Originally from European International Arbitration Review (EIAR)

The most important advantage of international arbitration is the enforceability of its result—the award—since, as the common wisdom teaches us, a deal is only as reliable as the mechanism by which it can be made legally enforceable. However, despite this and other advantages international arbitration offers, it may not always be the end of the story. Certainly not in the case when the award has been obtained against a state, since states may be protected by state immunity—a bar to an otherwise enforceable award. Whereas in some states this may not cause concerns due to detailed and internationally accessible laws regulating the matters of state immunity, there are many states with respect to which much is still unexplored. This article seeks to remedy that by surveying the regulation of state immunity in seven Central and Eastern European states—Poland, Czech Republic, Ukraine, Russia, Kazakhstan, Lithuania and Latvia.

I. Introduction

During the last decades, states, including Central and Eastern European states, have increasingly been subject to international investment arbitration claims. Year 2012, for instance, has been identified as the year with the highest number of known investor–state dispute claims ever filed in one year, thereby confirming the increasing tendency of foreign investors to resort to investor–state arbitration.1 With regard to the states the subject of this article, a brief survey of the UNCTAD Database of Treaty–Based Investor–State Dispute Settlement Cases reveals that within the last five years they have been respondents in altogether 16 investment arbitrations, and those are only the known cases.

With this increase in the number of investor–state arbitrations rises also the dissatisfaction of the public about the not so infrequent consequences of those arbitrations—obligations of states to compensate (from the money of taxpayers) the loss the investors have suffered. Nevertheless, despite the delicacy of such situations, states have usually complied with the rendered awards.2 But it may not be long before non-compliance becomes a not so unusual phenomenon.