When the European Union introduced its 18th package of sanctions against Russia, most media attention focused on export controls and technology bans. Almost no one noticed a far more consequential development: millions of ordinary, non-sanctioned Russian investors were left with no way to recover billions of euros frozen inside Euroclear. This is essentially analogous to an indefinite confiscation with no viable recourse to redeem the investment.
The European Union has been engaged in sustained economic pressure on Russia for nearly four years – a response to Moscow’s full-scale invasion of Ukraine – and it is unclear if and when this will change. This economic front in the broader struggle has had deep and far-reaching effects, some of which are already visible, while others will surface over time. This stance is manifested, among other things, to the EU’s expanding legal campaign against Russia. While the actual harm of these to the Russian state remains unclear, what has become evident is the damage to Europe’s own reputation.
The recent 18th sanctions package further unveils this troubling pattern. The measures ostensibly shield member states from legal claims, but in reality undermines both Europe’s standing as a bastion of the rule of law and its attractiveness to investors worldwide.
The Human Cost of Frozen Assets
During the fintech boom of the late 2010s, phone apps emerged that made purchasing foreign stocks easily accessible. Millions of low-income and middle-class Russians invested their savings in American and European companies. At the time, it seemed self-evident that no safer haven existed than private property secured in Europe, for example within Euroclear. That assumption was shattered when the EU launched its sanctions campaign in response to Russia’s invasion of Ukraine. According to the Carnegie Endowment, over five million Russians saw their foreign securities frozen after the EU blacklisted Russia’s National Settlement Depository and other brokers in 2022. Approximately €14 billion in stocks, ranging from Apple to BMW to global ETFs, became and remain immobilized in Euroclear. Those suffering most are ordinary people with ordinary jobs who only gained access to stock markets once technology advanced sufficiently. The vast majority of these portfolios contain several thousand euros at most.
Given salary levels and currency exchange rates in Russia, these investments represent significant wealth for many families. A limited frozen asset exchange program launched last year allowed some investors to recover amounts not exceeding €1,000. The remaining 3.5 million investors are still locked out, with no viable path to reclaim their assets or receive dividends and corporate action payments.
In theory, these individuals could have sought legal remedies through investment arbitration, either individually or through collective action. However, even this recourse has now been effectively eliminated. The EU’s 18th sanctions package virtually precludes any such arbitral awards from being enforced. The explicit goal of the new package was to preempt a wave of investor-state arbitration claims expected to target Euroclear, Belgium and other EU jurisdictions. However, even if this is achieved, the implications extend far beyond harm to Russian investors and much more harm is likely to be done to Europe itself.
A Collision with International Commitments
Legal experts warn that the measure places the EU in direct conflict with more than a dozen bilateral investment treaties it has signed with Russia over the past three decades. Those treaties guarantee Russian investors, including retail investors, access to arbitration and require states to honour arbitral awards.
The principle of pacta sunt servanda (“agreements must be kept”) forms the foundation of any developed legal system. A blanket refusal to enforce awards may itself constitute a treaty breach. In attempting to limit legal exposure, Brussels may have inadvertently magnified its long-term risk.
The reputational cost extends further still. The European Union has long presented itself as one of the world’s most reliable jurisdictions for investors, and that has always included the expectation that arbitration awards would be respected and courts would follow predictable rules. By making its courts disregard tribunal rulings, Europe has begun eroding the rule-of-law reputation upon which much of its economic influence depends.
Investors in the Gulf states, India and Southeast Asia, regions that Brussels is aggressively courting, may now question whether Europe’s legal commitments hold when geopolitics intervene. For an economic bloc that is reliant on foreign capital, such doubt carries serious consequences.
A systemic refusal by EU courts to enforce arbitral awards involving Russian parties would weaken confidence in the neutrality and mutual reliability that the New York Convention is intended to secure. Such a development may prompt courts in BRICS and other non-Western jurisdictions to rely more assertively on public-order doctrines in cases involving EU member states or European companies, thereby contributing to a gradual fragmentation of the global enforcement framework.
Arbitration tribunals will still issue awards on investment disputes regardless of EU policy. If the EU refuses to enforce awards domestically, investors will pursue their claims in other jurisdictions and no sanctions package can prevent that. Though this scenario may seem remote, it could eventually lead to asset seizures, counter-litigation and heightened diplomatic tensions, particularly in countries where European companies maintain substantial operations. A measure designed to protect EU governments from liability may well create even greater financial exposure. This comes at a particularly inopportune moment, as European states grapple with budget deficits, rising borrowing costs and sluggish economic growth.
There are also institutional consequences. By weakening its own enforcement guarantees, the EU has begun undermining the very rule-of-law principles that underpin its economic and political influence. For a bloc that regularly criticizes other nations for disregarding international norms, this precedent creates obvious difficulties.
The Questions Brussels Cannot Avoid
For millions of small Russian investors, the issue remains intensely personal. These are retirement savings, family assets and years of careful investment they cannot access. For Europe, it represents a rapidly escalating legal and reputational challenge.
What happens if tribunals rule in favour of these investors? What happens if foreign courts move to enforce those awards? And what is the EU’s strategy when its own assets abroad become targets?
Brussels has deferred these questions. Postponement offers no solution. The claims will continue, and so will the awards. Unless the European Union recalibrates its approach, the eventual cost, whether financial, legal or diplomatic, may prove far higher than anticipated. Assuming that the measures even work, is weaking Russia at any cost truly the wisest path forward?
