On 22 July 2025, a Stockholm Chamber of Commerce (SCC) emergency arbitrator ordered Armenia to refrain from any further steps aimed at the expropriation of the Electric Networks of Armenia (ENA).
This development comes on the heels of a dramatic sequence of events: in June 2025, billionaire Samvel Karapetyan was arrested for “advocating the seizure of power”; and, only days later, the Prime Minister told Parliament that Armenia’s electricity grid would soon be “returned to the people”. Armenia’s ongoing measures, culminating in the parliamentary adoption of a nationalisation law, risk breaching key protections under the Energy Charter Treaty (ECT) and the Cyprus-Armenia BIT. This post argues that Armenia’s primary legal risk stems not from the decision to nationalise as such, but from the speed and opacity with which it now seems poised to act.
Corporate Structure, Jurisdiction, and Emergency Arbitration
Appendix II of the SCC Arbitration Rules empowers parties to seek urgent interim measures before the main arbitral tribunal is constituted. For the ENA shareholders, this avenue was available through Article 9 of the Cyprus-Armenia BIT, which entitles an investor to refer disputes to the SCC, the International Chamber of Commerce (ICC), or the International Centre for Settlement of Investment Disputes (ICSID). The ECT provides a nearly identical selection of fora, including SCC, ICSID, or a UNCITRAL ad-hoc arbitration. ENA’s owners opted for the SCC’s emergency arbitration track.
ENA’s legal standing is secure. According to the Armenian e-register, Samvel Karapetyan and his son hold 31.8% and 29% of ENA’s shares, while the remaining equity is controlled through Cyprus-based entities, Liormand Holdings Limited and Tashir International Holdings. This arrangement classifies ENA as a foreign investment, entitling it to the protections of both the Cyprus–Armenia BIT and the ECT.
In Tokios Tokelés v Ukraine, for example, the Tribunal confirmed that incorporation in a treaty partner State is sufficient to trigger full investment protection, even if the ‘real’ controllers are nationals of the host country (para 42). By the same logic, ENA’s Cyprus-based ownership structure gives it standing to invoke Armenia’s investment treaty obligations, including guarantees of protection from expropriation.
Importantly, the SCC emergency arbitrator was persuaded that the claimant’s case was at least plausible and that the risk of irreparable harm was both real and imminent. By ordering Armenia to refrain from further steps toward expropriation of ENA, the arbitrator signaled that these legal and factual thresholds were met.
Armenia’s Response
Armenia’s Minister of Justice underscored that foreign arbitral awards must first be recognised by Armenian courts before they can be enforced. She emphasised that Armenian courts reserve the right to refuse recognition of any award that ‘contradicts public order’.
The Armenian Cabinet’s official statement emphasised that the emergency order was limited to interim relief and asserted that its scope ‘differs from the government’s objectives’ at ENA. Officials maintained that appointing a temporary administrator was driven by urgent domestic needs and was not prohibited by the arbitrator’s order. However, the SCC’s injunction did prohibit Armenia from installing any interim manager with decision-making authority, a detail the government has sought to minimise in public communications.
Expropriation under International Investment Law
Expropriation is arguably the severest risk a foreign investor faces and the raison d’être of every investment-protection treaty. It is widely acknowledged that States possess an unquestioned sovereign right to expropriate or nationalise foreign-owned property within their territory (see, eg, Dolzer, Kriebaum and Schreuer). That right, however, is not unlimited: international law requires that any expropriation (i) serves a public purpose, (ii) is carried out in a non-discriminatory manner, (iii) follows due process of law, and (iv) is accompanied by prompt, adequate, and effective compensation. These requirements are reflected under Article 4 of the Cyprus-Armenia BIT and Article 13 of the ECT. A failure to satisfy any of these requirements will render the expropriation (nationalisation) unlawful, regardless of the State’s intention or asserted public interest.
While Armenia grounds its actions in the language of public interest, the decisive point is not the government’s intentions. In Tecmed v Mexico, the Tribunal stressed that ‘the government’s intention is less important than the effects of the measures on the owner of the assets or on the benefits arising from such assets affected by the measures; and the form of the deprivation measure is less important than its actual effects’. (para 116; see also Azurix v Argentina, para 309).
Importantly, Armenia cannot shield itself from expropriation claims by pointing to the absence of a formal nationalisation decree under its domestic law. Under international law, expropriation is a matter of substance, not form. Where a state’s action results in the deprivation of the investor’s control, use, or economic benefits of the investment, expropriation will be established regardless of the legal label attached (LG&E v Argentina, paras 188, 191).
Even when the Minister of Justice assures that, in the event of nationalisaion, the investor will be compensated, this alone does not make the taking lawful: the measure must also be carried out with due process. In this case, the risk of a due process violation remains acute.
For instance, Article 13(2) ECT makes that procedural limb explicit, granting the investor a right to ‘prompt review, under the law of the Contracting Party making the expropriation, by a judicial or other competent and independent authority’ of the measure’s legality.
The International Court 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 factory, the ICJ defined arbitrariness as ‘a wilful disregard of due process of law, an act which shocks, or at least surprises, a sense of judicial propriety’ (para 128). Investment tribunals have since translated that formula into concrete procedural duties. For example, in Kardassopoulos v Georgia, the State’s opaque dealings over an oil-pipeline concession offered the investor neither reasonable advance notice nor a fair hearing. The Tribunal concluded that the expropriation ‘cannot by any definition be considered to have been carried out under due process of law’, and that Georgia’s failure to provide a timely forum for the investor’s claims breached Article 13(1) ECT (para 404). Similarly, the Tribunal in Yukos v Russian Federation found that Russia’s criminal and tax prosecutions were orchestrated to bankrupt the company and imprison its principals; the ‘harsh treatment’, the speed of proceedings, and the obstruction of counsel do not comport with due process of law (para 1583). Another illustrative case, ADC v Hungary, involved the overnight cancellation of an airport concession. Citing the absence of notice, hearing, or impartial review, the Tribunal in ADC held that where ‘no legal procedure of such nature exists at all, the argument that “the actions are taken under due process of law” rings hollow’ (paras 435-440).
A coherent test emerges across these awards. There must be: (a) reasonable advance notice of the intended measure; (b) a genuine opportunity to be heard or to remedy alleged breaches; (c) a transparent, reasoned decision by a competent authority; and (d) an impartial avenue of review within a reasonable time. Breach of any single prong renders the taking unlawful ab initio; compensation or public-purpose rhetoric cannot cure the defect.
Armenian law itself draws a line in the sand. Article 8 of the 1994 Law on Foreign Investments prohibits nationalising foreign-owned assets outright, allowing seizure only as an emergency measure ordered by a court and coupled with full compensation.
Armenia’s handling of the ENA already raises red flags. Karapetyan’s arrest, followed by the sweeping promise to nationalise the grid, all without a clear statutory basis, a transparent valuation process, or genuine consultation with ENA’s shareholders, evokes precisely the kind of shortcuts that arbitral tribunals have repeatedly condemned. Unless Armenia builds a transparent, participatory legal framework and offers ENA prompt access to an independent review body, the planned nationalisation risks failing the ECT’s due-process limb before questions of purpose or compensation even arise.
But why does it matter if a state is willing to compensate? After all, nearly all expropriation cases apply the treaty-based standard of compensation at fair market value. Various methods exist to determine that value, but for a going concern that has already produced income, the discounted cash flow (DCF) method is often used, rather than simple book value or replacement cost.
Although some tribunals have held that damages for illegal expropriation should not differ from compensation for a lawful taking (see, eg, Guaracachi v Bolivia, para 443), the prevailing approach is that an unlawful expropriation instead engages the rules of state responsibility. In such cases, damages must, so far as possible, restore the investor to the position they would have been in had the illegal act not occurred (ILC Articles on State Responsibility, Article 31).
By contrast, lawful expropriation requires compensation based on the market value at the time of taking (see, eg, Siemens v Argentina, para 352). The difference between these two methods can be substantial: a successful claim for unlawful expropriation may result in a higher award than a market value settlement.
Therefore, investors may have every incentive to proceed with arbitration rather than accept mere compensation on the government’s terms.
A Procedural Playbook Worth Studying
Tribunals do not begrudge a State the power to take back strategic assets so long as the procedure is transparent, participatory, and reviewable. For example, Argentina’s 2012 nationalisation of Yacimientos Petrolíferos Fiscales (YPF), the country’s largest oil and gas company, offers a rare illustration of a high-profile expropriation that managed to avoid condemnation as unlawful. The process ultimately resulted in substantial compensation for Repsol, YPF’s principal shareholder. An expert-valuation mechanism was fixed: within a year, Buenos Aires placed USD 5 billion in sovereign bonds with Repsol, and the ICSID claim (Repsol v Argentina) was discontinued. The key takeaway is that due process for investors must proceed state power: a clear statutory basis, genuine dialogue with the investor, and a standing invitation to impartial review.
Conclusion
The SCC emergency order has put Armenia’s handling of the ENA nationalisation squarely under the spotlight of international investment law. By granting interim relief, the arbitrator has already signalled that Armenia’s actions carry a tangible risk of breaching its investment treaty obligations.
Expropriation is not defined solely by a final decree, but may emerge from a coordinated pattern of state action that results in the substantial and permanent deprivation of control or value. Tribunals have found expropriation where a series of state measures, criminal proceedings, asset seizures, and public threats left the investor with no recourse or economic benefit (as in Yukos v Russia). As Azurix v Argentina makes clear, even when the public interest justifies intervention, the means chosen must be proportionate and fair; a legitimate aim cannot be pursued through disproportionate or opaque procedures that leave the investor without a remedy (para 311).
The direction Armenia has taken so far risks turning the ENA affair into a protracted and expensive international dispute. Armenia can soon face substantial liability for unlawful expropriation, with the financial burden ultimately falling on taxpayers. Unless a course correction restores standards of transparency and legal review, the ENA case may well become a cautionary tale in balancing political urgency and international commitments.
Davit Khachatryan, LLM (Swedish Defence University), LLM (Uppsala University), specialises in investment law, alternative dispute resolution, and public international law. His academic and professional work focuses on investment and commercial arbitration, the protection of foreign investment, and the intersection of international investment law with emerging global challenges such as energy security and climate change.