Government Commission on the Control of Foreign Investments: Recent Decisions of Summer 2023
The Sub-Commission of the Government Commission on the Control of Foreign Investments in the Russian Federation (hereinafter referred to as the Commission) is authorized to grant permissions for residents to conduct transactions with foreign individuals from unfriendly states, as well as foreign exchange operations. The rules for issuing permissions are set by Government Decree No. 295 dated 06.03.2022, and each case is considered separately by the commission. As we have noted in earlier publications, the Commission generalizes decision-making practices by publishing excerpts from some of its decisions, thereby providing general permissions for certain categories of persons or transactions or clarifying the rules that it will follow in considering similar or related cases.
Let's examine the most recent and relevant decisions. In June this year, a unanimous decision was made to allow residents to carry out foreign exchange operations related to the provision of foreign currency under loan agreements for the benefit of friendly foreign non-residents (or Russian persons controlled by them) until 30.09.2023 inclusive. Last year's trend towards restricting foreign exchange operations remains relevant, but today the Russian Government provides temporary relief for those transferring capital to friendly countries.
On July 12, the Commission changed the conditions to be assessed for making decisions on granting permissions for transactions aimed at the alienation of securities, including shares, interests (contributions) in the charter (joint) capitals of Russian economic societies. The meeting protocols of the Sub-Commission dated 22.12.2022 No. 118/1 and 02.03.2023 No. 143/4 were recognized as no longer valid. It can be said that the list of conditions for assessment was expanded, regulating new relationships arising in connection with the reorganization (or liquidation) of persons during their sale.
The approaches to issuing permissions for the payment of dividends to foreign creditors were also updated and clarified, taking into account the recommendations of the Ministry of Finance and the Bank of Russia, which participate in coordinating transactions along with the Commission.
On July 27, the Government Commission issued a general permission for the fulfillment of obligations under Eurobonds and presented the conditions under which such transactions are feasible:
● if the redemption date of the Eurobonds occurs in the period until 31.12.2024 (inclusive), or
if the Russian legal entity has obtained the consent of the Eurobond holders regarding the implementation of separate payments to Eurobond holders whose rights are accounted for by Russian depositories, and to Eurobond holders whose rights are accounted for by a foreign depository, provided that:
a) Eurobonds are admitted to organized trading at PJSC Moscow Exchange;
● b) the Russian legal entity has received confirmation of the will of the Eurobond holders who have the right to dispose of more than 75% of the total number of Eurobonds accounted for in Russian depositories, about choosing the method of fulfilling obligations under the Eurobonds by making monetary payments on them, rather than issuing bonds, the payment for which upon placement is carried out by Eurobonds or monetary funds with the targeted use of the attracted funds to purchase Eurobonds.
In conclusion, it should be noted that analyzing the regulatory legal acts governing the activities of the Commission in issuing permissions for transactions with unfriendly non-residents will never allow for an unambiguous conclusion about which transaction currently has chances for approval and which does not. In fact, excerpts from decisions published by the Ministry of Finance of the Russian Federation are our only guide in trying to plan our shaky and uncertain future in relations with persons committing unfriendly actions and persons controlled by them.
