Investor-State Arbitration Used as Battleground Over Russian Sanctions

On January 14, 2026, sanctioned Moldovan billionaire Igor Viktorovich Makarov filed a Request for Arbitration with the International Centre for the Settlement of Investment Disputes (ICSID), seeking damages against Canada for sanctions imposed against him.

The case, Igor Viktorovich Makarov v. Canada, is one of the first uses of an individual turning to investor-state dispute settlement to seek damages for the effects of Canadian sanctions after attempting to challenge them through domestic courts.

Background

Since February 24, 2022, Canada has added over 1,500 individuals and 600 legal entities to the sanctions schedules under the Special Economic Measures (Russia) Regulations (SEMR) (Sanctions List), with almost 3,000 entries now on the list.

On April 19, 2022, the Government of Canada sanctioned Makarov under the Sanctions List due to his business activities in Russia.

Makarov subsequently made a series of administrative and judicial challenges before Canadian courts to remove himself from the Sanctions List:

• Makarov sought a recommendation from the Minister of Foreign Affairs for his removal from the Sanctions List, which the Minister declined
• Makarov applied to the Federal Court for judicial review of the Minister’s decision to keep him on the Sanctions List, which the Federal Court dismissed
• Makarov appealed that decision. The Federal Court of Appeal subsequently dismissed his appeal in Makarov v. Canada (Foreign Affairs). The Federal Court of Appeal noted that foreign policy laws are “in the realm of the quintessentially executive, a matter beyond the ken of the Courts”

Makarov claimed that the sanctions effectively destroyed the value of his investment in an Alberta company, Spartan Delta, since he could no longer dispose of his shares nor receive dividends. Makarov also alleged that he was excluded from a substantial reorganization within Spartan Delta.

The Canada-Moldova FIPA

The 2018 Agreement Between the Government of Canada and the Government of the Republic of Moldova for the Promotion and Protection of Investments (Canada–Moldova FIPA) contains a standard suite of investor protections common to FIPAs, including:

• National treatment and most-favoured-nation treatment
• Minimum standard of treatment
• Non-expropriation without compensation
• Free capital transfers

The Canada-Moldova FIPA also includes an investor-state dispute settlement mechanism, under which an aggrieved investor can seek recourse to an international arbitral tribunal for disputes concerning the protections in the FIPA, instead of suing the host state before its own courts.

Makarov’s ICSID Claim

On January 14, 2026, Makarov filed a Request for Arbitration with the International Centre for the Settlement of Investment Disputes (ICSID) under the Canada–Moldova FIPA. Mr. Makarov sought damages of C$350-million, alleging that he was denied the value of his shareholding in Spartan Delta.

Makarov alleged that his inclusion on the Sanctions List and Canada’s subsequent conduct regarding his delisting applications breached Canada’s national treatment, most-favoured-nation treatment, minimum standard of treatment, expropriation and transfers obligations under articles 4, 5, 6, 10 and 11 of the Canada–Moldova FIPA.

Implications

Canada is party to many international trade and investment agreements. Those agreements provide foreign investors of one state party in the territory of the other state(s) with certain guarantees and protections, and often contain a standing offer by the host state to arbitrate investment disputes of the foreign investor. Investor-state dispute settlement allows investors to challenge the effects of state action on their investments in a forum other than domestic courts.

Investor-state settlement has not, however, typically been used against Canada by individuals facing political sanctions. The Makarov case represents a new development to monitor in an environment of increasing and shifting sanctions and trade restrictions.

For further information about this bulletin, please contact the authors or any member of our Arbitration or International Trade groups.