Foreign companies returning to Russia

Lately, there has been increasing discussion about the possibility of foreign companies returning to the Russian market. Many brands that were once market leaders now want to regain their positions.

However, the process is accompanied by numerous challenges related to legal, financial, and administrative issues:

1. Permission of governmental commission

One of the key requirements for returning to the Russian market is obtaining approval from a government commission.

This rule became mandatory after the introduction of relevant laws in the fall of 2022. Previously, some brands were able to sell their assets without such permission. However, now even companies that had planned for a potential return must seek approval again.

Additionally, when selling a business, mandatory discounts from the market value of assets are imposed, along with a so-called “voluntary contribution” to the budget, which can reach up to 35%.

2. Restoration of trademark rights

Another significant problem for returning companies is the protection of intellectual property. During the absence of many brands from the Russian market, their trademarks may have been “diluted”: Russian companies have registered similar designs. To restore their rights, foreign brands will need to conduct a thorough audit of their trademarks, challenge others’ registrations, and combat counterfeit goods through customs registries and legal proceedings. Otherwise, companies risk losing the protection of their trademarks in Russia.

3. Sanction restrictions

Existing sanctions remain one of the main obstacles for the return of foreign companies. Doing business in Russia inevitably involves interaction with sanctioned individuals. Moreover, foreign companies will face increased tax costs, as some double taxation avoidance agreements have been canceled.

4. Nationalization of foreign assets

Another issue for returning companies is the risk of nationalization of their assets. Some assets of foreign companies are now under state control, and even the presence of a buyback option does not guarantee that former owners will be able to reclaim their assets. For example, in the case of one dairy product brand, its assets were transferred to state control.

Most likely, the return of foreign companies to the Russian market will proceed slowly and with caution due to sanctions. Many brands left Russia not because of direct prohibitions but due to the geopolitical situation. Therefore, even a relaxation of sanctions does not guarantee a mass return. Much will depend on the uniqueness of the goods or services offered by the company, as well as its readiness to face new potential challenges. Russian counter-sanctions imply individual consideration of each return deal. Although some measures may be softened, a complete removal of state control is unlikely.

Thus, the return of foreign companies to the Russian market is a complex, multi-stage process that will require significant effort and resources. Legal, financial, and administrative barriers, as well as ongoing sanctions, make this path challenging. However, for some brands, especially those that have maintained loyalty to Russian consumers, returning could be a strategic opportunity to regain their position in one of the world’s largest markets. In any case, the success of this process will depend on the companies’ readiness to adapt to new conditions and find compromises in a complex geopolitical environment.