The Federal Law of July 9, 1999 ¹ 160-FZ
“On Foreign Investment in the Russian Federation”.

Approved by the State Duma on June 25, 1999
Approved by the Federation Council on July 2, 1999

     The present Federal Law determines the principal guarantees of foreign investors’rights to investment, and revenues and profits gained therefrom, terms of business activity of foreign investors on the territory of the Russian Federation.
     The present Federal Law is aimed at involving and efficient application in the economy of the Russian Federation of foreign material and financial resources, advanced machinery and technology, management skills, ensuring stable terms for operations of foreign investors and compliance of the legal order of foreign investment with the standards of the international law and international practice of investment cooperation.

     Article 1. Relations governed by the present Federal Law and its application scope.

1.  The present Federal Law governs the relations connected with state guarantees of foreign investors’ rights in the course of their investing on the territory of the Russian Federation.
2. The present Federal Law does not apply to relations connected with deposits of foreign capital in banks and other credit institutions and insurance organizations, which are subject to the legislation of the Russian Federation on banks and banking business and legislation of the Russian Federation on insurance,receptively.
3.  Nor does the present Federal Law apply to relations with investment of foreign capital into non-commercial organizations in order to achieve some socially useful purpose, including educational, charitable, scientific or religious purposes, which are subject to the legislation of the Russian Federation on non-commercial organizations.

     Article 2. Basic terms used in the present Federal Law.

     For the purpose of the present Federal Law, the following terms are used:
     Foreign investor is a foreign legal entity, the civil code of which shall be determined in accordance with the legislation of the state in which it was established and in accordance with the legislation of the said foreign state may invest within the Russian Federation; a foreign organization not being a legal entity the civil capacity of which shall be determined in accordance with the legislation of the state in which it was established and which, in accordance with the legislation of the said foreign state, may invest in the Russian Federation; a foreign citizen whose civil capacity and legal capacity shall be determined in accordance with the legislation of the state he is a citizen of and who, in accordance with the legislation of said foreign state, may invest within the Russian Federation; a person having no citizenship who is permanently residing outside the Russian Federation, whose civil capacity and legal capacity shall be determined in accordance with the legislation of the state he is a permanent resident of and who, in accordance with the legislation of said foreign state may invest within the Russian Federation; an international organization who may invest in the Russian Federation in accordance with an international treaty of the Russian Federation; foreign states in accordance with the terms determined by federal laws;
     Foreign investment is an investment of foreign capital into a business entity within the Russian Federation in form of civil right objects belonging to the foreign investor unless such civil right objects are exempt or restricted in use in the Russian Federation, including money, securities (whether in foreign currency or in the currency of the Russian Federation), other property, property rights, exclusive rights to results of intellectual activity having monetary value (intellectual property), as well as services and information;
     Foreign direct investment is acquisition by a foreign investor of a share at least 10%, shares (contribution) in the authorized (stock) capital of a business entity established or being established within the Russian Federation in form of a business partnership or a company in accordance with the civil legislation of the Russian Federation; investment of capital into fixed assets of a branch of the foreign legal entity being established within the Russian Federation by a foreign investor as a lessor of a financial rent (leasing) of an equipment stated at issues XVI and XVII of the Invoice Nomenclature on external economic activity of CIS countries in customs cost no less than 1 million roubles;
     Investment project is a rationalization of feasibility, volume, and term of performing foreign direct investment, including contract documents developed according to standards provided by the legislation of the Russian Federation;
     Priority investment project is an investment project with a total amount of foreign investment should be at least 1 billion roubles (no less than equivalent amount in a foreign currency at the rate of the Central Bank of the RF for the date of adoption of the present Federal Law), or an investment project with a minimum share (contribution) of foreign investors in the authorized (stock) capital of a commercial organization with foreign investment should be at least 100 million roubles (no less than equivalent amount in a foreign currency at the rate of the Central Bank of the RF for the date of adoption of the present Federal Law), included with a list of priority investment project being approved by the Government of the Russian Federation.
     Investment project payback time is the time from the date when the financing of the investment begins until the date when the difference between the accrued net profit amount with depreciation assignments and the amount of investment costs of the business entity with foreign investment, or a branch of a foreign legal entity, or a lessor under a contract of financial renting (leasing) becomes positive.
     Reinvestment is making capital investment into business objects on the territory of the Russian Federation at the expense of revenues or profits of a foreign investor or a business entity with foreign investment which were gained by them from foreign investment.
     Aggregate tax burden is the rated total amount of money due to be paid as customs duties (excluding customs duties caused by using measures on protection of economic interests of the RF in the course of fulfilling foreign trade in order to ensure the basis of the constitutional regime, morality, health, rights, and legal interests of other persons, country’s defense and state security.

     Article 3. Legal regulation of foreign investment within the Russian Federation.

1.  The legal regulation of the foreign investment within the territory of the Russian Federation is performed by the present federal Law, other federal laws, and other legal regulations of the Russian Federation, and international treaties of the Russian Federation.
2.  The subjects of the Russian Federation may pass laws and other legal regulations governing foreign investment in matters within their authority and within joint authority of the Russian federation and the subjects of the Russian Federation according to the present Federal Law and other federal laws.

     Article 4. Legal treatment of activities of foreign investors and business entities with foreign investment.

1.  Legal treatment terms of activities of foreign investors and use of profit gained from investment must not be less favorable than the legal treatment of activities and use of profit gained from investment that are accorded to Russian investors, with exclusions established by federal laws.
2.  The exclusions of restrictive kind for foreign investors may be established by federal laws only as far as this may be necessary in order to protect the principals of constitutional system, morality, health, rights, and legal interests of other persons, ensuring the country’s defense and state security. Exemptions of stimulating kind on the form of preferences for foreign investors may be established for the purpose of social and economic development of the Russian Federation. The types of preferences and terms of granting the same shall be established by the Russian Federation legislation.
3.  A branch of a foreign legal entity, established within the Russian Federation, shall perform some or all functions, including those of a representative office, on behalf of the foreign legal entity that has established it (hereinafter referred to as ‘the parent entity”) provided that the establishment purposes and the business of the parent entity have commercial character and the parent entity bears immediate property accountability for obligations undertaken by the same in relation to performance of the said business within the Russian Federation.
4.  Subsidiary and dependent companies of a business entity with foreign investment shall not enjoy the legal protection, guarantees, and preferences established by the present Federal Law when performing their business activities on the territory of the Russian Federation.
5.  A foreign investor, a business entity with foreign investment established on the Russian Federation territory, in which a foreign investor(s) hold(s) at least 10% of a share, shares (contribution) in the authorized (stock) capital of such entity shall fully enjoy the legal protection, guarantees, and preferences established by the present Federal Law when reinvesting.
6.  A Russian commercial organization shall receive the status of a commercial organization with foreign investment from the date when a foreign investor joins its members. Starting from that date, the business entity with foreign investment and the foreign investor shall enjoy the legal protection, guarantees, and preferences established by the present Federal Law.
     A business entity loses the status of the business entity with foreign investment from the date when a foreign investor retires from its members (and, when there are several foreign investors in such entity, then when all foreign investors leave such entity). Starting from that date, the business entity with foreign investment and the foreign investor shall lose legal protection, guarantees, and preferences established by the present Federal Law.

     Article 5. Guarantee of legal protection of foreign investor’s business on the territory of the Russian Federation.

1.  A foreign investor on the territory of the Russian Federation shall be granted full and unconditional protection of rights and interests provided by the present Federal law, other federal laws and other legal regulations of the Russian Federation as well as treaties of the Russian Federation.
2.  A foreign investor shall be also entitled to be indemnified for any damages incurred by him due to illegal actions (failure to act) of state authorities, local administration authorities or officers of such authorities in accordance with the civil legislation of the Russian Federation.

     Article 6. Guarantee of exercising various forms of investing by a foreign investor on the territory of the Russian Federation.

     A foreign investor may invest in the territory of Russian Federation in any forms not prohibited by the legislation of the Russian Federation.
     Evaluation of the capital contributed to authorized capital (stock capital) of a business entity with foreign investment shall be performed according to market prices in accordance with the legislation in force of the Russian Federation.
     The capital investment evaluation shall be made in the currency of the Russian Federation.

     Article 7. Guarantee of transfer of foreign investor’s rights and liabilities to a third party.

1.   A foreign investor may transfer his rights (assign claims) and liabilities (transfer a debt) under a contract, and shall be obliged transfer his rights (assign claims) and liabilities (transfer a debt) to a third party according to a law or a court order in accordance with the civil legislation of the Russian Federation.
2.   If a foreign state or a state authority authorized by the former pay in favor of the foreign investor under a guarantee (insurance contract) granted to the foreign investor in respect to his investment made on the territory of the Russian Federation, and the rights (claims) to such investment of the foreign investor are transferred to that foreign state of a state authority authorized by the same, then such transfer of rights (assignment of claims) shall be deemed in the Russian Federation.

      Article 8. Guarantee of reimbursement in case of nationalization and requisition of the property of a foreign investor or a business entity with foreign investment.

1.   The property of a foreign investor or a business entity with foreign investment shall not be subject to seizure, including nationalization, requisition, except for the cases and reasons determined by a federal law or international treaty of the Russian Federation.
2.   In case of requisition, the foreign investor or the business entity with foreign investment shall be repaid the price of the property being requisitioned. When the circumstances in connection with which the requisition was made terminate, the foreign investor or the business entity with foreign investment may judicially recover the return of the preserved property, but shall be obliged to return the reimbursement sum received by them with the losses from the property depreciation taken into account.
      In case of nationalization, the foreign investor or the business entity with foreign investment shall be repaid the price of the property being nationalized and other losses. The disputes concerning the reimbursement of losses shall be considered according to the order provided in article 10 of the present Federal Law.

      Article 9. Indemnity from legislation changes disadvantageous for a foreign investor.

1.   In the event of new federal laws and legal regulations of the Russian Federation come into effect which alter the amounts of imported customs duties (excluding customs duties aiming at introducing protective measures for economic interests of the Russian Federation while carrying out foreign trade according to the legislation of the Russian Federation), federal taxes (excluding excise tax, VAT on goods produced on the Russian Federation territory), and fees to the state non-budget foundations (excluding fees to the Pension Fund of the Russian Federation), or existing federal laws and legal regulations of the Russian Federation amended and modified so that the overall tax burden on activity of the foreign investor or the business entity with foreign investor on realization of priority investment projects increases, or the regime and restrictions in respect to foreign investment in the Russian Federation is established as compared with the overall tax burden and regime that existed in accordance with federal laws and legal regulations of the Russian Federation by the date when financing of the priority investment project at the expense of foreign investment began, then such new federal laws and legal regulations of the Russian Federation as well as amendments and modifications made to existing federal laws and legal regulations of the Russian Federation shall not be applied to the foreign investor and the business entity with foreign investment who are performing their priority investment projects at the expense of direct foreign investment during the term specified in paragraph 2 of the present article, if goods, imported to the customs territory of the Russian Federation by the foreign investor and the business entity with foreign investment, are used according to the stated purposes of the investor for realization of priority investment projects.
      Conditions of the first paragraph of the present article apply to a business entity with foreign investment if a share, shares (contribution) of foreign investors in the authorized (stock) capital of such organization amounted to upwards of 25% as well as to a business entity with foreign investment, which is carrying out a priority investment project, irrespective of a share, shares (contribution) of foreign investors in the authorized (stock) capital of such organization.
2.   The stability of conditions and regime specified in paragraph 1 of the present article for foreign investors is ensured during the complete investment project payback period, but not exceeding seven years from the date when financing of the investment project at the expense of foreign investment began. Differentiation
of investment project payback periods depending upon their types shall be determined in the order established by the Government of the Russian Federation.
3.   On extraordinary occasions, when a foreign investor and a business entity with foreign investment implement priority investment project in the sphere of production or creation of transport infrastructure or other infrastructure with aggregate amount of foreign investment not below 1 billion roubles (not below equivalent sum in foreign currency at the rate of the Central Bank of the Russian Federation at the date of coming into effect of the present Federal Law) and payback exceeding seven years, the Government of the Russian Federation shall resolve that effectiveness of conditions and regime specified in paragraph 1 of the present article for said foreign investor and the business entity with foreign investment should be extended.
4.   The provisions of paragraph 1 of the present article does not cover any amendments and modifications made to legislative acts of the Russian Federation, or new federal laws and legal regulations of the Russian Federation being passed, are aimed at protecting the constitutional system, morality, health, rights, and legal interests of other persons, ensuring the country’s defense and state security.
5.   The Government of the Russian Federation shall:
      establish rating criteria for evaluating the changes in disadvantageous for the foreign investor and business entity with foreign investment concerning the imported customs duties, federal taxes, and fees to state non-budget funs, as well as regime of bans and restrictions in respect to foreign investment on the territory of the Russian Federation;
      approve a procedure of registration of the priority investment projects by a federal body of executive authority specifies in article 24 of the present Federal Law;
      monitor execution of commitments on realization of priority investment projects, taken by a foreign investor and business entity with foreign investment, in term specified in paragraphs 2 and 3 of the present article.
      If a foreign investor and a business entity with foreign investment do not fulfill obligations, specified in the first part of the present paragraph, they will deprive of the preferences given according to the present article. A sum of cash resources which was not paid according to the preferences stated, should be repaid on the basis of the legislation established by the Russian Federation.

     Article 10. Insurance guarantee of due consideration of a dispute arisen in connection with performance of investment and business activity on the territory of the Russian Federation by a foreign investor.

      A dispute by a foreign investor arisen in connection with performance of investment and business activity on the territory of the Russian Federation by a foreign investor shall be considered in accordance with international treatment of the Russian federation and federal laws in a court or arbitration tribunal, or in an international court of arbitration (court of mediation).

     Article 11. Guarantee of using the revenues, profits and other legally acquired money sums on the territory of the Russian Federation and exporting the same from the Russian Federation.

     On returning any taxes and levies provided by the legislation of the Russian Federation, a foreign investor shall have a right to freely use the revenues and profits on the territory of the Russian Federation for reinvesting with due observance of provisions specified in paragraph 2, article 4, of the present Federal Law, or any other purpose not contradicting the legislation of the Russian Federation, as well as the right to export without hindrance any revenues, profits, and other legally acquired money sums in foreign currency from the Russian Federation in connection to investment previously made by the same, including:
      revenues from investment received as profits, dividends, interest, and other incomes;
      money sums as fulfillment of obligations under contracts and other deals of a business entity with foreign investment or a foreign legal entity that has opened its branch on the territory of the Russian Federation;
      money sums received by a foreign investor in connection with liquidation of a business entity with foreign investment or a branch of a foreign legal entity, or alienation of invested property, property rights, and exclusive rights to results of intellectual work;
      compensations provided by article 8 of the present Federal Law.

     Article 12. Guarantee of a foreign investor’s right to export from the Russian Federation without hindrance property and information in documentary form or as records on a magnetic medium if they were initially brought into the Russian Federation as a foreign investment.

     A foreign investor who has initially brought into the Russian federation property and information in documentary form or as records on a magnetic medium as a foreign investment shall have the right to export the said property and information from the Russian Federation without hindrance (without allocating, licensing, and application of other measures of non-tariff foreign trade regulation).

     Article 13. Guarantee of foreign investor’s right to acquire securities.

     A foreign investor may acquire stock and other securities of Russian business entities and state securities in accordance with legislation of the Russian Federation on securities.

     Article 14. Guarantee of foreign investor’s participation in privatization.

     A foreign investor may participate in privatization of objects of state-owned and municipal property by means of acquiring ownership to state-owned and municipal property or part(s) and shares in the authorized capital (stock) capital of an entity being privatized under the terms and conditions provided by the legislation of the Russian Federation on privatization of state-owned and municipal property.

     Article 15. Guarantee of providing foreign investor with a right to land, other natural resources, buildings, structures, and other immovable property.

     Acquisition of a right to land, other natural resources, buildings, structures, and other immovable property by a foreign investor shall take place in accordance with the legislation of the Russian Federation and legislation of subjects of the Russian Federation.
     The tenant right to a land plot may be acquired by a business entity with foreign investment at a tender (auction, contest) unless the legislation of the Russian Federation provides otherwise.

     Article 16. Benefits granted to a foreign investor and a business entity with foreign investment in respect to payment of customs duties.

     Benefits in respect to payment of customs duties shall be granted to foreign investors and business entities with foreign investment when they implement a priority investment project in accordance with the customs legislation of the Russian Federation and legislation of the Russian Federation on taxes and duties.

     Article 17. Benefits and guarantees granted to a foreign investor by the subjects of the Russian Federation and local authorities.

     The subjects of the Russian Federation and local authorities within their competence may grant a foreign investor benefits and guarantees, perform financing and render other support forms for the investment project implemented by a foreign investor at the expense of budgets of subjects of the Russian Federation and local budgets, as well as non-budget funds.

     Article 18. Antimonopoly legislation of the Russian Federation and foreign investor’s adherence with fair competition.

     A foreign investor has to comply with antimonopoly legislation of the Russian Federation and keep from unfair competition and restrictive business practices, including creation of a business entity with foreign investment in the Russian Federation or a branch of a foreign legal entity for the purpose to produce some article being in tightly demand, and then self-liquidation in order to promote in the market an analogous article of foreign origin, and by means of malicious price-fixing arrangements, or market-sharing arrangements, or agreements on participation in tenders (auctions, contests).

     Article 19. Property Insurance by a business entity with foreign investment and by parent organization of a foreign legal entity’s branch.

     The property insurance of a risk of loss (destruction), property deficiency or damage, risk of civil responsibility and businessman’ risk shall be covered by a business entity with foreign investment at its own discretion, and by a branch of a foreign legal entity at discretion of its parent organization, unless the legislation of the Russian Federation provides otherwise.

     Article 20. Formation and liquidation of a business entity with foreign investment.

1.  Formation and liquidation of a commercial organization with foreign investment shall be performed under the terms and conditions provided by the Civil Code of the Russian Federation and other federal laws with exemptions which may be imposed by federal laws in accordance with paragraphs 2, article 4, of the present Federal Law.
2.  Legal entities being business organizations with foreign investment are subject to state registration according to Federal Law of state registration of legal entities.

     Article 21. Establishment and liquidation of the representative office of the foreign legal entity.

     A representative office of the foreign legal entity shall be established for the purpose to carry out activity performed by the parent company outside the territory of the Russian Federation. The representative office shall be liquidated in accordance with resolution of the foreign legal entity – the parent company.
     The state control over establishment, activity, and liquidation of the representative office of the foreign legal entity shall be performed through its accreditation in the order determined by the Government of the Russian Federation.
     The Federal executive body said in the article 24 of the present Federal Law shall perform accreditation of the representative office of the foreign legal entity.
Accreditation of the foreign legal entity’s representative office may be rejected in order to protect interests of the constitution, morality, health, right, and legal interests of other people, in order to provide defense of the country and state safety.

     Article 22. Requirements to the regulation on the representative office of the foreign legal entity.

1.  The parent organization shall submit to the federal executive body said in the article 24 of the present Federal Law a regulation on the representative office of the foreign legal entity and other documents, list of which and requirements to the content of which taking into account paragraphs 2 and 3 of the present article shall be adopted by the Government of the Russian Federation.
2.  The regulation on the representative office of the foreign legal entity shall contain the name of the representative office and the name of its parent organization, organizational and legal form of the parent organization, location of the representative office on the territory of the Russian Federation and the legal address of its parent organization, purposes of establishment and types of activity of the representative office, nature, amount and terms of capital investment into main funds of the representative office, the order of management for the representative office. The regulation on the representative office of the foreign legal entity may also include other information connected with peculiarities of act of the representative office of the foreign legal entity on the territory of the Russian Federation if they are not in contradiction to the legislation in force of the Russian Federation.
3.  Evaluation of the capital investment into the main funds of the representative office of the foreign legal entity shall be performed by the parent organization in accordance with the internal prices or in accordance with the international prices. Estimation of the capital investment shall be made in the currency of the Russian Federation. The amount of the price of the capital investment to the main funds of the foreign legal entity’s representative office shall be included into the regulation on the representative office of the foreign legal entity.
4.  The representative office of the foreign legal entity shall be entitled to carry out business activity on the territory of the Russian Federation since the date of its accreditation.
     The representative office of the foreign legal entity shall terminate its business activity on the territory of the Russian Federation since the date of cancellation of its accreditation.

     Article 23. Working out and realization of the state policy in the field of foreign investment.

     The Government of the Russian Federation shall work out and realize state policy in the field of the international investment cooperation in accordance with the federal constitution law “On the Government of the Russian Federation”.
     The Government of the Russian Federation shall:
     Determine advisability of implementation of restriction and limitations to perform foreign investment activity on the territory of the Russian Federation, shall work out bills of the list of the said restriction and limitations;
     Determine measures on control over activity of the foreign investors on the territory of the Russian Federation;
    Adopt the list of priority investment projects said in the article 2 of the present Federal Law;
    Work out and ensure realization of federal programs on attraction of foreign investment;
    Engage investment credits of the international financial organization and foreign countries in order to finance the Budget development of the Russian Federation and investment projects having federal importance;
    Perform cooperation with subjects of the Russian Federation in respect of the matters of the international investment cooperation;
    Perform control over preparation and making investment agreements with foreign investors on their realization of massive investment projects;
    Carry out control over preparation and signing investment agreements of the Russian Federation on encouragement and mutual protection for the investment.

     Article 24. The federal executive body on coordination of attraction of the foreign direct investment.

     The Government of the Russian Federation shall determine the federal executive body responsible for coordination of attraction of the foreign direct investment into economy of the Russian Federation.

     Article 25. Ackowledgement of validity termination of the previously adopted legislative acts of the Russian Federation and their separate regulations in connection with adoption of the present Federal Law.

     In connection with adoption of the present Federal Law to acknowledge as terminated its validity:
     The Law of the Russian Federation “On foreign investment in the RF” (Bulletin of the Council of the People’s Deputies and the Supreme Soviet of the RF, 1991, ¹ 29, article 1008);
     Decree of the Supreme Soviet of the RF “On implementation of the RF law “On foreign investment in the RF”” (Bulletin of the Council of the People’s Deputies and the Supreme Soviet of the RF, 1991, ¹ 29, article 1009);
     Article 6 of the federal Law “On making amendments and alternations to the legislative acts of the RF in connection with adoption of the RF law “On standardization”, “On provision of the measurement unity”, “On products and services certification” (legislation council of the Russian Federation, 1995, ¹ 26,
article 2397);
     Paragraph 4 of the article 1 of the Federal Law “On making amendments and alternations to the legislative acts of the RF in connection with adoption of the RF law “On arbitrage courts in the Russian Federation” and “On arbitration proceeding code of the Russian Federation” (Legislation council of the RF, 1997,
¹ 47, article 5341).

     Article 26. Adjustment of the normative legal acts of the Russian Federation to the present Federal Law.

1.  To advice the president of the RF and the Government of the RF to adjust their normative legal acts to the present Federal Law.
2.  In accordance with established procedure the Government of the Russian Federation shall make proposals on introducing in legislative acts of amendments and addenda following up the present Federal Law to the State Duma of the Federal Assembly of the Russian Federation.

     Article 27. Adjustment of the regulations of the foreign legal entities’ representative offices established on the territory of the Russian Federation to the present Federal Law.

     The parent organization, representative offices of which are established on the territory of the Russian Federation, shall prior to the present Federal Law coming into force:
     Adjust the regulations of the foreign legal entities’ representative offices to the present Federal Law within six months since the date of its coming into force;
     Carry out accreditation of the representative offices of the foreign legal entities within one year since the date of the present Federal Law coming into force.

     Article 28. The present Federal Law coming into force.

     The present Federal Law shall come into force since the date of its official publication.

The President of the Russian Federation

B.Yeltsin

Moscow, Kremlin
July 9, 1999
¹ 160-FZ