Not All Foreign Investors Will Be Able to Reacquire Their Russian Assets: Who Is Affected and Why

By Serafima Pankratova, Counsel, BALAYAN GROUP
RBC | 26 August 2026

The position of foreign investors who sold their Russian assets—often for just one rouble—has become less secure. Buyers may now refuse to sell those assets back. Serafima Pankratova, Counsel at BALAYAN GROUP, explains the grounds that may justify such a refusal.

Since 4 August 2026, Russia has had a new legal mechanism allowing courts to terminate a foreign investor’s right to buy back a Russian business that it previously owned and sold after February 2022.

The new rules cover not only options but also other agreements providing for the reacquisition of previously sold assets, including agreements governed by foreign law.

For foreign investors, this represents a significant change in their legal position: a contractually agreed buyback mechanism no longer guarantees that they will be able to exercise that right in the future.

Which Rights Fall Within the Scope of the New Rules?

Federal Law No. 319-FZ of 4 August 2026 introduced Article 20.1 into the Foreign Investment Law. It establishes a specific mechanism for terminating a foreign investor’s right to acquire or buy back a Russian business that it previously owned. The provision applies to shares and participation interests in Russian companies, as well as other business assets in which foreign investments have been made.

The date of disposal is critical. The rules cover transactions completed after 22 February 2022 where the former foreign owner retained a contractual right to buy back the asset at a later date. The legislation is broadly drafted: it covers not only provisions in the principal sale and purchase agreement but also related options, option agreements and similar arrangements.

Which Criteria Apply?

The new rules do not automatically apply to every foreign investor that sold a Russian business after 22 February 2022.

The mechanism is primarily intended for investors connected with states taking actions deemed unfriendly towards Russia, as well as companies and Russian legal entities under their control. However, even the combination of foreign investor status and a disposal after the specified date does not, in itself, provide grounds for terminating a buyback right. A combination of statutory conditions must be satisfied, including circumstances falling within at least two distinct categories.

First Category: The Investor’s Conduct

The first category concerns the foreign investor’s conduct after 22 February 2022.

In particular, the law takes account of:

• Public support for actions deemed unfriendly towards Russia;
• Dissemination of information known to be false;
• Financing of terrorism or extremist activities;
• Public statements announcing the cessation or suspension of operations in Russia;
• Failure to duly perform corporate or other obligations.

The legislation separately addresses actions that may have jeopardised the continued operation of the business sold. These may relate to the performance of material contracts, the use of intellectual property, the supply of products or the provision of services.

Such actions must be disregarded if they resulted from clear economic circumstances or if there are grounds to conclude that the investor was compelled to comply with foreign sanctions restrictions. This qualification is likely to become one of the most contentious issues in future litigation.

Second Category: Economic Circumstances

The second category concerns the economics of the transaction and the subsequent development of the business, rather than the investor’s conduct.

One potential ground is a difference of 25% or more between the contractual buyback price and the asset’s market value. Additional investments by the Russian buyer in the asset or related assets, or other measures necessary to keep the business operating, may also be relevant.

Accordingly, an option with an exercise price that differs from market value does not, by itself, mean that the buyback right will be terminated. To apply the new mechanism, a statutory condition relating to the foreign investor’s conduct must also be established.

Assessing the investor’s conduct is the most challenging aspect. In practice, much of the risk arises not from the formal transaction terms but from how the statutory criteria will be interpreted. For example, after 2022, many international companies publicly announced that they were ceasing or suspending operations in Russia. Those statements may now potentially be considered when determining whether their buyback rights should remain in place.

A similar issue arises in relation to compliance with foreign sanctions. A foreign investor may have restricted supplies, stopped providing technology, ceased using intellectual property or otherwise reduced its dealings with a Russian company precisely because the sanctions laws applicable to it required those measures.

In such circumstances, the reasons for the investor’s actions become critical: were they objectively required by sanctions, or did they reflect an independent commercial decision? Documents recording the reasons for, and circumstances surrounding, the investor’s withdrawal from the Russian market may therefore become important evidence.

Third Criterion: The Buyer’s Actions

A separate criterion concerns what the Russian buyer did with the asset after acquiring it. The law takes account of investments in the acquired business and other measures without which its operations could have been suspended, substantially reduced or discontinued.

However, the legislation does not expressly specify a minimum level of investment that would enable the buyer to bring the buyback issue before a court. This leaves room for judicial assessment. Depending on the circumstances, relevant expenditure may include not only investments in equipment, production or infrastructure but also other costs directly associated with keeping the business operational.

This also raises practical questions of evidence: what level of investment will the court consider sufficient, and how will it be established that the business could actually have ceased operating without it?

Financial statements, investment documentation, corporate resolutions, business plans and other materials that establish the business’s financial position following the sale are likely to be particularly important in such disputes. Where the dispute concerns market value, an independent valuation may play a significant role.

When Can Buyback Rights Be Terminated?

A buyback right may be terminated before it is exercised or when the foreign investor seeks to exercise it.

One of the most significant aspects of the new provision is that a claimant does not have to wait until the foreign investor exercises its right before bringing proceedings. In other words, the Russian owner may initiate court proceedings before the former owner requests that the asset be sold back.

This fundamentally changes the practical value of an option. Previously, an option provided a contractual mechanism through which the investor could potentially regain ownership of the business. Now, the right to do so may itself become the subject of separate litigation.

Proceedings may be brought not only by the Russian buyer but also by a federal executive authority, subject to authorisation from the Government Commission.

The Ministry of Economic Development has already prepared draft regulations on the procedure for asset buybacks by foreign investors. The draft sets out the timeframes and procedure for the Government Commission to issue the opinions required to bring court proceedings seeking termination of a foreign investor’s buyback rights.

Which Court Will Hear the Dispute?

A contractual choice of a foreign forum does not rule out proceedings in Russia.

A special jurisdictional rule applies: claims are heard by the Commercial Court of the Moscow Region. This rule may also apply where the parties have agreed that disputes will be resolved by a foreign court or through international commercial arbitration.

An exception concerns situations in which foreign sanctions impede one party’s access to justice. The legislation therefore establishes a specific Russian judicial mechanism for terminating buyback rights which, in certain circumstances, takes precedence over the foreign forum agreed by the parties.

Will the Investor Receive Compensation?

Compensation may be available, but it is not guaranteed.

A foreign investor may claim compensation from the Russian buyer within one year of the judgment terminating its buyback right taking legal effect.

The law does not prescribe a uniform formula for calculating compensation. Moreover, the court may adjust the amount to reflect the nature of the investor’s conduct, the losses caused by that conduct and the investments made by the Russian buyer after acquiring the business. In certain circumstances, the court may deny compensation altogether.

Some Russian buyers are concerned that a foreign investor might seek to exercise its buyback right solely to obtain compensation. However, this is unlikely.

First, an option exercise notice does not, in itself, create a right to compensation. That right arises only if a court terminates the buyback right. The proceedings must be initiated by the buyer or a public authority, and bringing a claim requires compliance with the statutory conditions and receipt of the requisite approvals. A foreign investor therefore cannot independently initiate the termination of its own right and thereby secure an entitlement to compensation.

Second, as noted above, compensation will not necessarily equal the value of the asset or option lost. Using the buyback mechanism solely to obtain a monetary payment therefore exposes the foreign investor to substantial uncertainty as to whether any compensation will be awarded and, if so, in what amount.

What Should Foreign Investors and Russian Buyers Do?

Investors that have retained rights to buy back Russian businesses should consider reviewing their transactions now.

The review should cover not only the option terms but also the entire subsequent history of the parties’ relationship, including:

• The investor’s public statements after 22 February 2022;
• Corporate decisions;
• Performance of obligations owed to the Russian company;
• Actions relating to intellectual property;
• Supplies of goods and the provision of services;
• Reasons for restricting or discontinuing particular activities;
• Documents demonstrating the need to comply with foreign sanctions;
• The basis for the buyback price;
• Evidence of the asset’s market value.

The purpose of this review is to identify, in advance, the circumstances that could be relied upon to terminate the buyback right and the documents that could support the investor’s position.

For Russian buyers, the position is different. The new rules provide a means of addressing the uncertainty associated with a former owner’s potential return to the business.

The new law does not automatically terminate existing options or other buyback rights. It does, however, materially change the risk assessment for transactions already completed. Whereas buyback rights were previously viewed primarily as contractual rights, they now also fall within a specific counter-sanctions regime.

 

RBC