The EU’s Sanctions Regime and Arbitration: Implications of the 20th Package
- Sovereign Arbitration Advisors
- 7 days ago
- 5 min read
On 23 April 2026, the European Union adopted its 20th sanctions package against Russia, marking another significant step in a sanctions regime that has expanded dramatically since the Annexation of Crimea in 2014. The EU's sanction regime has evolved into a dense and far-reaching legal framework—one that increasingly intersects with both commercial arbitration and investor-State dispute settlement (ISDS).
This post unpacks how EU sanctions operate, and reflects on how recent developments may affect international arbitration.[1]
Two Categories of EU Sanctions
The existing sanctions adopted by the EU against Russia in the context of the war against Ukraine fall into two types of categories:
1. Targeted listings against individuals and entities
These measures are included in Regulation 269/2014 and contains:
· Asset freezes
· Travel bans
· Prohibitions on making funds or economic resources available
While such targeted sanctions are not unique (they are also used in contexts like Iran, Sudan, and Venezuela), the scale is unprecedented. Over 2,600 Russian individuals and entities have been listed—nearly half of all EU sanctions listings globally.[2]
2. Sectoral economic measures
These measures are included in Regulation 833/2014 and target broad segments of the Russian economy. These measures are deliberately broad, applying to virtually all operators engaging with Russian counterparties in affected sectors—even where those counterparties are not themselves listed.
Some key features—further expanded under the 20th package—include:
Dual-use and military goods restrictions, now extended to certain listed entities in third countries (including China, the UAE, Uzbekistan, Kazakhstan, and Belarus)
Trade restrictions across a wide range of goods and services, from raw materials to fresh flowers, from industrial inputs, chemical materials to luxury goods, but also encompassing services in cybersecurity, as well as services such as cybersecurity, ship and aircraft maintenance, crypto-finance, insurance and brokering services
Energy sector measures, including new designations across the oil value chain and continued restrictions on the so-called “shadow fleet”
A phased ban on Russian LNG imports by 2027
A broad prohibition on transactions with Russian state-owned or state-controlled entities, including the Russian Central Bank, as well as entities owned by or acting on their behalf.
Sanctions and Arbitration
Both sanction categories have implications for arbitration. This affects commercial arbitration as well as ISDS.
Both regulations contain a so-called “no claims” clause in Article 11(1) of the regulations:
“No claims in connection with any contract or transaction the performance of which has been affected … by the measures imposed under this Regulation shall be satisfied.”
This clause lies at the heart of sanctions-related arbitration disputes, and applies both to listed legal persons and entities as well as any other Russian person or entity.
Commercial Arbitration
The key legal issue is how sanctions – in particular this no-claims provision -works in practice. This is currently being tested before the Court of Justice of the European Union in the Reibel case. The dispute concerns a Stockholm-seated arbitration between NV Reibel (Belgium) and JSC VO Stankoimport (Russia), arising out of a 2015 supply contract for helicopter parts. Following the refusal of an export licence by the Belgium authorities in 2017 because these are dual-use goods under Regulation 833/2014, performance became impossible. The contract contained a commercial arbitration provision. In its 2021 award, the arbitral tribunal rejected damages claims and ordered repayment of advance payments that Stankoimport had paid in anticipation of performance. Importantly, it found that repayment did not fall within the scope of Article 11(1).
In the context of the annulment proceedings, the Swedish court referred several preliminary questions to the Court of Justice of the European Union, seeking clarification on the interaction between EU sanctions and arbitration[3]:
Are sanctions-related disputes arbitrable?
Do EU sanctions form part of public policy?
Does repayment of advance payments qualify as a “claim”?
In his Opinion of February 2026, the Advocate General adopted a nuanced approach:
Article 11 prohibits the satisfaction of claims—but not their submission to arbitration
EU sanctions form part of EU public policy
Repayment of advances does not constitute a prohibited “claim”
Whether or not the Court will follow this advisory reasoning remains to be seen. The distinction between admissibility and enforceability may ultimately prove decisive for the viability of sanctions-related arbitration in the EU.
Beyond the “no-claims” clause, the EU has introduced additional provisions in Articles 11 of Regulation 833/2014 affecting arbitration. This includes:
Clawback provision allowing EU parties targeted by sanctions-related claims in third countries to recover damages, including legal costs, before EU courts (Article 11(a));
Protections against Russian countermeasures against European parties, including interference or expropriation of European assets in Russia (Article 11(b));
Protections against anti-arbitration injunctions issued by Russian courts (Article 11(c))
The 20th sanctions package continues to address litigation tactics in Russian courts, including proceedings brought in breach of arbitration agreements. It allows EU companies to seek relief before Member State courts, including:
Orders upholding exclusive jurisdiction or arbitration clauses (new Article 11ca)
Injunctions to prevent or terminate foreign proceedings (new Article 11ca)
Clarification of the existing clawback provisions. The amended Articles 11a and 11b(1a) allow EU courts to award damages (including legal costs) to EU operators targeted by foreign proceedings linked to EU sanctions, including claims brought abroad for non-performance of contracts due to sanctions (Article 11a) and the enforcement in third countries of Russian countermeasures or related decisions (Article 11b(1a)).
These provisions are designed to counter anti-arbitration injunctions and parallel proceedings initiated in Russia.
ISDS: A Different Battlefield
The picture changes significantly in the context of ISDS.
Here, disputes are not about contractual non-performance, but about the legality and effects of the sanctions themselves, including asset freezes and economic restrictions imposed by EU Member States.
More than 25 ISDS cases are now publicly known to challenge Russia-related sanctions.
Notable Examples;
Mikhail Fridman has initiated a USD 16 billion claim against Luxembourg under the Belgium–Luxembourg–Russia BIT for the freezing of assets under the EU Russian sanctions regime.
Rusal, a Russian aluminum company has commenced ISDS proceedings against Germany in relation to restrictions and regulatory measures imposed on its German operations.
Rosneft is reportedly preparing a claim against Germany concerning trusteeship measures under Article 5aa of Regulation 833/2014.
Russian state entities are threatening to use the 1989 Belgium-Luxembourg (BLEU) - USSR bilateral investment treaty (BIT) to sue Belgium over the European Union’s (EU's) plan to back Ukraine support loans with immobilized Russian Central Bank assets held in Belgium. The immobilized Russian assets are concentrated at Euroclear in Brussels, an international central securities depository. Roughly EUR 185 billion in Russian Central Bank holdings are immobilized there, with about EUR 176 billion in cash.
In response, the EU has addressed these risks in the 18th sanctions package (July 2025) by including provisions containing:
A prohibition on recognising or enforcing ISDS awards related to sanctions in an EU Member State (Article 11(2)(a))
A right for Member States to recover damages and legal costs of ISDS-proceedings (Article 11e)
An obligation to raise all available objections to enforcement of arbitral awards rendered in ISDS-proceedings (Article 11(f))
The 20th package introduces an addition to Article 11(1) of Regulation 269/2014, authorising Member State authorities to release frozen assets where necessary to satisfy an arbitral award on costs. This applies in situations where arbitration proceedings have been initiated by sanctioned entities or individuals after their designation, and the tribunal orders those parties to pay costs to a non-sanctioned respondent.
Conclusion
The EU’s 20th sanction package reflects a broader trend: the EU is gradually adapting its sanctions regime in response to developments in commercial arbitration and ISDS.
Some measures largely codify what Member State courts would likely have done in any event—namely, resist enforcement of sanctions-related awards. Others, however, have more tangible implications. In particular, the damages recovery mechanism provides a legal basis for Member States to “claw back” amounts enforced outside the EU—potentially offsetting the financial impact of adverse awards. Its effectiveness will depend on a practical question: whether sanctioned claimants retain attachable assets within the EU.
If you have questions or comments, or need help navigating this world, please let us know.
[1] This post is based on the speaker’s notes prepared for the 2026 American Society of International Law panel on Investor-State Arbitration Amid Global Sanctions Regimes.
[3] See case C-802/24, Reibel via https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:62024CN0802
