registered in April 2020, the claimants challenged Norway’s fishing bans and licence denials as discriminatory and expropriatory, claiming over EUR10 million in losses from thwarted expeditions. The tribunal dismissed all claims on the merits in its 22 December 2023 award, prioritising Norway’s sovereign resource management under international law, including UNCLOS. As of October 2025, the claimants’ February 2024 annulment application remains pending, with memorials exchanged in early 2025 and a hearing scheduled for Q1 2026. A parallel claim, SIA Baltjura-Serviss v Kingdom of Norway (ICSID Case No. ARB/23/7), filed in March 2023 and raising similar allegations of FET breaches and market access denial, was discontinued in January 2024 pursuant to ICSID Arbitration Rule 44, following a settlement or strategic withdrawal, with costs allocated accordingly.
Collectively, these cases, spanning energy (AMTO), insurance (Roščins), banking (Belokon) and fisheries (Pildegovics and Baltjura-Serviss), demonstrate Latvian investors’ willingness to leverage ISDS for high-stakes disputes in diverse, often sensitive sectors. Yet, they also reveal persistent hurdles: jurisdictional pushback, modest success rates (with only partial or zero recoveries in decided matters) and enforcement pitfalls, as seen in annulments and discontinuities. In Eastern Partnership contexts like Ukraine and Moldova, where Latvian FDI focuses on infrastructure and trade, such claims remain sporadic, potentially deterred by geopolitical instability and the ECT’s intra-bloc limitations post-Achmea. As Latvia’s outbound investments grow, particularly in renewables and logistics, investors may increasingly turn to reformed mechanisms like the MIC to mitigate these risks. At the same time, policymakers could enhance support through dedicated advisory units to navigate procedural complexities.
Forward-looking perspectives: balancing security, solidarity and growth
Latvia’s three-decade journey in investor–state arbitration reflects a nation balancing its aspirations for economic openness with the rigours of EU membership and the tremors of geopolitical upheaval. Latvia has cultivated a robust yet pragmatic framework for protecting FDI from the foundational ratification of the ICSID Convention and accession to the ECT in the late 1990s to an expansive BIT network tailored to its geographic and economic realities.
In the future, Latvia will confront existential questions about how to shield outbound investors in “hostile” jurisdictions. Viable mechanisms persist, such as extra-EU BITs, ECT-provided sunsets until 2046, and EU free trade agreements. Inbound FDI protection hinges on EU solidarity: sanctions fortify national security yet risk chilling investor confidence. It is unlikely that national institutions like Latvia’s Court of Economic Matters, designated to hear investor–state disputes, could restore appeal, even if proven adept at FET applications.
Sorainen
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LV-1010 Riga
Latvia
+371 67 365 000
latvia@sorainen.com www.sorainen.com
Law and Practice
Authors
Sorainen has a dedicated team of over 20 arbitration specialists – including five partners and 15 qualified lawyers – who advise global clients. The team comprises lawyers from Tallinn, Riga and Vilnius, working seamlessly with leading international law firms. Sorainen handles high-stakes commercial and investor–state disputes, including landmark and sports arbitration cases. Notable representations in ISDS include representing Windoor AS against the Republic of Kazakhstan, representing AS Tallinna Vesi and United Utilities (Tallinn) B.V. against the Republic of Estonia, and representing UAB E energija against the Republic of Latvia, among others. Sorainen’s specialists frequently sit as arbitrators for local, regional and international arbitration institutions (ICSID, ICC, SCC, DIAC and more), appear as experts (legal, tax, etc) in multi-jurisdictional arbitration proceedings and are represented in the EU Trade Agreements Arbitrator Pool. Sorainen is recognised for its depth, versatility and consistent excellence.
Trends and Developments
Authors
Sorainen has a dedicated team of over 20 arbitration specialists – including five partners and 15 qualified lawyers – who advise global clients. The team comprises lawyers from Tallinn, Riga and Vilnius, working seamlessly with leading international law firms. Sorainen handles high-stakes commercial and investor–state disputes, including landmark and sports arbitration cases. Notable representations in ISDS include representing Windoor AS against the Republic of Kazakhstan, representing AS Tallinna Vesi and United Utilities (Tallinn) B.V. against the Republic of Estonia, and representing UAB E energija against the Republic of Latvia, among others. Sorainen’s specialists frequently sit as arbitrators for local, regional and international arbitration institutions (ICSID, ICC, SCC, DIAC and more), appear as experts (legal, tax, etc) in multi-jurisdictional arbitration proceedings and are represented in the EU Trade Agreements Arbitrator Pool. Sorainen is recognised for its depth, versatility and consistent excellence.
