Executive Summary
The Russian State Duma is expected to review, on an expedited basis in June 2025, a draft law that would significantly restrict foreign investors’ rights to repurchase shares or equity interests in Russian companies that they divested after 24 February 2022. The law introduces a framework for unilateral refusal of such buyback rights by Russian counterparties and provides for retroactive application.
Foreign investors with existing buyback arrangements, or those evaluating a return to the Russian market, are advised to review their current exposure and assess potential consequences.
Scope and Applicability
The draft law targets buyback arrangements included in exit deals between:
- Foreign investors (or their affiliates) and
- Russian individuals or entities or foreign entities under Russian control.
executed between 24 February 2022 and 1 March 2025.
These arrangements often provided the foreign seller with the option to repurchase the divested interest at a later date under agreed conditions. While such provisions are typically confidential, media coverage of certain high-profile transactions (e.g., involving Renault or McDonald’s) has indicated the possible inclusion of repurchase rights exercisable within several years.
Unilateral Refusal by the Russian Buyer
The draft law introduces a new Article 20.1 to the Law on Foreign Investments, permitting a Russian buyer to unilaterally decline the execution of a buyback clause, provided that all the following conditions are met:
- Origin of the Investor: The foreign investor is linked to a jurisdiction officially classified as “unfriendly” by the Russian Federation.
- Price and Term: The original sale price and/or agreed buyback price is significantly below market value, and the repurchase clause has a term of three years or more.
- Time Elapsed: At least two years have passed since the original sale agreement.
- Good Faith Performance: The Russian company has fulfilled its obligations to employees and creditors.
If these conditions are satisfied, the Russian owner may refuse to honor the buyback, which would result in the termination of the repurchase right.
The implementation mechanics of such a unilateral refusal remain undefined, particularly given that under current Russian law, a buyback can, in principle, be executed without the Russian party’s participation.
Compensation Mechanism
If a refusal is issued, the foreign investor may file a request for compensation within one year of the refusal.
However, the amount of compensation may be reduced or denied if the foreign party is found to have acted in bad faith or interfered with the company’s operations prior to the sale.
Regulatory Veto Power
Separately, Russian regulatory authorities may prohibit a repurchase right regardless of the parties’ intentions. This may apply if:
- The business is classified as critical to Russia’s socioeconomic stability, such as in sectors like energy, defense, telecommunications, finance, or agriculture, or
- Other grounds exist, as determined at the discretion of the relevant authorities
Such regulatory decisions would have the same legal effect as a refusal by the Russian owner. The draft law does not clarify whether compensation claims remain available in cases of regulatory prohibition.
Retroactive Effect
Once enacted, the law will apply retroactively to all qualifying transactions made since 24 February 2022. It is expected to enter into force immediately upon official publication.
Implications for Foreign Investors
If adopted in its current form, the draft law would have a material effect on the validity and enforceability of buyback clauses included in foreign exit transactions. It further expands the grounds under which such rights can be denied — either by private counterparties or by regulatory authorities.
What Foreign Investors Should Consider
Foreign investors with buyback arrangements or ongoing commercial exposure in Russia should:
- Review existing contractual documentation for repurchase rights.
- Evaluate exposure to the proposed restrictions.
- Consider strategic and legal risk mitigation options in light of the anticipated retroactive application
Contact Us
Solstico Legal advises international clients on regulatory, transactional, and dispute-related matters in Russia. If your company is affected by this development — or if you are considering renewed activity in the Russian market — we invite you to contact us for a confidential review of your legal position.