Foreign Investments Safety Alert

Overview of Limitations of Foreign Investments and Consequences for Foreign Companies in Russia

Due to the significant changes of the investment climate in Russia, the Russian Government has introduced a number of extraordinary measures to prevent foreign investor and capital flight, some of them directly targeting multinationals operating in Russia.

On March 4, Russian First Deputy Prime Minister Andrey Belousov, responsible for foreign investment policy in the Government, outlined three options available to foreign investors:

1. Foreign companies should continue their business operations in Russia while securing supply of components and materials and fully complying with their obligations to employers.

2. Foreign companies should transfer ownership of their Russian assets to the management of their Russian partners and then, when the “political pressure” reduces, may look to return to the Russian market.

3. Should a company completely cease business in Russia, close its production facilities and lay off its employees, the Russian Government will consider such moves as equivalent to “premeditated bankruptcy”. Such bankruptcy constitutes a criminal offense in accordance with the Russian Criminal Code and could be punished by fine or imprisonment up to 6 years.

Accumulated FDI in Russia constitutes almost 700 billion USD (the majority originating from European Union countries), and their future in Russia represents a significant issue both for the Russian and European economies.

As part of our ongoing efforts to protect and support multinational investments in Russia, Kesarev has prepared a brief guide on the measures introduced by the government of Russia that affect operations of international companies in the country.

Information will be updated in response to major developments throughout the crisis, with the most recent information highlighted.

To access the full guide click here

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