PETERKA PARTNERS-Summary of Russian Restrictive Measures as of 15 March 2022
Following the introduction of various sanctions by EU, US, UK etc., the Russian Federation has enacted a number of measures affecting both Russian residents and foreign businesses. We are presenting below some of the main ones.
List of Unfriendly States established by Government Decree as of March 5, 2022 No. 430-r
The List of Unfriendly States includes the member states of the EU, as well as Australia, Albania, Andorra, the United Kingdom (including Jersey, Anguilla, the British Virgin Islands and Gibraltar), Iceland, Canada, Liechtenstein, Micronesia, Monaco, New Zealand, Norway, the Republic of Korea, San Marino, North Macedonia, Singapore, the USA, Taiwan, Ukraine, Montenegro, Switzerland, and Japan.
Restrictions on payments in foreign currency instructed by Order of the President of the Russian Federation as of March 5, 2022 N 95 "On the temporary procedure for the fulfilment of obligations to certain foreign creditors" (“Order No. 95”).
A temporary procedure was introduced for the fulfilment of payment obligations by Russian residents, as well as the Russian Federation. It affects obligations from loans and borrowings, and financial instruments to foreign creditors from Unfriendly States (with the exception of those registered in the Russian Federation).
Restrictions:
• Relates only to loans and borrowings, and financial instruments;
• Only affects obligations of Russian residents in excess of 10 million rubles per calendar month (or foreign-currency equivalent);
• Russian residents have the right to fulfil their obligations by transferring Russian rubles to special ruble “C” accounts opened in the name of a foreign creditor in a Russian bank. The procedure for opening such accounts will be determined by a decision of the Central Bank;
• Payments in foreign currency are possible only on the basis of a special permit.
Restrictions do not apply to foreign creditors from Unfriendly States which are:
• under the control of Russian legal entities or individuals (end beneficiaries are the Russian Federation, Russian legal entities or individuals), including if this control is exercised through foreign legal persons associated with such foreign states; and
• information on control over them is disclosed by Russian legal entities or individuals by the persons mentioned above, to the tax authorities of the Russian Federation in accordance with requirements of the legislation of the Russian Federation.
Residents and other states which have not joined the sanctions
On one hand, Order No. 95 applies exclusively to the debts owed to creditors from Unfriendly States (and creditors controlled by persons from such countries), and also for debts that were assigned to such creditors from Unfriendly States (non-residents). On the other hand, according to the Clarifications of the Central Bank, creditors who are residents of states that have not joined the sanctions shall also receive payments in rubles at the exchange rate at the time of payment. Whether these clarifications mean that Order No. 95 covers residents of countries that have not joined the sanctions is not clear at the moment.
Ban and restrictions on the export of certain products and raw materials from the Russian Federation introduced by Order of the President of the Russian Federation No. 100 dated March 8, 2022 "On the Application of Special Economic Measures in the Sphere of Foreign Economic Activity for the Purpose of Ensuring the Security of the Russian Federation" and following Government Decree as of 9 March 2022 No. 311, 312, 313, following Government Decree as of March 6, 2022 No. 302
The list includes technological, telecommunications, medical equipment, vehicles, agricultural machinery, electrical equipment – more than 200 items in total, including railway cars and locomotives, containers, turbines, metal and stone processing machines, monitors, projectors, consoles, and panels.
The export of these goods is temporarily restricted to all foreign countries, with the exception of the member states of the EAEU, Abkhazia, and South Ossetia. In relation to the latter, a permitting procedure for export will apply, providing that permits for the export of goods to the EAEU countries, Abkhazia, and South Ossetia will be issued by the Ministry of Agriculture, the Ministry of Transport, the Ministry of Industry and Trade, the Ministry of Digital Development, and the Ministry of Natural Resources.
In addition, the Government Decree temporarily restricted the export of certain types of timber from Russia. It is banned in states that have committed “Unfriendly Actions”, according to the approved list.
Among other things, Russia has introduced a temporary ban on the export of foreign medical devices from the country, i.e., medical devices that were delivered from states that joined the sanctions and are now in the warehouses of importers or are undergoing customs procedures.
Additionally, the Government of the Russian Federation determined a list of goods and equipment previously imported into Russia from abroad, which are temporarily prohibited from being exported from the country until the end of 2022.
A procedure for certain previously frozen transactions with foreign counterparties is established by Decree of the Government of the Russian Federation No. 295 dated 06.03.2022 "On Approval of the Rules for Issuing Permits by the Government Commission for Control over Foreign Investments in the Russian Federation for the Transactions Conducted by Residents with Foreign Persons in order to Implement Additional Temporary Economic Measures for ensuring the financial stability of the Russian Federation and amending the Regulations on the Government Commission for Control over Foreign Investments in the Russian Federation" Government Decree as of March 6, 2022 No. 431-r
As mentioned in a previous Legal Alert, on 1 March 2022, the Russian President signed Order No. 81, which stipulates the need to obtain permission from the Government Commission for Control of Foreign Investment in Russia (the “Commission”) for certain transactions and operations between Russian residents and residents of Unfriendly States. Such transactions include, inter alia, provision of loans and credits, and transactions related to transfer of ownership to securities and real estate.
On 6 March 2022, the Russian Government defined the procedure for issuing approvals for the above transactions.
An application for permission to conduct a transaction or a group of transactions is sent to the Russian Ministry of Finance by the Russian party to the transaction or by residents of Unfriendly States. The application shall contain, in particular, information on the purpose, subject matter, content and essential conditions of the transaction (operation), on the planned validity period of such permission, and other information.
The application must be accompanied by a document confirming the state registration of the applicant; constituent documents of the applicant – a legal entity; a document containing information about beneficiaries, beneficial owners, a person exercising control over a person of a foreign state who is a party to the transaction (participating in the transaction); balance sheet of the resident as of the last reporting date and other documents. The application and documents are drawn up in Russian. If the original documents are in a foreign language, they are submitted with a certified translation (with an apostille of the competent authority of the state in which this document was drawn up). A description of the submitted documents is attached to the application. The application and documents may be submitted on paper or in an electronic form, including in the form of electronic documents signed using an electronic digital signature.
The Russian Government does not specify the timeframe for reviewing an application. If the application is processed with a positive outcome and the authorization is issued, the Commission has the right to determine the conditions of the transaction and/or the period of validity of the authorization at its own discretion.
Dividend payments provided by Instruction of the Central Bank No. 018-34-3/1202 dated February 28, 2022
According to an instruction of the Central Bank, it is prohibited to “transfer payments” on securities to any foreign legal entities and individuals. This applies to payments such as dividends and interest on bonds. It is not yet entirely clear whether this applies to income from the sale of shares. Apparently, this rule should not apply to LLCs.
Temporary ban on the export of grain to the EAEU, as well as on the export of white sugar and raw cane sugar to third countries by Decree of the Government of the Russian Federation Nos. 361, 362 dated 14.03.2022
Russia introduced a temporary ban on the export of grain to the EAEU, as well as on the export of white sugar and raw cane sugar to third countries. Restrictions on grain will be valid until June 30, and on sugar until August 31, 2022.
The grain ban applies to wheat and meslin, rye, barley, and corn.
There are a number of exceptions for the export of sugar and grain. Thus, the supply of these products outside of Russia will be possible, including for the provision of humanitarian assistance, as well as within the framework of international transit traffic.