International Arbitration In The Context Of Danish Investor Protection In Russia – Arbitration & Dispute Resolution – European Union

Legal Protection of Danish Foreign Investments in Russia

1. Introduction

Russian authorities have implemented economic measures in response to international condemnation of their invasion of Ukraine. This article examines the legal basis for Danish investors in Russia to seek compensation through international arbitration for losses resulting from breaches of the Investment Treaty between Denmark and Russia. The treaty requires Russia to create favorable conditions for Danish investors and provide full protection and security to Danish investments in Russian territory.

Authors: Morten Adler-Nissen, Danish Attorney and Solicitor of England & Wales, Kromann Reumert, and Danna Zhang, Danish Attorney, Bruun & Hjejle

2. Legal Protection of Danish Foreign Investments

Both Russian legislation and international law offer protection for foreign investments in Russia.

• General rules and principles of international law provide some protection for foreign investments, but investors typically need to seek diplomatic protection from their home state.
• Russia has a Foreign Direct Investment (FDI) Act that protects foreign investments and allows for compensation in case of infringements or forced nationalizations. However, claims under this act must be settled by Russian courts.
• Bilateral investment treaties (BITs) grant foreign investors rights and remedies for effective enforcement through investor-state dispute settlement (ISDS).

Denmark has an Investment Treaty with Russia that requires Russia to create favorable conditions and provide full protection and security to Danish investments in Russian territory.

3. The Investment Treaty between Denmark and Russia

The bilateral Investment Treaty between Denmark and Russia offers the most effective protection for Danish companies’ investments in Russia.

• The treaty defines “investments” as any asset invested by a Danish investor in Russia in accordance with laws and regulations.
• The treaty includes substantive orders and prohibitions regarding the treatment of foreign investors and their investments.
• The treaty allows Danish investors to initiate arbitration proceedings against Russia for settlement.

Under the Investment Treaty, Russia is obligated to provide full protection and security to Danish investments in its territory. This includes protection against physical injury, destruction, and access to effective enforcement of the investor’s rights.

The treaty also requires fair and equitable treatment of Danish investors and their investments, comparable to that given to investments of Russian or third country investors.

The arbitration clause in the Investment Treaty offers Danish investors an advantage by allowing them to bypass Russian courts and avoid associated political risks.

Overall, the Investment Treaty provides significant protection for Danish investors in Russia, allowing them to seek compensation through arbitration if Russia fails to meet its obligations.

Originally published by Karnov Group Denmark A/S on the 18th of January, 2023.

SDGs, Targets, and Indicators Analysis

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 16: Peace, Justice, and Strong Institutions
• SDG 17: Partnerships for the Goals

The issues highlighted in the article are related to the Russian invasion of Ukraine and the economic measures taken by Russia in response to Western sanctions. These issues involve international relations, investment protection, and legal rights, which align with SDG 16 (Peace, Justice, and Strong Institutions) and SDG 17 (Partnerships for the Goals).

2. What specific targets under those SDGs can be identified based on the article’s content?

• SDG 16.3: Promote the rule of law at the national and international levels and ensure equal access to justice for all.
• SDG 17.3: Mobilize additional financial resources for developing countries from multiple sources.

Based on the content of the article, the specific targets that can be identified are SDG 16.3, which focuses on promoting the rule of law and ensuring equal access to justice, and SDG 17.3, which aims to mobilize additional financial resources for developing countries.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Indicator for SDG 16.3: Number of countries with a functioning and comprehensive legal aid system.
• Indicator for SDG 17.3: Amount of financial resources mobilized from international sources to developing countries.

The article does not explicitly mention indicators, but based on the identified targets, potential indicators can be used to measure progress towards these targets. For SDG 16.3, an indicator could be the number of countries that have a functioning and comprehensive legal aid system. For SDG 17.3, an indicator could be the amount of financial resources mobilized from international sources to developing countries.

Table: SDGs, Targets, and Indicators

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Source: mondaq.com

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