Future steps for foreign owners of Russian assets
Alexander Arbouzov, Partner of the "Duvernoix Legal" law firm, has taken the role of a foreign owner of Russian assets.
On February 28, the Central Bank's ban on the sale of securities on behalf of foreign clients and the payment of dividends-interest on securities abroad came into force.
At the same time, the President signed a decree prohibiting, in particular, Russian residents from providing loans in foreign currency to foreigners and crediting currency to bank accounts outside the Russian Federation. Since March 1, it is prohibited to provide non-residents from unfriendly countries, as well as their subsidiaries, with ruble credits and loans. 47news asked Alexander Arbouzov, partner of the "Duvernoix Legal" law firm, to take the role of a foreign owner of Russian assets.
- What would you do now to minimize the trouble from what is happening for your subsidiary in Russia?
- I would not fuss, I would not try to get rid of assets, including by illegal methods, I would not follow the recommendations of those who convince to leave the market - these may be representatives of competitors. During such periods, frauds usually become more active. I would maintain asset control with the help of lawyers, which is important in an unstable period. Maybe, I would even invest in the business for it to survive, for example, through deposits in the property of the own Russian company or loans, even in foreign currency. A good way is a loan agreement with own subsidiary so that it can safely survive this time. Do not forget the basic postulate of economics - you should protect your investments. And only then, when the situation stabilizes, you can make a well-considered decision about the preservation or sale of the asset.
- It seems that it is no longer profitable for the foreigners to have subsidiaries in Russia at all...
- Economists joke: capital is such a bird, you scare it off a little - and it flies away. Although do we need such a timid and unreliable capital? Companies with foreign beneficiaries are having a hard time right now, but the government's actions are logical - they prevent the withdrawal of currency from the country, do not allow foreign businesses to buy cheaper securities and real estate. In general, it is a normal reaction to the current international situation. I wouldn't jump to conclusions. So far, in any case, it is assumed that the measures are temporary. The restrictions of the Central Bank as of March 2, for example, are set until March 31. Finally, intuition suggests that the remaining foreigners in the future will be able to fully enjoy the advantages of their exceptional position.
- That is, the life of foreign companies is frozen?
- Well, yes. A beneficiary from a country recognized as unfriendly cannot do anything with his Russian assets now. There are possible difficulties with their sale, with the receipt of proceeds from the sale. Even to attract a credit or loan from a Russian resident is problematic. You need a special permission from the government commission, and it is not very clear how to get it. Waiting for the changes - everything that remains for the owner of Russian assets since their disposal without any detriment will not work out yet.
- By the way, speaking about "disposal". British Petroleum (BP), for example, announced its desire to sell its securities and shares in Rosneft projects. How is it possible?
- It can't be done completely legitimately.
- Chinese companies are predicted to be the buyers. If the deal is abroad, not in Russia, how will our Central Bank prevent the Chinese from paying for shares somewhere in Shanghai?
- This will be a violation, because the presidential decree establishes a special permissive procedure for such a transaction. Why would the Chinese violate it? They will not be able to sell what they bought, the transaction may be declared void, they may be fined, put on the "list of violators". No one needs a legal time bomb. Moreover, the Central Bank temporarily banned brokers from performing actions with shares on behalf of non-residents. And in general, why should BP sell something right now when the price is low - no one will pay them normally. To declare such a sale does not mean to make it.
- Let's return to your role of a "foreign beneficiary" who really wants to sell a Russian asset. Please, try.
- The legal form of the subsidiary is important here. For example, I am not sure that there is a ban on the sale of shares in LLC. Perhaps this is a gap that will be eliminated soon. But the price will still be underestimated, it will be difficult to withdraw the currency abroad, so such a deal will not be profitable. And I would ask for security mechanisms - for example, an escrow or a letter of credit (when the money is held by a third party - an escrow agent or a bank before closing the transaction), or a pledge, an independent guarantee. It would be problematic to legally sell securities or real estate. Even to a foreigner from a friendly country.
- Is it safe?
- No, of course not. There is a risk that a foreign buyer will then decide to challenge the transaction for some reason. In the current situation, there are plenty of reasons and grounds for contesting. The court will most likely take place in the Russian jurisdiction, which may lead to the cancellation of the transaction and the need to return the remuneration received. As a foreign beneficiary, I would be very confused by such risks.
- What about the exchange for another asset abroad?
- Russian legislation interprets barter as one of the forms of purchase and sale. But that's not even the point. Any transaction for the alienation of an asset, if it falls under a special procedure, can be challenged.
Returning to the position of the Russian lawyer, Alexander Arbouzov added: "I think the establishment of certain barriers on both sides was inevitable. If the current situation had not happened, the world would still have been divided into economic zones. The world economic system is experiencing a crisis of demand, and each center wants to fence off the market for itself. Perhaps such a division is an intermediate stage to the transition of the system to a new level of self-organization...".
But his final comment is still important for understanding the present - in the future.