Russian Federal Law No. 319-FZ, signed on 4 August 2026, introduces a mechanism by which the Arbitrazh Court of the Moscow Region may, on application by the buyer or a regulator, terminate contractual repurchase rights – including buy-back and call options – held by investors from "unfriendly" states who divested Russian assets after 22 February 2022. The law operates regardless of the governing law chosen in the original transaction documents and regardless of any foreign forum or arbitration clause, with compensation left to the court's discretion. For companies that structured their Russia exit with deferred consideration, earn-outs, or retained buy-back rights, this legislation materially alters the risk profile of those instruments.
The Legislative Framework: What 319-FZ Actually Does
Law No. 319-FZ amends the foundational Russian statute on foreign investments – Federal Law No. 160-FZ – by inserting a new Article 20.1. The provision is surgical in its targeting: it applies specifically to investors from states designated as "unfriendly" by Russia who completed a divestiture of a Russian asset at any point after 22 February 2022. That date is significant because it coincides with the period during which most Western companies began accelerating their Russia exit programmes in response to geopolitical events and the first waves of EU sanctions.
The new article gives standing to two categories of applicant: the Russian buyer of the divested asset, and an unspecified regulator. Either may approach the Arbitrazh Court of the Moscow Region – a court that already handles a substantial share of high-value commercial disputes involving foreign interests in Russia – and request that the court formally extinguish any contractual right of the former owner to repurchase the asset or exercise a call option over it.
The compensation framework is deliberately open-ended. The law does not set a floor, a formula, or a reference to fair market value. It simply states that compensation is at the court's discretion. In practice, this creates a wide band of outcomes, from a nominal payment to something closer to the original exit price, depending on judicial interpretation that has not yet been tested at the appellate level.
Governing Law and Forum Clauses: Why They May Not Protect You
One of the most consequential aspects of 319-FZ is its express overriding of contractual choice-of-law and dispute resolution provisions. Exit agreements involving Russian assets were frequently governed by English, Dutch, or Swedish law, with disputes referred to ICC arbitration, the LCIA, or the Stockholm Chamber of Commerce. Under the new article, none of this insulates the buy-back right from termination by the Arbitrazh Court of the Moscow Region.
This is consistent with a broader trend in Russian civil procedure: the Arbitrazh courts have, since 2022, been granted progressively wider competence to hear disputes touching on Russian assets even where the parties agreed to foreign jurisdiction. The Supreme Court of Russia has in several procedural contexts endorsed the principle that Russian courts retain jurisdiction over matters deemed to affect the Russian economic order. Law 319-FZ builds on that logic by treating an "unfriendly" investor's retained repurchase right as an instrument that can be judicially neutralised within Russia irrespective of its contractual home.
For lawyers advising on enforcement strategy, the practical consequence is this: even if a foreign arbitral tribunal or court were to affirm the buy-back right and order its exercise, the Russian leg of enforcement against a Russian asset or a Russian-domiciled buyer remains blocked. The Arbitrazh Court's order terminating the right would take precedence within Russia's legal system.
If you have deferred consideration structures or option arrangements tied to Russian assets and are reassessing your exposure, the team at Ferraz & Whitmore can discuss the specific terms of your transaction. Contact us at info@ferrazwhitmore.com or visit our contacts page.
Interaction with the Government Commission Regime
Law 319-FZ does not operate in isolation. Exit transactions by "unfriendly" investors from Russian assets remain subject to Government Commission approval – a requirement that predates this legislation and that has, since 2022, imposed significant structural conditions on exits, including so-called "voluntary contributions" (effectively discounts or levies applied as a condition of approval).
The interaction between these two regimes creates an important dynamic. An investor who completed a Government Commission-approved exit – and who therefore accepted the conditions attached to that approval, potentially including a reduced headline price – may have retained a buy-back right precisely as a mechanism to recover value if circumstances changed. Law 319-FZ now threatens that recovery mechanism. The investor accepted a discounted exit on the basis of a contingent upside, and the new law allows the Russian counterpart or a regulator to extinguish that upside through judicial process.
It is currently an open question whether the existence of a Government Commission approval for the original exit transaction has any mitigating effect on the Arbitrazh Court's exercise of discretion under Article 20.1. The law does not address this expressly. Practitioners monitoring the first wave of applications under the new article will be watching for any guidance from the court or from the Commission itself.
Deferred Consideration: A Distinct but Related Risk
Buy-back options are the explicit target of 319-FZ, but companies should also examine how the law interacts with deferred consideration arrangements more broadly. Earn-outs, deferred payment tranches, and price adjustment mechanisms tied to future performance of the Russian business are not, on the face of the new article, directly caught. However, several risk vectors deserve attention.
- Re-characterisation risk: A deferred consideration clause that is structured to give the seller a right to reacquire equity if payment is not made could be read, in a Russian court, as functionally equivalent to a repurchase right. Russian courts applying APC RF procedural rules have shown willingness to look to the economic substance of arrangements rather than their formal characterisation.
- Parallel enforcement difficulties: Even where deferred consideration is not caught by Article 20.1, collecting payment from a Russian buyer on future tranches remains subject to the same enforcement obstacles that existed before 319-FZ – including EU sanctions asset freeze restrictions that may limit the buyer's ability to transfer funds, and export control and circumvention risk if payment routes involve sanctioned intermediaries.
- Best-efforts obligations: Some exit agreements include best-efforts obligations on the Russian buyer to satisfy regulatory requirements necessary for payment. If the buyer seeks and obtains a court order under 319-FZ extinguishing an associated option, it may argue that this also modifies its obligations under related deferred consideration provisions – a point that will require careful analysis on a transaction-specific basis.
- Sanctions screening of payment flows: Any incoming payment from a Russian buyer to a Western seller now requires rigorous sanctions screening. EU sanctions, export controls, and circumvention prohibitions mean that the route by which funds travel matters as much as the underlying contractual entitlement.
Cross-Border Implications: EU Sanctions and the Squeeze from Both Sides
Companies that exited Russia face a structural tension. On the Russian side, Law 319-FZ limits their ability to exercise repurchase rights or recover deferred value through Russian courts or through the contractual mechanisms they negotiated. On the Western side, EU sanctions, asset freeze provisions, and export control regimes constrain the ways in which they can interact commercially with Russian counterparts, even to enforce legitimate contractual rights.
This creates what practitioners sometimes describe as a double lock: the investor cannot exercise the right in Russia, and many of the actions it might take to pressure the buyer from outside Russia (including certain legal manoeuvres involving Russian-domiciled entities or assets) may require sanctions screening and potentially a licence from competent EU authorities. The Netherlands, as a major conduit jurisdiction for Russian investment structures, has specific national implementation rules that may affect how Dutch-held holding companies interact with these constraints. Details of those national rules are subject to ongoing regulatory development.
For a detailed review of how EU sanctions interact with your specific exit structure, our sanctions and trade practice can assist. See our overview of Russia sanctions and trade advisory services and our analysis of Netherlands-specific sanctions compliance considerations.
Open Questions and Areas of Legal Uncertainty
As of late October 2026, Article 20.1 of Law No. 160-FZ as introduced by 319-FZ has been in force for only a matter of weeks. Several significant interpretive questions remain unresolved.
- Scope of "unfriendly" investor: The designation of unfriendly states is by government list, but questions remain about how the provision applies to investors with dual domicile, investors who restructured their holding structures after February 2022, or investors whose beneficial ownership runs through neutral-jurisdiction vehicles.
- Retroactivity and vested rights: The law applies to exits completed after 22 February 2022 – a date now more than four years in the past. Whether this retroactive application is consistent with constitutional protections of vested contractual rights under Russian law remains a point that could, in theory, be raised before the Constitutional Court of Russia, though the prospects and timeline of such a challenge are deeply uncertain.
- Compensation methodology: The absence of a statutory formula for compensation means that first-instance decisions by the Arbitrazh Court of the Moscow Region will be closely watched. Whether the court adopts a market-value approach, a book-value approach, or something more discretionary will substantially affect the economic stakes for affected investors.
- Interaction with bilateral investment treaties: Many "unfriendly" investors retain rights under bilateral investment treaties (BITs) that Russia has not formally terminated. Whether a 319-FZ court order constitutes a compensable expropriation under an applicable BIT – and whether investor-state arbitration can be pursued – will depend on the specific treaty and on the investor's ability to satisfy nationality requirements given any restructuring.
Strategic Recommendations for Affected Investors
Given the state of the law as it currently stands, companies with residual contractual rights in Russian exit transactions should consider the following steps.
- Audit your existing documentation: Identify every instrument in your exit package that could be characterised as a repurchase right, call option, or contingent equity recovery mechanism. This includes side letters, shareholder agreements, and price adjustment clauses, not just the main sale and purchase agreement.
- Assess the risk of a 319-FZ application: Consider whether your Russian counterpart has a commercial incentive to seek termination of your buy-back right. The fact that a party has the right to apply does not mean it will; in some transactions the parties' ongoing commercial relationships or reputational considerations may militate against a court application.
- Review BIT coverage: If you have not already done so, obtain advice on whether an applicable BIT remains in force and whether a 319-FZ order, if made, could give rise to an investment treaty claim. The analysis requires prompt attention given that limitation periods under BITs vary and may begin running from the date of the measure rather than the date of any court order.
- Sanctions and circumvention compliance: Before taking any steps that involve communicating with or making demands of Russian counterparts, conduct sanctions screening. EU sanctions, export controls, and anti-circumvention rules impose obligations on the Western party as well as restrictions on the Russian one.
- Monitor court developments: The first applications under Article 20.1 will generate significant guidance. Establishing a process to monitor Arbitrazh Court of the Moscow Region decisions in this area is advisable for any company with live exposure.
- Consider proactive negotiation: In some cases, approaching the Russian buyer to negotiate a consensual resolution – such as an accelerated deferred payment or a modified exit structure – may be preferable to waiting for a unilateral court application. Any such approach must be conducted through sanctions-compliant channels.
For a structured review of your specific contractual position under 319-FZ, including consideration of BIT coverage and sanctions compliance, please reach out to our team at info@ferrazwhitmore.com. You can also find our full analytical note on buy-back rights under 319-FZ at our dedicated alert page.
Outlook
Law 319-FZ is best understood as one element of a continuing legislative programme in Russia aimed at reshaping the terms on which "unfriendly" investors participate in – or extract value from – the Russian economy. The direction of travel has been consistent since 2022, and there is no current indicator that it will reverse in the near term. Investors who have already exited and who believed their residual contractual rights were secure should treat 319-FZ as a material change in the risk environment, not an isolated measure.
At the same time, the law is not self-executing. It requires an application, a judicial process, and the exercise of court discretion. There are procedural rights, substantive arguments, and international law tools that affected investors can deploy. The quality of the legal strategy brought to bear on these situations is likely to influence both the process and the outcome of any proceedings.
If your company or fund has a Russia exit with deferred consideration or retained option rights, we are available to discuss the implications of 319-FZ for your specific position. Contact Ferraz & Whitmore 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.