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.

2. 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).

3. 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.

4. 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.

5. 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.

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.

2. 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.

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.

2. 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.