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International Investment Treaties of the Russian Federation: Brief Overview

International Investment Treaties of the Russian Federation: Brief Overview

The paper provides a review of the bilateral investment treaties concluded by the Russian Federation on promotion and reciprocal protection of investments (bilateral investment treaties, bilateral investment agreements, BITs) and containing investment protection provisions (multilateral investment treaties, multilateral investment agreements).

It offers insights into the dynamics of how Russia concludes investment agreements, the states, with which they are concluded, and their main provisions.

In several instances, it is indicated how the relevant matters are regulated by the Regulation on the Conclusion of International Treaties of the Russian Federation on the Promotion and Protection of Investments approved by the Resolution of the Government of the Russian Federation No. 992 of 30 September 2016 (Model Regulation), which contains recommendations for state authorities when negotiating with foreign states on the content of investment agreements.

The results are derived from and were calculated based on the total number of investment treaties in force, terminated, and not in force to which the Russian Federation is or was a party.

The information provided is relevant as of April 2024.

From Soviet times to the present day, the Russian Federation (USSR) has signed 84 bilateral and multilateral investment treaties.

As of April 2024, 64 bilateral and 3 multilateral treaties are in effect.

19 treaties did not enter into force (4 of them were ratified by the Russian Federation), 3 treaties were replaced by new ones (1 treaty replaced a previously effective treaty), 1 treaty was denounced.

Under bilateral treaties, the Russian Federation has agreed on investment protection with 81 states, 78 of which are UN members.

The geography of countries with which Russia has concluded bilateral investment treaties covers most sub-regional groups (in accordance with the United Nations geoscheme) and includes Northern Europe, Western Europe, Southern Europe, Eastern Europe, Western Asia, Central Asia, South Asia, East Asia, South-East Asia, North America, Latin America and the Caribbean, North Africa, West Africa, East Africa, and South Africa.

The majority of treaties are concluded with developing and developed countries – 39 and 34 states respectively.

Most of the investment treaties of the Russian Federation (USSR) were concluded in 1989–1999 (53 treaties).

From 2000 to 2010, 22 of such treaties were signed, from 2011 to 2021 – 13, from 2022 to 2024 – 1 treaty.

Investment treaties are mostly concluded for a fixed initial term, after which they are automatically renewed for different periods of time or indefinitely.

The provision for an initial validity term of 10 years is contained in 27 treaties, 15 years – in 55 treaties, 20 years – in 1 treaty (with Sweden).

No expiration date is specified in six treaties, one of which provides for denunciation upon notice of termination by either party.

Many of Russia’s investment treaties are retroactive: 71 treaties (68 bilateral and 3 multilateral) apply to investments made both after and before the date of entry into force of the treaty.

Twelve Russian investment treaties apply only to investments made after the treaty enters into force.

The so-called sunset clause is found in 87 investment treaties. It states that the investment protection provisions will remain in force for a certain period after the termination of the treaty (usually 15 or 10 years) in respect of investments made prior to the date of termination and existing at that date.

Typically, investment agreements contain combinations of the following guarantees to facilitate and protect investments: national treatment, most-favored-nation treatment, fair and equitable treatment, full protection and security, prohibition of discrimination, expropriation guarantees, compensation for damages, transfer of funds, and umbrella clause.

The content of investment treaties in terms of these guarantees varies.

For example, the bilateral investment treaty between Russia and Armenia is notable for containing the least number of the above-mentioned guarantees among all treaties of the Russian Federation (only four out of nine: full protection and security, expropriation guarantees, compensation of damages, and transfer of funds).

All nine guarantees are contained in the treaties with France, the USA (did not enter into force), Denmark, Slovakia, Kuwait, Sweden, Italy, Japan, and China.

All agreements involving Russia include provisions prohibiting unlawful expropriation. Most of these treaties regulate both direct and indirect expropriation, and only two treaties (with Finland and Austria) do not regulate cases equal to expropriation in terms of consequences. Transfer of funds guarantees are also found in all treaties.

Eighty-eight agreements contain most-favored-nation treatment; full protection and security provisions are found in 86 treaties.

According to publicly available data, foreign investors in known disputes against the Russian Federation under international investment agreements most frequently refer to expropriation (20 disputes) and violation of fair and equitable treatment (10 disputes).

In turn, Russian investors in known disputes with other states on the basis of investment agreements of the Russian Federation mainly refer to the violation of fair and equitable treatment (11 disputes) and discrimination (7 disputes).

Only a small number of Russia’s international investment treaties contain a reference to the applicable substantive law.

Thus, five bilateral treaties (with Belgium/Luxembourg, Austria, Spain, Italy, and China) stipulate that the provisions of the investment agreement itself and principles of international law serve as the applicable law. Four out of five treaties (with Belgium/Luxembourg, Austria, Spain, Italy, and China) also specify that arbitrators may rule on the basis of the domestic law of the recipient state.

Investment treaties with the participation of Russia provide an opportunity to use various mechanisms to resolve disputes between the investor and the state.

All treaties provide for arbitration, either as an exclusive method of dispute resolution (19 treaties) or as an alternative to a state court (70 treaties).

Ad hoc arbitration under the UNCITRAL Arbitration Rules is mentioned in the treaties most often (it is found in all the international treaties reviewed as at least one of the options).

Thirty-seven treaties (33 bilateral and 4 multilateral) allow for dispute settlement before the International Centre for Settlement of Investment Disputes (ICSID) and/or under the ICSID Supplementary Rules.

In addition, 22 treaties (21 bilateral and 1 multilateral) mention the Arbitration Institute of the Stockholm Chamber of Commerce as a forum for dispute settlement.

As a rule, recourse to arbitration or court is possible only after an attempt to settle the dispute amicably. Most treaties involving the Russian Federation (81) provide for a six-month period (cooling-off period) for making such an attempt.

Negotiations are the most commonly envisioned method of preliminary dispute settlement: they are found in 65 treaties (61 bilateral and 4 multilateral).

The treaties also provide for the possibility of the parties to settle the dispute through consultations, which are available in nine bilateral treaties (in seven treaties – along with negotiations).

Twenty-one treaties do not specify a particular method of dispute settlement – only a requirement to try to resolve differences amicably.

In addition, the treaties with China and the UAE contain a reference to administrative procedure as a method of pre-trial/pre-arbitration settlement.

Out of all 89 international investment treaties of the Russian Federation, it is known that dispute settlement procedures have been initiated under 20 of them (17 bilateral and 3 multilateral).

According to publicly available information, there were 54 disputes, with the Russian Federation listed as a respondent in 28 of them.

List of Investment Treaties with the Participation of the Russian Federation see in the attached file.

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