According to the Extract, with respect to the prohibition on transactions (operations) that create a right of ownership of foreign securities established by Decree of the President of the Russian Federation No 81 of 1 March 2022, a decision was made to establish an exception for certain transactions involving the disposal of foreign securities.
In accordance with paragraph 1 of the Extract, residents, including Russian depositories, are permitted to carry out (perform) such transactions (operations) involving foreign securities with “unfriendly” non-residentsForeign persons associated with foreign states that commit unfriendly acts against Russian legal entities and individuals (including if such foreign persons have the citizenship of such states, their place of registration, place of primary business activity or place of primary profit are such states) or persons who are under the control of such foreign persons, regardless of the place of their registration or the place where they predominantly conduct their business activities (paragraph 1 of the Extract) are recognised as “unfriendly.” if, as a result of such transactions (operations), the foreign securities will be debited from the account of Non-Banking Credit Organisation Joint Stock Company National Settlement Depository (“NSD”) opened by the NSD with a foreign depository.
Significance of the decision
The establishment of this exception to the general prohibition on transactions involving securities significantly simplifies the procedure for Russian investors to dispose of their assets blocked by European clearing systems (Euroclear and Clearstream) due to sanctions imposed on the NSD.As you are aware, after the European Union imposed blocking sanctions on the NSD, obtaining a licence from the relevant European regulator became a mandatory step to unblock assets. Since one of the possible options for obtaining a licence is the sale of assets to a foreign “unfriendly” buyer (in particular, a citizen or a company of an EU member state), such a transaction, among other conditions, required the approval of the Government Commission.
The decision adopted by the Government Commission allows Russian investors to sell securities blocked by Euroclear and Clearstream on NSD’s accounts without the need to obtain individual authorisation from the regulator. We note that in certain cases transactions involving the disposal of blocked assets may require the approval of other Russian regulators, in particular, under Decree of the President of the Russian Federation No 520 (an overview of the provisions of Decree of the President of the Russian Federation No 520 of 5 August 2022 is available at this link in the Russian language).
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The Denuo team has significant experience in advising major Russian public and private companies on the sanctions imposed by the United States, the European Union and the United Kingdom against Russia and other countries.
