On July 5, 2022, the President of the Russian Federation issued Decree No. 430 “On the Repatriation of Foreign Currency and the Currency of the Russian Federation by Residents Participating in Foreign Economic Activity”1 (hereinafter referred to as the “Decree”). The Decree, in addition to the requirements and restrictions established earlier2, provides for the introduction of new measures in the field of regulation of currency relations.
So, the new introduced measures establish:
- The obligation to repatriate (import into the Russian Federation) foreign currency received by residents under exercising international business activity in the amount no less than the amount of foreign currency subject to mandatory sale. At the same time, as of today, due to the easing introduced by the Governmental Subcommittee, the amount of foreign currency subject to mandatory sale is of 0% of foreign exchange earnings3.
- Limitation of cases when residents are unable to deposit and transfer foreign currency to their accounts abroad. For now, the ban on such operations applies only to cases when residents transfer funds that they received:
- in the form of dividends on shares of Russian joint-stock companies or
- during the distribution of profits of Russian LLCs, business partnerships and production cooperatives.
At the same time, the Governmental Commission is empowered to introduce additional grounds for restricting the crediting of foreign currency by residents to their accounts abroad, as well as for making money transfers without opening a bank account using electronic means of payment provided by foreign payment service providers.
- Grounds for recognizing obligations to owners and holders of Eurobonds4
as duly fulfilled:
- if Russian legal entities have placed bonds in favor of holders of Eurobonds, and the payment of such bonds is carried out by the specified Eurobonds. At the same time, such criteria of bonds and Eurobonds as the amount of income, the period of payment of income, the maturity date and the nominal value shall be similar;
- if the funds used by Russian legal entities for purchasing Eurobonds were received during the placement of the bonds.
- Additionally, Russian legal entities that have obligations under Eurobonds are required to ensure the fulfillment of such obligations if the rights of holders of these Eurobonds are recorded by Russian depositories. This requirement can be fulfilled by:
- transferring the placed bonds to the specified holders, or
- transferring funds to them in the manner order by the Central Bank.
- A special procedure for the execution of syndicated loan agreements between Russian legal entities (debtors) and residents (creditors), where the creditor’s payment agent is foreign person of unfriendly jurisdictions or persons controlled by it. Thus, debtors under such obligations must fulfill them by transferring money to creditors, bypassing the specified payment agents.
Thus, the measures established by the Decree provide for both new restrictions and a certain relief in the field of currency regulation.
1 Presidential Decree No. 430 of 05.07.2022 “On the Repatriation of Foreign Currency and the Currency of the Russian Federation by Residents Participating in Foreign Economic Activity” // URL: http://publication.pravo.gov.ru/Document/View/0001202207050011
2 Presidential Decree No. 79 of 28.02.2022 “On the application of special economic measures in connection with the unfriendly actions of the United States of America and foreign States and international organizations that have joined them” // URL: http://publication.pravo.gov.ru/Document/View/0001202202280049?index=1&rangeSize=1; Presidential Decree No. 81 of 01.03.2022 “On additional temporary economic measures to ensure the financial stability of the Russian Federation” //// URL: http://publication.pravo.gov.ru/Document/View/0001202203010083?index=0&rangeSize=1; Presidential Decree No. 95 of 05.03.2022 “On the temporary procedure for fulfilling obligations to certain foreign creditors” // URL: http://publication.pravo.gov.ru/Document/View/0001202203050062
3 Extract from the minutes of the meeting of the subcommittee of the Governmental Commission for the Control of Foreign Investment in the Russian Federation No. 61 of 09.06.2022 (published by the Ministry of Finance of the Russian Federation on 10.06.2022 No. 05-06-05/VN-29704) // URL: https://minfin.gov.ru/ru/permission/79-81/?id_65=136373-vypiska_iz_protokola_zasedaniya_podkomissii_pravitelstvennoi_komissii_po_kontrolyu_za_osushchestvleniem_inostrannykh_investitsii_v_rossiiskoi_federatsii_ot_9_iyunya_
4Eurobonds within the meaning of the Decree are foreign bonds issued by foreign organizations