Decree of the President of the Russian Federation No. 95 "On the temporary procedure for fulfilling obligations to Certain foreign creditors". A brief overview

On March 5, 2022, a new Decree of the President of the Russian Federation No. 95 "On the temporary procedure for fulfilling obligations to Certain foreign creditors" was signed and entered into force. The decree was adopted in addition and clarification to the previous Decrees No. 79 and No. 81 on special economic measures.

A temporary procedure for the fulfillment of obligations to foreign creditors (execution in rubles) has been established, as well as special restrictions on transactions previously imposed on CFC have been lifted. Details below.

1. A temporary procedure has been established for residents of the Russian Federation to fulfill their obligations on loans and borrowings, financial instruments to foreign creditors from unfriendly states in the amount of more than 10 million rubles per calendar month (or the currency equivalent of this amount). Such foreign creditors may be:

• citizens of these states, legal entities and other persons registered or predominantly operating or profiting mainly in such states, other persons controlled by them, regardless of the country of registration (except the Russian Federation).

The temporary procedure defines the following procedure for the fulfillment of obligations:

• the debtor has the right to send to a Russian credit institution or to the central depository (if the execution is to be carried out on securities) an application for opening an account of type "C" in the name of a foreign creditor or its foreign nominee holder, intended for settlements on obligations. At the same time:
• the debtor has the right to send to a Russian credit institution or to the central securities depository (if the execution is to be carried out on securities) an application for opening a type "C" account in the name of a foreign creditor or its foreign nominee holder), intended for settlements on obligations. At the same time:
• depo accounts opened earlier for a foreign lender will relate to such "C" type accounts, the "C" type account is maintained in rubles. The "C" type account regime is established by a decision of the Board of Directors of the Central Bank of the Russian Federation,

The amount of liabilities denominated in foreign currency is converted into rubles at the exchange rate of the Central Bank of the Russian Federation on the day of crediting funds in rubles to an account of type "C" or an account in a Russian depository.

• a foreign creditor will be able to use the funds credited in his favor upon his application and in the manner established by the Central Bank of the Russian Federation or the Ministry of Finance of the Russian Federation.

According to the Decree, obligations to these foreign creditors "are considered to be duly fulfilled" if:

• they are executed in rubles according to the specified procedure;
• they are executed before the residents of the Russian Federation, whose securities are recorded in the accounts of the depot in Russian depositories, by transferring funds in rubles by the debtor to the creditor's account. At the same time, payments are made through Russian depositories without transferring funds to accounts of type "C";
• they are executed before a foreign nominee holder by transferring the debtor to a type "C" account of a foreign nominee holder opened in a Russian depository;
• they are executed in a different order, which will be determined by the Central Bank of the Russian Federation or the Ministry of Finance of the Russian Federation, and on the basis of the relevant permits issued by these bodies.

If, before March 1, 2022, the assignment of the rights of claim for these obligations occurred in favor of residents or in favor of foreign persons who are not associated with unfriendly states, then a temporary procedure is also subject to application for such creditors. The Board of Directors of the Central Bank of the Russian Federation may determine a different date of assignment for the application of the temporary procedure.

The fulfillment by Russian legal entities of obligations under foreign securities (Eurobonds and depositary receipts) is also carried out in the specified temporary order.

2. It has been clarified (for the purpose of applying Decree No. 81 of March 1, 2022) that persons associated with unfriendly states are not controlled by Russian legal entities or individuals (the final beneficiaries are the Russian Federation, Russian legal entities or individuals), even if this control is carried out through foreign legal entities associated with unfriendly states. The condition for exclusion from special restrictions is the disclosure of control information to the tax authorities of the Russian Federation in the appropriate manner.

Thus, the special restriction imposed earlier by Decree No. 81 for loans (loans) and transactions in respect of securities and real estate has been canceled for CFC.

3. The Central Bank of the Russian Federation is authorized to give official explanations on the application of Decrees 79, 81 and the Decree on Temporary Procedure.

4. The list of foreign states committing unfriendly acts against the Russian Federation, Russian legal entities and individuals will be determined by the Government of the Russian Federation no later than March 8.