Russian Government Submits Myanmar Bilateral Investment Treaty Agreement For Duma Approval

The Russian government has submitted a Bilateral Investment Treaty (BIT) agreement on the promotion and protection of investments between Russia and Myanmar to the State Duma for ratification. The agreement establishes a procedure for protecting investments, including procedures for compensating for expropriation and for resolving investment disputes. The agreement was originally signed off by both foreign ministers in June last year. Ratification by both countries’ parliaments is the final step before adoption.

Among other matters, the agreement protects movable and immovable property, shares and equity interests in legal entities, claims under monetary obligations and contracts, bonds, debt obligations, loans, and other forms of debt instruments, as well as intellectual property rights, including copyrights, patents, and trademarks. It can also help reduce corporate income tax liabilities in the services industry when doing business in both countries. In Russia, this is 25%, and in Myanmar, 22%. In services, this can be reduced by charging withholding tax used for the provision of services. In Russia this is 15%, and in Myanmar it is just 2.5% for foreign companies, meaning there can be significant benefits for Russian companies investing in business in Myanmar by utilizing such mechanisms.

The agreement outlines procedures for protecting investors in the event of expropriation and breach of obligations by the state and includes the resolution of investment disputes involving investors through international arbitration. Unless the parties agree otherwise and the dispute is resolved through consultations within one year, the investor may submit it to international arbitration, typically being an ad hoc arbitration tribunal under UNCITRAL rules, the Hong Kong International Arbitration Centre, or, by agreement of the parties, a different arbitral institution. Such agreements are typically outlined in bilateral contracts between the two involved corporate entities.

The BIT agreement is valid for 15 years, and the provisions remain applicable for an additional eight years for investments made prior to the agreement’s termination. BITs are typically a first step to a later full trade agreement depending on their success and the need to encourage further trade and investment.