Many Russian depositors are facing losses of up to 40 percent in Cyprus, and are currently considering their legal options. Should one of these options be initiating an investment treaty arbitration against Cyprus for expropriation on the basis of the 1997 Russian Federation-Cyprus bilateral investment treaty, which is included here: IAA-Bilateral-Investment-Treaty-Between-Russia-and-Cyprus.
Such a claim could most obviously be made on the basis of (1) expropriation or (2) unfair treatment and discrimination (and would almost certainly be initiated by EU-based investors against the Russian Federation if it had acted in a similarly brazen fashion, simply ignoring public international law norms concerning the prompt, effective and adequate relief that must be accorded in the event of expropriation).
It appears that this treaty, however, has never been ratified. Hence, it is not legally binding and may not serve as a basis upon which Russian investors may assert their rights under international law. This does not mean, however, that there are not other means for Russian investors to be compensated for their losses via international arbitration.
Below is a list of additional bilateral treaties which have been signed by Russia, many of which have been ratified. If Russian investors are owners of corporate vehicles that are located in one of these countries (for instance, if a parent company is located in the British Virgin Islands or Jersey) then they very well might be able to use investment treaty arbitration to be reimbursed for the amounts that have been taken, by bringing a claim in the name of this “UK-based” corporate vehicle under the April 6, 1989 bilateral investment treaty signed between the UK and Cyprus, which protects against such losses.
What about initiating an arbitration directly against Germany, given its key role in the measures imposed upon Cyprus, harming Russian investors? While it would be impossible to directly initiate an investment dispute against Germany, since the expropriated investments in issue are located in Cyprus, such an action remains theoretically possible, for instance in the case where a German subsidiary of a Russian company was economically harmed by Germany’s actions.
Ultimately, international arbitration offers many means to seek redress for the EU’s/Cyprus’/Germany’s actions, and there is a good chance that someone will pay for Russian losses.
– William Kirtley
|Treaties of Russian Federation|