Pacta sunt servanda.

Practice area · IV

Investment, armed conflict and emergency regimes

For the exposed investor as for the host State, armed conflict, sanctions and State fragility are not a residual risk: they are the very terrain of the operation. International humanitarian law, international investment law, the law of treaties, State responsibility and sanctions law coexist, overlap and at times contradict one another. In exceptional situations, the investor rarely loses the right to reparation. What the investor loses is access to that right, for want of a strategy that articulates the right fora, in the right order, with the right arguments. Legal and political risk is not merely a due diligence exercise to be carried out; it is an architecture of defence to be built.

Direct or indirect expropriation; post-conflict nationalisation; requisition or destruction of assets without adequate compensation; asset freeze under a sanctions regime; State contract unilaterally repudiated; commercial dispute recast as criminal prosecution of an executive; entry into a conflict zone or into high-risk natural resources; divestment from an asset that has become untenable: sovereign coercion takes many forms. The legal characterisation of the facts, and of their interactions, always precedes the response.

Conflict, occupation and IHL

Armed conflict zone, occupied territory, natural resources, requisition, destruction of assets

Sanctions and emergency regimes

Asset freezes, restrictive measures, overcompliance, emergency measures, force majeure and stabilisation

Protection and arbitration

BITs, ICSID, fair and equitable treatment, expropriation, enforcement of awards and sovereign immunities

In exceptional situations, the investor rarely loses the right to reparation: what the investor loses is access to that right, for want of a strategy that articulates the right fora, in the right order.

Identify your situation

Conflict, sanctions, arbitration: identify your situation

Six points of entry, for the investor as for the State. The firm handles each in isolation, or several together under a single strategy.

An investment is exposed to armed conflict or located in occupied territory

Asset, operation or supply chain exposed to destruction, requisition or nationalisation in a State in armed conflict or in occupied territory. Objective: to identify the applicable regime, international humanitarian law, BIT, war or security clause, and to build protection before the characterisation hardens.

An operation is affected by a sanctions regime or an asset freeze

Investment, counterparty or financial transfer subject to targeted sanctions, OFAC, European Union, United Nations, or to an economic emergency measure. Objective: to analyse licences and exemptions, characterise any indirect expropriation by cumulative effect, and articulate the overlapping regimes without contradiction.

An asset is exposed to expropriation or to an emergency measure

Direct or indirect expropriation, requisition, unilateral termination of a State contract, or emergency measure recast as an interference with the right to property. Objective: to characterise the measure, distinguish compensable loss from non-compensable war damage, and anticipate the State's defences.

A dispute pits an investor against a State (ICSID or BIT arbitration)

Dispute arising under a bilateral investment treaty or a State contract, on the investor's side as on that of the host State. Objective: to characterise the breaches or the defences, select the optimal forum, ICSID, PCA, ICC, UNCITRAL, and build the claim or the defence, enforcement included.

Entry into a high-risk zone requires enhanced due diligence

Investor, fund or company structuring an operation involving natural resources, minerals or a State contract in a conflict, post-conflict or sanctions-affected zone. Objective: to characterise the applicable framework, secure traceability, and build the protective architecture from the entry phase onwards.

An exit or divestment from an exposed asset must be structured

Investor organising an exit or disengagement from an asset that has become untenable in an exceptional environment. Objective: to structure a responsible divestment that minimises residual exposure, contractual, criminal and reputational, and preserves consistency with earlier positions.

Strategic diagnosis

Warning signs and aggravating factors

Certain indicators show that the situation no longer calls for ordinary handling, but for a crisis architecture. These signals are not sufficient to characterise the case in law; they warrant a rapid, confidential and structured mapping.

Warning signs

Asset located in a conflict zone, occupied territory or sanctioned environment.
Nationalisation, requisition, destruction, freezing or loss of economic control.
Criminal proceedings opened against an executive in a dispute with the host State.
Breach of a public contract or targeted regulatory change.
Difficulties in enforcing an award against sovereign assets.
Risk of corruption, fraud or initial illegality of the investment.

Aggravating factors

Entry into a high-risk zone without documented enhanced due diligence.
Contradictory positions between criminal defence, arbitration and public communication.
No analysis of security, war, force majeure or necessity clauses.
Belated search for attachable assets after the award.
Underestimation of immunities from execution and of the applicable sanctions.

Mistakes to avoid

Assuming that armed conflict automatically terminates or suspends investment treaties.
Treating every instance of war damage as a compensable expropriation.
Neglecting international humanitarian law in the analysis of the investment.
Commencing an arbitration without an enforcement strategy.
Overlooking the illegal-investment defences that the State may raise.

Situation 1 · Conflict, occupation and IHL

Investing in a conflict zone

International humanitarian law, occupation, natural resources and the characterisation of the loss: when the theatre of operations determines the right to reparation.

International humanitarian law, directly relevant to investment

International humanitarian law specifically governs the conduct of hostilities, occupation, requisition and the destruction of property in situations of armed conflict. The relevant rules include, in particular, Article 23(g) of the 1907 Hague Regulations on the destruction or seizure of enemy property, Articles 43, 46, 52 and 53 of the same Regulations on the administration of occupied territory, private property, requisitions and public property, and Articles 33 and 53 of the Fourth Geneva Convention of 1949 on pillage and the destruction of property in occupied territory. The assets and operations of an investor exposed to armed conflict fall directly within this body of law, which determines whether a loss constitutes war damage or a compensable injury.

The characterisation of the loss, a central strategic act

The distinction between non-compensable war damage and an injury giving rise to a right to compensation determines the applicable regime and the extent of the reparation. Destruction justified by imperative military necessity within the meaning of Article 23(g) of the Hague Regulations, or meeting the strict conditions of Article 53 of the Fourth Geneva Convention in occupied territory, may amount to war damage. Destruction exceeding military necessity, or covered by an extended war clause in the applicable treaty, may give rise to a right to compensation. The Eritrea-Ethiopia Claims Commission confirmed that this obligation to compensate remains owed but may be deferred by the interruption of economic relations between belligerents.

Natural resources in occupied territory

The exploitation of natural resources under occupation raises cumulative questions of international humanitarian law, human rights law and due diligence. Unlawful appropriation and pillage are prohibited. In the case concerning Armed Activities on the Territory of the Congo, Democratic Republic of the Congo v. Uganda, the International Court of Justice ruled on the illegal exploitation of natural resources under occupation, on the merits on 19 December 2005 and on reparations on 9 February 2022. An exposed operation must build this framework into its characterisation of risk.

In a conflict zone, the characterisation of the loss decides everything: non-compensable war damage or compensable injury, the applicable regime turns on that very distinction.

Situation 2 · Sanctions and restrictive regimes

Investing under sanctions

Overlapping regimes, extraterritoriality, asset freezes as indirect expropriation and conflict minerals: reconciling them without contradiction.

Overlapping and at times contradictory sanctions regimes

Restrictive measures, whether asset freezes, transaction bans or restrictions on financial transfers, are adopted by the United States Office of Foreign Assets Control (OFAC), the European Union and the UN Security Council. Their overlap creates conflicting obligations for the transnational investor: an operation that is lawful under local law may expose the investor under another regime, notably through the extraterritorial effect of certain secondary sanctions. An analysis of the available licences and exemptions precedes any investment decision.

The asset freeze as a potential indirect expropriation

The combination of an asset freeze, the impossibility of performing contracts and restrictions on financial transfers may amount to a mechanism of coercion equivalent to an indirect expropriation. The deprivation of the economic substance of the investment, assessed according to the intensity, duration and context of the measure, may give rise to a right to compensation irrespective of any formal transfer of title. This characterisation governs the strategy of treaty protection.

Natural resources and conflict minerals

Structuring an operation involving gold, critical minerals or hydrocarbons in a conflict zone or under sanctions brings several bodies of law into play at once: compliance with sanctions regimes, due diligence obligations on origin and the supply chain under Regulation (EU) 2017/821 of 17 May 2017, the risk of characterisation as the financing of armed groups, and exposure to seizure or confiscation proceedings in third jurisdictions. These regimes must be reconciled without contradiction.

An operation that is lawful under local law may expose the investor under another regime: sanctions compliance is never read jurisdiction by jurisdiction in isolation.

Situation 3 · Protection and arbitration

Investment protection and arbitration

Bilateral treaties, fair and equitable treatment, expropriation, choice of forum and enforcement of awards in the face of sovereign immunities.

Standards of investment treatment

Bilateral investment treaties guarantee a baseline of protection whose scope varies with their drafting: fair and equitable treatment, either as an autonomous standard or tied to the customary international minimum standard depending on the treaty; full protection and security, entailing an obligation of due diligence; non-discrimination, national treatment and most-favoured-nation treatment. Compensation clauses applicable in the context of conflict, both non-discrimination clauses and extended war clauses, together with security clauses, which allow the State to take measures necessary to protect its essential interests, determine the real breadth of the protection.

Direct and indirect expropriation

Direct expropriation is the formal transfer of the investor's property to the State or to a third party. Indirect expropriation, or creeping expropriation, refers to measures which, without any formal transfer, deprive the investor of the economic substance of the investment. Arbitral tribunals assess it according to the degree of interference with the right of property, the intensity of the deprivation, its duration and the regulatory context. Under emergency regimes, the two forms may combine, and their characterisation determines the compensation regime. UNCTAD, in Expropriation, A Sequel (United Nations, 2012), provides a frame of reference.

The forum and the evidential case

The determination of the optimal forum, whether ICSID, the Permanent Court of Arbitration, the International Chamber of Commerce, UNCITRAL or an ad hoc tribunal, depends on the dispute settlement clauses of the applicable treaty. The evidential case anticipates the State's defences, force majeure, necessity, the security clause and absence of causation, and documents the losses from verifiable institutional sources. Arbitral case law, from Asian Agricultural Products v. Sri Lanka (ICSID ARB/87/3, 1990) to Wena Hotels v. Egypt (ICSID ARB/98/4, 2000) and CMS v. Argentina (ICSID ARB/01/8, 2005), structures this field.

Enforcement of the award and sovereign immunities

Obtaining a favourable award does not bring the dispute to an end. Enforcement against a State runs up against regimes of immunity from execution, which vary from one jurisdiction to another. The enforcement strategy is built before proceedings are commenced: identification of attachable commercial assets, mapping of favourable jurisdictions, and the interplay between the recognition of ICSID awards under Articles 53 to 55 of the ICSID Convention and the enforcement of non-ICSID awards under the 1958 New York Convention, subject to the grounds for refusal and to immunities from execution.

A favourable award is not the end of the matter: enforcement against a sovereign State is prepared even before the arbitration is commenced, or it founders on immunities.

Situation 4 · Emergency regimes and political risk

Emergency regimes and political risk

Continuity of treaties, force majeure, state of necessity, security clause and stabilisation: the circumstances precluding wrongfulness are characterised one by one.

Continuity of treaties and circumstances precluding wrongfulness

The outbreak of an armed conflict does not ipso facto suspend treaty obligations. The International Law Commission's Articles on the Effects of Armed Conflicts on Treaties (2011), of which the General Assembly took note in its resolution 66/99 of 9 December 2011, provide that the existence of an armed conflict does not ipso facto terminate treaties and identify, in an annex, categories of treaties that are intended to continue in operation, including agreements concerning private rights and treaties for the settlement of disputes, a category to which investment treaties belong. A State wishing to withdraw from them must follow a formal notification procedure. The circumstances precluding wrongfulness, force majeure and state of necessity, are subject to strict conditions.

Force majeure, necessity and the security clause

Force majeure, under Article 23 of the International Law Commission's 2001 Articles on State Responsibility, presupposes an irresistible and unforeseeable event making performance of the obligation materially impossible. The state of necessity, under Article 25, presupposes an essential interest threatened by a grave and imminent peril. The scope of the security clause depends on its drafting, whether it operates as a substantive exception or as a defence to liability, and whether it is self-judging or subject to strict arbitral review, on conditions of necessity and proportionality. ICSID case law has diverged on their scope, the state of necessity having been accepted for a defined period in LG&E v. Argentina (decision on liability of 3 October 2006), in contrast to the stricter reading adopted in CMS v. Argentina.

The Energy Charter Treaty, subject to verification

The Energy Charter Treaty (1994) provides a framework for the protection of investments in the energy sector. The European Union and Euratom notified their withdrawal on 27 June 2024, with effect from 28 June 2025. Under the survival clause in Article 47(3), prior investments remain in principle protected for twenty years from the date on which the withdrawal takes effect. The residual applicability of the Treaty and the scope of that clause must be verified in the light of the configuration of each case, in particular for intra-European and extra-European situations.

Conflict does not suspend the treaty: it shifts its interpretation. Force majeure, necessity and the security clause are characterised one by one, or they cancel one another out.

Situation 5 · Governance, due diligence and exit

Enhanced due diligence and divestment

Due diligence before entry, interplay with human rights, defence of the host State and orderly exit from an asset that has become untenable.

Enhanced due diligence before entry

For an investor entering a conflict, post-conflict or sanctioned zone, prior advice determines future exposure. It characterises the applicable regulatory framework, OFAC, European Union and United Nations sanctions, Regulation (EU) 2017/821 on conflict minerals, national legislation on the duty of vigilance, analyses the compliance of the operation, structures the counterparties and payment channels, and puts a protective architecture in place from the entry phase onwards. This preventive intervention considerably reduces exposure to risks that can no longer be corrected once the operation is under way.

Interplay with human rights and international mechanisms

In cases involving violations of international humanitarian law or of the human rights of the investor or its executives, the arbitral strategy is coordinated with the avenues offered by the United Nations treaty bodies, the Human Rights Committee and the Committee on Economic, Social and Cultural Rights, by regional mechanisms and by the relevant special rapporteurs. An institutional position documenting the context in the host State strengthens the arbitral case on questions of political context and procedural guarantees.

Defence of the host State and the unlawful investment

Sovereign risk is not one-sided. International investment law does not protect an investment made in breach of the law. The State's defence rests on three converging lines: permanent sovereignty over natural resources and the right to nationalise subject to appropriate compensation, enshrined in General Assembly resolution 1803 (XVII) of 14 December 1962; illegality, fraud or corruption in obtaining the investment, which deprive it of treaty protection, World Duty Free v. Kenya (ICSID ARB/00/7, 2006); and the right to regulate, which distinguishes a legitimate measure from an expropriation.

Orderly exit and responsible divestment

Divestment from an exposed asset is prepared with the same rigour as the initial commitment. An improvised exit may create fresh exposure, whether contractual, criminal or reputational, and contradictions with earlier positions that can be exploited on the other fronts. The legal structuring of the withdrawal minimises residual exposure and preserves the overall strategic coherence.

Sovereign risk is not one-sided: the same analysis serves both the exposed investor and the State resisting a claim founded on an unlawful investment.

Risk patterns

Recurring configurations of exposure

Identifiable situations, in which the initial characterisation and the order of the steps taken decide the outcome.

Asset destroyed or requisitioned in a conflict zone

State forces or authorities have requisitioned, damaged or destroyed an asset without prompt, adequate and effective compensation. The characterisation of the loss, as war damage or as compensable injury, and the analysis of the war clauses in the applicable treaty determine the right to reparation.

Asset freeze and coercion through sanctions

An investment, a counterparty or a transfer is targeted by OFAC, European Union or United Nations sanctions, or by an economic emergency measure. The combined effect of the freeze, the impossibility of performance and the transfer restrictions may amount to an indirect expropriation.

Expropriation, nationalisation or termination of a State contract

A direct or indirect expropriation, a post-conflict nationalisation or the unilateral termination of a concession deprives the investor of the substance of its investment. The characterisation of the measure and the scope of the State's right to regulate govern the strategy.

Investor-State dispute brought to arbitration

A dispute falls under a bilateral investment treaty or a State contract. The choice of forum, ICSID, PCA, ICC or UNCITRAL, the evidential case and the anticipation of the State's defences decide the outcome, for investor and State alike.

Criminalisation of a dispute with a State

A commercial dispute with a sovereign entity is recharacterised as criminal proceedings against an executive or shareholders. That recharacterisation may constitute a breach of fair and equitable treatment; the criminal defence and the arbitral strategy must be coordinated without contradiction.

Entry or exit in an emergency environment

Entry into natural resources or a State contract in a high-risk zone, or exit from an asset that has become untenable, calls for enhanced due diligence and legal structuring. Prior advice and an orderly exit minimise residual exposure.

What the firm puts into practice

The method

One sequence, from the strategic audit and the mapping of forums to the enforcement of the award, conducted case by case.

Strategic audit and mapping of forums

Before any formal step, map the entire exposure: identification of the applicable treaty or treaties, analysis of the dispute settlement clauses, mandatory negotiation periods, prior recourse to national courts, limitation periods, identification of the optimal forum and preliminary analysis of the foreseeable State defences. This mapping determines the order of actions.

Characterisation of the applicable regime and interplay of the bodies of law

Determine how international humanitarian law, international investment law, sanctions law and the law of State responsibility fit together, fact by fact and clause by clause. Their interplay is case-specific: it governs the characterisation of the contested measures and the choice of legal grounds.

Evidential case and assessment of loss

Document the chronology of State measures, characterise the contested acts, gather the available evidence and engage sector experts for the financial assessment of the losses. The distinction between compensable losses and non-compensable war damage combines the standards of international humanitarian law with arbitral precedent.

Neutralising the State's defences

Anticipate and dismantle the arguments likely to be raised: force majeure, under Article 23 of the International Law Commission's Articles, state of necessity, under Article 25, the treaty's security clause, and the characterisation of the acts as legitimate exercises of public authority. The distinction between these defences and their respective scope shapes the response.

Multi-jurisdictional coordination and parallel fronts

Coordinate the main arbitral proceedings, any national proceedings, applications to human rights mechanisms and parallel proceedings targeting executives. Each action must reinforce the others; a lack of coordination produces strategic contradictions that the opposing party can exploit.

Post-award strategy and enforcement

From the moment proceedings are commenced, identify attachable State assets in favourable jurisdictions, analyse the regimes of immunity from execution and prepare the exequatur proceedings. Once the award is obtained, carry out enforcement in a coordinated manner, manage the opposing State's challenges and, where appropriate, negotiate the terms of payment.

Expert work and strategy

Expert reports, opinions and overall strategy

Beyond the litigation engagement, the offering of an expert architect of public international law, international humanitarian law and investment law.

An offering distinct from the litigation engagement

The firm may act without necessarily being lead counsel in an arbitration, in support of an arbitration firm already instructed, of an in-house legal department, of a State or of an institution, where the case calls for expertise in public international law that some firms do not possess in-house.

Deliverables

Memoranda on the applicable regime, whether international humanitarian law or treaty, comparative analyses of security clauses and compensation standards in the context of conflict, mapping of forums and procedural risks, notes on sovereign immunities and enforcement, and expert opinions for arbitral proceedings.

Recipients

This work may be intended for an investor, a fund, a family office, a State, a State-owned enterprise, a domestic or foreign arbitration firm, a litigation team or a tribunal.

The firm's value lies not in promising an outcome, but in building the legal architecture of a position within a field of forces, upstream and in the shadow of the case.

Effects obtained or sought

Anonymised results and effects sought

The firm does not publish named case studies. The confidentiality of engagements is a non-negotiable condition. The results below are presented by category of effects obtained or sought in investment cases exposed to armed conflict, sanctions, expropriation and sovereign risk.

Applicable regime characterised and forums mapped

Identification of the applicable treaty or treaties, interplay of international humanitarian law and investment law, and choice of the optimal forum, the foundation of the entire strategy that follows.

Loss characterised and injury assessed

Distinction between non-compensable war damage and compensable injury, documentation of losses and assessment of the loss suffered in a context of conflict or emergency, anticipating the State's defences.

Arbitration claim constructed or State defence built

Construction of the investor's claim, on the claimant side, or of the host State's defence, unlawfulness of the investment, public policy and the right to regulate, on the respondent side.

Sanctions exposure contained

Analysis of overlapping regimes, licences and exemptions, characterisation of a possible indirect expropriation by cumulative effect and resolution of conflicting obligations between regimes.

Enhanced due diligence structured before entry

Protective architecture built from the entry phase onwards for natural resources, minerals or a State contract in a high-risk zone, integrating sanctions, traceability and the risk of financing armed groups.

Enforcement strategy prepared in advance

Identification of attachable commercial assets, mapping of favourable jurisdictions and interplay of the ICSID and New York Conventions, subject to immunities from execution.

Expert reports and expert opinions

Confidential studies and opinions in public international law, interplay of international humanitarian law and investment law, sovereign immunities, standards of treatment, produced for arbitral proceedings or a decision-making body.

Responsible divestment carried through

Legal structuring of the exit from an exposed asset, minimising residual exposure, whether contractual, criminal or reputational, and preserving consistency with earlier positions.

A selection of configurations handled

By category and without any identifying element. They illustrate the nature of the cases, not their outcome, and constitute neither a promise nor a guarantee of results.

Industrial asset destroyed or requisitioned in armed conflict
Investment located in a conflict zone, exposed to destruction or requisition by State forces. Characterisation of the loss under international humanitarian law and the treaty's war clauses, and construction of the claim for compensation.
Investment constrained by a sanctions regime
Asset freeze, impossibility of performance and transfer restrictions affecting an investment. Analysis of licences and exemptions, characterisation of an indirect expropriation by cumulative effect and strategy of treaty protection.
Award-holding investor facing a State that obstructs enforcement
Final arbitral award against a State that obstructs its enforcement and asserts its immunity in the jurisdictions where assets have been identified. Comparative mapping of immunity regimes, identification of attachable commercial assets and coordination of exequatur proceedings.
State defending its sovereignty against contested investment contracts
State resisting a claim founded on inherited contracts, suspected of irregularities or corruption and encroaching on its sovereignty over its resources. Defensive and offensive strategy combining an audit of lawfulness, sovereignty over resources and the right to regulate.
Criminalisation of a commercial dispute with a State
Commercial dispute recharacterised as criminal proceedings against an executive of the investment. Coordination of the criminal defence and the arbitral strategy, the recharacterisation itself being capable of founding a breach of fair and equitable treatment.
Infrastructure project in a territory of contested international status
Industrial group exposed to a cumulative risk: listing in an institutional database, allegations under human rights and vigilance rules, reputational exposure. Analysis of the lawfulness of the operation under international law and construction of a documented institutional position.
Entry into natural resources in a complex environment
Investor structuring the acquisition or trading of gold or minerals in producing States with a complex security environment. Securing origin and traceability under Regulation (EU) 2017/821, sanctions compliance and prevention of the risk of financing armed groups.
Front not covered in a strategy already coordinated
Engagement targeted on one specific front, enforcement proceedings in a given jurisdiction, challenge to an immunity, opinion on the interplay of international humanitarian law and investment law, or application to an international mechanism, with reporting to the counsel coordinating the case.

Where exposure is layered – armed conflict, sanctions, expropriation, criminal recharacterisation – the first decision can freeze the case. Waiting for the conflict to end while the treaty's time bars run, confusing war damage with compensable expropriation, turning first to the courts of the host State without having analysed the dispute settlement clauses, isolating the criminal defence from the arbitral strategy, or neglecting enforcement from the moment proceedings are commenced: each of these errors can close forums and irreversibly reduce the reparation available. The analytical phase determines the outcome.

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Frequently asked questions

Conflict, sanctions, arbitration: the essentials

Does a bilateral investment treaty continue to apply during an armed conflict?

In principle, yes, but the analysis remains treaty-specific and contextual. The International Law Commission's Articles on the Effects of Armed Conflicts on Treaties (2011) provide that the existence of an armed conflict does not ipso facto terminate treaties. Their annex identifies, in particular, treaties of commerce, agreements concerning private rights and treaties relating to the peaceful settlement of disputes as categories intended to continue in operation, in whole or in part, during a conflict. Bilateral investment treaties may therefore continue to produce their effects, subject to their wording, to security clauses, to any notifications given and to the general rules of international law.

Does international humanitarian law prevail over investment treaties in a conflict setting?

The relationship between international humanitarian law and investment treaties is more subtle than a simple hierarchy. International humanitarian law specifically governs the conduct of hostilities, occupation, requisition and the destruction of property in situations of armed conflict. Investment treaties may nonetheless continue to produce their effects during the conflict. The analysis consists in determining, clause by clause and fact by fact, how investment obligations are to be interpreted in the light of international humanitarian law and of the special clauses of the applicable treaty. Scholarship describes this intersection as not strictly hierarchical.

Can compensation be obtained for assets destroyed by State forces during a conflict?

Yes, subject to certain conditions. A State's responsibility for the destruction of assets depends on the characterisation of the acts. If the destruction is justified by imperative military necessity within the meaning of Article 23(g) of the 1907 Hague Regulations, or meets the strict conditions of Article 53 of the Fourth Geneva Convention in occupied territory, it may amount to non-compensable war damage. If it exceeds military necessity or is covered by an extended war clause in the treaty, it may give rise to a right to compensation. The Eritrea-Ethiopia Claims Commission clarified that such compensation may be deferred by the interruption of economic relations between belligerents, but remains due.

What is the scope of the security clause in an investment treaty?

A security clause, or emergency clause, may allow the State to invoke the protection of its essential interests in the event of war, national emergency or serious crisis. Its scope depends on its wording: some clauses are framed as substantive exceptions, others as defences to responsibility; some are self-judging, others remain subject to strict arbitral review. The case law arising from the Argentine cases, in particular CMS v. Argentina and LG&E v. Argentina, shows that their effect varies according to the treaty, the period under consideration, the necessity of the measure and its proportionality.

What is the difference between direct and indirect expropriation?

Direct expropriation is the formal transfer of the investor's property to the State or to a third party. Indirect expropriation, or creeping expropriation, refers to State measures which, without formally transferring ownership, deprive the investor of the economic substance of its investment. Arbitral tribunals assess it by reference to the degree of interference with property rights, the intensity of the deprivation, its duration and the regulatory context. In a setting of armed conflict or emergency regimes, the two forms may combine, and their characterisation determines the applicable compensation regime.

Can force majeure be invoked to justify non-compliance with a treaty in a conflict setting?

Force majeure, under Article 23 of the International Law Commission's Articles on State Responsibility, may preclude wrongfulness where an irresistible, unforeseeable event beyond the State's control makes it materially impossible to perform an obligation. In a setting of armed conflict, its usefulness is limited: it does not apply to obligations governed by a due diligence standard, such as full protection and security, which already absorbs its elements. It may, however, justify the temporary non-payment of financial obligations if the State demonstrates material impossibility, not mere economic hardship. Its scope must be verified under the applicable treaty.

What is the difference between force majeure and state of necessity?

Force majeure, under Article 23 of the International Law Commission's Articles, presupposes an irresistible and unforeseeable event making performance materially impossible. The state of necessity, under Article 25, presupposes an essential interest of the State threatened by a grave and imminent peril, and is governed by distinct conditions relating to timing and to the nature of the peril. The state of necessity was accepted for a defined period in LG&E v. Argentina, decision on liability of 3 October 2006, in counterpoint to the stricter reading adopted in CMS v. Argentina. The distinction between these circumstances precluding wrongfulness governs the construction of the response.

How is an arbitral award enforced against a recalcitrant State?

For ICSID awards, Article 54 of the ICSID Convention requires their recognition as final judgments of the courts of each Contracting State. For non-ICSID awards (UNCITRAL, ICC, Permanent Court of Arbitration), the 1958 New York Convention governs recognition and enforcement, subject to the exhaustively enumerated grounds for refusal. In both cases, effective enforcement against State assets runs up against immunity from execution, the rules on which vary from one jurisdiction to another. The strategy must anticipate these obstacles from the moment proceedings are commenced: identification of attachable commercial assets in favourable jurisdictions, mapping of immunity regimes and coordination of proceedings across several States.

How do criminal proceedings against an executive interact with an investment arbitration?

Where a commercial dispute with a State is recharacterised as criminal proceedings against an executive, the two fronts must be handled in a coordinated manner. The criminal recharacterisation may itself constitute a breach of the treaty's fair and equitable treatment standard, through interference with procedural guarantees, or an indirect expropriation if it renders the investment unviable. The arguments developed in the criminal defence must not contradict the positions adopted in the arbitral claim. The strategic architecture must integrate both fronts from the earliest stages.

What is enhanced due diligence before entering a high-risk zone?

For the investor entering a conflict zone, a post-conflict zone or a sanctioned territory, prior advice characterises the applicable regulatory framework – OFAC, European Union and United Nations sanctions, Regulation (EU) 2017/821 on conflict minerals, duty of vigilance legislation – analyses the compliance of the transaction, structures the counterparties and payment channels, and puts a protective architecture in place from the entry phase. This preventive intervention reduces exposure to risks that can no longer be corrected once the transaction is under way.

What obligations apply to trading in natural resources from conflict zones?

Trade in gold, tin, tantalum and tungsten can finance armed groups. Regulation (EU) 2017/821 of 17 May 2017 imposes due diligence obligations on Union importers regarding origin and the supply chain. These obligations come on top of sanctions regimes, the risk of characterisation as financing of armed groups, and exposure to seizure or confiscation proceedings in third-country jurisdictions. An exposed transaction must reconcile these bodies of law without contradiction, ideally from the moment entry is structured.

Can a State refuse to protect an investment obtained through corruption or fraud?

Yes. Arbitral case law establishes that unlawful investments are excluded from treaty protection. A contract obtained through corruption has been held contrary to international public policy (World Duty Free v. Kenya, ICSID Case No. ARB/00/7, 2006; Metal-Tech v. Uzbekistan, ICSID Case No. ARB/10/3, 2013). An investment obtained by fraud or in breach of domestic law, including environmental requirements, may likewise be denied treaty protection (Inceysa v. El Salvador, ICSID Case No. ARB/03/26, 2006; Cortec Mining v. Kenya, ICSID Case No. ARB/15/29, 2018). The State's defence then rests on the characterisation of the illegality and on the scope of the clause requiring that the investment be made in accordance with the host State's law.

Can a State bring a counterclaim against an investor?

Yes, subject to certain conditions relating to the dispute settlement clause of the applicable treaty. Tribunals have admitted State counterclaims based on environmental harm (Perenco v. Ecuador, ICSID Case No. ARB/08/6, 2019; Burlington v. Ecuador, ICSID Case No. ARB/08/5, 2017) or on the investor's human rights obligations (Urbaser v. Argentina, ICSID Case No. ARB/07/26, 2016, concerning the right to water). Admissibility depends on the connection between the counterclaim and the investment and on the wording of the arbitration clause.

Does the Energy Charter Treaty still protect investments?

The Energy Charter Treaty of 1994 remains relevant, subject to verification in each case. The European Union and Euratom notified their withdrawal on 27 June 2024, which took effect on 28 June 2025. Under the survival clause in Article 47(3), prior investments remain in principle protected for twenty years from the date on which the withdrawal takes effect. The residual applicability of the Treaty and the scope of this clause must be verified according to the configuration of each case, in particular for intra-European and extra-European situations.

Does the firm act for the investor or for the host State?

Both. Sovereign risk is not one-sided. Hennebel Avocats acts for the exposed investor, for protection and reparation, as well as for the host State, the State-owned enterprise or the sovereign entity in defence, where the contested transaction arises from a tainted contract, from allegations of corruption or from a legitimate regulatory measure recharacterised as expropriation. Every instruction is preceded by a strict conflict-of-interest check and an assessment of compatibility with the rules of professional conduct.

Does the firm produce expert reports without assuming representation?

Yes. The firm produces studies, memoranda and expert opinions on public international law, the interplay between international humanitarian law and investment law, sovereign immunities, standards of treatment and the interpretation of treaty clauses, including as an expert witness in arbitral proceedings, without necessarily assuming the lead engagement. Professor Ludovic Hennebel may act as the author of opinions or expert reports where his independence and the procedural framework so permit.

Preparing the first contact

Useful documents for an initial analysis

There is no need to send a complete file at the first contact. Certain elements make it possible to characterise the situation quickly.

Summary description of the investment and of the transaction concerned
Applicable bilateral investment treaty or State contract, where relevant
Contested State measures and chronology of the facts
Presence or exposure in a conflict zone or occupied territory
Applicable sanctions regimes and known licences or exemptions
Arbitral, domestic or criminal proceedings pending or contemplated
Counsel already instructed in the jurisdictions concerned
Documentation of losses and evidence for the assessment of damage
Arbitral award and status of enforcement proceedings, where relevant
Known time bars or notification deadlines
Reputational or institutional exposure
Institutional sources documenting the context of the host State

The purpose of the first exchange is to assess the urgency and the relevance of an intervention. It does not, in itself, constitute a full opinion on the prospects of success.

Modes of intervention

Six ways of engaging the firm

For the exposed investor, for the host State in defence, for the arbitration firm already instructed, for arbitral proceedings, on a preventive basis, or for the referring firm that outsources specialist expertise.

Strategic counsel, lead counsel

Lead counsel with responsibility for the overall strategic architecture of the case: characterisation of the breaches or defences, structuring of the claim or of the State's defence, coordination of local co-counsel in the host State and in the enforcement jurisdictions, and conduct of the proceedings before the arbitral tribunal. Suited to cases involving several States or jurisdictions and a public international law dimension.

Co-counsel in support of an arbitration firm

Alongside an arbitration firm already instructed, where the case raises specific questions of public international law: the interplay between international humanitarian law and investment law, sovereign immunities, human rights mechanisms, coordination with parallel criminal proceedings. The firm contributes its public international law expertise; the counsel already instructed retains the conduct of its own part of the case.

Confidential expert support

Defined assignments on behalf of a referring firm: memorandum on the applicable regime (international humanitarian law or treaty), comparative analysis of security clauses, note on compensation standards in a conflict setting, mapping of forums and procedural risks, within a contractually defined scope.

Expert witness and professional opinion

Expert opinion on questions of public international law in arbitral proceedings (ICSID, PCA, ICC): the interplay between international humanitarian law and investment law, the regime of sovereign immunities, standards of treatment in a conflict setting, interpretation of treaty clauses. Professor Ludovic Hennebel may act where his independence and the procedural framework so permit.

Targeted engagement on a strategic front

Responsibility for a specific front within a strategy coordinated by other counsel: proceedings to enforce an award in a given jurisdiction, challenge to a plea of sovereign immunity, referral to a human rights mechanism, coordination with a regional court, with reporting to the coordinating counsel.

Monitoring, anticipation and prevention

Preventive arrangements for the exposed investor: advice prior to entry into a high-risk zone, characterisation of the sanctions and due diligence framework, structuring of counterparties and payment channels, and a protective architecture for the investment put in place before the transaction is committed or the situation deteriorates.

Contact by profile

Find the right point of entry

Depending on your profile, an initial confidential orientation discussion, without mutual commitment.

Exposed investors and businesses

Assets in a conflict zone, under sanctions or in a fragile State, expropriation, requisition, asset freeze, treaty protection and arbitration.

Funds and family offices

Exposure of a shareholding or an asset, enhanced due diligence before entry, high-risk zones and natural resources.

States and sovereign entities

Defence against an investor claim, challenge or enforcement of an award, sovereignty over resources and the right to regulate.

Executives and corporate officers

Criminal recharacterisation of a dispute with a State, coordination of the criminal defence and the arbitral strategy.

Arbitration firms and correspondent counsel

Public international law aspects of a case, co-counsel, confidential expert support and expert opinion.

Institutions and organisations

Documentation of a context, coordination with international mechanisms, structured institutional dialogue.

Exposer votre situation

Sovereign risk is neither an inevitability nor a mere matter of due diligence: it is a field of forces to be structured, in advance, for the exposed investor as much as for the State defending itself.

An investment to protect, a claim to build or to defend?

Investor, fund, family office, host State, executive or correspondent arbitration firm: in exceptional situations, the window for action often closes before the point of no return, and the initial characterisation determines what follows. Initial confidential orientation discussion, without mutual commitment. In French, English and Spanish.

Request an orientation discussion

global@hennebel.legal