LITHUANIA Trends and Developments Contributed by: Kęstutis Švirinas, Ieva Rimavičienė, Domantė Lunytė and Luka Tamulionytė, Sorainen
tlement. Second, EU legal acts form part of Lithuania’s domestic legal order, requiring the implementation of instruments such as Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union. Third, EU- level political initiatives, such as the creation of a new investment dispute settlement mechanisms and inter- pretative rulings of the Court of Justice of the Euro- pean Union (CJEU), for instance, in the Achmea case, directly shape the parameters of dispute settlement within the Union. These developments have created a more complex and sometimes fragmented legal environment for investors, requiring careful navigation between nation- al, EU and international norms. Geopolitical dynamics have become increasingly influential in shaping Lithuania’s investment treaty policy. Russia’s war of aggression against Ukraine and Belarus’s alignment with Moscow have prompted Lithuania and other EU member states to reassess its treaty relationship. The termination of BITs with Russia and Belarus reflects a broader EU trend of decoupling from authoritarian regimes and prioritising values- based foreign policy. This recalibration has implications for investors oper- ating in or from these jurisdictions, as well as for Lithu- anian entities with cross-border interests. Against this backdrop, questions arise: what role will Lithuania play in future investment disputes, and how will these disputes evolve in light of shifting legal and geopolitical realities? Termination of the Lithuania–Russia and Lithuania– Belarus BITs: implications for dispute settlement In response to Russia’s full-scale invasion of Ukraine, Lithuania has taken decisive legal and political steps to sever treaty-based investment ties with Russia and Belarus. On the initiative of the government, the Lithu- anian parliament resolved to denounce three treaties with these states, including the Lithuania–Russia BIT and the Lithuania–Belarus BIT. This move reflects a broader strategic realignment in Lithuania’s foreign policy and investment protection framework.
The official explanatory memorandum accompanying the decision cited several grounds for termination: “ Termination is warranted in view of the geopolitical context – Russia’s and Belarus’s unprecedented mili- tary aggression against Ukraine and grave breaches of international law; the suspension of interstate eco- nomic co-operation with the aggressor states; the undesirability of investments originating from those states; the risks faced by Lithuanian businesses oper- ating in those markets; and, finally, the incompatibility of the treaties with contemporary standards of invest- ment protection .” As a result, both BITs will formally cease to apply as of 15 October 2025. Nonetheless, the treaties contain so-called “sunset clauses”, which preserve certain protections for a transitional period. Specifically, investments made prior to the termination date will continue to benefit from treaty protections – including access to inves- tor–state dispute settlement (ISDS) – for an additional ten years, until 15 October 2035. The terminations of these BITs reflect a broader trend in Europe, where geopolitical risks increasingly influ- ence legal frameworks for foreign investment. Dispute settlement under BITs Both the Lithuania–Russia and Lithuania–Belarus BITs establish a two-stage dispute settlement mechanism, designed to provide investors with structured recourse in the event of a dispute with the host state. The process begins with a mandatory consultation period. A Lithuanian investor must first notify the respondent state in writing, outlining the nature of the dispute and the alleged treaty violations. The host state is obliged to respond within six months, during which the parties must attempt to resolve the matter through negotiation. In theory, this phase is intended to facilitate amicable settlement and avoid formal proceedings. However, in practice, non-response or refusal to engage by the host state – particularly in politically strained contexts - often amounts to a de facto rejection of the consultation process. This limits
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