By Alexander Pracht
Armenia’s Economy Ministry unveiled a draft of a new investment law last Wednesday, aiming to overhaul the country’s outdated legal framework for investments. Published for public review, the proposed law seeks to establish a modern, transparent, and predictable legal environment for both local and foreign investors, replacing the 1994 law on foreign capital.
The draft defines investment as capital with “entrepreneurial risk” intended for profit, and specifically excludes passive investments and loans without active management. It also introduces clear protections for investors, including the right to repatriate profits, safeguards against illegal expropriation, and the guarantee of fair legal proceedings in disputes. The law specifies that, in case of conflict, international agreements will take precedence over Armenia’s domestic legislation.
Additionally, the law proposes a legal framework for individual investment agreements with the government through a competitive selection process. It also includes provisions for the cessation of investment activities, addressing scenarios such as asset sales, enterprise liquidation, and capital withdrawal.
The new legislation brings more precise legal definitions, such as distinguishing between “investor” and “entrepreneur,” and includes provisions for investments in digital assets and cryptocurrencies. A key feature of the law is its focus on “sustainable” investments, explicitly excluding short-term and portfolio projects.
This law aims to reduce the legal uncertainty surrounding investments in Armenia by centralizing investment guarantees and creating a more stable environment, offering incentives for long-term capital and addressing the gaps left by previous fragmented regulations and agreements.
According to the United Nations Trade and Development agency, the total amount of foreign direct investment in Armenia is estimated at $7.5 billion. The country ranks as the most appealing former Soviet state for foreign direct investment, according to the World Bank.
Following Russia’s 2022 invasion of Ukraine, several multinational corporations with operations in Russia have shifted their offices to Armenia. Additionally, an influx of Russian and Ukrainian émigrés has brought a new qualified workforce. However, Armenia still remains heavily reliant on Russian investment, and challenges such as closed borders with Turkey and Azerbaijan, as well as persistent corruption, continue to limit its investment potential.
