LATVIA Trends and Developments Contributed by: Agita Sprūde and Valts Nerets, Sorainen
evant given Latvia’s energy sector ties to the broader Baltic and post-Soviet region. The ECT offers sub- stantive protections, against discrimination, expro- priation and treaty violations, alongside access to international arbitration. However, the ECT’s relevance is rapidly diminishing. Russia, which signed but never ratified the ECT, with- drew in 2009. Belarus signed the ECT in 1994 but never ratified it, and in 2022 suspended its provisional application. Latvia has decided to withdraw from the ECT, with withdrawal taking effect in August 2026, although ECT obligations will continue to apply for 20 years thereafter under its sunset provisions. Latvia’s investment arbitration landscape: cases and experiences Recent ISDS cases involving Latvia as respondent: modest volume amid jurisdictional battles Latvia’s ISDS docket remains sparse, with eight known cases as a respondent since 2013, according to UNCTAD’s Investment Dispute Settlement Naviga- tor. This low incidence, contrasting with neighbours like Poland (over 50 cases), stems from a stable regu- latory environment and EU integration, though renew- ables and financial sanctions dominate recent filings. Post-2020 cases underscore jurisdictional rigour. In R.S.E. Holdings AG v Republic of Latvia (II) (UNCI- TRAL, instituted 2021, ECT), a Swiss investor chal- lenged Latvia’s alleged modifications to renewable energy incentives, including feed-in tariffs. Initially pending, the tribunal in June 2025 invoked the ECT’s denial-of-benefits clause, dismissing the claim for lack of a genuine link to the claimant, marking a rare jurisdictional victory for Latvia and signalling stricter standing requirements in ECT disputes. The protracted AS PNB Banka, Alexander Guselnik- ov, Grigory Guselnikov and others (formerly AS Nor- vik Banka) v Republic of Latvia (ICSID Case No. ARB/17/47, instituted 2017, Latvia–UK BIT) persists into 2025. Claimants, including the sanctioned PNB Banka, allege breaches of FET via anti-money launder- ing measures. Despite rejecting intra-EU objections in 2020 (noting the UK’s pre-Brexit status), the tribunal in mid-2025 advanced to the quantum phase, with Lat- via securing partial bifurcation. This case exemplifies
enforcement tensions: EU alignment may complicate award recognition under ICSID Article 54. The impact of UAB E Energija v Republic of Latvia A critical case illustrating both the strengths and vul- nerabilities of Latvia’s ISDS exposure is UAB E Ener- gija v Republic of Latvia (ICSID Case No. ARB/12/33, instituted 2012, Latvia–Lithuania BIT). The dispute arose from Latvia’s revocation of permits for a Lithua- nian investor’s cogeneration plant in Rezekne, leading to claims of FET breaches and indirect expropriation. In its December 2017 award, the tribunal found Latvia liable for violating the FET standard, ordering payment of EUR1.585 million in damages plus interest and costs totalling approximately EUR3.7 million. Latvia’s subsequent annulment application was dismissed in April 2020, upholding the award and affirming the tri- bunal’s reasoning on regulatory stability expectations under FET. The case’s impact extends beyond its merits reso- lution, particularly in the post- Achmea era. As an intra-EU dispute under a terminated BIT, E Ener- gija highlights enforcement challenges for legacy awards. Following the annulment denial, the claim- ant petitioned the US District Court for the District of Columbia in August 2020 to confirm and enforce the award under the ICSID Convention. Latvia moved to dismiss, arguing jurisdictional defects tied to Achmea ‘s invalidation of intra-EU arbitration clauses, but the proceedings underscore a key trend: while EU courts may resist recognition, third-country jurisdictions like the USA provide viable enforcement avenues. Substantively, the decision has influenced subsequent Latvian cases by clarifying FET thresholds in energy sector regulations. It emphasised legitimate expecta- tions in permit processes, prompting Latvia to refine administrative procedures to mitigate similar claims, as evidenced in renewables disputes like R.S.E. Hold- ings . However, the intra-EU dimension amplifies risks: the Termination Agreement’s sunset clause protects the investment until 2026, but Achmea ‘s shadow rais - es non-enforcement prospects in EU forums, deter- ring regional investors and reinforcing Latvia’s pivot to extra-EU treaties. E Energija exemplifies ISDS’s dual- edged role, vindicating investor rights while exposing systemic frictions in EU integration.
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