Effective July 1, 2025, amendments come into force prohibiting the parties to Special Investment Protection and Promotion Agreements (SPIK) from referring disputes to arbitration. This ban on arbitration clauses in SPIK agreements significantly alters the approach to resolving investment disputes in the Russian Federation.

Previously, counterparties were allowed to choose arbitration as a dispute resolution mechanism, provided that the contract contained an applicable arbitration clause. However, starting from the effective date, such clauses lose their legal validity due to a direct legislative prohibition. All disputes must now be resolved exclusively by the competent state courts of the Russian Federation. As a result, investor disputes fall solely under the jurisdiction of Russian state courts, which directly impacts the country’s investment climate.

In addition, the law introduces new requirements for the reimbursement of expenses related to the implementation of investment projects. Specifically, confirmation of actual expenditures must now be supported by a formal opinion issued by the Federal Treasury. This requirement applies to any investment project covered by SPIK agreements.

Importantly, these rules extend not only to new agreements but also to those concluded on or before June 30, 2025. This expansion enhances oversight of public spending and promotes greater transparency in project execution. Tighter regulation of investment contracts will require businesses to comply more rigorously with procedural obligations.

Commentary by Litigation Attorney Andrey Safonov:

The prohibition on referring disputes under SPIK agreements to arbitration significantly limits the range of dispute resolution mechanisms available to investors. This may reduce Russia's attractiveness for foreign investors accustomed to neutral international arbitration. Strengthening the role of state courts increases legal and political risks, which could lead to higher investment costs and lower investment volumes. In the long term, such developments may negatively affect the investment climate and erode confidence in the Russian legal system. However, the use of mediation in investment disputes may partly offset the impact of eliminating arbitration.

At the same time, these legislative changes do offer certain advantages.
First, they enable the government to exercise more effective control over the implementation of investment projects and safeguard public interests.
Second, the exclusion of arbitration reduces the risk of decisions that contradict the state's national interests. In addition, it fosters greater transparency and predictability in judicial proceedings through uniform procedural rules for all parties involved. Ultimately, this approach may strengthen trust in state courts and contribute to the development of institutional dispute resolution mechanisms within the country. It also opens opportunities to advance domestic judicial practice in investment matters.

Against this background, the legislator’s emphasis on developing mediation becomes especially relevant. In the absence of arbitration under SPIK, mediation offers a flexible and less formal alternative that helps reduce court caseloads and preserve business relationships. As such, mediation can effectively complement the limitations imposed on arbitration and serve as a practical dispute resolution tool within the state judicial system. It may become a key element of investment protection strategy in the new regulatory environment.

Source: Federal Law No. 441-FZ of November 30, 2024