Advising on Russia's temporary economic measures

The main directions of action of temporary economic measures 

The system of temporary economic measures in Russia affects several key areas. The measures apply to both Russian and foreign persons, especially when it comes to "unfriendly" jurisdictions. 

1. Currency transactions and cross-border transfers 

Restrictions have been imposed on a number of currency transactions with the participation of non-residents from unfriendly countries. In particular: 

• a ban has been established on transfers in favor of such persons without the permission of the Bank of Russia or the Government Commission; 

• there is a restriction on crediting foreign currency to foreign accounts of Russian residents; 

• the terms of repatriation of export proceeds are regulated. 

Certain transactions require individual permission from the Bank of Russia or the Ministry of Finance. 

2. Transactions with foreign persons 

For transactions between Russian companies and persons from unfriendly countries (including through offshore structures), a pre-approval regime has been introduced. This applies to: 

• alienation of shares in LLCs and shares in Russian JSCs; 

• distribution of profits, payment of dividends and interest; 

• assignment of rights of claim, loan, gift and other gratuitous transactions; 

• a number of transactions with real estate, intellectual property and financial assets. 

Approval is carried out through the Government Commission for Control over Foreign Investment. 

3. Restrictions on payments to foreign investors 

According to the regulations of the Bank of Russia and the Government of the Russian Federation, limits or complete prohibitions on the payment of: 

• dividends on shares; 

• interest on loans and bonds; 

• income under participation agreements. 

For most payments in favor of foreign persons from unfriendly states, a separate permit or compliance with the established conditions (for example, the amount of investment, the amount of profit, compliance with the industry, etc.) are required. 

4. Asset transactions and corporate rights 

The special procedure applies to transactions related to: 

• acquisition or disposal of shares and shares in companies with foreign participation; 

• purchase and sale of securities, the beneficiaries of which are non-residents; 

• corporate restructuring with the participation of foreign persons; 

• sale of real estate with the participation of foreign owners. 

Often, such transactions are possible only if there is a decision of the Government Commission and the support of an authorized legal consultant. 

5. Other measures and special regimes 

In some areas, additional restrictions apply, including: 

• a ban on the transfer of technology and critical infrastructure; 

• restriction on receiving dividends from strategic enterprises; 

• special conditions for the transfer of rights to licenses, software, patents and know-how. 

In addition, the formation of new mechanisms for sanctions and counter-sanctions regulation, directly related to temporary measures, continues.

When legal advice is required 

Temporary economic measures cover dozens of scenarios in which even familiar business processes require legal assessment. Violation of the established procedure may entail not only the blocking of the transaction, but also administrative or criminal liability, as well as refusal to pay by banks. In this context, legal advice becomes a necessary condition for lawful and safe activities.

When structuring transactions with foreign persons 

Any transaction involving non-residents, especially from "unfriendly" jurisdictions, is subject to preliminary legal verification: 

• whether coordination with the Government Commission is required; 

• whether prohibitions on the alienation of interests, securities or property are applicable; 

• whether the transaction is subject to restrictions on counterparties, jurisdiction or form of the transaction; 

• whether it is possible to use bypass structures (and whether it is legal). 

Without legal due diligence, a company may accidentally make a transaction with signs of fictitiousness or violate the rules of the special permit regime.

When transferring funds abroad 

In the context of restrictions on foreign exchange transactions and capital transfers, advice is necessary in the following cases: 

• transfer of funds to a foreign account; 

• settlements with non-residents in foreign currency; 

• repayment of loans or payment of interest to a non-resident; 

• payment for services, licenses or goods imported from abroad. 

A lawyer determines whether the transaction violates the provisions of the regulations of the Central Bank of the Russian Federation, and, if necessary, helps to obtain permission.

When withdrawing profits by foreign participants 

If the company has foreign investors, consulting allows you to determine whether it is possible to withdraw profits, under what conditions, and how to draw up documents to comply with the law.

When transferring ownership of assets or shares 

Many corporate transactions involving foreign entities — alienation, donation, pledge, reorganization — fall under the sanctions regime and require prior permission from the Government Commission, or in some cases, from the Central Bank or the Ministry of Finance.

When holding assets abroad 

Residents who have foreign accounts, real estate, shares in foreign companies are required to comply with special rules. Violation of the terms of notifications, reporting procedures or currency transactions can lead to fines and criminal liability. 

Consultation helps: 

• Determine whether a notification or account registration is required. 

• correctly reflect the possession in the documentation; 

• comply with the regime of legal disposal of assets.

Difference between temporary measures and sanctions regulation and currency control 

Temporary economic measures are often perceived as part of sanctions legislation or currency controls. However, from a legal point of view, it is an independent regime that has a special nature, goals and mechanism of application. 

Temporary economic measures are a measure of domestic economic policy 

These measures are imposed unilaterally on the basis of: 

• decrees of the President of the Russian Federation; 

• resolutions of the Government of the Russian Federation; 

• regulations of the Bank of Russia and the Ministry of Finance. 

Their goal is to ensure the stability of the financial system, prevent capital outflow, preserve critical infrastructure and adapt the economy to external conditions. 

The measures are addressed to both residents and non-residents, and restrict certain types of transactions, operations and corporate actions. As a rule, they are applied to transactions with persons from unfriendly states, transactions in foreign currency, disposal of assets abroad, etc. 

Sanctions regulation is a foreign policy tool 

Sanctions, on the contrary, are retaliatory or preventive measures applied both by the Russian Federation and against it by other states (the United States, the EU, the United Kingdom, etc.). 

Sanctions are formed under international law or the national legislation of foreign states. They relate to personal, sectoral or country constraints. 

The sanctions regime requires a separate analysis. 

Currency control is a permanent regulatory regime 

It is a stable element of the economic system, regulated: 

• the Law "On Currency Regulation and Currency Control" (173-FZ); 

• by-laws of the Central Bank of the Russian Federation and the Ministry of Finance. 

It establishes a general procedure: 

• opening foreign accounts; 

• settlements in foreign currency; 

• repatriation of foreign exchange earnings and execution of contracts. 

Temporary measures may supplement or temporarily change certain provisions of currency legislation, but in themselves they are not identical to currency control. 

For an accurate legal assessment and correct execution of the transaction, it is necessary to understand: 

• to which regulation the restriction belongs; 

• which authorities are authorized to issue permits; 

• what sanctions for violation are applicable; 

• how to substantiate your legal position. 

A lawyer must take into account all three regimes as a whole, but at the same time accurately understand their boundaries and specifics.