Exiting the Russian Market in 2026: Government Commission Approval and Exit Costs

Exiting the Russian market in 2026 remains a regulated, multi-step process that requires approval from the Government Commission on Control over Foreign Investments, payment of a mandatory exit contribution, and careful navigation of recent legislative changes that can affect the enforceability of contractual protections negotiated at the time of sale. Federal Law No. 319-FZ, signed on 4 August 2026, introduced new rules allowing a Russian court to extinguish buy-back rights granted to departing foreign investors, regardless of the governing law or arbitration clause in the relevant agreement. Businesses considering an exit should assess the full picture – regulatory, contractual and sanctions-related – before committing to a transaction structure.

Why the Exit Framework Has Changed in 2026

The regulatory environment for foreign companies leaving Russia has shifted considerably since the wave of departures that followed February 2022. What began as a series of Presidential Decrees and Government Commission instructions has now been partially codified in statute. The most significant development is Federal Law No. 319-FZ, which came into force after being signed on 4 August 2026. It adds Article 20.1 to Law No. 160-FZ on Foreign Investments, creating a specific judicial mechanism targeted at investors classified as being from unfriendly states.

Under Article 20.1, the Arbitrazh Court of the Moscow Region may, on application by the buyer of the divested asset or by a relevant regulator, terminate any contractual repurchase right – commonly structured as a call option, tag-along, or buy-back clause – that was granted to a foreign investor when they sold their Russian interest on or after 22 February 2022. The court may do so regardless of which law governs the underlying contract and regardless of any foreign forum or arbitration clause. Compensation, if any, is awarded at the court's discretion. This represents a material erosion of protections that many departing investors believed were secured by international contract law or bilateral investment treaty provisions.

For companies that have not yet completed their exit, this development changes the negotiating calculus: contractual re-entry mechanisms may carry significantly less value than assumed when pricing the transaction.

If you are reviewing your current exposure under existing sale agreements or considering a new exit, the sanctions and trade team at Ferraz & Whitmore can assist with a preliminary legal mapping. Write to info@ferrazwhitmore.com or visit our contacts page.

The Government Commission Approval Requirement

Any disposal by a resident of an unfriendly state of shares, participatory interests, or other assets in a Russian entity above the applicable threshold continues to require prior approval from the Sub-Commission of the Government Commission on Control over Foreign Investments (commonly referred to as the Government Commission). This requirement operates in parallel with – and is independent of – any obligations that may arise under EU sanctions, export controls, or the sanctions screening procedures of the investor's home jurisdiction.

Key Conditions Typically Imposed by the Commission

• Discount on transaction value: The Commission has consistently required that sales to Russian buyers occur at a discount to an independently assessed fair market value. The applicable discount percentage is set on a case-by-case basis and has varied over time; no single published rate applies universally.
• Exit contribution: A mandatory contribution to the Russian federal budget is required as a condition of approval. The rate is set by the Commission in each decision and is calculated by reference to the transaction value.
• Buyer eligibility: The Commission scrutinises the proposed buyer. Sales to parties connected to the exiting foreign investor or to entities that might facilitate circumvention of Russian capital controls are likely to be refused.
• Operational continuity undertakings: For businesses in strategically significant sectors, the Commission may require the buyer or the Russian subsidiary to give undertakings on employment, production levels, or supply chains.
• Instalment payments and deferred proceeds: Transfer of sale proceeds to the exiting investor is subject to separate currency control rules; full repatriation of funds in a single payment is generally not possible under current Russian foreign exchange regulations.

Procedural Steps for Obtaining Approval

While the Commission's internal rules are not fully published, the process in practice involves the following stages:

1. Pre-application preparation: Obtain a valuation of the Russian asset from an accredited Russian appraiser. Identify and carry out due diligence on the proposed buyer.
2. Application filing: Submit the application package to the Federal Antimonopoly Service (FAS), which acts as the secretariat. The package typically includes corporate documents, the draft transaction agreement, the appraisal report, information on the buyer, and a description of the business rationale.
3. Inter-agency review: FAS circulates the file to relevant ministries (economy, finance, industry, and others depending on the sector). Requests for supplementary information are common and extend the timeline.
4. Commission decision: The Sub-Commission issues a decision, which may be unconditional, conditional (with specific requirements attached), or a refusal. Conditions must be satisfied before or simultaneously with closing.
5. Closing and reporting: The transaction closes following satisfaction of all conditions, with post-closing reporting obligations to the Commission and to Russian corporate registries.

Realistic timelines from application submission to receipt of a Commission decision have ranged from several months to over a year, depending on the sector, the size of the asset, and the complexity of the buyer structure. Delays frequently arise where the application package is incomplete or where inter-agency consultations reveal regulatory concerns not identified at the outset.

Interaction with EU Sanctions and Export Controls

For European and other Western investors, the exit process must be managed simultaneously against the requirements of EU sanctions and, where relevant, UK sanctions and export controls. EU restrictive measures – including asset freeze provisions and prohibitions on making funds available – apply to any transaction that might benefit a designated person or entity. Even where the Russian counterparty is not itself designated, a thorough sanctions screening of the proposed buyer, its beneficial owners, and related parties is essential before any binding commitment is made.

Export controls add a further layer where the Russian business involves dual-use goods, technology, or software. The disposal of a controlling interest in a company that holds controlled technology licences or operates controlled equipment may itself be caught by export control regulations, requiring a separate licence or authorisation from the relevant competent authority in the investor's home jurisdiction.

The concept of circumvention is actively monitored by EU and UK regulators. A transaction structure that routes proceeds or control through a third-country intermediary may be regarded as circumventing sanctions even if each individual step appears technically permissible. Investors should ensure that any exit structure withstands scrutiny under a best-efforts obligation standard – meaning that all reasonable steps have been taken to avoid a sanctions-impermissible outcome.

Our Russia sanctions and trade practice covers both the Russian regulatory approval process and the parallel EU/UK compliance requirements. For UK-specific sanctions considerations, further detail is available on our United Kingdom sanctions page.

Cost Drivers: What Exiting Actually Costs

The total cost of an exit is frequently underestimated at the planning stage. The principal cost components include:

• Valuation discount: The mandatory reduction from appraised fair market value is the largest single cost for most transactions. The applicable level varies by decision.
• Exit contribution to the federal budget: This is a direct cash cost payable as a condition of approval and is distinct from any taxes arising on the transaction.
• Russian corporate income tax and withholding tax: Tax treatment depends on the structure of the investment (shares vs. assets), the applicable double tax treaty position, and whether the relevant treaty has been suspended. Treaty relief cannot be assumed without current legal advice.
• Currency conversion and repatriation costs: Russian foreign exchange rules restrict the currency, routing, and timing of proceeds transfers. Conversion losses and banking costs can be significant.
• Professional fees: Russian legal counsel, tax advisers, appraisers, and the investor's home-country legal and compliance advisers all represent real costs. In complex transactions, multi-jurisdictional advice is not optional.
• Contingent costs from Article 20.1 litigation: If the buyer or a regulator applies to the Arbitrazh Court of the Moscow Region under Federal Law No. 319-FZ to extinguish contractual repurchase rights, the investor may face litigation costs and the loss of the value attributed to that optionality.

The Impact of Federal Law No. 319-FZ on Exit Structuring

Prior to 4 August 2026, it was common for departing investors to negotiate call options or buy-back clauses as a form of insurance – a mechanism to re-enter the Russian market if the political or regulatory environment improved. These rights were typically governed by English or Dutch law and subject to arbitration outside Russia. Federal Law No. 319-FZ fundamentally alters the reliability of that protection for investors from unfriendly states.

Under the new Article 20.1 of Law No. 160-FZ, the Arbitrazh Court of the Moscow Region has jurisdiction to hear applications for termination of such rights regardless of the contractual choice of law or dispute resolution clause. The court's compensation award, if any, is discretionary. In practical terms, this means that an investor who sold after 22 February 2022 and retained a buy-back right should treat that right as legally uncertain and should not price a future exit or re-entry transaction on the assumption that it will be enforceable.

For investors currently structuring an exit, the lesson from this legislation is to focus primarily on the cash proceeds obtainable at closing rather than on contingent re-entry rights. Deferred consideration mechanisms and escrow arrangements should also be assessed for their exposure to Russian currency controls and to future legislative change. Further analysis of the buy-back rights regime is available in our alert on Federal Law No. 319-FZ.

Common Errors by Foreign Investors

Ferraz & Whitmore has observed a consistent set of errors in transactions where foreign clients have attempted to manage the Russian exit process without adequate specialist support:

• Underestimating the Commission review period: Timetables built around a standard M&A closing timeline frequently prove unworkable. Government Commission review does not follow a fixed statutory timetable.
• Inadequate buyer due diligence: Accepting a buyer without thorough sanctions screening and corporate structure analysis has led to transactions being blocked at the Commission stage or – worse – generating sanctions compliance exposure in the investor's home jurisdiction.
• Treating contractual protections as reliable: As discussed above, governing law clauses and arbitration agreements do not provide the protection they would in a non-Russian context. Legal advice must be sought on the enforceability of every contractual right before it is priced into a deal.
• Failing to coordinate Russian and home-country compliance: Steps required to satisfy the Government Commission (such as agreeing a buyer and fixing a price) may trigger obligations or restrictions under EU sanctions or export controls before home-country authorisations have been obtained. Sequencing matters.
• Overlooking post-closing obligations: Corporate deregistration, tax filings, reporting to the Commission, and winding up Russian operational entities each carry their own timelines and potential penalties for non-compliance.
• Assuming treaty protections are intact: Russia has suspended the application of a number of double tax treaties with countries it classifies as unfriendly. The availability of withholding tax relief or capital gains exemptions should be verified as at the date of any transaction.

Decision Checklist Before Initiating an Exit

Before instructing counsel to begin the formal process, the following questions should be addressed at board or senior management level:

• Has the Russian asset been independently appraised by a Russian-accredited valuer within the past twelve months?
• Has a shortlist of eligible buyers been identified and screened against applicable sanctions lists and Government Commission eligibility criteria?
• Has the board assessed the value – or lack of enforceability – of any contractual repurchase rights in light of Federal Law No. 319-FZ?
• Has the group's tax position under applicable double tax treaties been confirmed for the current year?
• Have home-country sanctions and export control requirements been reviewed, including whether any licence or authorisation is needed before a transaction can be announced or completed?
• Has the proposed transaction structure been assessed for circumvention risk under EU sanctions rules?
• Is the group prepared for a review process that may extend substantially beyond initial expectations?
• Have post-closing Russian corporate, tax and regulatory obligations been identified and resourced?

If you would like to discuss the specifics of your situation – including a preliminary review of Government Commission requirements, sanctions screening, or exit structuring – the team at Ferraz & Whitmore is available to assist. Please contact us at info@ferrazwhitmore.com or through our contacts page.

Working with Russian and International Counsel

An exit from the Russian market in 2026 requires engagement with counsel in more than one jurisdiction. A lawyer Russia-qualified team is needed to manage the Government Commission application, Russian corporate steps, tax filings, and any Arbitrazh court proceedings. A law firm with international sanctions and trade expertise – ideally one with experience of both the Russian regulatory framework and the EU and UK sanctions regimes – is needed to manage the parallel compliance obligations and to coordinate the overall transaction.

The Arbitrazh court system in Russia, including the Arbitrazh court of the Moscow Region with its new jurisdiction under Article 20.1 and the Supreme Court of Russia as the ultimate appellate instance, operates under the Arbitrazh Procedure Code of the Russian Federation (APC RF). Foreign investors are parties to Russian court proceedings more frequently than might be assumed, and local procedural expertise is not a luxury in that context.

Ferraz & Whitmore coordinates cross-border matters involving Russian, EU and UK legal and regulatory issues and works with vetted local counsel networks where Russian-qualified representation is required. To discuss how we can assist with your exit process, please reach out to info@ferrazwhitmore.com or visit 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.