LATVIA Trends and Developments Contributed by: Agita Sprūde and Valts Nerets, Sorainen
EU integration: from Achmea to the Multilateral Investment Court Latvia’s accession to the EU in 2004 fundamental- ly transformed its investment policy landscape. EU membership brought Latvia within a comprehensive legal and institutional framework that now shapes vir- tually all aspects of its investment regime. First, Latvia is bound by EU trade and investment agreements with third countries, many of which con- tain substantive investment protection provisions and dispute settlement mechanisms. These include agree- ments with Canada (CETA), Singapore, Vietnam and numerous others negotiated at the EU level. Second, EU regulations directly applicable in Lat- via, 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 politi- cal 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 UNCI- TRAL claims against Latvia are feasible, though pend- ing cases proceed unimpeded. The EU’s reform agenda, spearheaded by the Europe- an Commission, pivots towards a permanent Invest- ment Court System, evolving into the MIC proposal. Key documents from the EU Trade Directorate out- line a two-tier structure: a first-instance tribunal and an appellate body, designed for transparency, pre- dictability 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 pos- its that the MIC’s appellate mechanism could com- pete 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 Work- ing Group III discussions, supporting “meaningful reforms” in ISDS processes. This engagement reflects Latvia’s dual role: defending against claims while pro- moting 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 alter- native mechanisms for resolving intra-EU investment disputes, Latvia took the remarkable step of desig- nating 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 Lat- vian Civil Procedure Law to adjudicate investment claims that would previously have been subject to treaty-based arbitration. This represents an innova- tive attempt to address the post- Achmea gap. Rather than leaving investors with recourse only to ordinary administrative or civil courts, which may lack special- ised expertise in international investment law, Latvia created a dedicated forum to handle complex invest- ment disputes regarding international investment law principles. The new framework is yet to be tested in practice. In 2023, a Dutch mink-farming investor notified Lat- via 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 Lat- via’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.
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