Armenia's New Law on Investments: A Landmark Reform for Foreign and Domestic Investors

ARMENIA'S NEW LAW ON INVESTMENTS: A LANDMARK REFORM FOR FOREIGN AND DOMESTIC INVESTORS

I. Overview

Armenia's Parliament adopted the new Law on Investments in a first hearing on 16 April 2026, marking the most significant reform of the country's investment legislation since 1994. The Law replaces the narrow, foreign-investor-focused framework with a comprehensive statute that treats domestic and foreign investors equally. Key features include a broad definition of protected investments, codified national treatment and most-favored-nation guarantees, explicit protection against direct and indirect expropriation, a structured dispute resolution mechanism, a stabilization clause, and, for the first time, a formal legal basis for investment incentives and institutional investment policymaking. This note summarizes the Law's principal provisions and their implications for investors operating in or considering entry into Armenia. The Law must still undergo a second parliamentary hearing before final adoption.

II. Contextual development of the Armenian Investment Law.

Because Armenia gained independence from the Soviet Union only in 1991, it didn’t have an investment law until 1994. The Armenian legislature adopted the Law on Foreign Investments in 1994, laying the legal and policy groundwork to attract much-needed investment into the country’s economy.

The policymakers of the era, generally, and the authors of the law, specifically, took a very sensible approach by proposing a legal framework that was liberal, pro-investor, protective of private property, and open to the inflow of foreign investment. They simply declared Armenia an open economy.

The 1994 law was geared toward foreign investors and announced that Armenia welcomed them. Of course, much has changed in the Armenian economy since then. First, per capita GDP has increased by approximately 45-fold since 1994, from about $200 to about $9,000 today. Second, Armenia has 40 Bilateral Investment Treaties in force with other countries. Third, many multinational companies have entered the Armenian market, including NVIDIA and Firebird’s establishment of an AI datacenter in Armenia. These developments necessitated drafting a new law to regulate investments, so the Armenian Ministry of Economy drafted the new Law on Investments (the Law) and presented it to the Parliament, which adopted it in first hearing on April 16, 2026.

III. Definition of Investment and the protection that the law provides

The Law, within the framework of the Armenian civil legislation, defines the concept of “investment” in such a way that, in practice, it encompasses all possible types of investments made and assets acquired/created for the purpose of entrepreneurial activity, so that they receive the protection stipulated and guaranteed by the draft. Accordingly, under the Law, investment is the lawful acquisition, allocation, creation, or use in Armenia of the following assets for the purpose of carrying out entrepreneurial activity, provided that these assets are used or were clearly acquired (allocated, created) for the purpose of conducting entrepreneurial activity:

a) property (including monetary proceeds, as well as information or rights to objects of intellectual property (including inventions, industrial designs, and production secrets (know-how), trademarks (service marks));
b) shares, equity interests, units, and other rights or instruments certifying participation in a commercial organization or investment fund, as well as other securities;
c) claims with economic value that are directly or closely related to the investment;
d) property rights, concession rights, licenses, operational or other permits, or similar rights granted by law or contract, including rights to explore, develop, extract, or exploit natural resources;
e) a new asset created in the Republic of Armenia as a result of the investment.

It should be noted that the draft law does not consider so-called “portfolio investments” as investments and therefore does not provide them with protection. These are investments that do not ensure control or significant influence over an organization and are mainly acquired for short-term income, price appreciation, or liquidity, and are not aimed at establishing long-term economic relationships.

IV. Definition of investors, equal footing between local and international investors

The current law “On Foreign Investments,” as its very title indicates, applies exclusively to foreign investments and foreign investors. In this respect, the Law represents a fundamental step forward, aiming to cover not only foreign investments but also domestic/local investors and their investments.

This is particularly important, as the logic and objectives underlying the draft law should not differentiate between investments made by foreigners and those made by locals, and should therefore equally encourage all types of investment in Armenia.

Accordingly, the draft provides that an “investor” is any of the following entities/individuals making an investment in Armenia in accordance with its legislation:

• a natural person, regardless of citizenship or residency;
• a legal entity, regardless of the country of registration or residency;
• an investment fund;
• states;
• communities.

It is also important that the draft gradually introduces the mechanisms provided by the law for investments by domestic/local investors in forms other than equity participation (i.e., assets other than shares, equity interests, or units).

V. National Treatment and Most-Favored-Nation Guarantees

The Law establishes internationally recognized key principles in the field of legal regulation of investments, such as the principle of National Treatment and the Most Favored Nation.

In this regard, the draft provides in particular that:

1. National treatment applies to and is guaranteed for foreign investors and their investments in Armenia. Under national treatment, foreign investors, under similar conditions and in relation to their investments (including their management, implementation, operation, expansion, sale, or other forms of disposal), enjoy rights, freedoms, and obligations equal to those of domestic investors. The legal guarantees for foreign investors in Armenia may not be less favorable than those provided to domestic investors.
2. The Most Favored Nation (MFN) applies to and is guaranteed for foreign investors and their investments. Under this regime, the Republic guarantees that, under similar conditions, foreign investors and their investments (including their management, implementation, operation, expansion, sale, or other forms of disposal) are accorded treatment no less favorable than that granted to investors of any other state or their investments, with the exception of:

• the right to apply to international arbitration, as well as
• cases arising from the regulations of customs unions, free economic zones, economic unions, common markets, tax regimes established under international treaties, and other international agreements.

VI. Liberal regime for capital flows

Under the Law, Armenia continues to run a liberal regime for capital flows. This regime grants investors the right to freely import and export foreign currencies and other valuables, subject to customs, taxation, anti-money laundering, and other relevant regulations. In addition, and very importantly, investors will enjoy no restrictions on the repatriation of proceeds received from their investments, including the liquidation thereof.

Continuing the good policies established in 1994, the new Law allows investors to freely transact in both the local currency, the Armenian Dram, and any freely tradeable foreign currency accepted by Armenian commercial banks.

VII. Protection from expropriation

The Law addresses, for the first time, the concepts of direct and indirect expropriation, establishing that Armenia guarantees the protection of investors' investments against direct or indirect expropriation. In particular, under the draft law:

Direct expropriation is defined as an official act or measure of the state (a state body, a local self-government body, or their officials) that results in the compulsory taking or seizure of an investment or any part thereof, including confiscation, alienation, requisition, forfeiture, or nationalization, through the deprivation of ownership rights.

Indirect expropriation is defined as deliberate and discriminatory actions or decisions by the state that result in a substantial and prolonged deprivation of the use, value, or economic benefit of an investment, even if no formal transfer of ownership or deprivation of possession has occurred.

Moreover, a series of interrelated measures may constitute indirect expropriation, even if each measure would not have that effect on its own. In determining whether a measure or a series of measures constitutes indirect expropriation, it is necessary to consider and analyze the specific facts of each case, giving due regard to the purpose and nature of the measure, the investor’s distinct and reasonable investment-backed expectations, as well as the proportionality between the public purpose pursued and the impact on the investment.

The Law clearly establishes that direct expropriation carried out unlawfully (in the absence of legal grounds prescribed by law, or where such grounds are formally invoked but in reality do not exist, and the true purpose is to deprive the investor of property), as well as indirect expropriation, are prohibited. If, in violation of this prohibition, such actions occur, the investor has the right to receive adequate compensation as provided by law, as well as by international or other agreements.

It is noteworthy that the current law “On Foreign Investments” merely provides in this regard that “foreign investments are not subject to nationalization in the Republic of Armenia. State bodies may not confiscate foreign investments either. Seizure is permitted only as an exceptional measure under a state of emergency as defined by the legislation of the Republic of Armenia, by court decision, and with full compensation.”

It is evident that the aforementioned existing legal framework does not address all possible cases of expropriation in practice, especially indirect expropriation. The Law comprehensively addresses this gap.

It is also important that, under the draft, in relevant cases of direct expropriation, unlawful direct expropriation, as well as indirect expropriation, adequate compensation must be provided, in addition to other requirements and procedures established by law, while also observing the following principles:

• in a non-discriminatory, prompt, adequate, and effective manner;
• with advance compensation at the fair market value of the property in cases defined by law, and where advance compensation is not required by law, within a reasonable time;
• determination of the fair market value of the property in accordance with the requirements of the law.

VIII. National Treatment and Most-Favored-Nation Guarantees

The Law does not intend to protect unlawful investments. Accordingly, it clearly stipulates that the rights, guarantees, and protections provided by the law—except those of general constitutional application—apply only to lawful investments made in good faith. Moreover, the protections and guarantees established by the Law do not extend to investments created, acquired, or operated through fraud, corruption, money laundering, the provision of false information, concealment of the beneficial owner, violations of international sanctions, or serious (material) violations of Armenian law.

Under the Law, investors enjoy the following legal protection mechanisms:

• the right of access to justice in criminal, civil, administrative, and other judicial proceedings, as well as to alternative (out-of-court) dispute resolution mechanisms provided by the domestic legislation of the Republic of Armenia or international treaties;
• the right to the proper application of procedures established by law (due process) in judicial, extrajudicial, and administrative proceedings, which, among other things, includes the exclusion of substantial delays in decision-making— including violations of time limits established by law or other legal acts, and, where no such time limits are set, reasonable timeframes dictated by the nature of the process—as well as ensuring the transparency of judicial and administrative decisions and procedures;
• protection from any discrimination or arbitrariness in decisions of judicial, administrative, and law enforcement agencies;
• protection from pressure, unlawful coercion, or threats against investors by state agencies, municipalities, or their officials;
• physical protection and security, including the obligation of competent authorities to take reasonable measures to prevent and respond to acts of violence, vandalism, or unlawful interference by third parties that may cause physical damage to an investment or endanger the personal safety of the investor;
• other protections provided by law and other legal acts that are applicable to investors and investments.

While establishing the principles and mechanisms for investor protection, the Law also addresses investors' obligations and liabilities. It provides that:

• Investors are obliged to comply with the legislation of Armenia, inter alia, health and safety standards, and corporate governance rules applicable to them; to respect culture and cultural values, business and other customs, and the rights of employees; to take care of environmental protection and follow climate policy principles; to duly fulfill tax and other mandatory payment obligations; and to comply with anti-corruption legislation.
• Investors bear liability, in the cases and manner prescribed by law, for failure to fulfill or improper fulfillment of obligations established by law or other legal acts, as well as for damages resulting therefrom.

IX. Dispute resolution

The new Law also establishes a comprehensive Access to Justice article that provides investors with access to both the traditional judicial authorities and alternative dispute resolution mechanisms.

The said article also establishes that in case a dispute arises between the Republic, any of its municipalities, and the investor, then the parties must first try to resolve the dispute through negotiations (which should start no later than 30 days after the notice of dispute has been communicated) and in case the parties do not resolve the conflict within 90 days, then the dispute can be moved to the judiciary, arbitration or even mediation.

X. Stabilization mechanisms

As is typical for investment legislation in many countries, the Law also establishes a stabilization mechanism, stipulating that investments benefiting from the guarantees provided by the law will continue to be protected by those guarantees—regardless of any changes to their scope or their repeal—for a period of five years following such change or repeal, unless otherwise provided by an agreement concluded between the investor and the Republic.

XI. Investment incentives

For the first time, the Law establishes the legal foundations for investment incentives (benefits). In particular, it stipulates that the purpose of granting such incentives by the state is to encourage investments in specific sectors of the economy or regions. These incentives must be derived from the objectives of the medium- or long-term investment policy adopted by Armenia.

The Law defines the following possible types of investment incentives:

• fiscal incentives,
• financial support,
• state (legal/regulatory) measures,
• simplified administrative procedures,
• infrastructural support,
• assistance in land acquisition,
• construction or development of infrastructure, as well as
• other incentives provided by the legislation of the Republic of Armenia.

The Law sets out the following principles for granting investment incentives:

1. exclusion of discrimination among investors operating in the same sector or region;
2. minimization of negative impact on economic competition;
3. the imperative of creating or maintaining jobs;
4. environmental protection;
5. proportionality of the incentive to the targeted outcome (i.e., the incentive must be an effective means of achieving its objective while minimizing negative impacts on public finances and third-party interests);
6. measurability of results throughout the entire duration of the incentive;
7. public accountability of both the investor benefiting from the incentive and the state bodies responsible for oversight and administration.

The Law states three bases for investment incentives: (i) by law, (ii) by decisions of the Government or a competent body, or (iii) through an investment agreement between Armenia (via the Government or an authorized body) and the investor.

An important feature of the Law is also that the competent authority must maintain a public registry of all investment incentives in force in Armenia.

XII. Institutional Framework: The Government's New Investment Mandate

For the first time, the Armenian legislature has mandated a formal, institutional framework for investment policymaking. Under this framework, the Government has a clear legislative mandate to:

a. Secure a favorable investment climate in the country and boost investments;
b. Enact the mid-run and long-run investment policies of the Republic;
c. Approve the incentives of investment programs that have a positive socioeconomic effect, are sustainable, and target sectoral or regional priorities;
d. Approve the methodology for the evaluation and monitoring of investment incentives,
e. Publish the FDI Policy Statement of the country;
f. Provide the cooperation mechanism between the investors and the Republic with the investment agreements;
g. Establish and approve the registry of all investment incentives available in the country,
h. Establish and mandate a public agency responsible for boosting investments.

Within the Government, the Ministry of Economy has been tasked with investment policy formulation and development.

 
How can we help?

Our Managing Partner, Varoujan Avedikian, and Senior Partner, Misak Babajanyan, have been deeply involved in drafting this new investment framework for the country

Moreover, our team has extensive experience assisting investors and business founders in navigating the Armenian regulatory landscape. Therefore, do reach out for further assistance, such as structuring investments, designing complex investment programs, negotiating investment arrangements either with the government or private parties, and resolving investment disputes.

Disclaimer

This note has been prepared in May 2026, is for informational purposes only, and does not constitute legal advice. We reserve the right not to update this note should laws or regulations change.