Reports of legal actions that have affected or could affect the property rights of foreign investors in Russia include:
- Since March 14, 2022, a new law allows foreign aircraft leased by Russian airlines to be registered as airline property. Putin signs a bill: the leased planes belong to Russian Airlines (Airway Magazine);
- Unauthorized use of patents owned by individuals or affiliated companies in hostile countries will not be compensated. Affiliation with a hostile state includes being registered, doing business in, or holding nationality of that state. Russia allows patent theft from anyone in ‘unfriendly’ countries (The Washington Post);
- The authorities plan to lift restrictions on the use of intellectual property on goods whose supply in Russia has been restricted. Russia allows patent theft from anyone in ‘unfriendly’ countries (The Washington Post);
- A ban on the export of goods from the following sectors: telecommunications, agriculture, electrical equipment, vehicles and forest products. The ban covers 48 countries, including the United States and EU members. Russia responds to Western sanctions with export bans (BBC News);
- A Wall Street JournalAn article dated March 14, 2022 says Russian prosecutors have warned they could seize the assets of companies that pull out of the country. Russian prosecutors warn Western companies of arrests and asset seizures (WSJ).
Russia has entered into international treaties that protect foreign investments against various government actions. These bilateral investment treaties (BITs) and multilateral treaties, such as the Energy Charter Treaty, generally include protections against expropriation without adequate compensation; a guarantee of total safety and security of foreign investments; a guarantee against any arbitrary or discriminatory treatment of foreign investments; that the movement of capital out of the country will not be unduly restricted, and a guarantee that compensation for war-related damages for foreign investments will be equivalent to that granted to residents.
In addition, most BITs allow foreign investors to bring claims for violations of their provisions before independent arbitration tribunals administered, for example, by the Stockholm Chamber of Commerce or the Permanent Court of Arbitration in The Hague. It should be noted that the annexation of Crimea by Russia has given rise to multiple claims under BITs, some of which have resulted in awards in favor of the investor.
To benefit from the protection of the BIT, an investor must be a national of (or incorporated in) a State that is a signatory to the treaty. However, there is no requirement for direct ownership of an investment, so indirect owners (including shareholders) with the appropriate nationality may be able to sue, even if the direct investor does not can’t. Investors should also be aware that BITs and other investor protection treaties may include additional jurisdictional requirements, including having refrained from bringing domestic lawsuits; waiver of the right to bring cases relating to the same facts before other courts; and sending notice. See, for example, Everest Estate LLC et al. vs. The Russian Federation(Case | PCA-CPA).
Below is a list of some jurisdictions with which Russia currently has bilateral investment treaties. Note that each of these treaties may differ significantly, both in the exact definition of a protected investor and in the precise protection they offer.
Investors affected by government action may wish to consider whether BITs may be applicable and proceed accordingly, including following treaty requirements regarding potential claims.
Russian Federation BIT
Canada
China
France
Germany
Italy
Japan
Netherlands
Norway
Singapore
South Korea
Spain
Sweden
Switzerland
Turkey
UK
Ukraine
