Russian counter measures. Recent Developments (19 August 2022 update)
Russia has adopted a series of new measures.
Namely, the President introduced new restrictions concerning transactions with shares in certain Russian companies. The Government added new jurisdictions to the list of unfriendly states.
At the same time, the Russian Central Bank suspended some of its previously adopted restrictions.
For more information on sanctions targeting Russia, as well as Russian counter measures, please refer to our previous legal alerts.
Russian counter measures
On 5 August 2022, Russian President issued Decree No. 520 “On Adoption of Special Economic Measures in the Financial and Oil Fields Due to Unfriendly Acts of Certain Foreign States and International Organizations”.
The new decree establishes a temporary ban for certain transactions until 31 December 2022. Namely, the decree restricts transactions / operations that might directly or indirectly lead to the establishment, change, termination or encumbrance of the rights of possession, use and (or) disposal of:
► securities of Russian legal entities (shares in Russian joint-stock companies),
► shares / contributions into charter capitals of Russian legal entities (shares in Russian limited liability companies),
► participatory shares, rights and obligations belonging to the participants in production sharing agreements, agreements on joint activities or other agreements on the basis of which investment projects are implemented on the territory of the Russian Federation,
if said securities, shares, contributions, rights and obligations belong to foreign persons affiliated with foreign states that commit unfriendly acts towards Russia and its persons.
The following transactions are targeted by this ban:
► Involving shares in the share capital of joint-stock companies included in the list of entities and enterprises of strategic importance;
► Involving shares in / contributions to the charter capital of companies, including limited liability companies, in which joint-stock companies mentioned above own directly or indirectly shares / contributions;
► Involving participatory shares, rights and obligations belonging to the participants in Production Sharing Agreement “Sakhalin-1” and Agreement on the Development and Production of oil at the Kharyaginskoye Field under production sharing conditions;
► Involving shares in / contributions to the charter (share) capitals of the companies that produce equipment and provide maintenance services for the fuel and energy organizations, companies that produce energy, refine oil. The list of said companies is approved by the President (the Government is to provide a list within 10 days from publication of the decree).
► Involving shares in the charter (share) capitals of Russian credit organizations. The list of said organizations is approved by the President (the Government is to provide a list within 10 days from publication of the decree).
► Involving shares in the charter (share) capitals of entities, which exploit:
+ subsoil plots located on the territory of the Russian Federation and containing hydrocarbon deposits, uranium, high-purity quartz raw materials, rare earths of the yttrium group, nickel, cobalt, tantalum, niobium, beryllium, copper;
+ subsoil plots located on the territory of the Russian Federation, and which are primary deposits of diamonds, primary deposits of gold, lithium, platinum group metals;
+ subsoil plots of internal sea waters, territorial sea, continental shelf of the Russian Federation.
Transactions restricted by said decree can be authorized by the President. Otherwise, such transactions are considered as void.
On 8 August 2022, Russian President issued Decree No. 529 providing for a temporary procedure for executing currency obligations.
► Obligations of Russian credit organizations under agreements of bank deposits / bank accounts. According to the new decree, Russian credit organizations targeted by sanctions may:
+ Suspend execution of their obligations under the agreements of bank deposits / bank accounts with legal entities or individual entrepreneurs in part related to operations with funds credited to such bank accounts, if said obligations are made in a foreign currency that is the same as the currency under the bank account / bank deposit agreement between the Russian credit organization and a foreign credit organization that makes the Russian bank organization’s rights under said agreement inexecutable;
+ Upon agreement with the client assign the rights under the bank deposit / bank account agreement with a foreign credit organization to the client.
Interest will not accrue during the suspension of obligations, nor will penalties for non-performance apply.
► Obligations of Russian debtors towards owners and holders of Eurobonds. Particularly,
+ Russian debtor under Eurobonds may, prior to receiving authorization from the Russian Central Bank or the Governmental Commission on control of foreign investments, request opening a special account D for owners or holders of Eurobonds. Such account is established in roubles and can be held without the presence of the owner or holder of Eurobonds.
+ Transfer of funds to the account D can be made in roubles at the exchange rate of the Central Bank of Russia at the date of transfer. In this case, a foreign depositary which records the rights to Eurobonds is to confirm its consent to accept execution on Eurobonds using a type “D“ account. The funds can be converted into a foreign currency without prior approval required by previous presidential decrees required for such operations.
► New rules for Russian residents participating in foreign economic activity
+ Russian residents do not need to comply, in particular, with the general rule that foreign exchange transactions must be settled through accounts in authorized banks or electronic money transfers. The easing is valid from August 8 until the Law on Currency Regulation and Control is amended;
+ Unless otherwise provided by presidential decrees, Russian legal entities and individual entrepreneurs can set off their claims to non-residents and obligations to them and to replace the obligations of non-residents with new obligations.
On 1 August 2022, Russian Central Bank (CBR) published information notifying of its decision to extend cash withdrawal restrictions until 9 March 2023. The provisional measure allows to withdraw cash in the amount of USD 10,000. Previously the restriction was supposed to be effective until 9 September 2022.
On 23 July 2022, Government of the Russian Federation issued Decision No. 2018-p extending the list of foreign states that are considered as committing unfriendly acts towards Russia. The decision adds Guernsey island and the Isle of Man (both self-governing British Crown Dependencies), as well as the Commonwealth of The Bahamas to the list.
As a reminder, the list also contains the European Union, the United States, and the United Kingdom.
On 20 July 2022, the CBR suspended its general rule providing that advance payments for non-residents should not exceed 30 % of the sum of obligations under the contract.
As of moment, the rule is no longer effective.
We are actively following the developments related to those issues and are fully prepared to advise our clients.