(Updated on 31 March 2022)

Russia has adopted countermeasures through various presidential decrees and government orders, which are mainly aimed primarily aiming at protecting the capital market, but also at restricting the export of goods.

First Presidential Decree No. 79 of 28 February 2022

A first Presidential Decree of the Russian Government President provides for a compulsory sale of 80% of the foreign exchange revenues earnings from cross-border supply and service contracts by Russian contractors with retroactive effect from 1 January 2022. A subsequent Presidential Decree No. 126 of 18 March 2022 now allows Russian exporters to apply to the Central Bank for an exemption from the compulsory saleexchange.

In addition, Russian residents were prohibited from making transfers in foreign currency to their own foreign accounts, as well as from making transfers without opening a bank account using foreign electronic means of payment, and from granting foreign currency loans to individuals or legal entities not resident in Russia. The ban on granting loans was later relaxed again (see below). Existing loans are not affected by this.

However, the ban on payments was again relaxed by an Oorder of the Russian Ministry of Finance of 12 March 2022 (N 05-06-10/VN-11081) and later by the Presidential 's Decree of 18 March 2022 No. 126, : according to which to this, Russian residents by way of exception may exceptionally make transfers in foreign currency to their foreign accounts in order to finance the current business activities operations of their branches.

In addition, payments by non-residents in foreign currency to foreign accounts of residents are permitted if these are salary, rent and dividend payments from securities or other interest income. 

FinallyLastly, resident individualpersons are allowed to make transfers in foreign currency from foreign accounts opened before 1 March 2022 to other foreign accounts, provided they have been disclosed to the Russian tax administration in accordance with the requirements of Russian law.

FinallyLastly, Russian public joint stock companies are entitled to repurchase their own shares as of 31 December 2022 if, i.a.et al., the average price of the acquired purchased shares has decreased by 20% or more in a three-month period beginning on 1 February 2022.

Decree of the President No. 81 of 1 March 2022

The granting of loans (in Roublesroubles), trading in securities and real estate between Russian residents and persons from so-called unfriendly statesUnfriendly Countries is now only permitted with the approval of the Russian government, with the exception of transactions involving the Russian Central Bank. According to an explanation by the Central Bank, real estate outside Russia is not covered by this restriction. The government commission responsible for approval has also generally excluded the sale of real estate by residents individuals to non-residents. Transactions between residents and foreign persons not from unfriendly statesUnfriendly Countries are affected if the subject matter is securities and real estate acquired by these foreign persons from persons from unfriendly statesUnfriendly Countries after 22 February 2022. The list of unfriendly statesUnfriendly Countries is reviewed by the Russian government every second day and adjusted if necessary. It currently includes all EU member states and 21 other countries (as of 5 March 2022, Government Order No. 430-r).

The subsequent Decree of the Russian President dated of 18 March 2022 No. 126 clarified that the requirement of a special permit for granting Roublesrouble loans,  trading in securities and real estate between Russian residents and persons from unfriendly statesUnfriendly Countries shall not apply with respect to Russian subsidiaries of shareholders located in unfriendly statesUnfriendly Countries.

Since 2 March 2022, the export of cash in foreign currency with an equivalent value of more than US$10,000 from Russia has been prohibited.

Possible repayment of foreign loans in Roubles

By a further Presidential Decree No. 95 of 5 March 2022 , the Russian State, its federation subjects and municipal entities, but also other Russian residents (i.e. Russian legal and natural persons) are permitted to settle loan obligations towards foreign lenders from so-called “Unfriendly Countries” in Roublesroubles if the obligation, on the first of each month, exceeds an amount of 10 million Roublesroubles per month at the official rate of exchange of the Russian Central Bank. For this purpose the Russian debtor, in the case of a Russian credit institution, may open a special (type “C”) clearing account. The obligation under the loan is deemed to have been settled when the payment has been received on such account at the official exchange rate of the Russian Central Bank on the date of the payment concerned. The foreign creditor may then request payment of the funds from the Russian credit institution. The procedure also applies to loans in which the foreign creditor has assigned its receivables to a third party after 1 March 2022, even if such third party is a Russian resident. The above provisions do not apply to Russian and natural persons who reside in Unfriendly Countries or who are controlled by Russian persons.

Based on the wording, however, this applies only to loans of foreign lenders and not to other cross-border supply and service contracts.

The list of Unfriendly Countries is reviewed and where applicable adjusted by the Russian Government every two days. It currently includes all EU member states and 21 other countries (as at 5 March 2022, Government Directive No. 430-r).

Payments to foreign accounts by residents

According to an Order of the Russian Ministry of Finance of 12 March 2022, Russian residents by way of exception may make payment transfers in foreign currency to their foreign accounts to finance the current business operations of their branches provided that the corresponding financing amount does not exceed that of the previous year.

Moreover, foreign currency payments by non-residents to foreign accounts of residents are allowed if these are salary, rent and dividend payments from securities or other interest income. 

Lastly, resident natural persons may make transfers in foreign currency from foreign accounts opened prior to 1 March 2022 to other foreign accounts if they were disclosed to the Russian tax administration in accordance with the requirements of Russian law.

Presidential Decree (“Ukaz”) No. 126 of 18 March 2022

For a limited term until 1 September 2022, banks on which foreign sanctions were imposed are entitled to settle foreign currency obligations to Russian legal persons under account or deposit contracts in roubles if such obligations arose before the adoption of the sanctions.

Until 31 December 2022, residents may make payments for shares, deposits or ownership interests in a non-resident legal person only with the approval of the Central Bank.

The Central Bank is entitled, among other things, to fix a cap

• on advance payments which residents may transfer to foreign companies and non-resident persons for contracts yet to be determined by the supervisory board of the Central Bank,
• on transfers by non-residents from Unfriendly Countries (e.g. Russian branches or representative offices) to non-residents of other countries or vice-versa, or
• on foreign currency purchases by non-residents in Russia.

With regard to advance payments, the Central Bank stipulated that a maximum of 30% of the contract value may be paid as advance payment for the following contracts:

• contracts whose, the terms and conditions of which provide for provision of services by a non-resident;
• contracts whose the terms of which provide for performance of works by a non-resident, transfer of information or results of intellectual activity by a non-resident, including exclusive rights to them.

Russian exporters can apply to the Central Bank for an exemption from the requirement for the compulsory sale of 80% of their foreign currency revenues.

The requirements for a special permit for granting rouble loans and trade in securities and real estate between persons residing in Russia and persons from Unfriendly Countries does not apply to Russian subsidiaries of shareholders located in Unfriendly Countries.

The Central Bank has adopted corresponding implementing provisions in this regard.

Export bans

By Presidential Decree of the Russian Government President of 8 March 2022 No. 100, an import and export ban on certain goods yet to be listed by the Russian Government to apply until 31 December 2022 was ordered. The Russian Government clarified this ban in three orders on 10 March 2022 further amended by Government Order 390 as of 17 March 2022.

The Government Order No. 311 of 9 March covers more than 200 items of goods. The listed goods are stated with the numbering of the Unified Goods Nomenclature for Foreign Economic Activities of the Eurasian Economic Union (Единая товарная номенклатура внешнеэкономической деятельности Евразийского экономического союза) and together with their respective designation. In summary, the export bans cover, among other things, pharmaceutical products, medical, optical, electrotechnical devices as well as devices and instruments of telecommunications, various industry, production as well as hand tools and machines, nuclear reactors, fuel elements, pumps, boilers, turbines, motors, drives, industrial and laboratory furnaces, mining equipment, all manner of road, water, rail vehicles and aircraft and their accessories, agricultural and forestry technology, household and electrotechnology as well as plant, devices and equipment for all manner of industrial sectors, such as the paper and printing industry, food and beverage production, metalworking, wood and rubber processing, textile industry, semi-conductor production, or e.g. foundries.

There are some exemptions, e.g. for deliveries to countries of the Eurasian Economic Union, Abkhazia und South Ossetia and for transit through Russia as well as for goods originating in the Russian Federation where an ST-1 certificate of origin, to be attached, is provided as proof. But proof can also be furnished by another authorised certificate including a confirmation from the Ministry of Industry and Trade of the Russian Federation.

Other exceptions apply e.g. also

• to goods and services originating in other member states of the Eurasian Economic Union which were transferred to the territory of such member states of the Eurasian Economic Union in customs procedures providing for an export from the customs territory of the Eurasian Economic Union,
• to goods in a special economic zone and equivalent territories which were produced using foreign goods transferred to the customs procedure of a customs-free zone,
• to goods produced in free warehouses in Russia using goods transferred to the customs procedure of a free warehouse,
• to spare parts and special equipment which are temporarily exported from the territory of the Russian Federation and intended for the reworking, protection of goods, the maintenance or the operation of international transport vehicles,
• to reusable packaging items (made from wood, metal, glass, plastic, special or other materials) which were imported in accordance with the customs procedure of re-export for temporary import or for temporary export,
• to goods which are intended to be exported from the Russian Federation and which were previously imported to the Russian Federation with the ATA Carnet and many more.

Furthermore, limited-term permits may be issued for the export of goods listed in the annex to the Decision of the Government of the Russian Federation No. 311.

Decision of the Government of the Russian Federation No. 312 as amended by the Decision of the Government of the Russian Federation of 17 March 2022 allows the export of certain agricultural technology, of listed vehicles, industrial products, telecommunications systems and medical devices listed in the annexes to the Eurasian Economic Union only with export permits, with similar exemptions applying in some cases to Decision of the Government of the Russian Federation No. 311.

Lastly, Decision of the Government of the Russian Federation No. 313 of 9 March 2022 bans the export of processed or unprocessed solid wood, wood chips or wood panel composites to Unfriendly Countries (with some exceptions).

Decision of the Government of the Russian Federation No. 302 of 6 March 2022 banning the export of medical devices produced abroad and transferred to Russia if the producing country had issued sanctions against Russia has since been repealed. Export bans on medical devices are now solely covered by the Decisions of the Government of the Russian Federation No. 311 and No. 312.

Decrease in IP protection for rights holders from Unfriendly Countries

Decision of the Government of the Russian Federation No. 299 of 6 March 2022 reduces compensation payments for patent infringements for patent holders from Unfriendly Countries to nil. In one (isolated) decision of the Commercial Court of the Kirov region of 2 March 2022, a foreign rights holder was denied IP protection against an IP infringement because the rights holder is from an Unfriendly Country. It remains to be seen here whether other courts will also hold this view.

Lastly, the Russian Government, according to Article 18(3) of the Law of 4 March 2022, may determine goods for which certain IP protecting provisions are no longer to apply. Such determination has not yet been made. The aforementioned Law of 4 March 2022 sets out supporting measures for the Russian population and economy.

A draft bill of Duma deputy Krascheninnikov submitted on 22 March 2022 provides among other things that in light of the sanctions against Russia it should not be permissible to unilaterally terminate or amend IP contracts except in cases of material breaches. The corresponding agreements are extended by the period of such “unfriendly measures” against Russia unless such extension is waived by the Russian contracting party. Here, the development in the further legislative procedure will have to be awaited.

Draft bill on external administration

A further draft bill provides for the possibility of appointing an external administrator over the assets of foreign shareholders in Russia if the participating interest of a company shareholder from Unfriendly Countries in a Russian company is at least 25% and the balance sheet value of the Russian company as per the last annual financial statement amounts to at least 1 billion roubles and/or the company has more than 100 employees. If the management of the Russian company was illegally terminated (because it left Russia, committed acts resulting in a significant depreciation in the company’s assets, or the company illegally suspended its activity, among other reasons) or the management performs acts that may lead to the unjustified suspension of operations, to liquidation or to insolvency (i.a. as a result of a public declaration of suspension without economic reasons, termination of material contracts, dismissal of at least one third of employees), an external administrator may be appointed by the courts. The administrator has the task of safeguarding the company’s continued existence and jobs. For that purpose he may also spin off or sell assets, which effectively is tantamount to an expropriation. Here, too, the development in the further legislative procedure will have to be awaited.

(Updated on 25 March 2022)