Cases of Forfeiture by the Russian Federation of Shares (Interests) in “Strategic” Companies Due to Non-Compliance with Federal Law No. 57-FZ dated April 29, 2008

In the last year and a half, a line of Russian court decisions has been actively developing on the forfeiture of shares (interests) of companies “strategic to national defense and state security”^[1] by the Russian Federation due to non-compliance by their shareholders (controlling persons) with the requirements of Federal Law No. 57-FZ dated April 29, 2008 “On the Procedure for Making Foreign Investments in Business Entities of Strategic Importance to National Defense and State Security” (hereinafter, “Law No. 57-FZ”). The development of this line of court decisions was reflected in the amendments to Law No. 57-FZ, which entered into force on May 9, 2023. According to the amendments, invalidity of void transactions (actions) executed by a foreign investor intentionally in violation of Law No. 57-FZ may result in direct forfeiture by the Russian Federation of shares (interests) of the “strategic” company and its fixed production assets, or income derived by the parties as a result of such transactions (actions).

In this overview, we present a selection of court cases related to the forfeiture of shares (interests) of “strategic” companies by the Russian state.^[2] The overview will be updated periodically as the relevant court practice develops.

[1]  I.e. engaging in one of the “strategic” activities listed in Law No. 57-FZ, such as nuclear waste handling, transport, and disposal; activities involving infectious agents (except for the cases when such activities are carried out by a company whose core business is related to food production); arms and military technology research and development, design and manufacturing; fishing and development of the continental shelf; aerospace industry; aviation security; cryptography and encryption services and dealing in encryption devices (except if such activity is carried out by banks in which the Russian Federation does not hold an interest); media and publishing, including television and radio broadcasting covering territories or population exceeding certain thresholds; subsoil use on specified subsoil plots of federal significance, etc.

[2]  The selection includes cases related to violation of Law No. 57-FZ. Cases related to violations of privatization, anti-corruption, and other laws, which resulted in the foreclosure of shares (interests) of companies by the state, are not considered in this overview.