Russian President Vladimir Putin issued a decree imposing an overall ban on transactions with certain assets, such as securities in certain Russian companies and interests in certain Russian investment projects, if these securities and interests are owned by persons from the so-called "unfriendly states" or persons controlled by such. Assets include shares in certain Russian major entities, energy and subsoil companies and projects, and Russian banks. The new ban restricts the ability of investors to exit from their Russian investments or to restructure their Russian holdings without specific permission of the Russian president.
This ban is in addition to several existing restrictions issued as part of the Russian counter-sanctions measures.
Decree No. 520, "On Application of Special Economic Measures in Financial and Fuel and Energy Sectors in Connection with Unfriendly Actions of Certain Foreign States and International Organizations" (the Decree), took effect immediately upon its publication on August 5.
The Decree generally prohibits any transaction (operation) resulting, directly and/or indirectly, in acquisition, modification, termination, or creation of any encumbrance over the rights to own, use, or dispose of:
The Decree applies if the above assets are owned by non-Russian persons connected with the so-called unfriendly states or by persons who are under control of such.
The prohibition is effective until December 31, 2022, and may be extended further by the Russian president numerous times.
The Decree directs that any transaction (operation) executed in violation of the prohibition is null and void. An owner of an asset which was the subject matter of such transaction must be denied of all its rights whether under Russian law, an agreement, or other legal arrangement.
Despite the general prohibition, the Decree specifies that it only applies to shares and interests in specific companies and projects. In particular, the Decree is stated to apply to:
The list of such entities is yet to be approved by the president, based on the proposal to come from the Russian government by August 15, 2022.
Given the actual scope, it remains to be seen yet whether the Decree would be extended to apply to other types of securities or other companies or investment projects implemented in Russia.
The Decree directly states that the Russian president can specifically approve any otherwise prohibited transaction.
The Decree contains two limited exemptions from the new prohibition for transactions (operations) executed pursuant to:
Our lawyers have long been trusted advisers to clients navigating the complex and quickly changing global framework of international sanctions. Because companies must closely monitor evolving government guidance to understand what changes need to be made to their global operations to maintain business continuity, we offer this centralized portal to share our insights and analyses. To receive the latest updates, subscribe to our Ukraine Conflict: How to Maintain Global Business Continuity mailing list.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Ukraine Conflict Task Force
Giovanna M. Cinelli
Alexey Chertov
Bruce Johnston
Grigory Marinichev
Michael Masling
Kenneth J. Nunnenkamp
Christina Renner
Vasilisa Strizh
Carl A. Valenstein
Dr. Axel Spies
Abaigael R. Clifford
Jiazhen (Ivon) Guo
Katelyn M. Hilferty
Christian Kozlowski
Daniel Lopez Rus
Eli Rymland-Kelly
Andrey Ignatenko