Russia has signed new legislation that allows courts to cancel contractual buy-back options held by foreign companies that sold their Russian businesses since the 2022 invasion of Ukraine.
President Vladimir Putin signed Federal Law No. 319-FZ on 4 August 2026, fundamentally altering the terms under which departing foreign investors may reclaim businesses they sold at token prices.
Since March 2022, foreign investors from states Russia designates as unfriendly have required permission from the Government Commission on Control of Foreign Investment before disposing of securities, real estate or business interests.
Those conditions have grown increasingly punitive, with a sub-commission directive from 15 October 2024 requiring sellers to accept discounts of at least 60% to independently assessed market value.
Sellers must also pay a contribution of at least 35% of the undiscounted market value into the Russian federal budget, meaning a departing investor nets roughly 5% of the appraised value of their business.
Many foreign companies accepted nominal sale prices in exchange for negotiated options to buy their businesses back at a later date, should conditions improve, but the new law now puts those options at serious risk.
The new Article 20.1, inserted into the Federal Law on Foreign Investments, gives Russian courts the power to cancel such options where two conditions are simultaneously met.
The first condition is behavioural, covering sellers who publicly criticised Russia’s military operations, restricted intellectual property or supply agreements, or took steps that cannot be explained by obvious economic reasons.
The second condition is economic, triggered where the option exercise price sits 25% or more below current market value, or where the acquirer has since recapitalised the business to keep it operational.
All such claims are heard exclusively by the Arbitration Court of the Moscow Region, with the statute setting aside any foreign court or arbitration agreements the parties originally made.
Compensation for the cancelled option is technically available but neither guaranteed nor calculated by any fixed formula, and the court that cancels the option is the same court that determines the payout.
The court may reduce that sum based on the investor’s conduct, the financial damage caused, and the amount the acquirer has invested in the business since taking ownership.
Where a departing investor or its chief executive faces criminal or administrative liability for terrorism or extremism, the court may refuse to award any compensation whatsoever.
The statute describes its own purpose as securing “the economic sovereignty and economic security of the Russian Federation” while stating it is “not aimed at the unjustified impairment of the rights and legitimate interests of foreign investors.”
At the EU level, Council Regulation (EU) 2026/1848 of 23 July 2026 bars member states from recognising or enforcing decisions derived from Articles 248.1 or 248.2 of Russia’s Arbitration Procedure Code, or from equivalent Russian legislation.
Whether Article 20.1 qualifies as equivalent legislation under that provision has not yet been decided, though its drafting closely mirrors the test those articles apply.
Council Regulation (EU) 2026/506, which came into force in April 2026, allows EU parties to obtain orders from member state courts requiring Russian parties to discontinue Russian proceedings, with financial penalties tied to the EU party’s loss.
Russia’s bilateral investment treaties with affected states typically prohibit expropriation without compensation and require fair and equitable treatment, standards that the cancellation of a contractual right with discretionary compensation arguably engages.
The European Commission’s proposal of 3 December 2025 has meanwhile asked member states to withdraw from or terminate those treaties as part of a coordinated approach linked to Ukraine reparations financing.
Foreign companies still holding buy-back options on Russian assets face mounting uncertainty as to whether those instruments retain any enforceable value inside or outside Russian jurisdiction.