On 3 November 2014 the National Bank of Ukraine (the "NBU") issued Regulation No. 699 "On Application of Certain Provisions of Currency Legislation during Regime of Temporary Occupation in the Territory of Free Economic Zone in Crimea" (the "Regulation"). The Regulation became effective on 5 November 2014 and was adopted in line with several pieces of legislation passed following the annexation of Crimea by the Russian Federation, including the Law of Ukraine "On Establishment of the Free Economic Zone "Crimea" and Special Aspects of Economic Activities on Temporarily Occupied Territory of Ukraine” No. 1636-VII dated 12 August 2014 (which we analysed in our previous law-now article).
According to the Regulation:
- legal entities and individuals registered (or permanently resident) in the territory of the free economic zone in Crimea (hereinafter – the "FEZ") shall be treated as non-residents for the purposes of the NBU regulations and those who are involved in investment transactions shall be treated as foreign investors;
- payments from mainland Ukraine to the FEZ (and vice versa) shall be treated as cross-border payments;
- contracts entered into between residents of mainland Ukraine and residents of the FEZ shall be treated as foreign economic contracts. Therefore, foreign exchange restrictions shall apply to such contracts, including the so-called 90-day rule (which applies to export / import transactions);
- investments by Ukrainian residents to Crimea are prohibited;
- the following transactions cannot be conducted in the currency of Russia (the Rouble) in mainland Ukraine: (i) accepting bank deposits (including the increase and extension of deposits accepted before 27 September 2014), and (ii) providing loans (including overdrafts and extending the term of loan agreements entered before 27 September 2014); and
- Ukrainian banks shall stop any transactions on the bank accounts of legal entities registered in the FEZ and take all other measures required to close such accounts.
Legislation: Regulation of the National Bank of Ukraine “On Application of Certain Provisions of Currency Legislation during Regime of Temporary Occupation in the Territory of Free Economic Zone in Crimea” No. 699 dated 3 November 2014.