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Contested regions can bring both opportunities and challenges to the global economy. The 2014 annexation of Crimea by Russia brought widespread criticism and strained ties between Russia, the West, and Ukraine. The question of whether pre-annexation investments by Ukrainian investors are covered by the 1998 Bilateral Investment Treaty (BIT) has also been raised.

Investment treaties are international agreements that aim to protect and promote foreign investments. However, managing these agreements in regions where sovereignty is contested is a complex task. This essay examines the legal void that arises when there has been no legitimate transfer of territory and poses significant questions regarding the application of treaties signed by annexing nations in these contested regions. It sheds light on the multifaceted dimensions of investor-state disputes in these challenging contexts, addressing the legal questions that emerge within this complex paradigm.

VCLT and Moving Frontier

The Vienna Convention on the Law of Treaties (VCLT) is an international agreement that seeks to standardize the procedures and guidelines that control treaties' formation, use, interpretation, and termination.  Given that it deals with the application of international treaties when a state's territory changes, the VCLT is especially pertinent to issues involving changing boundaries.

One of the fundamental concepts of international law is state succession, which involves the transfer of rights and responsibilities under international treaties from one state to another because of a status adjustment. Effective state succession management is critical for ensuring international order and continuity. This involves adherence to the guiding principle of treaty continuity, which is crucial in the complex world of state succession, and guarantees that agreements signed by the preceding state continue to apply to the successor state.

State succession can be closely related to boundary movements or shifts, which may influence the rights and duties of the participating states under international treaties. Changes in state borders brought about by annexation, secession, or other causes may significantly impact the implementation of international treaties. The VCLT and the Vienna Convention on Succession of States in Respect of Treaties (VCST) provide a framework for resolving problems and guaranteeing the continuation of treaties in such circumstances.

Article 29 of the VCLT, entitled "Territorial Scope of Treaties," is significant in establishing the degree to which a treaty applies to the modified region when it comes to shifting borders. If a treaty covers a state's whole area, it will remain in effect even if that state's boundaries alter. The International Law Commission (ILC) itself pointed out that the shifting boundary example would not have fit under the definition of "State succession," but rather was a simple application of the territorial concept in Article 29 VCLT.

The Conference on Yugoslavia Arbitration Committee's Opinion No. 1 provided important information on the legal rules regulating state succession. The principle of consent, which emphasizes the significance of agreement or recognition by other nations, and the principle of identity of states, which aids in determining whether a new state has developed, are other concepts that aid in understanding state succession.

To preserve international legal order, it is crucial to comprehend the effects of boundary changes and state succession. Legal rules controlling state succession are essential for the continuation and order of international relations. The idea of treaty continuity is one of the guiding principles of state succession, which guarantees that agreements signed by the preceding state continue to apply to the successor state.

The Crimean Situation

The Crimean situation is a contentious issue regarding the status of the Crimean Peninsula, located in Eastern Europe, bounded by the Black Sea to the west and the Sea of Azov to the north. In 1954, Crimea was transferred from the Russian Soviet Federative Socialist Republic to the Ukrainian Soviet Socialist Republic, both members of the Soviet Union. In 2014, Russia annexed Crimea, resulting in an international controversy. The issue of investment treaties in the gained territory also arose. If an armed conflict results in a change of de facto authority over an area, the State assuming power should execute its existing treaty obligations to investors in the gained territory. Several arbitration cases initiated by Ukrainian citizens against the Russian Federation for investments in Crimea provided support for this. The Russia-Ukraine BIT should be implemented in Crimea, drawing attention to two distinct features of the Crimea scenario that might not apply to other parts of the country. First, Russia maintained effective control over Crimea and had plans to do so indefinitely, incorporating Crimea into the Russian Federation. Secondly, this intention has not been made clear about all of the areas of Ukraine that Russia now occupies.

In 2019, the State Hydrographic Service of Ukraine issued a statement claiming that Russia allegedly generated maritime navigational charts that encompassed the territory of Ukraine without its permission. Ukraine’s state-owned administration also claimed that it was preparing an investment treaty claim against Russia for the seizure of its assets in Crimea, costing an estimated $51 million.

Article 15 VCST and Article 29 VCLT reflect the situation in and around the Autonomous Republic of Crimea and the city of Sevastopol, which offers a pertinent example and raises important questions regarding State succession about treaties and the moving treaty-frontiers rule. Though Russia maintains that Crimea and Sevastopol joined the Russian Federation through the exercise of their right to self-determination and internationally legal means, the territory's inclusion into the Russian Federation after the independence referendum in March 2014 is generally regarded as an annexation.

Section 4 of General Assembly resolution 68/262 of 27 March 2014 invites all States, international organizations, and specialized agencies to abstain from any action or dealing that could be construed as acknowledging any change in the status of the Autonomous Republic of Crimea and the city of Sevastopol based on the aforementioned referendum of 16 March 2014. Similarly, a declaration from the European Union calls for non-recognition of the annexation of Crimea and Sevastopol by Russia.

PJSC Ukrnafta Case

PJSC Ukrnafta, a Ukrainian corporation in the gasoline business, claims that actions taken by the Russian Federation in Crimea interfered with and expropriated its assets in petrol stations there. PJSC Ukrnafta filed an arbitration claim under the Ukraine-Russia BIT to settle the issue, accusing Russia of unfair and unequal treatment and expropriation without just compensation. The annexation of Crimea and the varying views on its status complicate the case. The conclusion of this case could affect investor-state dispute settlement procedures in disputed areas and geopolitical crises, highlighting the difficulty of investor-state conflicts in geopolitical tensions, especially when territorial disputes are involved. Investors argue that investments made in Crimea are still protected under the BIT, despite the shift in territorial sovereignty. These conflicts bring to light the complex interactions between international law, territorial sovereignty, and treaty commitments. The case also raises questions on how international law, particularly the notions of territorial integrity and sovereignty, interacts with the privileges granted to foreign investors under bilateral investment treaties. The rights of the Crimean Tatar population and other ethnic Ukrainians residing in the region are also at stake, as Ukraine claims that Russia's activities breach its duties under the International Convention for the Elimination of All Forms of Racial prejudice (CERD). Investors may contend that Russia is still subject to its commitments under international treaties, particularly those protecting investments, even though it has sovereignty over Crimea. The case highlights the need to address issues of racial discrimination and ensure equitable treatment within boundaries, as required by the CERD.


In conclusion, we can see that the annexation of Crimea by Russia in 2014 has sparked numerous debates and criticism, particularly in terms of investment treaties and their application in contested regions. The VCLT and the VCST provide a framework for addressing the legal void that arises when there has been no legitimate transfer of territory. State succession and boundary movements are closely related concepts that significantly impact the implementation of international treaties. The Crimean situation highlights the complexity of investor-state disputes in contested areas and raises questions about how international law interacts with the privileges granted to foreign investors under bilateral investment treaties. The PJSC Ukrnafta case underscores the need to address issues of racial discrimination and ensure equitable treatment within boundaries. Overall, managing investment treaties in contested regions requires a thorough knowledge of international law and the complex processes involved.

Author: Joshua Joseph

University and Year: Jindal Global Law School (JGLS), 4th Year

Programme: BA LLB

Co-Author: Animesh Ranjan

University and Year: Jindal Global Law School (JGLS), 4th Year

Programme: BBA LLB


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