Update: Russia Introduces Ban Restricting Ability of Investors to Exit from Russian Investments in Certain Industries

Morgan Lewis

Russian President Vladimir Putin issued a decree imposing an overall ban on transactions with certain assets, such as securities in certain Russian companies and interests in certain Russian investment projects, if these securities and interests are owned by persons from the so-called "unfriendly states" or persons controlled by such. Assets include shares in certain Russian major entities, energy and subsoil companies and projects, and Russian banks. The new ban restricts the ability of investors to exit from their Russian investments or to restructure their Russian holdings without specific permission of the Russian president. 

This ban is in addition to several existing restrictions issued as part of the Russian counter-sanctions measures.

Decree No. 520, "On Application of Special Economic Measures in Financial and Fuel and Energy Sectors in Connection with Unfriendly Actions of Certain Foreign States and International Organizations" (the Decree), took effect immediately upon its publication on August 5.


The Decree generally prohibits any transaction (operation) resulting, directly and/or indirectly, in acquisition, modification, termination, or creation of any encumbrance over the rights to own, use, or dispose of:

  1. securities issued by Russian legal entities;
  2. participation interests in the charter (share) capitals of Russian legal entities; and
  3. participations interests, rights and obligations held by parties to production sharing agreements, joint operating agreements, or other agreements under which investment projects are implemented in Russia.

The Decree applies if the above assets are owned by non-Russian persons connected with the so-called unfriendly states or by persons who are under control of such.

The prohibition is effective until December 31, 2022, and may be extended further by the Russian president numerous times.

The Decree directs that any transaction (operation) executed in violation of the prohibition is null and void. An owner of an asset which was the subject matter of such transaction must be denied of all its rights whether under Russian law, an agreement, or other legal arrangement.


Despite the general prohibition, the Decree specifies that it only applies to shares and interests in specific companies and projects. In particular, the Decree is stated to apply to:

  1. Shares in the so-called “strategic stock companies” listed in Presidential Decree No. 1009 dated August 4, 2004, "On Approval of the List of Strategic Enterprises and Strategic Stock Companies". The list currently includes more than 40 stock companies including Gazprom, Rosneft, Transneft, Zarubezhneft, Rosneftegaz, VTB Bank, Promsvyazbank, Alrosa, Aeroflot, Sheremetyevo International Airport, Russian Railways, Sovcomflot, Rosseti, RysHydro, Inter RAO, Federal Grid Company of Unified Energy System, and United Grain Company.
  2. Shares (participation interests) in entities in which the above strategic stock companies own any shares (participation interests), directly or indirectly.
  3. Participation interests, rights, and obligations of the participants in the following production sharing agreements (PSA):
    1. Sakhalin-1 PSA (Chayvo, Odoptu, and Arkutun-Dagi oil and gas condensate fields)
    2. Kharyaga PSA (Kharyaginskoye oil field).
  4. Shares (participation interests) in entities which:
    1. produce equipment for organizations operating in the fuel and energy sector and provide service maintenance for and repair such equipment,
    2. generate and supply heat and/or electrical energy, or
    3. refine oil or feedstock and produce refined products.

    The list of such entities is yet to be approved by the president, based on the proposal to come from the Russian government by August 15, 2022.

  5. Shares (participation interests) in Russian credit organizations (e.g., banks). The list of such credit organizations is yet to be approved by the president, based on the proposal to come from the Russian government and the Russian Central Bank by August 15, 2022.
  6. Shares (participation interests) in entities which are users of subsoil blocks which are:
    1. located in Russia:
      1. have hydrocarbon deposits containing at least 20 mln tons of oil, 20 bln cubic meters of natural gas or 35 mln tons of coal, or deposits of uranium, high-purity raw quartz deposits, yttria group of rare earths, nickel, cobalt, tantalum, niobium, beryllium, or copper
      2. primary diamond, gold, lithium, or platinum group metal deposits
    2. located in the inland sea waters, territorial waters or on the continental shelf of Russia.

Given the actual scope, it remains to be seen yet whether the Decree would be extended to apply to other types of securities or other companies or investment projects implemented in Russia.


The Decree directly states that the Russian president can specifically approve any otherwise prohibited transaction.


The Decree contains two limited exemptions from the new prohibition for transactions (operations) executed pursuant to:

  1. President Decree No. 416, dated June 30, 2022, "On Application of Special Economic Measures in the Fuel and Energy Sector in Connection with Unfriendly Actions of Certain Foreign States and International Organizations", which regulates changing the operator under Sakhalin-2 PSA to a Russian entity and other related matters.
  2. Federal Law No. 320-FZ dated July 14, 2022, "On Amendment of Federal Law ‘On Privatization of State and Municipal Property’, Certain Legal Acts of the Russian Federation and On Regulatory Considerations of Property Relations", which relates to certain privatization transactions and transactions associated with mandatory conversion of a foreign company branch or representative office into a Russian entity in certain cases.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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