Moscow, Russia

Russian Federation

The Federal Antimonopoly Service strengthens enforcement of foreign investments legislation

9 min read

Foreign public investors are prohibited from obtaining control over Strategic Entities, or acquiring more than 25 percent of a Strategic Entity’s property.

Established by the Russian government in 2008, the Government Commission on Control over Foreign Investments in the Russian Federation is responsible for the review of foreign direct investment applications. The Government Commission is headed by the Chairman of the Russian government and composed of the heads of certain ministries and other government bodies. Following the appointment of Mikhail Mishustin as the new Chairman of the government and formation of the new government in January 2020, the new composition of the Government Commission was approved in March 2020.

Although the final decision on the application is made by the Government Commission, all the preparatory work (such as reviewing an application's completeness and liaising with relevant government bodies) is done by the Federal Antimonopoly Service (FAS). Among other things, FAS performs a preliminary review of the application and prepares materials for a further assessment by the Government Commission.



An acquirer must file if the proposed acquisition would result in the acquirer's control over an entity engaged in activities of "strategic importance" to Russian national defense and security (a "Strategic Entity"). The acquirer is required to obtain the consent of the Government Commission prior to the acquisition of control over a Strategic Entity, or the transaction is declared void.

To apply for consent, the acquirer must submit an application to FAS with attachments, which include corporate charter documents of the acquirer and the target, information on their groups' structures (including the whole chain of control over both the acquirer and the target), transaction documents and a business plan for the development of the target after closing.



The Government Commission reviews transactions that result in acquisition of control over Strategic Entities. Foreign investors must also obtain the Government Commission's consent for certain transactions involving the acquisition of a Strategic Entity's property. 

The list of activities of "strategic importance" comprises 47 activities that, if engaged in by the target, cause the target to be considered a Strategic Entity. The 47 activities encompass areas related to natural resources, defense, media and monopolies. The activities include not only those directly related to the state defense and security (such as operations with nuclear materials, production of weapons and military machines), but also certain other indirectly related activities (such as TV and radio broadcasting over certain territories, extraction of water bioresources and publishing activities).

The criteria for determining control are rather wide and are lower (25 percent) for a target that is involved in the exploration of "subsoil blocks of federal importance," such as oil fields with a certain size of reserves, uranium mines, and subsoil blocks subject to exploration within a defense and security zone. 

Foreign public investors are prohibited from obtaining control over Strategic Entities, or acquiring more than 25 percent of a Strategic Entity's property, and must obtain consent of the Government Commission for acquisitions of the reduced stakes in Strategic Entities.

Certain transactions involving Strategic Entities or their property are exempt from the requirement to obtain the Government Commission's approval, such as transactions in which the acquirer is ultimately controlled by the Russian Federation, constituent entities of the Russian Federation or a Russian citizen who is a Russian tax resident and does not have any other citizenship, as well as certain "intra-group" transactions. 

Non-disclosing investors (those refusing to disclose to FAS information about their beneficiaries, beneficial owners and controlling persons) are subject to a special, stricter regime established for foreign public investors. In December 2018, the Russian government approved rules for disclosing this information, according to which a foreign investor planning to enter into a transaction involving a Strategic Entity must make a prior disclosure of its controlling entities, beneficiaries and beneficial owners in order to avoid being treated as a "non-disclosing" investor and to ensure that the stricter regime established for foreign public investors does not apply to it. The disclosure must be made either in the form of an application for approval, if approval is required, or in the form of an informational letter filed with FAS 30 days before the transaction.

According to FAS, this advance disclosure requirement extends to exempted transactions in which the acquirer is ultimately controlled by the Russian Federation, constituent entities of the Russian Federation or a Russian citizen who is a Russian tax resident, and is a prerequisite for the relevant exemption to be applicable. 

Amendments to Russia's foreign investment laws introduced in 2017 gave the Chairman of the Government Commission the right to decide that prior approval is required with respect to any transaction by any foreign investor with regard to any Russian company, if this is needed for the purpose of ensuring national defense and state security. Upon receipt of such a decision from the Government Commission, FAS will notify the foreign investor about the need to receive approval for a prospective transaction. Any transaction made in breach of this requirement is void. 

The structure of the types of transactions that could potentially fall under the requirements of this amendment is still being formed. FAS has confirmed that in practice this rule so far has been applied to very exclusive cases only. The recent practice, however, shows that FAS has been using this procedure more frequently, primarily referring for the Prime Minister's review those transactions that were filed as part of the regular merger procedure. Those transactions typically concerned acquisition of targets operating in sensitive spheres such as industrial gases and certain chemical products, including those for the pharmaceutical industry.



Generally, a review of the application assesses the transaction's impact on state defense and security. 

FAS initially requests opinions of the Ministry of Defense and the Federal Security Service as to whether the transaction poses any threat to the Russian defense and security. Additionally, if the target has a license for dealing with information constituting state secrecy, FAS requests information from the Interagency Committee for the State Secrecy Protection on the existence of an international treaty allowing a foreign investor to access information constituting state secrecy. 

Russian law does not provide more details on the review's scope or the criteria on which the transaction under review is assessed.



In 2019, FAS considered 29 applications by foreign investors, of which the Government Commission approved 24 and rejected five. The total value of approved transactions was approximately US$18.6 billion, of which the amount of foreign investments was approximately US$14 billion.



Early in a transaction, a foreign investor should analyze whether the target company qualifies as a Strategic Entity and whether the planned transaction triggers a requirement for the Government Commission's consent. In light of the recent amendments, acquirers should also analyze whether such consent would be needed in case the acquirer is qualified as a "non-disclosing" investor. Answering these questions will allow the investor to start filing preparations, and then to file its application sufficiently in advance to manage the filing's impact on the timing of the transaction. 

If the planned transaction does not require prior consent but consent would be needed if the acquirer is qualified as a "non-disclosing" investor, the acquirer must disclose to FAS information on the acquirer's beneficiaries, beneficial owners and controlling persons in advance, at least 30 days before the planned transaction.



The statutory period for reviewing the application is three months from the date of its acceptance for review. The Government Commission can extend the review period for an additional three months. In practice, the Government Commission uses this extension right for a large portion of applications pending review.



  • Russia's foreign investment laws were amended in 2020. Pursuant to the amendments, the foreign investor is deemed to exercise control over the Strategic Entity even if voting rights in shares belonging to the investor have been temporarily transferred to other entities under the pledge or trust management agreement, or repo contract or a similar arrangement. According to FAS, the amendments are aimed at the exclusion of possible ways of circumventing the existing foreign investments control rules by way of temporary transfer of voting rights in the Strategic Entity's shares. However, the amendments raise many questions (including what is meant by "temporary," and the effect of transferring voting rights to another foreign investor), so their practical implementation has yet to be clarified.
  • FAS has developed several other bills with suggested amendments to the foreign investments laws that have not yet been submitted to parliament, most of which are still being discussed at various levels, including with the business community and with other governing authorities. 
  • FAS continues to follow the general trend for strengthening control in the foreign investments sphere. In 2020, FAS has been quite active in courts filing claims to apply the consequences of voidness of transactions effectuated in breach of the foreign investments legislation, and to deprive foreign investors of their voting rights in relation to Strategic Entities, in cases where it is impossible to apply the consequences of voidness (for example, if control is indirect and was acquired abroad). Notable also is FAS's continuation of the extensive interpretation of strategic activity dubbed "exploration of subsoil blocks of federal importance." Following the adoption of the regulation back in 2008, only companies having a license for development of subsoil blocks of federal importance (oil fields with a certain size of reserves, uranium mines, and subsoil blocks subject to exploration within a defense and security zone) were considered Strategic Entities. Later on, while considering applications for approval of specific transactions, FAS established that drilling on subsoil blocks of federal importance, as well as provision of equipment for the purposes of exploration of subsoil blocks, are also considered "strategic" activities, so entities involved in these activities qualify as Strategic Entities. In one of the recent court cases, FAS established (and the Constitutional Court confirmed) that oilfield services in general, if provided on subsoil blocks of federal importance, are considered strategic activities, so entities providing such services to the entity holding the license for the development of the respective subsoil block are considered Strategic Entities.



  • Most transactions submitted to the Government Commission for review are approved. Such approval contains the term within which the acquisition must be completed. The acquirer can subsequently apply to the Government Commission with a substantiated request to extend this term, if necessary
  • The Government Commission can approve the transaction subject to certain obligations imposed on the foreign investor. Since 2016, the Strategic Investments Law allows the Government Commission to impose any type of obligation on the foreign investor. Those obligations may include the obligation to invest certain amounts of funds into activities of the Strategic Entity, or to process bioresources or natural resources extracted by the Strategic Entity on Russian territory



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