Russian Federal Law No. 319-FZ, signed on 4 August 2026, empowers the Arbitrazh Court of the Moscow Region to extinguish contractual buy-back and call rights held by "unfriendly" foreign investors who divested Russian assets after 22 February 2022 – irrespective of the governing law chosen in the contract or any foreign arbitration or forum clauses. Compensation, if any, is awarded at the court's discretion. Foreign investors and their counterparties in Russia should assess their exposure immediately, as existing exit arrangements may now be subject to unilateral judicial termination.
What Law No. 319-FZ Changes
The law introduces a new Article 20.1 into Federal Law No. 160-FZ on Foreign Investments in the Russian Federation. Before this amendment, contractual repurchase rights – clauses that allowed a selling foreign investor to buy back its stake or assets under specified conditions – were generally treated as a matter of private contract. A foreign governing law clause or an arbitration seat outside Russia provided at least formal protection, even if enforcement was uncertain in practice.
Article 20.1 removes that layer of protection. On the application of either the Russian buyer or a competent regulator, the Arbitrazh Court of the Moscow Region may now declare such repurchase rights terminated. The court's jurisdiction cannot be displaced by a foreign choice-of-law provision or a foreign forum clause. This is a significant departure from ordinary conflict-of-laws principles and represents a direct legislative override of contractual arrangements entered into under non-Russian law.
The scope is deliberately broad: it covers any contractual right – however labelled – that would allow a divesting "unfriendly" investor to reacquire an interest in a Russian entity or asset. The divestment must have occurred on or after 22 February 2022, which is the date Russia's authorities have used as a general reference point for post-sanction exit transactions.
Who Is Affected
The practical reach of Law No. 319-FZ is wide. Affected parties include:
- Foreign investors classified as "unfriendly" – companies and funds from EU and other states designated unfriendly by Russia, who sold or transferred Russian assets after 22 February 2022 and retained any form of buy-back, call option, right of first refusal or similar repurchase mechanism in the sale documentation.
- Russian buyers and counterparties – Russian entities that acquired assets from unfriendly investors and are now potential applicants before the Arbitrazh Court of the Moscow Region, or that may face applications by a regulator.
- Funds and holding structures – private equity, venture and real estate funds with Russian portfolio positions that structured exits with clawback or re-entry provisions, particularly those relying on a non-Russian seat of arbitration or EU law as governing law.
- Transactions still in the pipeline – parties negotiating or finalising Russian asset disposals should note that exit transactions continue to require Government Commission approval and exit contributions; Law No. 319-FZ adds a further layer of risk to post-closing arrangements.
The reference to EU sanctions and asset freeze regimes is directly relevant here. Many foreign investors exited Russia in response to EU sanctions or export controls, and structured their exits under English, Dutch or German law specifically to preserve contractual flexibility. Law No. 319-FZ targets precisely those arrangements.
Key Features of the New Judicial Mechanism
Court with exclusive jurisdiction. The Arbitrazh Court of the Moscow Region (Arbitrazhny Sud Moskovskoy Oblasti) holds exclusive jurisdiction over these termination applications. This is the specialist commercial court framework under the APC RF (Arbitrazh Procedure Code of the Russian Federation). Decisions will be subject to appeal within the Russian court hierarchy, including potential review by the Supreme Court of Russia.
Applicants. Applications may be brought by the Russian buyer under the relevant transaction or by a designated regulator. This means termination proceedings can be initiated without any action by the foreign investor, and the foreign investor may have limited practical ability to participate effectively.
Discretionary compensation. The law allows the court to award compensation, but the amount – and whether any is awarded at all – is a matter of judicial discretion. There is no statutory formula. This creates significant uncertainty for investors who accepted reduced exit prices on the assumption that a buy-back right preserved long-term value.
No deference to foreign governing law or arbitration clauses. This is the most commercially disruptive element. Investors who relied on best-efforts obligations, specific performance remedies or foreign-seated arbitration as enforcement mechanisms will find those protections overridden as a matter of Russian domestic law. Sanctions screening and circumvention concerns that originally drove some investors to preserve contractual re-entry rights now sit alongside this new expropriation risk.
Immediate Action Items for International Companies
The following steps are relevant for companies and funds with Russian exposure. This is not an exhaustive list, and the appropriate course of action will depend on individual circumstances.
- Map existing buy-back and call provisions. Identify all transaction documents relating to Russian asset disposals concluded on or after 22 February 2022 that include any repurchase, call option, re-entry or similar right in favour of the foreign seller. This includes side letters and shareholders' agreements as well as main sale and purchase agreements.
- Assess the risk of an application being made. Consider whether the Russian buyer or any Russian regulator has an incentive to apply to the Arbitrazh Court of the Moscow Region to extinguish the relevant right. The risk is not uniform across transactions.
- Review Government Commission approval status. Confirm whether the original exit transaction obtained the required Government Commission approval and whether any outstanding exit contributions are in dispute, as these factors may interact with Article 20.1 proceedings.
- Consider strategic options before proceedings are initiated. Once an application is filed, the foreign investor's ability to influence the outcome is constrained by jurisdiction and procedural rules under the APC RF. Pre-emptive steps – including negotiations or waivers – may be more effective before any court process begins.
- Monitor for implementing guidance. Secondary regulations, court practice directions and any Supreme Court of Russia clarifications on Article 20.1 are pending; the practical scope of the new provision will become clearer as early cases are decided.
If your organisation exited a Russian investment after February 2022 and retained any form of repurchase right, our team can assist with a preliminary review of the relevant documents and risk assessment. Please write to info@ferrazwhitmore.com or visit our contact page to arrange a discussion.
Interaction with EU Sanctions and Export Controls
For EU-based investors, Law No. 319-FZ creates an additional layer of complexity alongside existing EU sanctions and asset freeze obligations. An EU investor holding a contractual buy-back right over a Russian asset must already consider whether exercising that right would be consistent with EU sanctions restrictions – including asset freeze rules and export controls applicable to goods or technology transferred in connection with the transaction. In many cases, exercising a buy-back right was already legally impracticable under EU law.
Law No. 319-FZ now adds the risk that the right itself is terminated by a Russian court before any question of exercise arises. The combined effect is that investors may lose a contractual position that had residual strategic or valuation value, without receiving meaningful compensation and without the protection of the foreign forum they bargained for. Circumvention concerns under EU sanctions law are a separate but related consideration: any steps taken in response to Article 20.1 proceedings should be reviewed for compatibility with applicable EU sanctions screening obligations.
For a more detailed analysis of exit structures and buy-back options in the Russian market, including the Government Commission approval process, see our dedicated briefing at Russia exit and buy-back options.
Governing Law and Forum Clauses: The Practical Position
Foreign investors and their counsel should proceed on the assumption that, as a matter of Russian law, Article 20.1 will be applied regardless of any contractual choice of English, Dutch, German or other non-Russian law. A foreign arbitral award or court judgment upholding a buy-back right will face the ordinary barriers to recognition and enforcement in Russia, which were already substantial before this amendment.
This does not mean that foreign proceedings are valueless. A foreign arbitral award may have enforcement value against other assets of the Russian buyer or its affiliates outside Russia. However, the immediate Russian-law position is that the Arbitrazh Court of the Moscow Region can terminate the right, and a parallel foreign process will not prevent that outcome within the Russian legal system.
Our Russia-qualified lawyers and trade lawyers work with a dedicated sanctions and trade practice for Russia and can assist in coordinating strategy across jurisdictions, including where EU or other sanctions obligations are relevant. For cross-border matters with a French-law dimension, our France sanctions and trade practice is also available.
Next Steps
Law No. 319-FZ was signed on 4 August 2026 and introduces a materially new litigation risk for any foreign investor that divested Russian assets after 22 February 2022 while retaining contractual re-entry rights. The window for pre-emptive action – before applications are filed before the Arbitrazh Court of the Moscow Region – is the most valuable period for assessing and managing exposure.
We recommend that affected companies and funds conduct a targeted document review as a first step. Ferraz & Whitmore can assist with that review, with analysis of interaction between Russian law developments and EU sanctions obligations, and with advice on strategy options. To discuss your situation, contact us at info@ferrazwhitmore.com or through our contacts page.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.