Federation Counsel approves law establishing grounds for terminating foreign investors' right to repurchase assets

On 24 July 2026, the Federation Council approved amendments (Draft Law No. 1206580-8), introducing Article 20.1 into Federal Law No. 160-FZFederal Law No. 160-FZ of 9 July 1999 “On Foreign Investments in the Russian Federation”, which establishes the grounds for terminating the right of a foreign investor from an unfriendly state (or a person under its control) to repurchase a business asset that it previously owned in Russia from the current owner of the asset: a Russian national or a Russian / “friendly” legal entity controlled by a Russian national (repurchase option).

As explicitly stated in the law, these developments have been introduced to protect the rights and legitimate interests of Russian nationals and Russian legal entities, and to ensure the economic sovereignty and economic security of the Russian Federation; they are not intended to unjustifiably infringe the rights and legitimate interests of foreign investors.

Grounds for terminating foreign investors’ right to repurchase assets

Under the new provisions, the right of an unfriendly foreign investor to repurchase an asset that it alienated after 22 February 2022, may be terminated through court proceedings provided that the following conditions are simultaneously met:

1. a foreign investor took any of the following actions after 22 February 2022:
1. public endorsement of or calling for unfriendly actions against the Russian Federation, Russian nationals or Russian legal entities;
2. actions aimed at discrediting the use of the Armed Forces of the Russian Federation and/or the exercise by state bodies of the Russian Federation of their powers to protect the interests of the Russian Federation and its nationals and to maintain international peace and security;
3. the dissemination of knowingly false information regarding the use of the Armed Forces of the Russian Federation and/or the exercise by state bodies of the Russian Federation of their powers for the specified purposes;
4. activities related to the financing of terrorism, extremist activities, and/or the financing of the proliferation of weapons of mass destruction;
5. a public announcement regarding the termination and/or suspension of operations within the Russian Federation and/or actions (or inactions) related to such an announcement;
6. improper performance of its duties (including those under corporate agreements);
7. actions aimed at restricting the conclusion, performance, and/or termination of agreements that are material to the asset’s operations, and/or facilitating such actions by another person, where such actions are not triggered by obvious economic reasons and/or where there are grounds to believe that they are related to compliance with restrictive measures imposed by unfriendly foreign states and/or international organisations;
2. an agreement granting the right to repurchase an asset provides for repurchasing at a price that deviates from the asset’s market price by 25% or more, and/or the current owner has made additional investments in the asset and/or other assets, performed other actions, which, if not performed, could entail the suspension, material reduction or discontinuation of the asset’s operations.

This statutory provision codifies the approach that has developed in practice regarding transactions that provide for the possibility to repurchase an asset. For example, when an option is involved, the subcommittee of the Government CommissionThe Government Commission for Control of Foreign Investment in the Russian Federation generally approves a transaction involving unfriendly non-residents contingent upon the requirement to repurchase the asset at the market value existing as at the option’s exercise date, the existence of an economic benefit for the resident owner of the asset and a limited term for the option (typically no more than two yearssubpara. 8 of para. 1 of decision of the Government Commission for Control of Foreign Investment in the Russian Federation No. 171/5 of 7 July 2023).

A demand to terminate a foreign investor’s right to repurchase may be filed in court (irrespective of whether the foreign investor has applied for a repurchase):

1. by the current owner of the asset: after receiving the relevant agency’s opinion on whether the filed demand complies with the objectives specified in the law, and the Government Commission’s opinion (in accordance with the procedure to be established by the Government of the Russian Federation), or
2. by the relevant agency: after receiving the Government Commission’s approval (in accordance with the procedure to be established by the Government of the Russian Federation).

At the same time, irrespective of the contractual provisions regarding jurisdiction, this type of case is expressly attributed by law to the jurisdiction of the Arbitrazh Court of the Moscow Region.

We note that the grounds specified in the law for terminating a foreign investor’s right to repurchase are formulated quite broadly and contain discretionary criteria. In particular:

1. The condition “performing actions (or omissions) related to a public announcement of the termination and/or suspension of operations within the territory of the Russian Federation” stands on its own within the first group of criteria listed above and may technically be applicable even in the absence of a public announcement of the termination or suspension of operations, by virtue of the very fact of such termination or suspension, for example, as a result of the alienation of an asset to a Russian investor based on the Government Commission’s approval. Furthermore, the vast majority of foreign investors (public companies) that left the Russian market after 22 February 2022 did in fact make such an announcement (including in their reports to shareholders).
2. The condition that “the current owner makes additional investments in the asset and/or other assets, or performs other actions, which, if not performed, could entail the suspension, material reduction, or discontinuation of the asset’s operations,” may be technically met if the current owner complies with the KPI conditionsAs a rule, establishing key performance indicators (KPIs) for new owners is a condition for the Government Commission to grant approval to enter into a transaction under the counter-sanctions decrees of the President of the Russian Federation (subpara.7 of para.1 of the excerpt from Decision No. 171/5 of 7 July 2023 of the subcommittee of the Government Commission for Control of Foreign Investment in the Russian Federation). set out in the Government Commission’s approval granted to the current owner for the transaction related to the acquisition of the asset from a non-resident. This condition may generally be interpreted quite broadly, since the operations of any business require certain investments and/or other actions to maintain day-to-day operations.
3. The condition of “improper performance of duties (including those under corporate agreements)” may be interpreted extremely broadly and, in essence, covers not only direct actions but also omissions, such as a failure to attend meetings of governing bodies, a failure to nominate candidates for governing bodies, or other similar matters.
4. The condition “actions aimed at restricting the conclusion, performance, and/or termination of agreements that are material to the asset’s operations; facilitating such actions by another person, unless such actions are triggered by obvious economic reasons and/or there are grounds to believe that they are related to compliance with restrictive measures imposed by unfriendly foreign states and/or international organisations” is a discretionary determination and, in essence, may include any actions or omissions aimed at complying with the sanctions laws of unfriendly jurisdictions.

The foreign investor’s right to demand compensation from the current owner in connection with the termination of the right of repurchase

If a foreign investor’s right of repurchase is terminated, the investor is entitled, within one year from the date the court decision takes effect, to demand that the current owner pays compensation in connection with such termination of the right.

The amendments do not establish criteria for determining the amount of such compensation, and based on the current wording of the law, it appears that the amount of compensation will be determined by a court at its discretion; furthermore, the subsequent adoption of bylaws regulating the procedure for determining the amount of such compensation is not expected.

At the same time, the law provides that the court has the right to reduce the amount of compensation, taking into account the nature of the foreign investor’s actions and the amount invested in the asset by the current owner. In addition, compensation may be denied if a foreign investor or its officers engage in activities related to the financing of terrorism, extremist activities, and/or the proliferation of mass destruction weapons, provided that such activities served as the ground for imposition of administrative or criminal sanctions.

Once the law is signed by the President of the Russian Federation, these amendments will take effect on the date of their official publication.