On July 22, 2025, Armenia suffered a significant blow on the international legal stage: the emergency arbitration of the Arbitration Institute of the Stockholm Chamber of Commerce ruled in favor of businessman Samvel Karapetyan and his family, obliging the Armenian government to refrain from any actions aimed at nationalizing the Electric Networks of Armenia (ENA) Closed Joint-Stock Company. The court found that Yerevan’s actions raise “serious doubts about compliance with the Agreement on Mutual Protection of Investments” concluded between Armenia and Cyprus in 1995.
At first glance, this appears to be a purely commercial dispute between an investor and the state. However, in reality, we are dealing with a resonant international legal precedent, the consequences of which extend far beyond the energy sector.
What Did the Arbitration Decide?
In essence, the Stockholm court upheld Karapetyan’s position, stating that:
- The Armenian government’s actions (including the adoption of new laws “On Energy” and “On the Public Services Regulatory Body”) could lead to the loss of control over ENA, resulting in irreparable harm;
- Without urgent protective measures, the claimants would likely be unable to obtain fair compensation for their losses;
- Until a final decision is reached, the Republic of Armenia must refrain from any actions aimed at seizing or interfering with ENA’s management.
Formally, these are temporary injunctive measures, but in international practice, they carry significant weight: failure to comply risks not only sanctions in the realm of international investments but also a profound erosion of investor confidence.
The New York Convention and Armenia’s Obligations
Following the announcement of the decision, some media outlets quickly highlighted that Armenia acceded to the 1958 New York Convention—the key international document regulating the recognition and enforcement of foreign arbitral awards—with reservations that, in certain cases, allow it to bypass compliance with such decisions. Is this truly the case? Let’s break it down.
Upon acceding, Armenia indeed made two standard reservations:
- It recognizes only those arbitral awards issued in the territory of other states that are parties to the Convention;
- The dispute must be of a commercial nature under Armenian legislation.
The Karapetyan case falls within these parameters: the arbitration was conducted in Sweden, a party to the Convention, and the dispute concerns an investment conflict in the energy sector, which is generally considered commercial under international standards. This means Armenia is obliged to recognize and enforce the Stockholm arbitration decision, even if it is temporary.
Nevertheless, the government has a small loophole to potentially circumvent the decision, as some media outlets have pointed out in reference to the reservations. The authorities could argue that the issue is not an investment dispute but rather pertains to domestic energy regulation, which falls under state jurisdiction. Furthermore, they are likely to emphasize that ENA is a company providing a public service, and its operations are subject to state regulation by law. They may also argue that the state adopted regulatory acts rather than directly interfering in the business, meaning there is no “commercial” nature to the conflict. In other words, the Armenian authorities may attempt to convince courts that the dispute is non-commercial, rendering the New York Convention inapplicable.
However, this argument is weak. In international practice, especially since the early 2000s, arbitrations have consistently rejected attempts by states to hide behind regulatory rhetoric when the case involves interference with investors’ rights. Even if the dispute concerns the regulation of a public service, it is considered commercial if there is a contract between the investor and the state, and the dispute involves capital investment—in this case, ownership of a stake in ENA and its management—and the outcome could result in financial loss. The current situation meets all these criteria, which is why such disputes are almost always classified as investment-commercial.
Risks of Non-Compliance with the Decision
If Armenia ignores or attempts to circumvent the arbitration decision in the ENA case, the consequences could be far-reaching. In international investment practice, there is a clear understanding: when a state violates or fails to fulfill its obligations under an international agreement even once, it sends a signal to other investors.
As a result, other investors, even those without current conflicts with the state, may take preemptive measures: filing arbitration claims to protect their investments, demanding revisions to existing contracts or the inclusion of additional guarantees, or, in some cases, simply refusing to make further investments. Those already invested in the Armenian economy, particularly those with access to international legal protection mechanisms (e.g., through bilateral investment protection agreements), may use the Karapetyan case as a precedent. This provides them with an argument that Armenia systematically violates its international obligations.
There have been similar precedents in global practice. In the early 2000s, Argentina faced dozens of arbitration claims when it refused to honor its obligations to foreign investors. Spain, after amending regulations in the renewable energy sector, also faced a wave of lawsuits from dissatisfied companies. One of the most notable cases is Yukos v. Russia, where courts in the Netherlands, Luxembourg, and France began seizing Russian assets abroad to enforce arbitral awards in favor of the claimants.