CJEU: Investment protection agreements such as the one between Germany and Russia are at odds with EU sanctions
Berlin, 17th December 2025: At tomorrow's European Council meeting, EU countries will discuss the use of frozen Russian assets. But Belgium in particular fears billions in lawsuits before international arbitral tribunals. This is because Russian oligarchs and corporations can – and are already – using outdated investment protection agreements between EU states and Russia to sue against the freezing of their assets via parallel justice. A total of $62 billion is already at stake in lawsuits and lawsuit threats from sanctioned investors. As shown by a study published last week by PowerShift.
Cancel investment agreements with Russia and others
European NGOs, including PowerShift, have therefore today filed infringement complaints with the European Commission against Germany, France, Austria and Sweden.1 States should terminate their investment agreements with Russia and other countries as they impede both effective sanctions and regulations in the public interest.2
The complaints raised increase the pressure on European governments because, according to recent press reports, the European Commission, for its part, has already called on EU member states to terminate the agreements with Russia.
The European Court of Justice (ECJ) already ruled in 2009 that these agreements were incompatible with European sanctions policy and condemned, among other things: Austria and Sweden, because they have not eliminated this incompatibility. To date, however, these countries have not brought their agreements into line with EU law.
“Claims before non-transparent arbitral tribunals have been restricting political room for manoeuvre in climate, energy and social policy for decades – now it also applies to sanctions against warmongers.”, explains Fabian Flues of PowerShift.
“The Federal Government has described the German investment protection agreements as “obsolete in many respects”. But there is a lack of political will to address these toxic contaminants. In view of the massive increase in lawsuits against sanctions, there is no time to lose. The agreements must be terminated as soon as possible.”
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- Specifically, PowerShift against Germany, Attac against Austria, the Veblen Institute against France and Jordens Vänner/Friends of the Earth against Sweden submit complaints to the EU Commission under Article 258 TFEU. The Commission should call on Member States to eliminate the incompatibilities of their investment agreements with EU law. The easiest way to do this would be to terminate these contracts. The procedure could have an impact on all investment agreements of EU Member States as they have similar characteristics.
- In the judgments Achmea (2018) and Komstroy (2021) the CJEU found that ISDS mechanisms within the EU are incompatible with the principles of autonomy of the EU legal order and mutual trust between Member States. In its 2019 Opinion 1/17 on CETA, the CJEU confirmed that ISDS outside the EU is compatible only if it does not undermine the autonomy of the EU legal order. In the same opinion, the Court clarified that an agreement containing ISDS would have such a detrimental effect if the arbitral tribunals established under that agreement:
• interpret or apply provisions of EU law; or
• could take decisions that prevent the EU institutions from acting within the Union’s constitutional framework (e.g. by finding that a public interest measure in line with EU rules constitutes unfair treatment of investors).
What is Investment Arbitration (ISDS)?
Many Bilateral Investment Treaties (BITs) contain investor-state dispute settlement clauses (ISDS). These give foreign corporations the right to circumvent national courts. They can sue states in private arbitral tribunals and claim huge financial compensation if governments enact new rules that could reduce their profits of profit expectations – even if those rules serve the public interest.
If you have any questions, please do not hesitate to contact:
Fabian Flues, Trade and Investment Policy Officer at PowerShift: fabian.flues@power-shift.de, +49 (0)30 308 821 92
