On 22 October 2018 President Putin adopted Decree No. 592 "On application of special economic measures in connection with unfriendly actions of Ukraine against citizens and legal entities of the Russian Federation" ("Decree"). The Decree was adopted as a retaliatory measure seeking to respond to the extension of sanctions against a number of Russian transportation companies (including companies of the RZD group) imposed by the National Security and Defence Council of Ukraine at the end of September.
On 1 November 2018, in implementing of the Decree, the Government of the Russian Federation adopted Resolution No. 1300 "On measures for implementation of the Decree of the Russian President No. 592 dated 22 October 2018" ("Resolution"). The Resolution introduced a number of special economic measures against 322 Ukrainian citizens, including senior public officers of Ukraine (notably, Chairman of the Ukrainian Parliament, Andrey Parubii; Head of the Ministry of Internal Affairs of Ukraine, Arsen Avakov; Secretary of the National Security and Defence Council of Ukraine, Aleksandr Turchinov); prominent businessmen (notably, Viktor Pinchuk, Gennadii Bogolyubov, etc.) and 68 Ukrainian legal entities or entities controlled by Ukrainian citizens ("Restricted Persons").
The respective special economic measures include:
- the blocking (freezing) of the following assets in the Russian Federation:
- non-cash monetary funds;
- book-entry (uncertificated) securities; and
- property located in the territory of the Russian Federation.
- a ban on the transfer of funds (capital withdrawal) from the Russian Federation.
The Resolution also imposes special economic measures in respect of companies controlled by the Restricted Persons. The specific definition of control is not set forth in the Resolution. It is possible that in practice the state authorities will define control as broad as possible, including indirect control through different means (e.g. corporate agreements, profit-transfer agreements). However, there is currently no further guidance in this respect.
The Resolution provides that the Ministry of Finance of the Russian Federation shall be the authority responsible for provision of proposals to the Russian Government on the following issues:
- amendments to the lists of Restricted Persons;
- provision of temporary permissions for certain dealings with certain restricted legal entities;
- annulment of the Resolution in the case of annulment of the restrictive measures imposed by Ukraine against Russian citizens and legal entities.
The Resolution took effect from the day of its official publication, i.e. on 1 November 2018.
What does it mean for your business?
We recommend the monitoring of further developments regarding the Resolution and consideration of the possible adaption of your business models in Russia to accommodate the new requirements.
We continue to monitor the situation closely and will update you once more specific information is available.