Russian sanctions against Ukrainian nationals and legal entities
On 22 October 2018, the President of the Russian Federation signed Decree No. 592 "On the application of special economic measures in connection with the unfriendly actions of Ukraine in relation to citizens and legal entities of the Russian Federation", according to which the federal government bodies, local authorities, organizations and individuals under the jurisdiction of Russia need in their activities to proceed from the fact that from the date of entry into force of this Decree special economic measures are applied in respect of certain individuals and entities identified by the Government of the Russian Federation.
In performance of the Decree No. 592, the Government of the Russian Federation adopted Resolution No. 1300 of 1 November 2018, which entered into force on the date of its official publication, which determined:
1) the list of 322 individuals, including businessmen, certain members of the Verkhovna Rada and members of the Government of Ukraine (including the former);
2) the list of 68 legal entities registered and located both in Ukraine and other countries (in particular, EastOne Group Ltd, Toledo mining corporation plc (United Kingdom), Ferrexpo pic (Switzerland));
3) special economic measures applied against the said individuals and legal entities, as well as organisations controlled by them:
- blocking (freezing) of non-cash funds, non-documentary securities and property in the territory of the Russian Federation;
- a ban on the transfer of funds (capital outflow) outside the territory of the Russian Federation.
Thus, individuals and legal entities listed in Resolution No. 1300, and the organizations controlled by them, cannot conduct in Russia operations with non-cash funds belonging to them, as well as transactions with non-documentary securities and assets (both movable and immovable).
It should be noted that since Resolution No. 1300 does not contain a definition of controlled organisations, currently there is legal uncertainty whether it is necessary to be guided in this regard by the provisions of the Federal Law No. 127-FZ of June 4, 201 "On the Measures (Countermeasures) in Response to Unfriendly Actions of the USA and(or) other Foreign States", Article 1 of which refers to "directly or indirectly controlled organizations" and the Federal Laws "On Limited Liability Companies" and "On Joint-Stock Companies Islands", defining the controlled organisation as a legal entity under the control of the controlling person who has the right to directly or indirectly (through controlled entities):
- by virtue of participation in the controlled organization and / or
- on the basis of contracts of trust management of property, and (or)
- simple partnership, and (or)
- instructions, and (or)
- shareholder agreement, and (or)
- another agreement, the subject of which is the exercise of the rights certified by shares (stakes) of the controlled organisation,
dispose of more than 50 percent of the votes in the supreme management body of the controlled organisation, or the right to appoint (elect) the sole executive body and (or) more than 50 percent of the collegial management body of the controlled organisation.
Or, to determine whether an organisation is controlled, one should be guided by the definition of “control” contained in Article 3 of the Federal Law of April 29, 2008 No. 57-FZ "On the Procedure for Making Foreign Investments in Business Entities of Strategic Importance to Ensuring the Defense of the Country and Security states".
Based on the proposals of the Ministry of Finance, the Government of the Russian Federation may:
- issue temporary permits for certain operations in respect of individual legal entities against which special economic measures are applied;
- make changes to the lists of individuals and legal entities contained in Resolution No. 1300;
- repeal this resolution in the event of the abolition of restrictive measures imposed by Ukraine on citizens and legal entities of the Russian Federation.
Director of the Corporate and Commercial Law Department, GRATA International (Moscow)
Tel: +7 (495) 660 11 84