Russian State Duma restricts foreign participation in investment protection agreements

MOSCOW. Nov 27 (Interfax) - Russia's State Duma has passed a bill in the second and third readings that will bar Russian companies from getting state support under capital investment protection and promotion agreements (IPPA) if they are more than 25% foreign-owned and excludes arbitration as a method of dispute resolution under IPPAs.

The bill (No. 555713-8) was submitted to parliament by a group of MPs in February and was significantly revised for its second reading.

Under the passed bill, state support measures available under IPPAs will not be provided to Russian legal entities in which foreign legal entities (including those registered in countries or territories included in the Finance Ministry's list of offshore territories) directly or indirectly own, in total, a stake of more than 25%. This provision will apply to legal relations arising from IPPAs signed before the date that this law goes into force, which will be July 1, 2025.

"It is important to create stable conditions in the implementation of investment projects that ensure jobs, the sovereignty of our economy and its technological development," one of the authors of the amendments, MP Stanislav Naumov said in the parliamentary debate.

"The amendments provide for the consideration of expenses with minimal possible deviations up to 10%, the scale of state expert review narrows only for facilities for which there is planned compensation of expenses and the compensation itself is possible after the presentation of the conclusions of the Federal Treasury and process audit," Naumov said.

The passed bill also changes the dispute resolution mechanism under IPPAs and eliminates arbitration as a means of rights protection.