Russia Moves to Terminate Repurchase Rights of Certain Exited Investors

Russia on 4 August 2026 adopted federal law No. 319-FZ (the Law) that among other things, permits a designated Russian state court to terminate an investor’s contractual right to repurchase Russian assets previously divested to Russian or other “friendly” parties, where that right relates to a divestment transaction entered into after 22 February 2022.

This Law demonstrates Russia’s continued focus on Western investors that have exited the country, even though the repurchase right termination mechanisms envisaged by the Law appear somewhat redundant under the already existing countersanctions framework.

LAW BACKGROUND AND COMPARISON WITH 2025 PROPOSAL

The Law introduces new article 20¹ to federal law No. 160-FZ, On Foreign Investments in the Russian Federation.

A separate bill proposed more than a year ago would have introduced a new article to the same law restricting foreign investors’ repurchase rights (the 2025 bill); we highlighted its key provisions in our May 2025 LawFlash. The Law reflects the same general concept but differs notably from the 2025 bill. The 2025 bill focused on commercial considerations, such as disparities between repurchase and market prices, and allowed a Russian party to decide whether to disregard the contract. The Law appears to be focused on Russian policy considerations, allows an industry regulator to seek termination, and requires a special court’s ruling to terminate the repurchase rights.

The Law also amends the process of foreign company redomiciliation for sanctions concerns under specific Russian legislation on so-called “international companies and funds,” which we do not address here.

This LawFlash explores the key points below.

UNFRIENDLY INVESTORS

The Law concerns so-called “unfriendly” investors, which include (1) persons, whether individuals or legal entities, from or connected with countries Russia designates as “unfriendly states,” and (2) persons controlled by them, regardless of jurisdiction.  Russia’s list of “unfriendly states” includes the United States, the United Kingdom, each EU member state, Canada, Norway, Switzerland, Japan, South Korea, Ukraine, and other countries and territories that have imposed sanctions against Russia. Investors who are not considered “unfriendly” are not affected.

FRIENDLY BUYERS: RUSSIAN BUYERS OR FRIENDLY BUYERS CONTROLLED BY RUSSIANS

The Law concerns transactions whereby “unfriendly” investors sold their Russian assets (shares or equity interests in Russian companies, real estate, or other “objects of foreign investment”) to “friendly” buyers, who are Russian persons or persons from countries that are not “unfriendly,” provided such persons are controlled by Russians.

REPURCHASE RIGHTS

The Law affects only repurchase rights, such as call options, contractually agreed upon between an “unfriendly” investor and a “friendly” buyer in connection with a divestiture that occurred after 22 February 2022, regardless of the contract’s governing law. On its face, the Law should not apply in other circumstances.

EXCLUSIVE JURISDICTION OF THE ARBITRAZH COURT OF THE MOSCOW OBLAST

A buyer or industry regulator seeking to terminate an investor’s repurchase right must apply to the Arbitrazh Court of the Moscow Oblast (the MO Court). In general, the MO Court will have jurisdiction regardless of whether the contract contains a foreign court selection or international arbitration clause.

The Moscow Oblast is a Russian region around Moscow. The MO Court is a Russian state commercial court generally in charge of the resolution of commercial disputes in that region and certain other types of disputes. But after February 2022, it has also been vested with exclusive jurisdiction over certain matters involving “unfriendly” parties. See, for example, our August 2023 LawFlash.

GOVERNMENT COMMISSION

The Law requires the involvement of the Government Commission for the Control of Foreign Investments in the Russian Federation (GovCom). GovCom is authorized to approve many transactions with “unfriendly” parties that would otherwise be prohibited by Russian countersanctions.

Under the Law, before seeking termination of repurchase rights in the MO Court, a “friendly” buyer must obtain opinions from GovCom and an industry regulator confirming that grounds for termination exist.

The industry regulator may seek to terminate repurchase rights in the MO Court on its own, apparently without the buyer’s initiative or knowledge. In that case, the industry regulator must receive GovCom’s permission before filing with the MO Court.

The reason for such a complex two- or three-step process is not clear. Under the current Russian countersanctions regime, GovCom has the power to allow or prohibit the exercise of repurchase rights by “unfriendly” parties anyway. The involvement of an industry regulator in the GovCom review process is also envisaged. Thus, the new judicial mechanism contemplated by the Law appears somewhat redundant given the current countersanctions framework.

GROUNDS FOR TERMINATION OF REPURCHASE RIGHTS

In general, the Law provides two categories of broadly worded grounds on which the MO Court may terminate an investor’s repurchase rights: (1) Russian policy considerations, including whether the investor supported sanctions against Russia, expressed views critical of Russia’s actions, supported Ukraine or causes viewed by Russian authorities as contrary to Russia’s interests, engaged in prohibited activities, or suspended, limited, or exited Russia-related businesses or contracts, potentially to comply with sanctions; and (2) financial considerations, including whether the contractually agreed repurchase price deviates by 25% or more from market value or the buyer made investments or took steps critical to the assets’ continued operation. Applicants must establish both categories before the MO Court, but the broad and intentionally ambiguous language may make them relatively easy to demonstrate.

COMPENSATION

If the MO Court terminates a repurchase right, the Law provides the investor one year to bring a claim for compensation from the buyer. The court may reduce or deny compensation based on a broad range of grounds, including those underlying the termination of the repurchase right.  As a practical matter, an investor therefore may be unlikely to obtain compensation from a Russian court.

CONFLICT OF LAWS

The Law, if adopted, will become another component of Russia’s countersanctions regime limiting (or extinguishing) investors’ rights as a matter of Russian law and presents additional legal challenges. For example, many divestment transactions are governed by laws other than Russian law and provide for international arbitration. It is an issue under those laws whether an investor can have a recourse against the buyer if the investor’s repurchase right has been terminated as contemplated by the Law.

KEY TAKEAWAYS

Repurchase arrangements (such as call options) allowing foreign investors to repurchase the divested assets (usually, shares or equity interests in companies) were often part of exit deals in the early stages of post-February 2022 exits. However, since then, such arrangements became uncommon for several reasons, including broader geopolitical considerations and following the Russian authorities’ tightening the exit approval procedure by expanding the approval requirements to call options.

The reasons for the new complex repurchase right termination mechanisms under the Law are not entirely clear. In any event, this Law demonstrates Russia's continued focus on Western investors that have exited the country, particularly those perceived as complying with international sanctions, responding to geopolitical challenges, or supporting Ukraine. It also signals Russia’s current policy preference for either deterring the return of such investors or otherwise making their return difficult.

Businesses considering whether to engage or re-engage with Russia must be mindful of the continued need to comply with applicable US, EU, UK, and other sanctions. These sanctions continue to restrict foreign investors’ ability to invest in Russia. Against the backdrop of ongoing sanctions and geopolitical tensions, the measures introduced by the Law are poised to further deter reinvestment in Russia and complicate cross-border asset strategies for many businesses.

HOW WE CAN HELP

Investors and acquirers should remain vigilant and undertake comprehensive reviews of their Russian exposures and contractual rights in light of these developments.

Our lawyers advise multinational companies, investors, and financial institutions on Russia-related transactions, sanctions, countersanctions, restructurings, and cross-border disputes. We stand ready to assist businesses in evaluating risks arising from Russian law and countersanctions and navigating compliance with applicable US, EU, UK, and other sanctions regimes.