Investment protection between Serbia and major economies: Russia

Investment Flows

We continue our series on investment protection between Serbia and major economies with the post on Russia. According to the Development Agency of Serbia, Russia is not among the top countries of origin of foreign investments in Serbia. However, according to the International Monetary Fund‘s Coordinated Direct Investment Survey for 2019, Russia is among the top five investment partners of Serbia, both in terms of inward direct investments from Russia to Serbia and outward direct investments from Serbia to Russia. Russian investments have also been largely publicized, the most prominent one being the state-supported takeover of the majority of shares of the Petroleum Industry of Serbia (NIS) by Gazprom Neft.

Investment Protection Regime

Serbia (then the Federal Republic of Yugoslavia) and Russia signed a bilateral investment treaty in 1995 and it has been in force since 1996 (“BIT“). The treaty was signed in Serbian and Russian only; there is no English version of the treaty and it is not mapped by UNCTAD’s Investment Policy Hub.

Investments are defined broadly, but they must be established in accordance with the host state’s domestic laws. Notably, the BIT does not apply to investments made before 1 January 1987. Regarding substantive protections, the BIT includes clauses on fair and equitable treatment, protection against discriminatory measures, full protection and security, national and most-favoured nation treatment, protection against expropriation (including an explicit reference to indirect expropriation), compensation for losses, and freedom of transfers. There is no umbrella clause. Being an old-generation BIT, there are no limitations on these clauses as in some newer treaties.

The investor-state dispute settlement clause is very brief. It refers to “disputes concerning investments, including disputes on the amount, conditions and means of compensation”. After a 6-month cooling-off period, disputes can be submitted to local courts or local arbitral tribunals, and/or ad hoc international arbitration under UNCITRAL rules. Russia has signed but never ratified the ICSID Convention.

As with other domestic and foreign investments, the Serbian Investment Act applies but does not provide access to international (or domestic) arbitration.

Recognition and Enforcement of Judicial and Arbitral Decisions

The former Federal People’s Republic of Yugoslavia and the former Union of Soviet Socialist Republics signed a treaty on Legal Assistance in Civil, Family, and Criminal Matters in 1962 (available in Serbian only here). The treaty entered into force in 1963 and remains in force between Serbia and Russia to the present day.

The treaty dedicates a section to the recognition and enforcement of judicial decisions, including settlements concluded before courts. The conditions for recognition and enforcement largely resemble those from Serbian national legislation on recognition and enforcement of foreign judicial decisions, with one significant exception. Recognition and enforcement can be denied if the decision is not final and enforceable; if according to the rules of the country of recognition the courts of the country of decision could not resolve the dispute; if recognition and enforcement would violate the public policy of the country of recognition; if due process rights of the defendant were violated; if there is an earlier final decision in the same matter rendered in the country of recognition, or due to lis pendens in the country of recognition. In addition, if the dispute was supposed to be governed by the substantive law of the country where recognition or enforcement is sought, the motion can be denied if the court did not apply that law or another essentially same law.

Notably, recognition and enforcement should be requested through the court that rendered the first instance decision in the country of origin, which then transmits the request to the courts of the other country. A motion for recognition/enforcement can be submitted directly to the court of the country of recognition only if the party requesting enforcement has permanent or temporary residence there.

With respect to the applicable law condition to recognition and enforcement, and the requirement to access the court of the recognizing country via the court that issued the judgment, the treaty is more onerous than the national law on recognition and enforcement of foreign court decisions in Serbia. However, the biggest advantage of the treaty is that it removes the issue of reciprocity. As we noted in an earlier post, the proof of reciprocity is an important obstacle to easy recognition and enforcement of foreign court decisions under the Serbian national law.

Both Serbia and Russia are members of the New York Convention and therefore recognition and enforcement of arbitral decisions should not present a problem.


Russian investors in Serbia are well covered. The relevant BIT gives them broad substantive investment protections and access to ad hoc international arbitration (albeit not to institutional arbitration). Moreover, a treaty on mutual recognition of judgments removes the uncertainties associated with the Serbian law requirement for the existence of reciprocity with the home country of the judgment.

The next post will focus on Germany.


Photo by Shubham Dhage on Unsplash