On 1 March 2022, the Russian President signed Decree No. 81* “On Additional Temporary Economic Measures to Ensure the Financial Stability of the Russian Federation” (the “Decree”). The Decree establishes a special procedure for residents to carry out and perform certain transactions (and operations) with non-residents or persons controlled by non-residents (including those registered in the Russian Federation).
Special procedure for transactions with certain categories of persons
From 2 March 2022, a special procedure is established for carrying out certain transactions between residents and foreign persons (as well as their controlled persons, including Russian persons) connected with the states, which commit, within the meaning of Russian law, unfriendly acts in relation to Russian persons (the “Restricted Persons”).
Such states include, in particular, the states, which have imposed political or economic restrictions on the Russian Federation, Russian citizens or Russian legal entities.
The special procedure for carrying out transactions with the Restricted Persons applies to the following transactions:
- provision of credits and loans in roubles to the Restricted Persons;
- transactions related to the transfer of title to securities; and
- transactions related to the transfer of title to real estate.
In addition, the special procedures provide for the requirement to obtain a permit from the Government Commission for Control over Foreign Investments in the Russian Federation (the “Commission”) to carry out these transactions, which may specify the conditions for the above transactions. The procedure for issuing such permits shall be determined by the Russian government within five days from the Decree’s effective date.
In addition, transactions related to the transfer of title to securities and made with the Restricted Persons can be entered into at organised auctions (i.e. on stock exchange) on the basis of permits issued by the Central Bank of the Russian Federation (the “CBR”) upon consultation with the Ministry of Finance of the Russian Federation.
The Commission’s permit is also required to carry out transactions with securities and real estate acquired from the Restricted Persons by other foreign persons after 22 February 2022.
Note that in accordance with a literal interpretation of the Decree, the restrictions set forth by the Decree should not apply to transactions with respect to the participatory interests in the charter capitals of limited liability companies.
Foreign currency transactions and interbank payments
The Decree also allows, subject to the Commission’s permit, to carry out operations related to granting by Russian residents foreign currencies to non-residents under loan agreements, foreign currencies to accounts and deposits of Russian residents with foreign banks and other financial market institutions, and transferring funds without opening bank accounts through electronic payment instruments (e.g. e-wallets) issued by foreign payment service providers. These operations were completely banned by the previous Decree of the Russian President No. 79* dated 28 February 2022.
Russian credit institutions can perform interbank money transfers of foreign currencies to correspondent accounts with non-resident banks subject to all restrictions established by the Decree.
Restriction on cash exports
Starting 2 March 2022, the Decree prohibits the export of cash (or cash instruments) from the Russian Federation in foreign currency in the amount exceeding the equivalent of USD 10,000.
Restrictions on payments on Russian securities
According to public sources, the CBR has temporarily prohibited registrars and depositories from making payments on Russian securities in favour of foreign investors (the relevant CBR act has not been published). This measure primarily refers to the payment of dividends on shares and proceeds on bonds.
Therefore, Russian joint-stock companies may decide to pay dividends in favour of their foreign shareholders and transfer the relevant funds to the registrar (i.e. depositary), but the latter cannot effect payments to foreign shareholders. The same applies to payments of proceeds on bonds (including federal loan bonds).
Restrictions on money transfers by non-residents
Also, according to a message published in the official Telegram channel of the CBR, transfers from the accounts of non-resident legal entities and individuals from the states, which commit unfriendly acts in relation to Russian persons to foreign accounts, have been suspended. Transfers by non-residents without opening an account are limited to amount of USD 5,000 or its equivalent per month.
We will continue to monitor these developments and report on further changes.
For further information, please email Konstantin Baranov and Artashes Oganov or your usual contact at CMS Russia.
* In Russian