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Russia-Turkey sanctions: businesses must be prepared for change

When a Russian military jet was shot down by Turkey last week Russia was quick to impose business sanctions on Turkey. Your business could be easily affected even if you do not trade in goods or services covered by the sanctions, so it is important to follow developments closely.04 Dec 2015

Sanctions were passed swiftly on 28 November. They ban the trade of some Turkish goods, limit some services provided by Turkish businesses and take measures on the employment of Turkish citizens. There have also been changes to the visa requirements for entry into Russia and for Russian tourists travelling to Turkey.

Both countries are being inflexible in their stance, fuelling fears that the relationship could further deteriorate, leading to more restrictive sanctions.

While the situation may not immediately be affecting your business interests, our experience of similar situations around the world tells us that sanctions have the habit of spreading fast to contractors, suppliers and other business relationships, so that any investment in a region can suddenly become affected.

This can even affect the day to day management of business in the region. When governments adopt sanctions it is not uncommon for local authorities to become over-zealous, imposing oppressive regulations on ordinary business transactions by investors from the other country.

If this happens it is important to remember that you have rights that extend beyond just the local courts in the host country, which may well be hostile to foreign businesses.

Turkish investors in Russia and Russian investors in Turkey may be able to turn to other remedies, including those under the International Law on Foreign Investments.

There is a Bilateral Investment treaty (BIT) between Russia and Turkey which protects and promotes investments from one country into the other. Under the BIT you may qualify as a 'foreign investor' with specific public international law rights and remedies, such as the right to fair and equitable treatment, protection from unlawful expropriation and most importantly  a right to 'investment arbitration' to protect your investments.

Noyan Göksu is a Turkey-based dispute resolution specialist at Göksu Law and Pinsent Masons, the law firm behind Out-Law.com