Comparative Summary Report — International Disputes Arising from Energy Sector Nationalisation
As Armenia explores the idea of nationalising its electricity distribution networks, it’s entering legally complex and politically sensitive territory. The right of a state to manage its own infrastructure is undisputed, however, when foreign investors are involved, the consequences can reach far beyond domestic borders.
International arbitration has seen numerous cases where governments made similar moves, only to face costly legal challenges, investor claims, and reputational fallout. Looking closely at two landmark cases can help Armenia see what’s at stake and more importantly, what can be done differently.
Case 1: JKX Oil & Gas plc, Poltava Gas B.V. and Poltava Petroleum Company JV v. Ukraine
(SCC Arbitration Case No. V2014/163)
In this case, UK-based JKX Oil & Gas challenged Ukraine under the Energy Charter Treaty, after the government imposed a series of punitive tax measures. The arbitration tribunal granted JKX interim relief, ordering Ukraine to halt enforcement of the penalties, a rare and significant move.
Why it matters for Armenia? Because the Stockholm Chamber of Commerce recently issued a similar interim measure in favour of Electric Networks of Armenia (ENA), halting further government interference. But here’s the catch: Ukraine’s domestic courts later refused to enforce the JKX award, citing public policy concerns. This case is a sharp reminder that even when an international tribunal sides with the investor, domestic enforcement is never guaranteed. Armenia would be wise to anticipate this friction and avoid actions that might undermine its standing before both international and domestic legal bodies.
Case 2: PJSC Ukrnafta v. The Russian Federation
(UNCITRAL, PCA Case No. 2015-34)
After Russia annexed Crimea, Ukrainian energy company Ukrnafta lost access to critical assets, petrol stations, storage facilities, and more. The company turned to arbitration, accusing Russia of unlawful expropriation under the Ukraine–Russia BIT. The tribunal sided with Ukrnafta, awarding USD 44.4 million in damages. When Russia tried to overturn the award, the Swiss Supreme Court upheld its enforcement, sending a clear message that even powerful states aren’t beyond the reach of international law.
For Armenia, this shows how high the stakes can be and how international institutions, if respected, can still offer real recourse for the investors. It also highlights how failure to honour investment treaties can lead to years of litigation, massive compensation orders, and a diplomatic headache.
Given the precedents set by the JKX and Ukrnafta cases, Armenia should approach the ENA nationalization carefully and strategically by prioritizing transparent and good-faith negotiations with investors to ensure fair compensation and uphold its treaty obligations. While interim relief like that obtained in the JKX case can temporarily protect investors’ interests, domestic courts might resist enforcing such awards, prolonging disputes and uncertainty. Likewise, as the Ukrnafta case demonstrates, uncompensated seizure of critical energy infrastructure can lead to costly arbitration awards and long-term reputational damage.
Therefore, Armenia would benefit from seeking alternative dispute resolution where possible and balancing national policy goals with maintaining a stable and attractive investment climate for the future.
In addition, foreign investors value predictability and fairness above all; abrupt policy shifts without clear communication can erode trust and deter future investment. Armenia should ensure that any steps taken are accompanied by detailed explanations of the legal framework and remedies available to investors. Proactively engaging with investors and respecting their rights signals respect for the rule of law, which is crucial to maintaining Armenia’s standing as a reliable investment destination. Moreover, Armenia should be mindful that investors will closely watch how the state handles compensation and dispute resolution, as these actions set precedents that affect the country’s broader investment climate.
By fostering a collaborative rather than adversarial approach, Armenia can reduce the risk of lengthy legal battles, preserve investor confidence, and support long-term economic stability.