Protecting Against Russia’s Asset Seizures: Investment Treaties May Provide a Remedy for Foreign Investors

Report: Russian President Signs Decree Putting Shares of Danone Russia and Baltika Brewing Company Under Temporary Management

On Sunday, July 16, Russian President Vladimir Putin signed a decree putting shares of Danone Russia JSC, owned by French yogurt maker Danone, and of Baltika Brewing Company, owned by Danish brewer Carlsberg A/S, under “temporary management.”

The Kremlin has since reportedly appointed Yakub Zakriev, deputy prime minister and agriculture minister of Chechnya, as head of the Danone business.[1] Mr. Zakriev has been described as a close ally of Ramzan Kadyrov, the notorious leader of the Chechen Republic, and himself a close ally of President Putin.[2] Meanwhile, Taimuraz Bolloev, a longtime friend of Putin, has been installed as director of Carlsberg’s Baltika business.[3]

These recent seizures follow a decree Putin signed in April, laying the groundwork to expropriate, damage, or otherwise impair the investments of companies from “unfriendly” countries—including the U.S., UK, Canada, all EU member states, Japan, Singapore, and South Korea.[4] This is the second time Russia has used the decree to seize assets. Previously, Russia took control of utilities owned by Finland’s Fortum Oyj and Germany’s Uniper SE.[5]

These Russian actions demonstrate the significant risks for foreign companies that continue to operate in Russia and signal further potential asset seizures, including the possible transfer of foreign assets to regime-friendly owners. Russia’s measures appear to constitute uncompensated expropriations, for which investors could seek redress under Russia’s network of bilateral investment treaties (BITs).[6]

Key Protections in Russian BITs

Russia has BITs in force with over 60 countries, including many EU members (such as Austria, Belgium, Bulgaria, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Lithuania, Italy, Luxembourg, the Netherlands, Romania, Slovakia, Spain, and Sweden) and countries such as Canada, Japan, Korea, Switzerland, the UK, and Ukraine. There is no BIT between Russia and the United States, but U.S. companies may nonetheless benefit from BIT protection if they hold their investments in Russia through a third country that does have a Russian BIT.

In its BITs, Russia has committed to, among other things, treat investors from the relevant countries in a fair and equitable manner, not to discriminate against such investors on the basis of nationality, not to expropriate their investments except under certain conditions and upon payment of adequate compensation, and to guarantee their right to freely transfer payments related to their investments out of Russia. All of these protections are relevant in the present context.

Russia’s Retaliatory Measures in Breach of BIT Protections

Russian retaliatory measures may constitute breaches of core protections accorded to foreign investors under Russia’s BITs. For example:

• Russia’s seizure and/or transfer of the assets of foreign firms to regime-friendly owners may constitute an expropriation in breach of Russia’s treaty obligations.
• All of Russia’s retaliatory measures affecting companies or their investments in Russia based on their shareholders’ “unfriendly” nationality would appear to be in breach of Russia

  SDGs, Targets, and Indicators Analysis

  1. Which SDGs are addressed or connected to the issues highlighted in the article?

  • SDG 16: Peace, Justice, and Strong Institutions
  • SDG 17: Partnerships for the Goals

  The issues highlighted in the article are related to the actions of the Russian government in seizing assets of foreign companies. These actions raise concerns about justice, strong institutions, and the need for partnerships to address the situation.

  2. What specific targets under those SDGs can be identified based on the article’s content?

  • SDG 16.3: Promote the rule of law at the national and international levels and ensure equal access to justice for all.
  • SDG 17.17: Encourage and promote effective public, public-private, and civil society partnerships, building on the experience and resourcing strategies of partnerships.

  The article highlights the need for the rule of law and equal access to justice for foreign investors affected by Russia’s actions. It also emphasizes the importance of partnerships between governments and companies to address the situation.

  3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

  • Indicator for SDG 16.3: Number of countries with a functioning and independent national human rights institution in compliance with the Paris Principles.
  • Indicator for SDG 17.17: Amount of funding allocated to public-private partnerships in developing countries.

  The article does not explicitly mention indicators, but these indicators can be used to measure progress towards the identified targets. The presence of a functioning and independent national human rights institution and the allocation of funding to public-private partnerships can indicate progress in promoting the rule of law and partnerships for addressing the issues.

  Table: SDGs, Targets, and Indicators

  SDGs	Targets	Indicators
  SDG 16: Peace, Justice, and Strong Institutions	Promote the rule of law at the national and international levels and ensure equal access to justice for all.	Number of countries with a functioning and independent national human rights institution in compliance with the Paris Principles.
  SDG 17: Partnerships for the Goals	Encourage and promote effective public, public-private, and civil society partnerships, building on the experience and resourcing strategies of partnerships.	Amount of funding allocated to public-private partnerships in developing countries.

  Behold! This splendid article springs forth from the wellspring of knowledge, shaped by a wondrous proprietary AI technology that delved into a vast ocean of data, illuminating the path towards the Sustainable Development Goals. Remember that all rights are reserved by SDG Investors LLC, empowering us to champion progress together.

  Source: lexology.com

   

  

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