Please be informed that on 06 March 2022 the Russian Government has issued Decree No. 295  (the “Decree”) which temporarily requires prior approval of certain transactions of Russian persons and entities, including Russian subsidiaries of foreign companies  (“Russian Parties”), with foreign persons and entities (“Foreign Parties”).

However, contrary to a number of inaccurate media reports, the Decree purportedly extends only to particular types of transactions, which are primarily financial in nature (the “Covered Transactions”), rather than to all transactions with Foreign Parties. The Decree is declared to be aimed at stabilizing the Russian financial system and should therefore not interfere with normal business operations such as the ordinary trade in works, services or goods. We elaborate on the details below.

The Decree draws a distinction between (i) Foreign Parties that are associated with countries that enacted sanctions against Russia such as EU, UK, Canada and the US (the “Covered States”), and (ii) other Foreign Parties:

1.           For Foreign Parties associated with the Covered States (“Parties from Covered States”), prior governmental approval is now required (i) for Russian Parties to extend loans to Parties from Covered States, and (ii) to enter into transactions dealing with title to securities and real estate. Please note that Parties from Covered States are defined broadly and include (i) persons with citizenship of a Covered State, (ii) entities with a place of incorporation, center of business activities or business profits in a Covered State, and (iii) their subsidiaries and controlled persons even if they are not incorporated or domiciled in a Covered State (please note that this may be interpreted to cover Russian entities affiliated with Parties from Covered States).

2.           With regard to other Foreign Parties that are not associated with Covered States, only the following transactions require prior approval of the Russian Government:

• foreign currency loans (but not loans in Russian Ruble) provided by Russian Parties to such Foreign Parties;
• transactions dealing with securities or real estate purchased from Parties from Covered States after 22 February 2022.

3.           In addition, all Russian Parties will now need prior governmental approval to transfer foreign currency to their own accounts in foreign banks or other financial institutions, and to use foreign payment processing without opening bank accounts.

The Decree declares its temporary nature and is aimed at stabilizing the Russian financial market in light of sanctions. It therefore does not appear to be aimed at service agreements, works contracts, sales contracts and similar business transactions, unless they also involve one of the Covered Transactions, such as a loan.

However, please note that it is not entirely clear whether the notion of a ‘loan’ would be interpreted narrowly as a financial service or more broadly (which may then include even advance payments pending supply of goods). We expect further clarifications on this matter to follow.

Please also note that as the Decree appears to have been hastily adopted, it may be revised from time to time and/or its interpretation may be evolving. Therefore, we recommend to obtain legal advice with regard to particular decisions to be taken in light of the Decree.

We will be glad to offer our advice on any of the regulatory measures being taken – often on an emergency basis – by the Russian authorities. Particular areas to stay on the alert for include, for example, (i) currency control measures, (ii) import/export regulations, (iii) the legal environment for businesses with foreign involvement.

Should you have any questions, please do not hesitate to contact us.