Turkey: Russia and Turkey Talk Sanctions

Last Updated: 9 February 2016
Article by Mark D. Skilling

In the following we highlight some of the more important recent developments in the deteriorating relationship between Russia and Turkey since the November 24th downing of a Russian warplane by Turkey. For the most part these developments have involved the threat of, and in some cases the actual imposition of, sanctions by Russia against Turkish citizens and companies doing business in Russia.

Given all the talk about sanctions, we also address below an important development in international law that recognizes new limitations on the freedom of states to impose sanctions – referred to here as "countermeasures" – when the countermeasures harm the investments of foreign investors. More specifically, recent decisions by ICSID arbitration tribunals have taken into account the significant change brought about by the proliferation of investment treaties in the past few decades and the concurrent creation of a "private right of action" in non-state actors.

As a result, foreign investors are increasingly able to pursue treaty claims in their own right for damages suffered at the hands of states hosting their investments, including claims for damages caused by countermeasures. One of the treaties in play here is the Turkey-Russia Bilateral Investment Treaty ("BIT"). Whether Russia – or Turkey, if it too gets involved in the countermeasure game – breaches any of its obligations under the BIT as a result of the countermeasures it has or may adopt deserves serious attention by foreign investors impacted by such countermeasures.

Recent Developments:

Perhaps needless to say, since the Russian jet was shot down the relationship between Russia and Turkey has been in a tailspin. Russia has demanded Turkey's apology for downing the warplane, prosecution of those responsible and payment of compensation.

Presumably to induce Turkey to submit to these demands, Russia has among other things issued two Presidential Decrees, one on November 28 and the other on December 30, both of which are aimed, at least partially, at limiting the freedom of Turkish citizens and companies doing business in Russia. For example, the November 28th Decree purports to ban the use in Russia of certain services by Turkey-based companies while the December 30th Decree provides that certain Turkish construction companies are prohibited from signing new contracts after January 1st.

In addition, the visa-free regime for Turkish citizens travelling to Russia has been suspended. So too, according to some reports, has the work on the Turkish Stream, a gas pipeline being built across the Black Sea, as well as the work by the state-owned Russian company Rosatom on Turkey's first nuclear power plant. Restrictions on the importation from Turkey of certain agricultural products as well as certain textile products have also been imposed. Just this past week, Russian President Putin announced that sanctions on Turkish companies working in Russia would be increased.

In response, Turkey itself is ramping up both its rhetoric and other efforts to counter Russian actions, evidenced by its threat of "retaliatory sanctions" and its more recent claim that it is "preparing to file a complaint against Russia's economic sanctions to the World Trade Organization". 

With foreign trade volume between the Turkey and Russia alone having exceeded $31 billion in 2014, the impact of the deteriorating relations between Russia and Turkey on both Turkish and Russian citizens and companies has been significant and will only increase. It seems likely Turkish and Russian businesses may already have suffered actionable damages, such as from the breach of individual contracts between Russian and Turkish parties[1]. As important is the possibility that countermeasures may have resulted in, or will result in, breaches of obligations owed to foreign investors pursuant to the Turkey-Russia BIT.

The Turkey-Russia Bilateral Investment Treaty:

Relevant foreign investment protections found in the Turkey-Russia BIT that may come into play here include, among others, the promise by both Turkey and Russia:

  • Of "fair and equitable treatment" (BIT, Art. II.2 and Art. III.1);
  • Of "full protection and security" (BIT, Art. II.2);
  • That "[n]either Contracting Party shall impede by discriminatory measures the management, operation, maintenance, use, acquisition, expansion or disposal of investments" (BIT, Art. II.2); and
  • That foreign investments "shall not be expropriated" without "prompt, adequate and effective compensation" (BIT, Art.VI).

Whether any of the countermeasures in question – imposed or contemplated – may give rise to a viable claim under the BIT is, of course, a mixed question of fact and law that can only be assessed after a thorough investigation. That said, it is no stretch to imagine situations where the countermeasures in question might give rise to such claims. The fact that many of these are directed at private Turkish citizens and companies – rather than, say, targeting the interests of the Turkish military – raises serious questions about the promised "fair and equitable" treatment.

Countermeasures as an Acceptable Response to alleged Wrongful Conduct:

The most likely response by Russia to countermeasure-related damage claims by Turkish investors in Russia pursuant to the BIT would be that the acts complained of were acceptable "countermeasures" taken in light of an "international wrongful act" of Turkey, i.e. the shooting down of the Russian warplane.

As a general rule, for such a defence to be successful it would have to be shown that the countermeasures were (i) "taken in response to a previous international wrongful act of another state and must be directed against that state" and (ii) the state taking the countermeasures must have "called upon the state committing the wrongful act to discontinue its wrongful conduct"[2]. Other considerations for the trier of fact and law are that the effects of any given countermeasure must be "commensurate with the injury suffered" and that its purpose must be "to induce the wrongdoing state to comply with its obligations under international law"[3].

In Archer Daniels Midland et al. v. United Mexican States, the majority of the three-arbitrator tribunal relied upon this rule when it rejected a countermeasures defence raised by Mexico. In that arbitration, Mexico had amended its tax code to impose a 20 percent excise tax on soft drinks and syrups and the same tax on services used to transfer and distribute these products. The claimants, U.S. corporations that produced corn syrup in Mexico, alleged the amendment violated provisions of Chapter Eleven of the North American Trade Agreement ("NAFTA"), which includes substantive protections for investors similar to those found in the Russia-Turkey BIT listed above[4].

In defence, Mexico claimed the amendment to the tax code was a countermeasure whose purpose was to induce the U.S. to comply with certain NAFTA obligations. The panel's disagreed, concluding the evidence showed that "protection of the Mexican sugar industry was the true motive and intent" underlying the amendment[5].

More important – given two subsequent ICSID decisions – is the Concurring Opinion of the third arbitrator, Arthur Rovine. Rovine took the position that the countermeasure defence was simply unavailable under the circumstances, concluding "countermeasures cannot ... eliminate, supersede, or suspend the rights of NAFTA investors to legal redress should the countermeasures constitute a breach of Chapter Eleven"[6]. Referring to NAFTA – but using language we believe equally applicable to other investment treaties, such as the Turkey-Russia BIT – he observed:

... an investor needs predictability and stability, encouragement from the host state, legal standards that include basic minimum protections of investments, a right of legal redress in case of breach of any of those protections by the host state, and an atmosphere in which an investor need not fear that his investment will be diminished or taken because his host state has a trade dispute with his home state[7].

Rovine's view was adopted by tribunals in two subsequent ICSID arbitrations, both of which also concerned claims brought by U.S. investors in Mexico pursuant to NAFTA's Chapter Eleven and arose out of the same amendment to the tax code. Thus, in Corn Products International v. United Mexican States, it was held that:

... the doctrine of countermeasures, devised in the context of relations between States, is not applicable to claims under Chapter XI of the NAFTA. Those claims are brought by investors, not by States. A central purpose of Chapter XI of the NAFTA was to remove such claims from the inter-State plane and to ensure that investors could assert rights directly against a host State. The Tribunal considers that, in the context of such a claim, there is no room for a defence based upon the alleged wrongdoing not of the claimant but of its State of nationality, which is not a party to the proceedings[8].

Similarly, in Cargill v. United Mexican States the tribunal held that Mexico's "argument that its actions were countermeasures cannot have the effect of precluding the wrongfulness of those actions in respect of a claim asserted under Chapter 11 by a national of the allegedly offending State"[9]. In reaching this decision the panel observed that the "fact is that it is the investor that institutes the claim, that calls a tribunal into existence, and that is the named party in all respects to the resulting proceedings and award"[10].

In summary, authority now exists recognizing that a state – even when legitimately aggrieved by the wrongful conduct of another state – should not be free to fashion countermeasures that harm certain foreign investors, such as those protected by BITs. Whether countermeasures implemented and that may be implemented in the aftermath of the downing of the Russia jet by Turkey run afoul of this authority deserves careful consideration by foreign investors negatively impacted by them.

[1] In such a situation, however, the breaching party may have a readymade force majeure defence for any failure to perform if the failure were the result of restrictions imposed by the countermeasures.

[2] Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc. v. United Mexican States (ICSID Case No. ARB(AF)/04/5) Award dated 21 November 2007, ¶126.

[3] Ibid. The countermeasures defence has been codified in the ILC Draft Articles on State Responsibility for Internationally Wrongful Acts. See, e.g., Art. 22 ("Countermeasures in respect of an internationally wrongful act") and Art. 49 ("Object and limits of countermeasures"). 

[4] See, e.g., NAFTA, Art. 1105.1 (promises foreign investors "fair and equitable treatment" and "full protection and security").

[5] Id. at ¶150. The majority also concluded that, even if it assumed the intent of the countermeasures was to induce the U.S. to comply with its international obligations, the means of attempting to do so did not meet the "proportionality requirement" given the countermeasures disproportionately impacted private investors. Id. at ¶¶152-160.

[6] Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc. v. United Mexican States (ICSID Case No. ARB(AF)/04/5) Concurring Opinion of Arthur W. Rovine dated 21 November 2007, p. 1.

[7] Id. at ¶84 (emphasis added).

[8] Corn Products International Inc. v. United Mexican States (ICSID Case No. ARB(AF)/04/1) Decision on Responsibility dated 15 January 2008, ¶161(emphasis added).

[9] Cargill, Incorporated v. United Mexican States (ICSID Case No. ARB(AF)/05/2) Award dated 18 September 2009, ¶429.

[10] Id. at ¶426. It should be noted that the precedents cited in this piece are not binding. That said, arbitral panels will often follow other tribunals' decisions when they find those decisions consistent and persuasive. See, e.g., Bayindir v. Pakistan (ICSID Case No. ARB/03/29) Final Award dated 27 August 2009, ¶145 (a tribunal "ought to follow solutions established in a series of consistent cases. ... By doing so, it will meet its duty to seek to contribute to the harmonious development of investment law and thereby to meet the legitimate expectations of the community of States and investors towards certainty of the rule of law").

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.