LATVIA Trends and Developments Contributed by: Agita Sprūde and Valts Nerets, Sorainen
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 independ- ence, 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 trea- ties (BITs) to its integration into the EU’s comprehen- sive legal framework, Latvia’s investment regime has been shaped by shifting domestic priorities, EU har- monisation and increasingly volatile geopolitical reali- ties. 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 secu- rity and foreign policy. This article examines the cur- rent 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 pres- sures signal a pivotal juncture for its investment dis- pute 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 juris- dictions? What mechanisms remain viable for dispute resolution? And how is Latvia balancing its interna- tional legal obligations with the imperatives of EU soli- darity 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 internation - al investment protection architecture. Ratification of the Convention on the Settlement of Investment Dis- putes 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 pro- gramme to attract foreign capital and provide recip- rocal protections for Latvian investors abroad. These treaties typically include core investment protections, safeguards against expropriation without compensa- tion, 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 part- ners (including Germany, the UK, France and the Nordic countries), regional neighbours (Estonia, Lithu- ania 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 deter- mining the mechanisms available for dispute resolu- tion. While many intra-EU BITs have been terminated fol- lowing 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.
149 CHAMBERS.COM
Powered by FlippingBook