A high-stakes arbitration could determine whether EU sanctions override investment treaty protections, with a Dubai tribunal set to weigh a claim by Mikhail Fridman.

The lawsuit filed by Russian billionaire Mikhail Fridman against the Netherlands over the consequences of European sanctions could become one of the key tests of the EU’s sanctions policy.

Dutch lawyer and sanctions expert Helen Over de Linden expressed this view.

“For people who have or had significant assets in the European Union, such as Fridman, these sanctions are, of course, a huge problem. In the Netherlands we know well that he owned Amsterdam Trade Bank. It was a very successful and well-known bank, which went bankrupt in April 2022 precisely because of sanctions. As far as I know, the bank did not have liquidity problems and was considered successful; it was the sanctions that became the decisive factor in its bankruptcy. This will be a very interesting case, but in my view, a final decision will have to be awaited for years, and the case could become one of the important tests for the EU’s sanctions policy”

– Helen Over de Linden

The essence of the lawsuit and the arbitration context

According to the expert, Fridman seeks compensation, citing bilateral investment treaties between the Netherlands, the Benelux countries, and the former USSR, which guaranteed investment protection. He asks to recognize that the Netherlands violated the 1989 investment protection treaty concluded with the former USSR, compensate material and non-material damages, cover the costs of the proceedings, and pay interest.

“Belgium and Luxembourg have a joint treaty with the USSR, and the Netherlands has its own. Fridman argues that sanctions violate this treaty, which guarantees the right to do business and investment protection in another country,” notes the expert.

The claim has been filed with the Permanent Court of Arbitration (PCA), based in The Hague, but the arbitration will take place in Dubai. The Dubai International Financial Centre has designated the place of arbitration in light of the UAE’s neutral stance on sanctions. She believes that such a location underscores the case’s particularities.

“The key question is whether the Dubai court will take into account the new provisions of the EU sanctions legislation that oblige member states to deny such claims based on investment treaties”

– Helen Over de Linden

The expert adds that the EU has tightened rules in recent years to prevent sanctions circumvention through international arbitrations. According to her forecast, if the Dubai arbitration recognizes the primacy of EU sanctions law, Fridman’s chances will diminish; if the investment treaty prevails, the case could set a precedent with significant consequences.

Under the EU’s new rules from last year, member states are obliged to deny enforcement of investment treaty claims by sanctioned individuals and not recognize corresponding judgments of third-country courts.

According to Over de Linden, Fridman has already repeatedly tried to challenge the sanctions and is using the services of a large team of lawyers. She explains that choosing Dubai as the arbitration venue is connected not only with the absence of a ban on entering the EU, but also with the aim to hear the case outside the EU’s jurisdiction.

It is also known that the wife of Kremlin spokesman Dmitry Peskov, figure skater Tatiana Navka, decided to challenge in the Court of Justice of the European Union the individual sanctions imposed on her by the European Union.

If a ruling is issued in Dubai, the case could set a precedent for applying EU sanctions in international arbitration proceedings.