Secondary Sanctions and the International Responsibility of States for Violations of Foreign Investment Rights

Abstract

In recent decades, secondary sanctions have emerged as one of the most prominent instruments of economic coercion in the contemporary international legal order. Their significance from the perspective of international law lies in the fact that their effects extend beyond the territorial and personal jurisdiction of the sanctioning state, exposing third parties, private corporations, financial institutions, and even other states to economic restrictions and enforcement measures because of their economic dealings with the sanctioned state or designated persons. Accordingly, secondary sanctions generate fundamental issues and challenges not only in the sphere of political and economic relations between states, but also within international trade law, international investment law, and the law of state responsibility. Employing a descriptive-analytical approach and drawing on library sources, international instruments, and international practice, the present article seeks to answer the principal question of whether the imposition of secondary sanctions, where it results in the violation of the rights and interests of foreign investors, may entail the international responsibility of the sanctioning state under international law. The findings indicate that whenever such sanctions lead to breaches of states’ international obligations toward foreign investors—including the obligation to accord fair and equitable treatment, the principle of non-discrimination, full protection and security, the prohibition of direct or indirect expropriation without appropriate compensation, and the freedom to transfer funds and capital—the sanctioning state may, in principle, incur international responsibility. Nevertheless, the sanctioning state may seek to justify its conduct by invoking certain recognized defenses under public international law, such as countermeasures, necessity, or security exceptions. However, the extraterritorial and unilateral character of secondary sanctions makes the establishment of the legality of such defenses subject to considerable legal difficulties. From this perspective, secondary sanctions appear, in many instances, to be incompatible with the fundamental principles governing the international legal order, particularly those relating to international investment law and respect for the stability and predictability of international economic relations. Ultimately, this article emphasizes the need to reconsider the legal status of secondary sanctions within the framework of international law and to formulate clearer criteria for limiting their extraterritorial effects. It also highlights the strengthening of protective and compensatory mechanisms for injured investors as an essential requirement for the development and coherence of the international legal system.