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Головна Legal advice The moratorium on the fulfillment of obligations for Russian Federation

The moratorium on the fulfillment of obligations for Russian Federation

On March 3, 2022, the Cabinet of Ministers of Ukraine adopted Resolution No. 187 “On ensuring the protection of national interests in future claims of the State of Ukraine in connection with the military aggression of the Russian Federation”1 (hereinafter referred to as Resolution). Specified Resolution comes into force from the date of its publication and is valid until the entry into force of the Law of Ukraine on the settlement of relations with the participation of persons associated with the aggressor state, but not more than one month from the date of termination or cancellation of martial law.

Resolution establishes the following moratoriums:

  1. The moratorium on the voluntary and compulsory execution of monetary and other obligations by creditors (claimants) for which the Russian Federation or persons associated with the aggressor state are:

  • citizens of the Russian Federation;

  • legal entities registered in the Russian Federation;

  • legal entities registered in Ukraine by the ultimate beneficial owner, member or participant (shareholder) having a share in the authorized capital of 10 percent or more, who are the citizens of the Russian Federation, a citizen of the Russian Federation or a legal entity registered in the Russian Federation.

The specified restriction does not apply to citizens of the Russian Federation legally residing on the territory of Ukraine, and legal entities established in Ukraine, the ultimate beneficial owner, member or participant (shareholder) of who are exclusively citizens of the Russian Federation residing in territory of Ukraine legally or exclusively citizens of Ukraine and citizens of the Russian Federation legally residing on the territory of Ukraine.

Thus, the moratorium does not apply to two types of Ukrainian legal entities, which include citizens of the Russian Federation:

  1. legal entities, which include only citizens of the Russian Federation residing on the territory of Ukraine;

  2. legal entities, which include only citizens of Ukraine and citizens of the Russian Federation residing on the territory of Ukraine.

Please note that this exception applies specifically to “residents on the territory of Ukraine”, the specified exception applies only to those citizens of the Russian Federation who have residence permits. Resolution does not use such terms as permanent or temporary residence on the territory of Ukraine, however, from the text it can be concluded that the mentioned exception applies to both temporary and permanent residence permits in Ukraine.

2) The moratorium also applies to the alienation, pledge, any other actions that should or may entail the alienation of real estate, securities, corporate rights, vehicles, aircraft and ships, inland navigation vessels by persons associated with the aggressor state, except for free alienation in favor of the state of Ukraine.

3) The moratorium applies to the alienation, pledge, any other actions that should or may entail the alienation of real estate, securities, corporate rights, vehicles, aircraft and ships, inland navigation vessels in favor of persons associated with the state – aggressor, or in favor of the Russian Federation.

Separately, Resolution prohibits the notarial certification of transactions that violate the moratorium, as well as any state registration or other recognition by state authorities of transactions that violate the moratorium.

In addition, the Cabinet of Ministers in its Resolution indicated that transactions, including powers of attorney, concluded in violation of the moratorium are insignificant. It should be noted that in this case the Cabinet of Ministers went beyond the limits of its powers as the grounds for declaring transactions insignificant are determined solely by the Law.

In the event that among the participants (shareholders), members, beneficiaries there is a citizen of the Russian Federation who does not permanently reside on the territory of Ukraine, with a share of participation of 10 percent or more, it is prohibited to make any monetary payments to this legal entity. Also, how to make payments directly to citizens of the Russian Federation who do not permanently reside on the territory of Ukraine.

In this case, it is also prohibited to conduct any transactions for the alienation of property in favor of persons associated with the aggressor state.

In connection with the foregoing, we recommend checking counterparties for the presence of persons associated with the aggressor state as participants (shareholders), members or beneficiaries of counterparties. If necessary, we are ready to conduct Due Diligence of your partners and counterparties.