Regulation of inbound foreign investment

Government investment promotion programmes

Does the state have a foreign investment promotion programme?

There is no codified investment promotion programme as such. However, the importance of attracting foreign investments are upheld in the Resolution of the government of the Russian Federation dated 29 September 1994 No. 1108 ‘On Intensifying the Attraction of Foreign Investments in the Economy of the Russian Federation’. The Resolution highlights that the work of federal executive bodies concerning the attraction of foreign investments into the economy of Russia is of primary importance.

Pursuant to this Resolution, the Advisory Council for Foreign Investments was established. The Advisory Council is based on a direct dialogue between the heads of investor companies and the Russian government with a focus on creating a favourable investment climate in the country.

Further, in 2014 the Russian government in Resolution No. 316 introduced the state programme on ‘Economic Development and Innovative Economy’. The programme pays much attention to foreign investment. The recent amendments to the programme in 2020 and 2021 indicated the need to facilitate the attraction and activities of foreign investors in Russia, to improve the investment climate for foreign investors. The programme puts a lot of effort into interaction with foreign companies and foreign authorities in terms of intensifying bilateral investment cooperation and support of investment projects as well as for creation of favourable tax conditions for the growth of investments.

Applicable domestic laws

Identify the domestic laws that apply to foreign investors and foreign investment, including any requirements of admission or registration of investments.

The central domestic law that governs foreign investments is the Federal Law dated 9 July 1999 No. 160-FZ ‘On Foreign Investments in the Russian Federation’ (the Law on Foreign Investments). It guarantees foreign investors the right to invest and to receive revenues and profits from such investments and sets forth the general terms for foreign investors’ business activities in Russia.

To be more specific, the Law on Foreign Investments establishes a number of principles and guarantees such as: the legal treatment of foreign investors may not be less favourable than that of domestic investors and that the property of a foreign investor shall not be subject to compulsory seizure, including nationalisation except in cases and on the grounds established by federal law or an international treaty.

Apart from the Law on Foreign Investments, there is a Federal Law dated 25 February 1999 No. 39-FZ ‘On investment activities in the Russian Federation carried out in the form of capital investments’. Generally, this Law determines the legal and economic foundations of investment activities carried out in the form of capital investments in Russia and also establishes guarantees of equal protection of the rights, interests and property of subjects of investment activities carried out in the form of capital investments, regardless of the form of ownership.

Recently, in 2020, the Federal Law dated 1 April 2020 No. 69-FZ ‘On the Protection and Encouragement of Investment in the Russian Federation’ (the Law on Protection of Investments) was adopted. The Law provides that Russian companies implementing investment projects in Russia (including foreign-owned companies) may enter into agreements for the promotion and protection of investments with Russia or its constituent entities. In exchange for the company’s commitment to invest over a certain threshold, the legal and regulatory regime applicable to such companies may be stabilised, including in respect of taxes, customs duties and certain regulatory matters.

Relevant regulatory agency

Identify the state agency that regulates and promotes inbound foreign investment.

Under article 23 of the Law on Foreign Investments and article 4 of the Law on Protection of Investments the government of Russia performs a number of functions in this regard. In particular, it controls foreign investors, determines which investment projects should have a priority, develops and fulfils federal programmes aimed at attraction of foreign investments.

The Ministry of Economic Development also performs several functions related to foreign investments, in particular, coordination of federal public bodies aimed at attraction of foreign direct investments, cooperation with international organisations and work under federal investment programmes as well as under long-term grant programmes.

Relevant dispute agency

Identify the state agency that must be served with process in a dispute with a foreign investor.

No particular state body is stipulated by the applicable Russian law.

In practice, the following state bodies are usually served with the notices of an investment dispute:

  • the Ministry of Foreign Affairs;
  • the Ministry of Justice;
  • the Ministry of Economic Development;
  • the Ministry of Finance;
  • the Administration of the President; and
  • the Prosecutor General’s Office.