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Russian President signs decree on additional counter sanctions measures

On 18 March 2022, Decree of the Russian President No. 126* “On Additional Temporary Economic Measures to Ensure Financial Stability of the Russian Federation in the Sphere of Currency Regulation” (the “Decree”) entered into force.

Additional powers of the Central Bank of the Russian Federation (the “CBR”)

Under the Decree, the Board of Directors of the CBR may limit the amount of:

•       prepayments or advance payments made by non-resident legal entities (other than credit institutions) under certain contracts with foreign residents: from 1 April 2022*, such payment may not exceed 30% of the amount of obligations under contracts for the provision by a non-resident of services, performance of works, transfer of information and results of intellectual activities, if the amount of obligations under the contract exceeds USD 15,000;
 
•    funds transfers from non-resident legal entities registered in the states listed in Russian Government Decree No. 430-r dated 5 March 2022 (the “Unfriendly States”) or to accounts or banks and other financial market organisations in the Unfriendly States; and
 
•    foreign currency that can be purchased by non-resident legal entities in the domestic foreign exchange market: from 1 April 2022*, such entities cannot purchase foreign currency.

Any transactions in excess of such limits must be approved by the Government Commission for the Control over Foreign Investments in the Russian Federation (the “Commission”).

Additionally, until 31 December 2022*, residents will have to obtain permissions from the CBR to pay for a share, contribution, or unit in the assets of a non-resident legal entity or a contribution to a non-resident under a simple partnership agreement with investments in the form of capital contributions (a joint venture agreement).

The CBR may also allow* residents to sell foreign currency proceeds within more than three business days or not to sell foreign currency proceeds that will be applied for the discharge of obligations in foreign currency under facility agreements with Russian banks (it is also possible to sell less than 80% of the total amount of foreign currency proceeds on the basis of the Commission’s permission).

Discharge of obligations under bank account (deposit) agreements entered into with certain banks

Until 1 September 2022, obligations in foreign currency under bank account (deposit) agreements entered into by resident legal entities with credit institutions in respect of which restrictive measures have been introduced by the Unfriendly States after the occurrence of such obligations are deemed duly performed if they are discharged in Roubles.

Clarifications of previous decrees

The Decree also contains some clarifications on the application of Decrees 79* and 81*.

The Decree permits crediting foreign currency to accounts or deposits of official representative offices of the Russian Federation, representative offices of federal executive bodies, foreign representative offices and branches of resident legal entities, and their employees that are opened with foreign banks and financial institutions without obtaining the Commission’s permission, which is required under Decrees 79 and 81 for crediting by residents of foreign currency to their accounts (deposits) opened with foreign banks and other financial organisations.

Also, the requirements of Decree 79 on the sale of foreign currency proceeds do not apply to foreign currency credited in connection with implementing projects related to the production of liquefied natural gas in the Russian Arctic to the accounts of organisations that implement such projects.

In addition, notwithstanding the requirements of Decree 81, it is now possible to grant loans and credits to residents who are controlled by persons from the Unfriendly States without obtaining the Commission’s permission.

Exemptions for persons controlled by Russian beneficiaries

For the purposes of the Decree, persons controlled by Russian beneficiaries (legal and natural persons), including through foreign persons, are not recognised as persons related to the Unfriendly States, if information on such control is disclosed to the Russian tax authorities.

We will continue to monitor these developments and keep you informed of any further changes.

* In Russian

Authors

Konstantin Baranov
Konstantin Baranov
Partner
Head of Banking & Finance
Moscow
Elena Tchoubykina
Elena Tchoubykina
Counsel
Banking & Finance
Moscow