On 22 July 2025, a Stockholm Chamber of Commerce (SCC) emergency arbitrator ordered Armenia to chorus from any additional steps aimed on the expropriation of the Electrical Networks of Armenia (ENA).
This growth comes on the heels of a dramatic sequence of occasions: in June 2025, billionaire Samvel Karapetyan was arrested for “advocating the seizure of energy”; and, solely days later, the Prime Minister instructed Parliament that Armenia’s electrical energy grid would quickly be “returned to the individuals”. Armenia’s ongoing measures, culminating within the parliamentary adoption of a nationalisation regulation, threat breaching key protections underneath the Power Constitution Treaty (ECT) and the Cyprus-Armenia BIT. This put up argues that Armenia’s main authorized threat stems not from the choice to nationalise as such, however from the pace and opacity with which it now appears poised to behave.
Company Construction, Jurisdiction, and Emergency Arbitration
Appendix II of the SCC Arbitration Guidelines empowers events to hunt pressing interim measures earlier than the primary arbitral tribunal is constituted. For the ENA shareholders, this avenue was out there by means of Article 9 of the Cyprus-Armenia BIT, which entitles an investor to refer disputes to the SCC, the Worldwide Chamber of Commerce (ICC), or the Worldwide Centre for Settlement of Funding Disputes (ICSID). The ECT offers an almost equivalent collection of fora, together with SCC, ICSID, or a UNCITRAL ad-hoc arbitration. ENA’s homeowners opted for the SCC’s emergency arbitration observe.
ENA’s authorized standing is safe. In response to the Armenian e-register, Samvel Karapetyan and his son maintain 31.8% and 29% of ENA’s shares, whereas the remaining fairness is managed by means of Cyprus-based entities, Liormand Holdings Restricted and Tashir Worldwide Holdings. This association classifies ENA as a overseas funding, entitling it to the protections of each the Cyprus–Armenia BIT and the ECT.
In Tokios Tokelés v Ukraine, for instance, the Tribunal confirmed that incorporation in a treaty accomplice State is enough to set off full funding safety, even when the ‘actual’ controllers are nationals of the host nation (para 42). By the identical logic, ENA’s Cyprus-based possession construction offers it standing to invoke Armenia’s funding treaty obligations, together with ensures of safety from expropriation.
Importantly, the SCC emergency arbitrator was persuaded that the claimant’s case was no less than believable and that the chance of irreparable hurt was each actual and imminent. By ordering Armenia to chorus from additional steps towards expropriation of ENA, the arbitrator signaled that these authorized and factual thresholds had been met.
Armenia’s Response
Armenia’s Minister of Justice underscored that overseas arbitral awards should first be recognised by Armenian courts earlier than they are often enforced. She emphasised that Armenian courts reserve the precise to refuse recognition of any award that ‘contradicts public order’.
The Armenian Cupboard’s official assertion emphasised that the emergency order was restricted to interim aid and asserted that its scope ‘differs from the federal government’s targets’ at ENA. Officers maintained that appointing a brief administrator was pushed by pressing home wants and was not prohibited by the arbitrator’s order. Nonetheless, the SCC’s injunction did prohibit Armenia from putting in any interim supervisor with decision-making authority, a element the federal government has sought to minimise in public communications.
Expropriation underneath Worldwide Funding Legislation
Expropriation is arguably the severest threat a overseas investor faces and the raison d’être of each investment-protection treaty. It’s broadly acknowledged that States possess an unquestioned sovereign proper to expropriate or nationalise foreign-owned property inside their territory (see, eg, Dolzer, Kriebaum and Schreuer). That proper, nevertheless, shouldn’t be limitless: worldwide regulation requires that any expropriation (i) serves a public goal, (ii) is carried out in a non-discriminatory method, (iii) follows due technique of regulation, and (iv) is accompanied by immediate, enough, and efficient compensation. These necessities are mirrored underneath Article 4 of the Cyprus-Armenia BIT and Article 13 of the ECT. A failure to fulfill any of those necessities will render the expropriation (nationalisation) illegal, whatever the State’s intention or asserted public curiosity.
Whereas Armenia grounds its actions within the language of public curiosity, the decisive level shouldn’t be the federal government’s intentions. In Tecmed v Mexico, the Tribunal pressured that ‘the federal government’s intention is much less essential than the results of the measures on the proprietor of the belongings or on the advantages arising from such belongings affected by the measures; and the type of the deprivation measure is much less essential than its precise results’. (para 116; see additionally Azurix v Argentina, para 309).
Importantly, Armenia can not defend itself from expropriation claims by pointing to the absence of a proper nationalisation decree underneath its home regulation. Beneath worldwide regulation, expropriation is a matter of substance, not kind. The place a state’s motion leads to the deprivation of the investor’s management, use, or financial advantages of the funding, expropriation will likely be established whatever the authorized label hooked up (LG&E v Argentina, paras 188, 191).
Even when the Minister of Justice assures that, within the occasion of nationalisaion, the investor will likely be compensated, this alone doesn’t make the taking lawful: the measure should even be carried out with due course of. On this case, the chance of a due course of violation stays acute.
For example, Article 13(2) ECT makes that procedural limb specific, granting the investor a proper to ‘immediate overview, underneath the regulation of the Contracting Occasion making the expropriation, by a judicial or different competent and impartial authority’ of the measure’s legality.
The Worldwide Court docket of Justice (ICJ) set the conceptual tone in ELSI (United States of America v Italy). Confronted with a municipal requisition of a United States-owned manufacturing facility, the ICJ outlined arbitrariness as ‘a wilful disregard of due technique of regulation, an act which shocks, or no less than surprises, a way of judicial propriety’ (para 128). Funding tribunals have since translated that method into concrete procedural duties. For instance, in Kardassopoulos v Georgia, the State’s opaque dealings over an oil-pipeline concession provided the investor neither cheap advance discover nor a good listening to. The Tribunal concluded that the expropriation ‘can not by any definition be thought of to have been carried out underneath due technique of regulation’, and that Georgia’s failure to supply a well timed discussion board for the investor’s claims breached Article 13(1) ECT (para 404). Equally, the Tribunal in Yukos v Russian Federation discovered that Russia’s prison and tax prosecutions had been orchestrated to bankrupt the corporate and imprison its principals; the ‘harsh remedy’, the pace of proceedings, and the obstruction of counsel don’t comport with due technique of regulation (para 1583). One other illustrative case, ADC v Hungary, concerned the in a single day cancellation of an airport concession. Citing the absence of discover, listening to, or neutral overview, the Tribunal in ADC held that the place ‘no authorized process of such nature exists in any respect, the argument that “the actions are taken underneath due technique of regulation” rings hole’ (paras 435-440).
A coherent take a look at emerges throughout these awards. There have to be: (a) cheap advance discover of the supposed measure; (b) a real alternative to be heard or to treatment alleged breaches; (c) a clear, reasoned choice by a reliable authority; and (d) an neutral avenue of overview inside an inexpensive time. Breach of any single prong renders the taking illegal ab initio; compensation or public-purpose rhetoric can not treatment the defect.
Armenian regulation itself attracts a line within the sand. Article 8 of the 1994 Legislation on Overseas Investments prohibits nationalising foreign-owned belongings outright, permitting seizure solely as an emergency measure ordered by a court docket and paired with full compensation.
Armenia’s dealing with of the ENA already raises crimson flags. Karapetyan’s arrest, adopted by the sweeping promise to nationalise the grid, all and not using a clear statutory foundation, a clear valuation course of, or real session with ENA’s shareholders, evokes exactly the form of shortcuts that arbitral tribunals have repeatedly condemned. Until Armenia builds a clear, participatory authorized framework and presents ENA immediate entry to an impartial overview physique, the deliberate nationalisation dangers failing the ECT’s due-process limb earlier than questions of goal or compensation even come up.
However why does it matter if a state is prepared to compensate? In spite of everything, practically all expropriation instances apply the treaty-based normal of compensation at truthful market worth. Varied strategies exist to find out that worth, however for a going concern that has already produced revenue, the discounted money circulation (DCF) methodology is commonly used, fairly than easy ebook worth or substitute value.
Though some tribunals have held that damages for unlawful expropriation shouldn’t differ from compensation for a lawful taking (see, eg, Guaracachi v Bolivia, para 443), the prevailing strategy is that an illegal expropriation as an alternative engages the principles of state accountability. In such instances, damages should, as far as doable, restore the investor to the place they’d have been in had the unlawful act not occurred (ILC Articles on State Duty, Article 31).
Against this, lawful expropriation requires compensation primarily based available on the market worth on the time of taking (see, eg, Siemens v Argentina, para 352). The distinction between these two strategies could be substantial: a profitable declare for illegal expropriation could lead to a better award than a market worth settlement.
Due to this fact, buyers could have each incentive to proceed with arbitration fairly than settle for mere compensation on the federal government’s phrases.
A Procedural Playbook Value Finding out
Tribunals don’t begrudge a State the facility to take again strategic belongings as long as the process is clear, participatory, and reviewable. For instance, Argentina’s 2012 nationalisation of Yacimientos Petrolíferos Fiscales (YPF), the nation’s largest oil and gasoline firm, presents a uncommon illustration of a high-profile expropriation that managed to keep away from condemnation as illegal. The method finally resulted in substantial compensation for Repsol, YPF’s principal shareholder. An authority-valuation mechanism was mounted: inside a 12 months, Buenos Aires positioned USD 5 billion in sovereign bonds with Repsol, and the ICSID declare (Repsol v Argentina) was discontinued. The important thing takeaway is that due course of for buyers should proceed state energy: a transparent statutory foundation, real dialogue with the investor, and a standing invitation to neutral overview.
Conclusion
The SCC emergency order has put Armenia’s dealing with of the ENA nationalisation squarely underneath the highlight of worldwide funding regulation. By granting interim aid, the arbitrator has already signalled that Armenia’s actions carry a tangible threat of breaching its funding treaty obligations.
Expropriation shouldn’t be outlined solely by a remaining decree, however could emerge from a coordinated sample of state motion that leads to the substantial and everlasting deprivation of management or worth. Tribunals have discovered expropriation the place a sequence of state measures, prison proceedings, asset seizures, and public threats left the investor with no recourse or financial profit (as in Yukos v Russia). As Azurix v Argentina makes clear, even when the general public curiosity justifies intervention, the means chosen have to be proportionate and truthful; a respectable goal can’t be pursued by means of disproportionate or opaque procedures that go away the investor and not using a treatment (para 311).
The course Armenia has taken to date dangers turning the ENA affair right into a protracted and costly worldwide dispute. Armenia can quickly face substantial legal responsibility for illegal expropriation, with the monetary burden finally falling on taxpayers. Until a course correction restores requirements of transparency and authorized overview, the ENA case could effectively change into a cautionary story in balancing political urgency and worldwide commitments.
Davit Khachatryan, LLM (Swedish Defence College), LLM (Uppsala College), specialises in funding regulation, different dispute decision, and public worldwide regulation. His tutorial {and professional} work focuses on funding and industrial arbitration, the safety of overseas funding, and the intersection of worldwide funding regulation with rising international challenges akin to power safety and local weather change.
