On 13 April 2018, the State Duma (a lower chamber of the Russian parliament) introduced draft law No. 441399 – 7 "On measures of impact (resistance) to unfriendly actions of the United States of America and (or) other foreign states" (the "Draft Law"). The Draft Law is in response to the latest additions to the US sanctions which were imposed on Russian companies and individuals on 6 April 2018 by the US Department of Treasury Office of Foreign Assets Control.
The Draft Law sets forth a list of restrictions which may be imposed on companies and nationals that do business with or in Russia and originate from the USA or those other countries which have imposed or supported sanctions against Russian economic sectors, companies and individuals (the "Designated Jurisdictions"). The restrictions may be introduced in part or in full by the Russian Government upon the decision of the President of the Russian Federation and shall be mandatory for Russian authorities, citizens and companies.
In the course of the Draft Law discussions held on 20 April 2018, Vyacheslav Volodin, speaker of the State Duma, raised an idea of liability (including criminal) for compliance with the sanctions against Russia imposed by the Designated Jurisdictions in the territory of Russia. This is not part of the Draft Law at this stage but may negatively affect most of international businesses operating in Russia.
The list of restrictions currently set forth by the Draft Law contains the following:
1. Ban (prohibition or limitation) on import of the following products:
- agricultural products, raw materials and food products originating from the Designated Jurisdictions – the list to be determined by the Russian Government;
- alcohol and tobacco products originating from the Designated Jurisdictions;
- pharmaceutical products (except for products with no Russian equivalent) manufactured in the Designated Jurisdictions – the list to be determined by the Russian Government;
- any other products manufactured in the Designated Jurisdictions – the list to be determined by the Russian Government.
2. Ban on travel of citizens of the Designated Jurisdictions into Russia. A list of such citizens may be adopted by the authorised state authority.
3. Termination or suspension of cooperation between the Russian Federation and (or) Russian legal entities on the one hand, and the Designated Jurisdictions and (or) companies more than 25% of shares of which are directly or indirectly owned by companies from the Designated Jurisdictions (the "Designated Persons"), on the other hand, in the following sectors:
- nuclear industry;
- aircraft engineering;
- rocket engines.
4. Prohibition or limitation of performance by the companies from the Designated Jurisdictions and by the Designated Persons of the following activities:
- consulting, audit and legal services in the territory of Russia for governmental and municipal needs and needs of specific types of legal entities;
- privatisation of state and municipal property;
- arranging the sale of state property on behalf of Russia and/or performing functions of the seller of such state property;
- export from Russia of products and equipment containing rare minerals.
5. "Exhaustion of exclusive rights to trademarks" owned by the citizens of the Designated Jurisdictions, companies from the Designated Jurisdictions or by the Designated Persons for the products included in the list to be issued by the Russian Government.
6. Increase of fees for navigation services for aircrafts of the Designated Jurisdictions which are transporting freight through the territory of Russia.
7. Prohibition or limitation of computer software and technological equipment (the list to be determined by the Russian Government) manufactured in the Designated Jurisdictions to be acquired for governmental and municipal needs as well as needs of specific types of legal entities.
8. Prohibition or limitation of employment of citizens from the Designated Jurisdictions in Russia.
What does it mean for your business
The State Duma has initiated a series of round table discussions with various experts. On 3 May 2018, the State Duma will host a round table with the business community, government, presidential administration, and Russian sanctioned companies. You may wish to explore your attendance with the State Duma or business associations (AmCham, AEB, German-Russian Chamber of Commerce).
To continue your business in Russia, you should be ready to review your operational model in Russia and adapt it to the new regulatory environment.
We continue to closely monitor the situation and will update you on any further developments.