After the Russian invasion of Ukraine, many companies to cut all or part of their ties with Russia. With Russia threatening to nationalize their properties, companies such as Shell and Heineken do not seem to be taking any concrete actions yet.
“The list of companies leaving is impressive, but I expect that only a few will turn their backs on Russia forever,” says Jeroen Ketting. He is an entrepreneur in Moscow and helps other Dutch entrepreneurs with doing business in Russia.
Workers on the street
McDonald’s, for example, could continue to bake burgers in Russia, but under a different name. “I expect that many companies will disconnect the legal structure from the parent company or continue with a name change in Russia. And temporarily stop exporting to Russia can be reversed next month,” says Ketting.
The departure of companies will affect Russia, if only given the number of people who are on the street due to the severing of Russian ties. Chain: “You may wonder whether that is ethical, because would it be a good idea to have 3000 or 10,000 employees put out on the street?” Incidentally, a number of companies have announced that staff in Russia are still being paid.
Compensation
If a company is expropriated, the question is whether the court can reverse this and whether there is compensation for damages. “It is difficult to say whether you can contest that. That depends on many laws,” says Alessandra Arcuri, professor of international trade and investment law at Erasmus University Rotterdam.
“Companies can file a complaint with an international arbitration tribunal on the basis of a bilateral investment treaty. But if a case is brought there, it is still far from clear whether companies can actually receive compensation,” says Arcuri.
Russian response
With the threat of expropriating companies, Russia seems to want to stop the exodus of Western companies that has now started. It is one of the Kremlin’s many responses to Western sanctions, and it is not expected to be the last.
PwC economist Velthuijsen: “Russia’s economic policy makers were probably not involved in the invasion. They keep wondering what to do. With the option to nationalize, it seems as if they are thinking: we’re going to grab a few now it still can.”
–
