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Jonathan Gimblett

Jonathan Gimblett joined the firm in 2004 following a successful career in the British Diplomatic Service. His practice combines international and antitrust law, drawing on his experience of 15 years in government. Jonathan’s international practice focuses principally on investor-state arbitration and public international law disputes, on which he advises both states and corporate clients. He also represents clients in U.S. federal court litigation relating to international law issues, including the application of the Foreign Sovereign Immunity Act (“FSIA”). His antitrust practice embraces litigation, counseling of corporate clients, and regulatory matters.

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On 24 June 2024, the Council of the European Union (the “Council”) adopted a new package of economic sanctions against Russia. This 14th package of sanctions introduces a broad range of new prohibitions, including new export and import sanctions, new services restrictions, new sanctions designations and further measures targeting the Russian financial and energy sectors. The 14th package also includes measures relating to the circumvention of existing EU-Russia sanctions, including the imposition of a new, affirmative obligation for EU companies to address diversion and circumvention risks both within their own operations as well as the operations of their non-EU based subsidiaries.  

Finally, the new Russia measures expand the powers of courts within Member States to hear damages claims arising from the actions of Russian companies related to “sanctions implementation and expropriation”.

The new EU measures were adopted shortly after the United States and the United Kingdom adopted new Russia related export controls and sanctions, which we summarize in this alert.

Separately, on 30 June 2024 the EU passed a broad new set of sanctions relating to Belarus, including various measures intended to bring the EU-Belarus sanctions more closely in line with similar Russia-related measures.

The EU’s 14th Package of Sanctions Targeting Russia

Asset-freezing Designations

Council Implementing Regulation (EU) 2024/1746 designates additional individuals and entities to the EU asset-freezing list. The new designations target the Russian military sector but also include entities—and owners and senior managers of companies—operating in other sectors of the Russian economy, such as Russia’s largest shipping company, Sovcomflot, and OJSC Ural Airlines.Continue Reading EU Imposes Additional Sanctions Against Russia and Belarus

On Sunday, July 16, Russian President Vladimir Putin signed a decree putting shares of Danone Russia JSC, owned by French yogurt maker Danone, and of Baltika Brewing Company, owned by Danish brewer Carlsberg A/S, under “temporary management.”

The Kremlin has since reportedly appointed Yakub Zakriev, deputy prime minister and agriculture minister of Chechnya, as head of the Danone business.[1] Mr. Zakriev has been described as a close ally of Ramzan Kadyrov, the notorious leader of the Chechen Republic, and himself a close ally of President Putin.[2] Meanwhile, Taimuraz Bolloev, a longtime friend of Putin, has been installed as director of Carlsberg’s Baltika business.[3]

These recent seizures follow a decree Putin signed in April, laying the groundwork to expropriate, damage, or otherwise impair the investments of companies from “unfriendly” countries—including the U.S., UK, Canada, all EU member states, Japan, Singapore, and South Korea.[4] This is the second time Russia has used the decree to seize assets. Previously, Russia took control of utilities owned by Finland’s Fortum Oyj and Germany’s Uniper SE.[5]

These Russian actions demonstrate the significant risks for foreign companies that continue to operate in Russia and signal further potential asset seizures, including the possible transfer of foreign assets to regime-friendly owners. Russia’s measures appear to constitute uncompensated expropriations, for which investors could seek redress under Russia’s network of bilateral investment treaties (BITs).[6]

In prior Covington alerts, we have discussed how foreign investors in Russia can protect their investments from Russian retaliatory measures by ensuring that they have access to international arbitration, including through BITs. We also have highlighted certain key protections available under BITs that may provide recourse to foreign investors affected by Russia’s recent measures. In this alert, we focus on those protections under Russian BITs of most direct relevance to foreign investors whose assets have been expropriated or that have had the management of that investment obstructed by Russia’s actions, present and future.

Key Protections in Russian BITs

Russia has BITs in force with over 60 countries, including many EU members (such as Austria, Belgium, Bulgaria, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Lithuania, Italy, Luxembourg, the Netherlands, Romania, Slovakia, Spain, and Sweden) and countries such as Canada, Japan, Korea, Switzerland, the UK, and Ukraine. There is no BIT between Russia and the United States, but U.S. companies may nonetheless benefit from BIT protection if they hold their investments in Russia through a third country that does have a Russian BIT.

In its BITs, Russia has committed to, among other things, treat investors from the relevant countries in a fair and equitable manner, not to discriminate against such investors on the basis of nationality, not to expropriate their investments except under certain conditions and upon payment of adequate compensation, and to guarantee their right to freely transfer payments related to their investments out of Russia. All of these protections are relevant in the present context.Continue Reading Protecting Against Russia’s Asset Seizures: Investment Treaties May Provide a Remedy for Foreign Investors