Legal Issues in Business Russia

Since the beginning of the invasion of Ukraine, we have followed the reactions of more than 1,200 companies, and the trend is rising. More than 1,000 companies have publicly announced that they are voluntarily restricting their activities in Russia to a certain level beyond the minimum level of international sanctions required by law – but some companies continue to operate in Russia undeterred. Russia is the 11th largest economy in the world in terms of GDP, according to IMF estimates for 2020. The economy contracted relatively modestly by 3.1% in 2020, in part due to lighter COVID-19 restrictions. However, the outlook remains gloomy due to sanctions and structural constraints. Macroeconomic policy continues to give priority to stability; Public debt remains low even after the pandemic, inflation is low and stable. The IMF forecasts growth of 3.0% in 2021 and a return to pre-crisis levels by 2022. A $400 billion spending program, the “national projects,” could spur growth and provide opportunities for businesses in areas such as infrastructure, financial services, health care and education. Exceptions/restrictions may be introduced, in particular to protect the Russian constitutional system; morality, health and rights of third parties; or to ensure the security and/or defence of the State. Some of the sectors concerned are discussed separately below. Overall, foreign investment is allowed in most sectors of the Russian economy, including investments in portfolios of government securities, stocks and bonds, direct investment in new companies, in the acquisition of existing Russian companies and in joint ventures. This publication is available at www.gov.uk/government/publications/overseas-business-risk-russia/overseas-business-risk-russia The discussion followed by a quick question-and-answer session modeled on game shows like Jeopardy. The main topic of discussion was that sanctions against Russia represent many new legal hurdles for US companies, but that cases can still be pursued in a more limited way.

Companies that reduce some important business activities but pursue others. In addition to the “Strategic Industries Law” (see Chapter Common Forms of Business Structures for Foreign Investors), there are restrictions on foreign investment, particularly in the insurance and banking sectors. Information on the restrictive measures implemented is available on the GOV.UK`s website. When in doubt, companies should contact the Business Helplines. UK businesses need to be aware of the potential risks and challenges of working in an environment of sanctions. Companies should continue to pay special attention to the Russian sections of the DIT and FCDO. Corruption is endemic in Russia and is a major problem for companies operating there. The Russian government continues to reaffirm its commitment to reducing corruption and other harmful informal practices, but they remain a challenge in practice.

Russia fell to 138th place out of 180 countries in Transparency International`s Corruption Perceptions Index in 2018. Click here to watch President Zelenskyy`s interactive Q&A session, moderated by Jeffrey Sonnenfeld and streamed live by CNBC, featuring more than 150 prominent U.S. CEOs at the Yale CEO Summit in June 2022, and click here to learn more about President Zelenskyy`s important lessons for business leaders. As Russia`s invasion of Ukraine reaches the seven-month mark, the legal landscape is changing for companies around the world to manage a series of sanctions resulting from military action. The Russian Civil Code (the “Civil Code”) establishes the basis of civil law and is the main source of law for companies. As part of the reform, important amendments to the Civil Code entered into force in September 2014 and June 2015. These changes represent the most important development since the creation of modern corporate and commercial law in Russia. Today, also in Russia, a number of concepts are recognized and widely used, which have long been common in international practice in the fields of business, debt and trade in general, in particular: there are protection security problems associated with doing business in Russia; Professionals should be aware of the following activities of the Local Security Service (FSB): Under the individual sanctions regime, travel restrictions and asset freezes have been imposed on persons and entities listed in the relevant legal acts. The measures include threatened sanctions for doing business with Russian banks and other companies closely linked to Putin, as well as Putin`s “middlemen,” family members and billionaire oligarchs. Companies that simply continue as usual in Russia. Federal Law No.

4015-1 of 27 on Insurance. As of November 1992, foreign investors are currently prohibited from owning more than 25% of the entire domestic insurance market. Insurance companies in which foreign shareholders hold more than 49% of the share capital are not allowed to engage in certain types of insurance business, including, for example, life insurance. The existing restrictions will be partially removed by the legislative changes envisaged in the context of WTO accession. Companies that defer planned future investments, development and commercialization while continuing their substantial operations. In the banking sector, the Central Bank of Russia has the right to use reciprocity as a criterion to determine the types of operations for which subsidiaries or branches of foreign banks may be admitted to Russia. However, in practice, branches of foreign banks are not able to carry out banking transactions in the Russian market. In addition, an upper limit on the total amount of capital of foreign banks may be set by federal law as a percentage of the total capital of the bank in Russia; However, no such limitations apply at the time of writing.

Under WTO rules, such a ceiling cannot be less than 50%. Here, too, Russia has reacted to these developments. First, in June 2018, it adopted a framework law on measures against unfriendly actions by the United States and other foreign states, and in November 2018, it imposed the first sanctions under this law on Ukrainian natural and legal persons. Second, effective August 6, 2018, tariffs were imposed on selected goods imported from the United States. Third, the ban on importing a number of goods of Ukrainian origin or transiting through Ukraine to Russia was declared in December 2018 and extended in December 2019. Corruption is illegal. It is a criminal offence for UK nationals or any person ordinarily resident in the UK to bribe a registered body or partnership registered in the UK anywhere in the world. In addition, a commercial organisation operating in the United Kingdom may be held liable for the conduct of a person who is neither a citizen of the United Kingdom nor a resident of the United Kingdom, or of an organization incorporated or incorporated in the United Kingdom. In this case, it does not matter whether the acts or omissions forming part of the offence take place in the United Kingdom or elsewhere. In the United States alone, sweeping measures prohibit “new investments” in the Russian Federation by “persons from the United States, wherever they are”. They also banned a wide range of business services for everyone in Russia and severely restricted various exports to the country and ally Belarus. Over the past six months, the administration has rewritten the rules allowing U.S.

companies to do business there and with Russians in third countries. While most companies are overseen by the U.S. Treasury Department`s Office of Foreign Assets Control, agencies that oversee areas such as the military supply chain and general trade are also involved. Russia`s domestic supply of consumer goods and services is still underdeveloped – so there are opportunities to develop new businesses such as e-commerce. Growth is currently sector-specific, for example: Mining, hydrocarbons and agriculture. U.S. sanctions related to doing business in Russia following its invasion of Ukraine in February have upended the traditional way of doing business with Russians and supply chains there, but lawyers involved in foreign trade say transactions are still possible with significant restrictions.