Russian government approves draft of new investment protection agreement with China
On 22 April 2025, Prime Minister Mikhail Mishustin signed an order instructing the Ministry of Economic Development to finalise negotiations with China and sign a new agreement between Russia and the PRC on the promotion and mutual protection of investments. The draft agreement has been published on the official legal information portal. There have been no comments from the Chinese side.
The existing Russia–China investment agreement was signed in 2006 and ratified by Moscow in 2009. It will automatically cease to be in effect once the new agreement enters into force. However, for investments made prior to the new agreement’s entry into force, the current treaty will remain applicable for a period of three years.
The new draft introduces a number of new provisions, including:
Additionally, the draft published by the Russian side includes a more detailed definition of “investment”, now encompassing “bonds, debt obligations, loans and other forms of debt instruments”, as well as “business reputation”. The concept of an “investor of a contracting party” is also clarified: it will not apply if a Chinese legal entity investor is owned or controlled by a Russian person, or vice versa. It will also exclude entities owned by a third country or its nationals if the other contracting party does not maintain diplomatic relations with that third country.
Significant changes are also proposed in the sections on “Expropriation” and “Dispute Resolution between a Contracting Party and an Investor of the Other Contracting Party”. It is clarified that a measure is not considered expropriation if it does not violate rights to tangible or intangible property related to the investment. Whether expropriation has occurred will depend on several factors, including the measure’s impact on the investment’s economic value, its duration, and its purpose. Any compensation for expropriation must include interest from the date of the taking to the date of payment, calculated at a “market-determined commercial rate”, but not lower than the SOFR rate on six-month USD loans. The current Russia–China agreement refers to the LIBOR rate, which ceased to exist in 2023. The SOFR rate is published daily by the Federal Reserve Bank of New York.
Regarding investment disputes, the new agreement proposes, firstly, to elaborate in more detail the procedure for submitting a request for consultations: the investor will be required to send such a request to the competent authority of the contracting state. The request must necessarily include, among other things, the compensation being sought and the approximate amount of the alleged damage.
If the dispute cannot be resolved through consultations, after a period of 180 days the claimant investor may refer the dispute either to the competent court of the state in which the investment was made, to an ad hoc arbitral tribunal under the UNCITRAL Rules, or to any other arbitral institution, provided the parties agree. In the current agreement, instead of “any other arbitral institution”, reference is made to the International Centre for Settlement of Investment Disputes (ICSID) under the World Bank. Furthermore, the draft clarifies that the dispute may not be referred to arbitration if the request for consultations is submitted more than three years after the date on which the investor became aware, or ought to have become aware, of the alleged breach of obligations under the agreement.