State Duma Drafts Amendments to Facilitate Return of Foreign Companies to Russian Market

1.      Conditions for repurchase of assets

According to the official statement in the press the State Duma Committee on Property, Land and Property Relations supported for a bill, which introduces special conditions for the repurchase of assets by companies from unfriendly countries. This draft law is being prepared as part of the fulfilment of instructions from the President of Russia.

Russian owners will be able to refuse to exercise an option to buy back assets if the investor is related to an unfriendly state, the transaction was concluded after the 24 of February 2022 and the option provides for an understated price in comparison with the current market value. An additional condition will be the proper fulfilment by the Russian subsidiary of its obligations to its employees and creditors.

If a Russian asset owner refuses to make it possible for a foreign investor to buy back its assets, the latter has the right to demand compensation within one year from the date of such a refusal. The amount of the compensation may be reduced down to zero if in the course of the sale of assets, the foreign investor unfairly fulfilled its corporate duties or interfered with the management of Russian enterprises.

The competent authorities will be able to prohibit the buyback of assets by foreign investors if the activities of Russian enterprises have a significant impact on the social and economic development of the country.

Special rules are established for economically significant enterprises regarding direct ownership of shares and participation interest therein. In addition, the draft law provides for restrictions on unilateral changes to public private and municipal private partnership agreements to protect the public partner in the event the private partner tries to abuse the right and revise the terms of the agreement in its favour.

Unfortunately, it is not yet known whether the draft law will include transitional provisions affecting option agreements previously concluded, including those whose terms were approved by the Government Commission for Control over Foreign Investment in the Russian Federation.

2.     Protection of trademarks

On the 21 of May the State Duma Committee on Industry and Trade submitted for preliminary consideration a draft law providing for a number of significant amendments to the Federal Law “On the Basics of State Regulation of Trade Activities in the Russian Federation” to monitor foreign companies that ceased their operations for foreign policy reasons but use means of individualisation in the territory of Russia.

The draft law provides for the maintenance by the Russian Government of a special Register of Trademarks and Commercial Designations of Foreign Companies which have ceased operations for foreign policy reasons. The Register may include means of individualisation if two conditions are met:

• a person, which was carrying out commercial activities using means of individualisation in the territory of Russia, ceased its activities due to the imposition of restrictive measures by an “unfriendly” foreign state;
• the means of individualisation were used in the territory of Russia at the time of the imposition of foreign restrictions, or on the 24 of February 2022.

The decision to include means of individualisation in the Register is taken by a multy-agency commission upon the proposal of the Ministry of Industry and Trade and the Chamber of Commerce and Industry.

The consequences of inclusion in the Register of means of individualisation aimed at preventing unfair competition and protecting Russian manufacturers will be additionally established by legislation.

The draft law provides for the impossibility of legal or administrative withdrawal from the Register. The only basis for excluding means of individualisation from the Register is the exclusion of an “unfriendly” foreign state from the official list of foreign states and territories committing unfriendly actions against the Russian Federation.