Russia’s new law on buy-back rights and international company status

What the law does

On 4 August 2026 President Putin signed into law Federal Law No. 319-FZ. The law makes two important changes. First, it changes the rules for international companies under the 2018 Law on International Companies and International Funds. Second, it creates a new court process that can end certain foreign investors’ rights to buy back Russian business assets they had previously sold. The law was adopted by the State Duma on 21 July 2026, approved by the Federation Council on 24 July 2026, signed on 4 August 2026, and takes effect on the date of official publication.

For businesses, the practical importance is straightforward. The law affects both companies considering or maintaining international company status in Russia and foreign companies that sold Russian assets but kept buy-back, repurchase or option rights. In practical terms, it creates a more controlled redomiciliation framework and makes retained re-entry rights over Russian assets materially less secure.

Why this matters

The law states that, for the buy-back regime, its purpose is to protect the rights and lawful interests of Russian citizens and Russian legal entities and to ensure Russia’s economic sovereignty and economic security, while not being aimed at the unjustified infringement of foreign investors’ rights.

In practical terms, this law changes the risk profile for foreign investors that exited Russian assets but kept buy-back, option or repurchase structures. Rights that may once have been viewed as preserved exit protections can now be challenged in a Russian court even before the investor tries to use them, including where the relevant agreements are governed by foreign law. For Russian purchasers, the law creates a potentially powerful tool, but not an automatic one, because use of the mechanism depends on specified conduct, economic criteria and prior involvement of the competent executive body and the Government Commission.

Sanctions-related mechanism

A key feature of the amendments is a sanctions-related mechanism involving the Government Commission for Control over Foreign Investments. Where restrictive measures are applied, or threatened, against the foreign legal entity, its future or existing international-company vehicle, its shareholders or participants, or foreign beneficiaries, by states or international organisations regarded as “unfriendly”, the Government Commission may recognise the requirement at Article 5(14) as satisfied under a Government-established procedure. However, sanctions do not automatically excuse compliance, and the law does not create a general exemption. Instead, it creates a formal administrative route for dealing with sanctions-related obstacles.

Transitional rules for some entities

The law also includes targeted transitional rules for certain entities from jurisdictions treated as “unfriendly”, especially where foreign law does not allow, or prohibits, redomiciliation to Russia. If such an entity adopted a decision to change its personal law and register as an international company in Russia, the requirement that the decision be adopted in the manner prescribed by that personal law is deemed satisfied, provided the entity was already entered in the special administrative region register as an international company when the law entered into force, or can be entered by the managing company no later than 1 September 2026. A parallel rule applies to entities that had already been removed from the foreign register of their home state or territory by the time of registration in Russia, as long as that removal occurred not earlier than 24 February 2022.

For those entities, the law also provides continuity effects. The law provides that the entity is regarded as a legal entity acting and continuously existing from the moment of registration or creation, and that it preserves or acquires international company status from registration in Russia. There is also a temporary suspension until 31 December 2027 for certain international companies already covered by a Government Commission decision where the period for exclusion from the foreign register expires after the new law enters into force. During that same period, the relevant Article 5 time limit does not run. Related temporary legislation is also extended by replacing 2026 with 2027 in part of one statute and 2026 with 2028 in part of another.

The biggest practical change: new power to terminate buy-back rights

The second and more commercially significant reform is the new Article 20.1 of the Foreign Investment Law. It deals with “the peculiarities of the exercise by a foreign investor of the right to acquire (repurchase) a business asset previously belonging to it” in Russia. This mechanism applies where a foreign investor sold shares, participatory interests or other business assets in Russia into which foreign capital had been invested, and retained a right to reacquire or repurchase those assets. The sale must have been made in favour of a Russian citizen, a Russian legal entity or a foreign legal entity controlled by a Russian citizen whose personal law is the law of a non-unfriendly state.

The reach of the law is broad. It covers not only the original sale contract but also related agreements, including options to conclude a contract and analogous agreements, including agreements governed by foreign law. Just as importantly, the mechanism is pre-emptive. A claim to terminate the repurchase right may be filed even if the foreign investor has not yet tried to exercise that right. So a dormant option or buy-back clause is no longer necessarily a passive protection that can simply be left unused until later.

Who can bring the claim, and where

The right to start the court process is not left entirely to the parties. The purchaser may bring the claim only after obtaining both the permissionof the competent federal executive body responsible for the relevant sector, confirming that the claim corresponds to the purposes of Article 20.1, and a conclusion of the Government Commission issued under a Government-established procedure. Separately, the relevant federal executive body itself may bring the claim after obtaining authorisation from the same Commission. Jurisdiction is centralised in the Arbitrazh Court of Moscow Region.

The law also contains a specific rule on dispute resolution clauses. It does not cancel all foreign forum or arbitration agreements, but it allows the Russian court’s jurisdiction to apply even where the parties agreed to a foreign court or to international commercial arbitration seated outside Russia, if that agreement is unenforceable because restrictive measures against one participant create obstacles to access to justice.

When can the court terminate the right?

The law does not allow termination simply because a repurchase right exists. It requires cumulative statutory conditions. The first set of conditions is conduct-based. After 22 February 2022, the foreign investor must have engaged in one of the listed categories of conduct. The examples identified include public support for unfriendly actions against Russia, calls for such actions, acts aimed at discrediting the use of the Russian Armed Forces or the exercise of powers by Russian state bodies for the purposes stated in the law, dissemination of knowingly false information presented as reliable reports, and conduct connected with financing terrorism, extremist activity or the financing of proliferation of weapons of mass destruction.

The law also mentions public announcement of termination or suspension of activities in Russia, acts or omissions linked to such an announcement, improper performance of duties including under corporate and analogous agreements and actions aimed at restricting the conclusion, performance or termination of contracts materially significant for operation of the given investment. It expressly mentions restrictions linked to intellectual property use, as well as the prohibition, termination, suspension or substantial restriction of production, supply, services, or works in Russia.

The second set of conditions is economic. The law refers to agreements where the repurchase price deviates from the market price by 25 per cent or more, and/or where the purchaser made additional investments in the asset or related assets, or took other actions without which the business might have been suspended, substantially reduced or ceased to operate  in Russia. The law also links the relevant conduct to cases where it is not explained by obvious economic reasons and/or there are grounds to believe it is connected with the foreign investor’s compliance with restrictive measures imposed by foreign states or international organisations taking unfriendly actions. These sanctions-related patterns are potentially relevant, not as an automatic basis in every case.

What happens if the claim succeeds?

If the court grants the claim, the foreign investor’s repurchase right is extinguished. The immediate legal effect is termination of the right itself, not merely suspension or modification of its exercise. The foreign investor may then, within one year from the judgment entering into force, apply to the purchaser for compensation connected with that termination.

But compensation is not guaranteed in full. The court may reduce compensation by taking into account the nature of the investor’s conduct, the losses associated with that conduct and the scale of the purchaser’s post-sale investments in the asset and related assets. In more serious cases, compensation may be denied entirely. The law says the court may refuse compensation if the foreign investor or its officers who are or were sole executive bodies engaged in conduct connected with financing terrorism, extremism or proliferation of weapons of mass destruction and where that conduct led to administrative or criminal liability. For individuals, this means termination risk and compensation risk must be analysed separately.

What this means in practice

For businesses relying on dispute resolution clauses in favour of foreign courts or arbitration in unfriendly jurisdictions, the law is more limited than a complete override, but it still creates a material litigation risk in Russia where sanctions make the agreed foreign forum practically unavailable.

At a practical level, parties most exposed are likely to be those with post-February 2022 exits from Russian businesses where the original seller retained any form of re-entry right, especially if the exit was linked to sanctions compliance, public withdrawal announcements, operational restrictions or a repurchase price materially different from market value.

Therefore, a dispute resolution clause in favour of a foreign court or arbitration in an “unfriendly” jurisdiction may still matter, but it may not prevent proceedings in the Moscow Region Arbitrazh Court if sanctions create the type of access-to-justice barrier that the law describes.

Immediate action point: document review

The clearest action point is document review. Parties should identify whether existing sale, option, shareholder or analogous agreements contain reacquisition language; whether those rights are governed by foreign law; whether any sanctions-related facts or public statements could be relied upon under Article 20.1; whether the purchaser has made significant follow-on investments; and whether dispute clauses depend on a foreign forum that could be challenged as inaccessible because of sanctions. Each of those issues is directly relevant to how the new regime may operate.

How Gherson can assist?

If you are an affected party who believes that the compensation you received is unreasonably reduced or have received no compensation from the Russian court  and are considering bringing an investment arbitration claim against Russia, Gherson LLP can assist in assessing whether a viable treaty basis exists and what further steps may be available.

Gherson’s Litigation and Arbitration Team are highly experienced in advising on investment arbitration matters. If you have any questions arising from this blog, please do not hesitate to contact us for advice, send us an e-mail, or, alternatively, follow us on X, Facebook, Instagram, or LinkedIn to stay-up-to-date.

The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please do not hesitate to contact Gherson. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.

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