Russian counter measures : recent developments (update July 12, 2022)

 

Russia has adopted a series of new measures.

Namely, the President and the Government introduced new measures that mainly facilitate operations involving foreign currency.

Laws on legalization of parallel importation and on additional powers of the President became effective.

Certain legal initiatives were rejected or put on hold. Specifically, the review of the draft law on external administration of foreign companies has been reportedly put on hold. For more information on this legal initiative, please refer to our April legal alert.

Russian counter measures

  1. New presidential decree on currency transactions

On 5 July 2022, President issued Decree No. 430 “On repatriation of foreign and Russian currency by the residents who participate in international economic activity”. The decree establishes a series of new measures.

Repatriation. New rules provide that the requirement for repatriation will depend on the amount of funds subject to compulsory sale. This amount was cancelled in June (for more information please refer to section 4 of the alert), meaning the new decree effectively cancels the requirement to repatriate the currency.

Restrictions on the transfer and crediting of funds. The new decree establishes that residents are not authorized to transfer and credit foreign currency to their accounts in foreign banks if the funds were received:

+     as dividends on shares of Russian joint-stock companies

+     as a result of distribution of profits in Russian limited liability companies, business partnerships, production cooperatives.

New powers of the Governmental Commission. The Governmental Commission on control of foreign investment is now authorized to limit:

+     crediting of foreign currency to the accounts of the residents in foreign banks and other organizations of the financial market;

+     transfer of funds without the opening of a bank account via foreign electronic payment instruments.

Obligations towards the owners of foreign bonds. The decree establishes cases when obligations towards the owners of foreign bonds issued by foreign entities, as well as Eurobonds holders will be considered as performed.

  1. Governmental Commission allowed early repayment of debt in foreign banks

On 7 July 2022, Special Governmental Commission allowed Russian residents early repayment of debts under loans provided by foreign banks in foreign currency, according to the press-release published on the official website of the Russian Ministry of Finance.  

The authorization applies if the debtor intends to extinguish at least 20 % of the debt, including when the obligations are performed by a third party, except for when such debtor and a third person are affiliated.

In case of loan syndication payments are to be made directly to the participants of the creditors who are Russian credit organizations, avoiding loan managers incorporated in unfriendly foreign states (as defined by the Government, including the EU and the United States).

  1. Procedure for the purchase of a share in a foreign entity simplified

On 23 June 2022, the Central Bank of Russia (the “CBR”) issued Resolution No. ПРГ-12-4/1383 allowing to pay for the shares in the charter capital of the entities-non-residents without obtainment of an authorization from the CBR. One of the following conditions has to apply:

►The operation is made in rubles or in a currency of the state who is not considered as unfriendly (as defined by the Government, including the EU and the United States). Location of the receiver of the funds is irrelevant; or

►The operation is made in a currency of an unfriendly foreign state, the location of the receiver of the funds is irrelevant. However, the sum of the operation should not exceed an equivalent of 15 million rubles at the rate of the CBR on the date of payment.

  1. Governmental Commission cancelled certain restrictions related to currency earnings

As of 10 June 2022,  Special Governmental Commission has cancelled the requirement to sell 50 % of foreign currency earnings under foreign trade agreements with nonresidents.

Additionally, residents who are simultaneously parties to the export and import agreements are now allowed not to sell 80 % of the currency earnings until 1 September 2022, if:

►The export contract under which foreign currency was received and the import contract that the resident intends to execute with the use of said funds have been registered with the authorized bank;

►Payments for the import are charged from the transit currency account of the resident, where the money initially got credited under the export contract.

According to the clarifications of the CBR, foreign currency earnings are not required to be sold even if they were received after 28 February and before 10 June.

Moreover, as of this July the exporters are authorized to credit foreign currency earnings to their accounts. As a reminder, previously the exporters were required to sell portion of the foreign currency earnings within an established deadline.

The earnings can now be credited to foreign accounts of the residents.

  1. Russian Central Bank allowed acquisition of shares in foreign entities

On 27 May 2022, the Russian Central Bank authorized the payment of shares in charter capital of foreign entities in case the following conditions have been simultaneously met:

► The foreign entity is not the resident of the unfriendly state (as defined by the Government, including the EU and US);

► The operation is executed in rubles or in currency of other state not committing unfriendly actions;

► The amount of the share does not exceed RUB 10 000 000 or the equivalent in mentioned currency at the exchange rate of the Russian Central Bank.

In this case the companies do not have to obtain separate authorizations of the Central Bank as it was required before.

Adopted legislation

  1. Law legalizing parallel import signed by the President

On 28 June 2022, Russian President signed new federal law on amending certain legislative acts related to the use of intellectual property. The law establishes that the use of intellectual property expressed in listed goods (groups of goods) as well as the means of individualization with which such goods are marked, will not be considered as violation of intellectual property rights.

On 6 May 2022, the Russian Ministry of Industry and Trade adopted a list of products that can be imported without the consent of the owner. The list includes clothes, textiles, beauty products, metals, electronic equipment.

  1. Amendments authorizing the President to enforce special measures on financial markets signed by the President

On 28 June 2022, the President signed a law authorizing it to implement certain measures in case of sanctions introduced by foreign states were adopted. The draft initially provided for amendments related to pensions. Particularly, the President is authorized to adopt:

► Special procedure for executing transactions between Russian nationals and foreign persons related or controlled to unfriendly states (as defined by the Government including the EU and the US);

► Special procedure for payment of dividends to shareholders incorporated in unfriendly foreign states;

►Special procedure for currency control, including foreign currency operations, repatriation of foreign currency, opening of bank accounts abroad;

► Other temporary economic measures that ensure financial stability of the Russian Federation, specifically:

+     Bans or restrictions for certain transactions, including bans for currency transactions;

+     Rules for certain obligations including changing the currency of the obligation, set-off of obligations arising out of the agreements between residents and non-residents;

+     Special permits for certain transactions including currency operations, opening accounts;

+     Requirements to open special accounts and to make certain transactions;

+     Requirements to make reservations with certain transactions, including currency transactions;

+     Requirement for obligatory sale of foreign currency on foreign domestic exchange market;

+     Freeze of assets or other property;

+     Limiting the volume of currency operations;

+     Requirements for the sale or purchase of foreign currency on the exchange market;

+     Requirements for the acquisition or alienation of debt and other securities, other financial instruments;

+     Rules for currency control.

The law becomes effective as of the date of its publication. Although the law was signed by the President, it has not yet been published.

Proposed legislation

  1. Review of the draft law on external administration of foreign companies has been put on hold

Draft Law “On External Administration of Companies” will not be adopted in the spring session of the State Duma, according to the Vedomosti. The draft law is expected to be updated pursuant to the comments of the Russian business community, including the Russian Union of Industrialists and Entrepreneurs.

According to the official website of the State Duma, no movement has been made on the draft law since its adoption in the first reading on 24 May 2022. The spring session terminated on 6 July 2022.

  1. Law allowing to contest transactions concluded for the evasion of sanctions rejected by the Federation Council

On 22 June 2022, the Federation Council rejected law on amending provisions of the Russian codes of procedure. The draft law authorized prosecutors to request invalidation of transactions concluded for the evasion of Russian counter measures.

The draft law was returned to the Duma. The Federation Council suggested forming a joint commission for further elaboration of the draft law.

The law was introduced to the State Duma on 11 June 2021 but did not initially include provisions related to sanctions. Earlier in June the State Duma adopted the law in three readings.

We are actively following the developments related to those issues and are fully prepared to advise our clients.

Our last newsletters

Sanctions Against Russia. Recent Developments

On 23 February 2024 European Union and the United States introduced a new round of sanctions targeting Russia. The 13th package of European sanctions provides for new individual sanctions, sectoral sanctions, export restrictions. Additionally, EU added the United Kingdom to the list of partner countries for the iron and steel import restrictions. American sanctions include […]

Moscow Desk

+

Newsflash – Corporate – Venture Capital – French government announcements to support Innovative Startup Companies (JEI)

For the occasion of the French Tech’s 10th anniversary, new measures stemming from the  report of Parliament Member Paul Midy (for which Jeantet had been consulted) have been announced. These measures, which aim at supporting the French startup ecosystem, should be included in the next Finance Act for 2024. ► Doubling of companies eligible to […]

| CORPORATE – M&A – PRIVATE EQUITY

+

Russian Counter Measures. Recent Developments

On 23 August, the Russian Ministry of Finance partially lifted a ban for the payment of dividends to foreign shareholders in case such shareholders have invested in the Russian economy. On 8 August, the Russian President suspended certain provisions of double tax treaties. Suspended provisions include tax regime for dividends, real estate, business profit, etc […]

Moscow Desk

+

Sanctions Against Russia. Recent Developments

On 23 June 2023, the EU introduced 11th package of sanctions. It primarily focuses on measures that would prevent circumvention of sanctions. It also includes new import and export restrictions and individual designations. Switzerland has joined European Union in sanctions targeting entities and individuals and may join other sanctions within the 11th package in August. […]

Moscow Desk

+

Newsletter – Tax law

Read the Jeantet Newsletter dedicated to Tax Law, covering issues related to : Transactional taxation Group taxation International Taxation Taxation of LBO transactions Non-profit organizations For more information, please download the Newsletter.

Paris | TAX

+

Russian Counter Measures

On 25 April 2023 Russian President issued a decree establishing cases authorizing him to introduce the regime of external management of certain assets owned by foreign residents. Namely, under the decree, the President may establish the regime of external management, if Russia, or its entities and individuals become deprived or risk of being deprived of […]

Moscow Desk

+

Russian counter measures and measures aimed at business support. Recent developments

Special regime for transactions involving securities On 3 March 2023 Russian President issued Decree No. 138 establishing additional measures involving securities. Namely, the new Decree establishes a specific procedure for transactions / operations involving: shares of Russian joint-stock companies, sovereign bonds, bonds of a Russian issuer, held in collective safe custody of a Russian depository, […]

Moscow Desk

+

Sanctions against Russia. Recent developments (2 march 2023 update)

By the end of February, the EU, US and UK announced new rounds of sanctions, all of them including restrictions targeting prominent Russian financial institutions The EU package includes individual listings of Russian entities and individuals and additional exports restrictions. The US sanctions provide for sectoral sanctions targeting Russian mining and metals sector, as well […]

Moscow Desk

+

Russian counter measures. Recent developments ( 12 january 2023 update)

Governmental Commission on Foreign Investments revised rules on the sale of assets and the payment of dividends On 30 December 2022, Russian Governmental Subcommission of the Commission of the Ministry of Finance on Foreign Investments (the – Commission) published revised rules and criteria for authorization of the sale of assets in Russian companies involving persons […]

Moscow Desk

+

Sanctions against Russia. Recent Developments (21 December 2022 update)

This December, the EU introduced a series of restrictive measures targeting Russia. Council of the EU approved the ninth package of sanctions. Additionally, the European Commission proposed framework that would amend the Lisbon Treaty and harmonize criminalization of violation of sanctions at the level of the Union. Finally, the EU introduced a price cap for […]

Moscow Desk

+

Russian counter measures. Recent developments (21 December 2022 update)

Russia has adopted a series of new measures. Namely, the President introduced new restrictions concerning certain transactions involving credit organizations and joint-stock companies that are not credit organizations. The Russian Central Bank issued decision expanding the scope of application of type C accounts. Moreover, the Ministry of Finance issued clarifications on the scope of transactions […]

Moscow Desk

+