On 18 July 2025, the Council of the European Union adopted Regulation (EU) 2025/1494 (OJ L 2025/494 of 19 July 2025), amending Regulation (EU) No. 833/2014, as well as Council Decision 2025/1478 (OJ L 2025/478 of 19 July 2025), which ensures its implementation. These instruments introduce a new interpretation of the concept of EU public policy specifically in the context of investment arbitration, where the adjudication of a dispute may result in the enforcement of claims that are expressly prohibited under the EU sanctions regime set forth in Regulations (EU) No. 269/2014 and No. 833/2014.
Practical Implications
Regulation 2025/1494 provides that the recognition or enforcement of awards rendered in the context of investment arbitration may be deemed contrary to the public policy of the European Union if such awards are intended to circumvent the sanctions restrictions. Consequently, Member States are now entitled to refuse recognition and enforcement of foreign awards issued in investment disputes where the underlying claims concern the performance of obligations that are explicitly prohibited by the EU sanctions regime, including but not limited to those set out in Regulations (EU) No. 833/2014 and No. 269/2014.
Legal and Commercial Consequences
Pursuant to Regulation 2025/1494, national courts and competent authorities of EU Member States are vested with the discretion to deny recognition and enforcement of arbitral awards rendered in investment disputes, where it is established that such awards would in effect circumvent the EU’s sanctions regime. This development represents a refinement and expansion of the established doctrine of public policy as a ground for non-recognition of foreign judgments and arbitral awards – traditionally set out, inter alia, in Article 45 of Regulation 1215/2012 (Brussels I bis) and Article VI of the 1958 New York Convention – but now, expressly linked to sanctions compliance.
As a result, investors initiating investment arbitration proceedings against EU Member States or their agencies may face significant barriers at the enforcement stage if the award seeks compensation for losses allegedly caused by the application of EU sanctions. Where an award seeks to vindicate rights whose enforcement would directly or indirectly infringe EU sanctions, Member State courts are now empowered to invoke public policy as a legal basis for refusal of recognition and enforcement.
This regulatory shift is expected to intensify judicial scrutiny of arbitral awards for compliance with EU sanctions law and may lead to an increase in cases in which non-recognition is grounded in sanctions-related concerns. Accordingly, pre-dispute legal assessments of sanctions exposure will play an increasingly important role in shaping investment protection strategies.
Over the longer term, this development may undermine the predictability and attractiveness of the EU as a jurisdiction for the enforcement of investment awards arising out of sanctions-sensitive disputes. Investors and counsel are therefore advised to take these legal risks into account when selecting the seat of arbitration, structuring contractual obligations, and planning for the potential enforcement of awards within the European Union.
Nordic Star Dispute Resolution practice team will continue to closely monitor the case law of EU Member States shaped by Regulation 2025/1494 and promptly inform you of key developments.