In the Russian Federation, foreign investment is governed by a number of legislative documents. The fundamental legal position of foreign investors is defined in the federal law “On Foreign Investment in the Russian Federation,” dated July 09, 1999 (link to the text of the law).
In addition to the Russian legislation, government guarantees for foreign investors are secured by bilateral and multilateral international agreements ratified by the Russian Federation.
Russia is a member-state of the Geneva Diplomatic and Consular Convention, as well as the multilateral Convention on Double Taxation of Royalties (Madrid, December 13, 1979).
Within the Commonwealth of Independent States (CIS) there are bilateral agreements for protection and incentives for investment within the CIS and two multilateral conventions as follows:
- A 1993 CIS Agreement ”On Cooperation In Investment Activities”;
- A 1997 CIS State Convention “On Investor Rights Protection.”
The incentives and guarantees provided for by the Law on Foreign Investment are vested in foreign investors from the date when they establish a commercial entity and thus acquire protected status.
The following entities are entitled to guarantees:
- a foreign entity;
- a branch of a foreign legal entity established in the Russian Federation, provided that its purpose and activity are of commercial nature, and its ultimate parent is fully liable for the branch operations in the Russian Federation; and
- a Russian commercial entity once a foreign investor becomes its shareholder. Subsidiaries of commercial entities with foreign investment are not protected by the provisions of the Law on Foreign Investment.
Types of Guarantees
- Guarantee of legal and court protection of the activities of a foreign investor in the Russian Federation;
- Guarantee to make use of various types of investments in the Russian Federation;
- Guarantee of the right for an investor to assign their rights and liabilities to a third party;
- Guarantee of a foreign investor’s right to repatriate property and information (in hard copy or electronic format) from the Russian Federation that had been originally imported as foreign investment;
- Guarantee to be compensated for any nationalization or government seizure of property of the foreign investor or of a commercial entity with foreign investment;
- Guarantee against unfavorable amendments to the legislation of the Russian Federation;
- Guarantee of the right to use and repatriate income, profit and other legally received remuneration;
- Guarantee of the right to acquire securities;
- Guarantee of the right to take part in the privatization of assets; and
- Guarantee of the right to own land, buildings and related structures, natural resources and other immovable property