Sanctions-linked arbitration threat against Bulgaria

On 19 February 2026, LITASCO SA, a Geneva-based company and international trading arm of a Russian major oil company, LUKOIL, filed a notice of dispute to the Republic of Bulgaria. As grounds of dispute, the notice refers to the Agreement between Switzerland and Bulgaria on the Promotion and Mutual Protection of Investments, signed in October 1991 (BIT), and the Energy Charter Treaty, signed in December 1994 (ECT). Both the BIT and the ECT protect investors against unlawful expropriation and guarantee fair and equitable treatment and other protections.

The dispute relates to the legislation passed by the Bulgarian parliament on 14 November 2025, whereby external management was introduced over LUKOIL Neftohim Burgas AD, LUKOIL Bulgaria EOOD and other entities of the LUKOIL Group operating in Bulgaria. According to the LITASCO SA’s statement, as of 17 November 2025, the affected companies came under new management of the special commercial manager. LITASCO SA claims that these (and some other) actions “have materially affected [its] investments in its Bulgarian subsidiaries and have resulted in significant losses”. It should be noted that the enactment of this legislation was most likely triggered by the blocking sanctions imposed by the U.S. on PJSC LUKOIL on 22 October 2025.

If the dispute is not resolved amicably, LITASCO SA threatens to initiate investor-state arbitration against Bulgaria in the International Center for Settlement of Investment Disputes (ICSID).

This is yet another sanctions-related investor-state dispute adding to the growing trend we have been observing in the last few years. These disputes usually involve complex issues of international arbitration, investment treaty, public international and sanctions law. To that extent, we can also mention the most recent investor-state cases Igor Viktorovich Makarov v Canada (ICSID Case No. ARB/26/6; Request for Arbitration was registered by ICSID on 30 January 2026) and Gulnara Kerimova v Switzerland (Notice of Arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law, UNCITRAL, was filed on 14 January 2026).

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