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]

In prior Covington alerts, we have discussed how foreign investors in Russia can protect their investments from Russian retaliatory measures by ensuring that they have access to international arbitration, including through BITs. We also have highlighted certain key protections available under BITs that may provide recourse to foreign investors affected by Russia’s recent measures. In this alert, we focus on those protections under Russian BITs of most direct relevance to foreign investors whose assets have been expropriated or that have had the management of that investment obstructed by Russia’s actions, present and future.

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’s obligation of non-discrimination, as well as Russia’s obligation to refrain from arbitrary, unfair, and inequitable treatment.
  • Russia’s measures may also violate the guarantee that protected foreign investors shall be able to remit the proceeds of their investment, including any proceeds resulting from a sale or liquidation.

Access to International Arbitration under Russia’s BITs

Russia’s BITs with many of the countries it considers “unfriendly” allow investors from such countries to pursue investment arbitration claims against the Russian government. As discussed in our prior alert, the scope of Russia’s consent to arbitration varies from treaty to treaty, with some treaties providing for access to international arbitration over a greater variety of disputes than others.

International arbitration under investment treaties may be the only effective remedy for many foreign investors with investments in Russia to recover the losses caused by Russia’s retaliatory measures. Arbitral awards may be enforced against certain types of Russian government assets overseas, and firms may also be able to work with their home governments to explore opportunities to enforce awards.

As Russia’s retaliatory measures continue to intensify, investors should actively analyze available protections and consider acting to preserve their rights under Russia’s BITs.

If you have any questions concerning the material discussed in this client alert, please contact the members of our International Arbitration practice.


[1] See M. Seddon, A. Stognei, and A. Klasa, “Kremlin oligarchs eye Carlsberg assets as Kadyrov ally takes over Danone unit” Financial Times (July 18, 2023), accessed at: https://www.ft.com/content/d5234953-cddf-4b64-8a55-dc749843ab5c; see also A. Liang, “Russia: Chechnya agriculture minister to run seized Danone unit,” BBC (July 19, 2023), accessed at: https://www.bbc.com/news/business-66241315.

[2] Id.

[3] Id.

[4] See TASS, “Putin signs decree on retaliatory measures over seizure of Russian assets abroad” (25 April 2023), available at: https://tass.com/economy/1609683.

Russia has previously included the following States among its list of “unfriendly countries and territories”: Albania, Andorra, Australia, Canada, all European Union member states, Iceland, Japan, Korea, Liechtenstein, Micronesia, Monaco, Montenegro, New Zealand, North Macedonia, Norway, San Marino, Singapore, Switzerland, Taiwan, the United Kingdom (including Jersey, Anguilla, the British Virgin Islands, and Gibraltar), the United States, and Ukraine. See TASS, “Russian government approves list of unfriendly countries and territories” (March 7, 2022), available at: https://tass.com/politics/1418197.

[5] See, e.g., A. Marrow, G. Stolyarov, and A. Kauranen, “Kremlin warns of more asset seizures after move against Fortum and Uniper,” Reuters (April 26, 2023), accessed at: https://www.reuters.com/business/energy/fortum-says-investigating-news-russian-asset-seizure-2023-04-26/.

[6] Radio Free Europe/Radio Liberty, “Russia Lays Groundwork For Nationalizing Foreign Companies Amid Fallout From Ukraine War” (March 10, 2022), available at: https://www.rferl.org/a/russia-nationalize-foreign-companies/31746695.html.

Photo of Nikhil Gore Nikhil Gore

Nikhil V. Gore advises financial institutions and global corporations in cross-border disputes, and domestic and international investigations and enforcement actions.

He has represented major U.S. and foreign banks in civil and criminal enforcement matters relating to the Bank Secrecy Act (BSA), the federal…

Nikhil V. Gore advises financial institutions and global corporations in cross-border disputes, and domestic and international investigations and enforcement actions.

He has represented major U.S. and foreign banks in civil and criminal enforcement matters relating to the Bank Secrecy Act (BSA), the federal criminal anti-money laundering (AML) statutes, and a wide range of governance, control framework, safety and soundness, and consumer and fair lending issues. He also counsels clients on BSA/AML regulations, and the structure and functioning of their control, compliance, and audit frameworks.

In his disputes practice, Nikhil has handled financial, commercial, and treaty-based arbitrations spanning Asia, Eastern Europe, North America, the Middle East, and Africa. He has experience under the DIFC-LCIA, ICC, ICSID, SIAC, and UNCITRAL rules, as well as before UNCLOS Annex VII tribunals and the International Tribunal for the Law of the Sea.

Photo of David Pinsky David Pinsky

David Pinsky is a partner in the firm’s international arbitration and litigation practices. David’s recent work includes winning a $5-billion award for Ukraine’s state-owned oil and gas company, Naftogaz, in an investment arbitration against Russia, in response to Russia’s unlawful expropriation of Naftogaz’s…

David Pinsky is a partner in the firm’s international arbitration and litigation practices. David’s recent work includes winning a $5-billion award for Ukraine’s state-owned oil and gas company, Naftogaz, in an investment arbitration against Russia, in response to Russia’s unlawful expropriation of Naftogaz’s assets upon annexing the Crimean Peninsula in 2014, as well as representing Radio Free Europe/Radio Liberty in an investment dispute against Russia.

In addition to his disputes work, David also counsels clients on how to structure their cross-border investments in order to be well-positioned in case of future disputes with foreign governments, and he has advised multiple clients in connection with their exits from Russia following the Kremlin’s full-scale invasion of Ukraine in February 2022.

David is a member of Covington’s Management Committee, and he practices and lives in New York City.

David’s arbitration practice focuses both on investor-state and on commercial disputes, often arising in Russia and Eastern Europe and in the energy sector. He has handled administered proceedings under the ICC, SCC, LCIA, ICDR, and AAA Rules, as well as ad hoc proceedings under the UNCITRAL Rules. On the commercial side of his arbitration practice, David has particular expertise in disputes arising under the Uniform Commercial Code. In U.S. litigation, his practice focuses on international law issues, including litigation in support of arbitration and applications for discovery under 28 U.S.C. § 1782.

David also maintains an active pro bono practice, representing journalists and other media professionals who seek asylum in the United States. An émigré himself, David has won asylum and other forms of immigration relief for clients from Russia, Uzbekistan, Iran, and Afghanistan.

Before joining Covington in 2005, David lived in Moscow as a U.S. State Department-sponsored fellow where he studied the challenges facing Russia’s press.

Photo of Jeremy Wilson Jeremy Wilson

Jeremy Wilson is co-chair of the firm’s International Arbitration Practice Group. Mr. Wilson advises and represents parties in price review disputes, investor-state matters, and commercial arbitration matters, including in both ad hoc proceedings under the UNCITRAL Rules, and institutional arbitrations under the rules…

Jeremy Wilson is co-chair of the firm’s International Arbitration Practice Group. Mr. Wilson advises and represents parties in price review disputes, investor-state matters, and commercial arbitration matters, including in both ad hoc proceedings under the UNCITRAL Rules, and institutional arbitrations under the rules of the ICC, HKIAC, the SCC, the DIAC, and the LCIA, in venues around the world. He has particular experience and a proven track record advising clients in the energy, life sciences, media, and consumer brands sectors

Photo of Clovis Trevino Clovis Trevino

Clovis Trevino is special counsel in the firm’s international disputes practice. She specializes in public international law and international commercial and investment arbitration and represents private entities and States in high-stakes international commercial, investor-State, and State-to-State proceedings, including under ICSID, ICC, UNCITRAL, and…

Clovis Trevino is special counsel in the firm’s international disputes practice. She specializes in public international law and international commercial and investment arbitration and represents private entities and States in high-stakes international commercial, investor-State, and State-to-State proceedings, including under ICSID, ICC, UNCITRAL, and UNCLOS rules and before the International Court of Justice.

Fluent in Spanish, Clovis regularly handles disputes arising out of Latin America. Her experience spans a wide range of industries, including mining and minerals, oil and gas, textile manufacturing, and consumer services. She also advises investment firms and asset managers in evaluating investments in international claims or arbitration awards.

Clovis is recognized by Legal 500 as a Rising Star in international arbitration in the United States.

Photo of Paris Aboro Paris Aboro

Paris Aboro advises clients across a range of industries in complex international disputes, including in both investor-state and commercial arbitrations, and related litigation. Her practice also includes sovereign representation in international courts.

Paris recently rejoined Covington from the Iran-United States Claims Tribunal, where…

Paris Aboro advises clients across a range of industries in complex international disputes, including in both investor-state and commercial arbitrations, and related litigation. Her practice also includes sovereign representation in international courts.

Paris recently rejoined Covington from the Iran-United States Claims Tribunal, where she was the Legal Advisor to Judge. O. Thomas Johnson.

Paris previously practiced as a barrister in London. In her practice as a barrister, Paris acted in a variety of litigation across a range of practice areas, including in cases that involved an international or cross-border element.