Author: Ilya Nikiforov
Contact: E-Mail (Link)
Overview of legal measures as of 25 May 2020 as response to the coronavirus. Please note: Due to the extraordinary situation, the legislation is in continuous evolution and may change very fast.
The Russian Federation is a federal state with 85 subjects of the federation (i.e. regions). Division of powers among the Russian Federation and the subjects of the Russian Federation was established by the Constitution of Russia adopted in 1993, the Federation Treaty of 1992 and other treaties between the regions on the division of authorities and powers between the federal and local governments. Powers are divided as follows: (1) jurisdiction of the Russian Federation, (2) the joint jurisdiction of the Russian Federation and the federal subjects, and (3) exclusive jurisdiction of the federal subjects and the powers of the Russian Federation under the joint jurisdiction.
1. INTERVENTIONS AND RESTRICTIONS
1.1 Legal basis
The implementation of measures against epidemics and coordination of healthcare and administrative legislation fall under the joint jurisdiction of the Russian Federation and the federal subjects. As a result, response actions on the current epidemiological situation in Russia are being taken both by the federal and regional governments, and hence the current regulation differs from one region to another.
According to the decree of the Government of the Russian Federation of 27 March 2020, regular and charter flights between Russia and foreign countries have been suspended. Exceptions are made for repatriation flights organized for Russian citizens who are currently abroad and coming back to Russia. Russian airports remain open for internal flights.
Closure of borders:
Since 30 March 2020, Russia has temporarily restricted traffic through automobile, railway, pedestrian, river and mixed state border checkpoints, as well as the Russia-Belarus land state border.
The restrictions do not apply to certain groups of individuals, including e.g.:
diplomatic workers of the Ministry of Foreign Affairs of Russia, employees of diplomatic missions and consular posts of the Russian Federation, official missions of the Russian Federation to international organizations,
citizens of the Russian Federation who are international truck drivers, crews of river vessels, train and locomotive crews in international rail traffic, etc., provided that these persons present valid identification documents;
citizens of the Russian Federation leaving the Russian Federation in connection with the death of a close relative, subject to the presentation of a copy of a death certificate, as well as a document confirming the degree of relationship;
citizens of the Russian Federation who are members of ship crews travelling for the changing of crews of ships located in foreign seaports, personnel performing maintenance and operation of cross-border infrastructure objects leaving the Russian Federation, provided that these persons present valid identification documents;
citizens of the Russian Federation having another citizenship or a residence permit or other valid document confirming the right to permanent residence in a foreign country, travelling from the Russian Federation to the place of permanent residence abroad;
foreign citizens and stateless persons specified in the Order of the Government of the Russian Federation of 16 March 2020 N 635-p.; etc.
In accordance with the decrees of the Chief State Sanitary Doctor of the Russian Federation all persons arriving to Russia are subject to mandatory 14-day isolation from the date of their arrival.
On 16 March 2020 Russia banned the entry of foreign nationals and stateless people from March 18 to May 1 (later postponed for an indefinite period of time ) in response to the coronavirus outbreak. The ban does not apply to diplomatic representatives, airplane crew members and some other categories of people.
1.4 Export control
With regard to export control measures like licensing / obtaining permits for export / import of certain goods which can be used for the creation of weapons of mass destruction, military equipment, etc., there have not been any relevant changes initiated due to the spread of COVID-19 so far.
In terms of export procedures for other goods, the major changes include:
ban on export of personal protective equipment, disinfectants, medical products and materials from the Eurasian Economic Union EAEU. Exceptions have been made since 10 May 2020 for export of disinfectants and goods with HS code 5903 10 (“textile materials soaked, coated or dubbed with plastics”);
grain export quotas (7 million tons for the export of wheat, muslin, rye, barley and corn) for the period from 1 April to 30 June 2020;
ban on export of certain food products, including onions, garlic, turnips, rice, buckwheat, millet, cereals, wholemeal flour and granules from cereal grains, peeled buckwheat, prepared foods from buckwheat, crushed and uncrushed soybeans and sunflower seeds.
1.5 Prohibition of crowds
Despite the fact that the non-workinh days period in Russia has ended on May 12, mass events are still banned due to the threat of the spread of coronavirus.
Lockdown (with stepwise easing of measures)
On 30 March the President of the Russian Federation introduced a lockdown, which was later extended several times and lasted until 12 May. During this period, most businesses were closed (excluding grocery stores, medical and pharmacy organizations and some others) and people were required to stay at home. The Government of the Russian Federation has taken a number of measures to support businesses and the public.
On 12 May the federal lockdown was cancelled, and regions now adopt and regulate lockdown restrictions locally depending on the epidemiological situation in the region. Nevertheless, persons over the age of 65, and persons suffering from chronic diseases still have to comply with the lockdown measures.
1.7 Open Businesses, Industries and allowed Gatherings
Depending on the region, and the complexity of the epidemiological situation with the spread of the new coronavirus infection, different restriction measures still apply.
1.8 Shareholder's meetings and other meetings of companies
There are no specific prohibitions for holding general shareholders meetings of Russian companies. However, general prohibitions and restrictions on crowds in public areas apply to general shareholder meetings attended in person.
For this reason, some measures in relation to general shareholder meetings have been implemented. Firstly, annual general shareholder meetings of Russian joint-stock companies (JSCs) and Russian limited liability companies (LLCs) may be held in 2020 later than normal: by 30 September rather than 30 June (Art. 12(4) of the Federal Law dated 07.04.2020 No 115-FZ). Secondly, JSCs (but not LLCs) may hold annual general shareholder meetings in 2020 through an absentee ballot (Art. 2 of the Federal Law dated 18.03.2020 No 50-FZ) which is usually not permitted for annual meetings.
1.9 Supply of essential medical goods
Key changes concerning supply of essential medical goods and medicinal products include the following:
“green lane”, i.e. priority customs processing and control at border checkpoints, has been given to imports of essential goods (including products for personal protection, hygiene, antiseptics, disinfection materials, etc.);
imports of goods intended to prevent the spread of COVID-19, do not require: (i) payment of import customs duty; (ii) certificate of state registration; (iii) documents on conformity assessment;
essential medical supplies (masks, protective suits, glasses, gloves, COVID-tests, etc.) imported into the Russian Federation from 16 March to 30 September2020 have been given exemption from VAT;
the shortest possible time period for registration of medical devices for the diagnosis of the coronavirus infection has been announced by the Federal Service for Supervision in the Sphere of Healthcare (Roszdravnadzor);
for the first time in Russia remote retail (via Internet or telephone) of over-the-counter (OTC) drugs has been permitted; and
at the same time a ban on the export of personal protective equipment, disinfectants, medical products and materials from the EAEU has been introduced.
2. SUPPORT OF BUSINESSES
2.1 Legal basis
Legal framework consists of:
Tax Code of the Russian Federation;
Various sectorial laws;
Decrees of the Government of the Russian Federation;
Decisions of the Central Bank of Russia;
Recommendations of the Central Bank of Russia to financial institutions; and
Laws and decrees adopted by regional authorities.
2.2 Support measures
Mostly such measures are intended to support companies working in economic sectors which were most affected by the coronavirus outbreak, including transport, culture and entertainment, fitness and sport, tourism, foodservice, continuing and non-governmental education, conferences and exhibitions activities, consumer services (repair, washing, dry cleaning, hairdressing and beauty salons), healthcare, non-food retail.
Small and medium-sized businesses are the main target group. Also systemically important companies (companies which are critically important for the national economy) are constantly monitored.
Support measures cover, inter alia:
tax measures (tax deferrals and deductions; tax write-offs are to be added to the list soon);
financial services incentives (preferential loans; loans restructuring; reduced rates of bank fees; waiver of right to claim penalties);
direct subsidies; and
waiver of right to impose financial sanctions for various violations of applicable regulations and freezing on the enforcement and collection of debt.
The Russian Government approved several programs, under which grants are provided to banks to compensate part of certain loan payments provided by banks to persons economically affected by COVID-19.
In particular, the government provides grants to compensate part of loans provided to:
systemically important organizations to pay for labour, property maintenance services, current repairs, maintenance of equipment etc.; and
companies from affected sectors of the economy to pay for labour.
Under the existing loans, certain deferrals are provided. These deferrals may be provided to SMEs from affected sectors of economy: (i) under the governmental program (compensation of a part of interest payments); (ii) under Federal law of 3 April 2020 No. 106-FZ (“repayment holidays”, i.e. the right to “freeze” loan repayments for up to 6 months).
The Bank of Russia also provides loans to credit organizations at a low rate, and credit organizations, in turn, provide loans to SMEs at a low rate.
The government also provides grants from the budget to SMEs from affected sectors of economy for any needs, including paying salaries.
State guarantees for loans and bonds are provided to principals of special significance.
The purpose of the loans or bonds shall be:
financing basic production activities and (or) capital expenditure; or
repayment of loans provided to the borrowers earlier for basic production activities and (or) capital expenditure, except for loans (bonds) secured by previously provided state guarantees of the Russian Federation.
4. SUPPORT OF SPECIFIC SECTORS
4.1 Legal basis
Support measures were introduced mainly by:
Amendments to the Tax Code of the Russian Federation;
Decrees of the Government of the Russian Federation; and
Laws and decrees adopted by regional authorities.
4.2 Support measures
Support of the agriculture sector
Most of the COVID-19 support measures in the agricultural sector are an expansion of existing programs. For instance, in April 2020, Rosagroleasing JSC (a state company) launched an anti-crisis program for agricultural machinery leasing with more favourable conditions, i.e. preferential rate, zero advance payment, increase in the lease term and one-year deferral of payments. The initiative to additionally capitalize Rosagroleasing JSC for RUB 12bn in order to stimulate a renewal of the agricultural machinery fleet has been supported by the President of Russia.
Another program, that may also be expanded, is the so-called Program 1432 (Decree of the Government of Russia No. 1432 of 27 December2012). The program aims to support agricultural machinery manufacturers.
At the beginning of May 2020, the Russian Government has allocated RUB 10bn for an additional capitalization of the Russian Agricultural Bank in order to support agricultural producers. The issue of an additional allocation of funds to increase preferential lending and to extend existing preferential loans was also raised at a government meeting on 20 May 2020.
Moreover, the subsidies for rail transportation were also expanded. Now, there is an additional opportunity to deliver vegetables and mineral fertilizers from the Siberian and Ural districts to the Far East. Additionally, there are several regional programs under development to increase vegetable and potato cultivation in the Far East.
The Government has also relaxed the requirements with regard to the obligations of businesses under special investment contracts and agreements to increase competition. The Government has already adopted a decree according to which in 2020 the agricultural producers who have entered into agreements to increase competition can maintain the preferential loan rate even if the agreed export performance indicators are not reached. The extension conditions for special investment contracts are also under development.
Support of the cultural sector and sports
Most of the available support measures are general support measures aiming to support the companies working in economic sectors that are most affected by the coronavirus outbreak - in the cultural and sport sectors those are companies dealing in:
Creative, art and entertainment activities;
Motion picture display activities;
Production of folk-art crafts;
Activities in the field of sports, recreation and entertainment;
Activities connected with physical well-being; and
Only few companies from these sectors were included in the list of systemically important companies (companies that are critically important for the national economy) enabling them to qualify for the measures intended to support this kind of companies.
Measures intended for small and medium enterprises are also available.
Emergency aid for cultural enterprises
Emergency aid for cultural enterprises is mostly provided through programs for the companies most affected by the coronavirus outbreak, programs for small and medium sized enterprises. These measures include tax deferrals and deductions, preferential loans, loan restructuring, rent “holidays” and direct subsidies.
The Government has adopted provisions on the cancellation, replacement or postponement of a performance by the cultural organizations. However, they might be reviewed soon, as cultural enterprises asked to extend the period of refund for the cancelled events to up to one year, and not to refund tickets for postponed events.
The Government has allocated more than RUB 3.8bn to support federal cultural organizations in 2020. The allocated funds will be distributed as subsidies to federal cultural organizations, the activities of which were fully or partially suspended due to the coronavirus outbreak.
Support for organisations
See the general measures in Support Section above.
The particular support measures intended for cultural sector are under development.
5. TENANCY AND LEASE
5.1 Legal basis
On 1 April 2020, the President of Russia signed Federal Law No. 98-FZ “On amendments to certain legislative acts of the Russian Federation regarding emergency prevention and relief”.
Soon after that, on 3 April 2020, the Government of Russia adopted Decrees No. 434 “On the approval of the list of industries of the Russian economy most affected by the deterioration of the situation as a result of the spread of the new coronavirus infection” and No. 439 “On the approval of requirements for the conditions and deadlines for extension of rent payments”.
Move out and move in
Generally, moving out of and moving into leased property is not prohibited. However, regulation of activities allowed and prohibited on the property differs in particular regions and may have substantial impact on the possibility to use the leased property.
For example, in Moscow it is prohibited for citizens even to attend the premises of some types of organizations specified in a list approved by the Moscow mayor. Such companies are only allowed to let in the property personnel securing intermittent activities, and all others must work remotely if possible.
There is also a requirement for businesses to ensure a proper distance is kept between personnel and attendees. Such distance may differ from region to region (e.g. 1.5 meters in Moscow).
Extension of payment deadlines
A lessee of any real estate (with the exception of residential premises) affected by COVID-19 is entitled to an extension of rent payment until 1 October 2020. Such delayed rent payments must be made within the period from 1 January 2021 to 1 January 2023.
Decrease in rent amount
When it is impossible to use leased real estate because of legal restrictions imposed during the pandemic, the lessee is entitled to a rent reduction. However, in respect of private properties there are no clear guidelines in the law on the range of such reduction. As to leases of state and municipal property, lessees prohibited to use the property are in many cases clearly exempt from lease payments from April to June by specific bylaws.
Prolongation of lease terms
The Russian State Duma is now discussing a bill that would provide lessees with the right to prolong the terms of the agreements for lease of state or municipal real estate and land plots.
Unilateral repudiation of lease agreement
The Russian State Duma is now discussing the bill that would provide lessees with the right to terminate a lease agreement if the lessee’s income has decreased by 50 percent after the introduction of anti-pandemic regime.
6. LEGAL PROCEEDINGS
6.1 Legal basis
Recommendations on the organization of the work of courts and the consideration of court cases during the pandemic were set out in Decisions of the Presidium of the Supreme Court of the Russian Federation and the Presidium of the Council of Judges of the Russian Federation No. 808 of 18 March 2020, No. 821 of 8 April 2020 (as amended on 29 April 2020), which were in force from 19 March to 11 May 2020. Starting from 12 May 2020, the recommendations no longer apply.
The main issues related to the application by the courts of legislation and measures to counteract the spread of coronavirus are reflected in the Surveys of the Supreme Court of the Russian Federation No. 1 of 04/21/2020 and No. 2 of 04/30/2020 (hereinafter - Review No. 1 and Review No. 2). The texts of the Reviews are available in Russian (link 1, link 2) and in English (link 1, link 2).
From 19 March to 11 May 2020, the courts were advised not to receive correspondence from couriers and to consider only categories of cases of an urgent nature (on securing a claim, on application of a preventive measure, for a number of administrative offenses, etc.), as well as cases decided under a simplified procedure. In practice, the extent to which each court operates is determined by the chairman of the court on the basis of an internal order.
In connection with the termination of the recommendations from 12 May 2020, a number of courts have resumed work in full. At the same time, some courts continue to hear cases on a limited basis. The courts have sanitary and epidemiological requirements for visitors, i.e. respiratory and hand protection, absence of signs of viral infection, etc.
Temporary standstill of deadlines in civil- and administrative proceedings
The introduction of special measures to counteract the spread of coronavirus does not affect the procedural timelines, however, it may be a basis for their restoration in the case of omission, depending on specific actual circumstances (Questions 2 and 4 of Review No. 1).
The limitation period is suspended only if a force majeure event is established in a specific situation. If the court does not establish the presence of force majeure circumstances, the limitation period will be calculated in the general manner.
The inability to consider a case in connection with the introduction of restrictive measures may be a basis for the adjournment of a trial. Also, if necessary, the court may suspend the proceedings or extend the trial period.
7. DEBT COLLECTION
7.1 Legal basis
In the area of debt collection and enforcement proceedings, a debt moratorium applies during the pandemic to certain categories of debtors based on Art. 9.1 of the Bankruptcy Law and Decree of the Government of the Russian Federation of 03.04.2020 No. 428 “On the introduction of a moratorium on the initiation of bankruptcy cases at the request of creditors in relation to individual debtors”. The text of the documents is available in Russian (link 1, link 2).
Temporary legal standstill in debt collection
For the duration of the moratorium, enforcement proceedings against debtors covered by the moratorium are suspended (subparagraph 4 of paragraph 3 of Article 9.1 of the Bankruptcy Law). Debt collection is also not allowed by presenting a writ of execution to the bank in which the debtor's accounts are opened. Creditors are not entitled to foreclose on the collateral, including out of court.
However, arrests remain on the property of the debtor if they were imposed before the introduction of the moratorium. If necessary, the bailiff has the right to further limit the debtor's right to dispose of the property.
8. INSOLVENSY MEASURES FOR BUSINESSES
8.1 Legal basis
On 1 April 2020, the Bankruptcy Law was supplemented by Article 9.1, which gives the Government of the Russian Federation the right, in exceptional cases (emergencies, a significant depreciation of the rouble, etc.) to introduce a moratorium on bankruptcy proceedings upon a request from creditors. Article 9.1 also establishes the rules of the moratorium. The text of the new provision is available in Russian (link).
On 3 April 2020, the Government of the Russian Federation adopted Decree No. 428 “On the introduction of a moratorium on bankruptcy proceedings at the request of creditors in respect of individual debtors” (hereinafter - Decree of the Government of the Russian Federation No. 428). The text of the decision is available in Russian (link).
Obligation to notify over-indebtedness
For the period of the moratorium, an insolvent debtor is relieved of the obligation to file a bankruptcy petition with the court (subparagraph 1 of paragraph 3 of Article 9.1 of the Bankruptcy Law). Controlling persons are exempted from secondary liability for the obligations of the debtor for failure to fulfil such an obligation.
The debtor is not required to notify creditors or the court of his insolvency.
The moratorium aims to prevent the widespread bankruptcy of companies that have suffered from the COVID-19 pandemic. The moratorium allows organizations the opportunity to return to business activities through a ban on bankruptcy at the request of creditors and the suspension of all penalties.
The moratorium is applied by default to all companies that meet at least one of the following criteria (paragraph 1 of Government Resolution No. 428):
(a) the company carries out its main activity in one of the sectors of the economy that the Government has recognized as a most affected by the COVID-19 pandemic (for example, tourism, hotel business, airports, consumer services, catering);
(b) the company is included in the list of system-forming organizations, which is established by the relevant committees of the Government of the Russian Federation;
(c) the company is included in the lists of strategic enterprises approved by the President of the Russian Federation and the Government of the Russian Federation.
To receive an exemption from the moratorium, a company must make an appropriate publication in a unified state information register.
The consequences of the moratorium are established in paragraphs 3-4 of Article 9.1 of the Bankruptcy Law.
Limitations for Lenders:
(a) bankruptcy proceedings cannot be instituted at the request of the creditor;
(b) the creditor is not entitled to foreclose on the assets of the debtor, including on the security, however, the freeze on the assets of the debtor is not lifted (see paragraph 8 x.2);
(c) set-off of counterclaims is not allowed if it leads to a preferred satisfaction of the creditor's claims.
Consequences for debtors:
(a) an insolvent debtor has the right, but is not obligated to initiate its own bankruptcy;
(b) the debtor is not charged with penalties or default interest for misuse of other people's money;
(c) it is not allowed for members of the debtors to withdraw from the company or to be paid the actual value of the shares; distribution of profits / dividends is also not allowed;
(d) in the event of bankruptcy of the debtor within 3 months after the moratorium, the amount of obligations that arose before the moratorium was introduced will be determined at the date of the moratorium, and obligations in foreign currency will be calculated at the lowest rate established at the date of the moratorium or the initiation of bankruptcy proceedings.
The moratorium was introduced for 6 months, but the Government of the Russian Federation can extend it, and more than once.
The debtor has the right to conclude a settlement agreement with creditors, which is approved by the court. If a bankruptcy petition is filed within 3 months from the end of the moratorium, the settlement is concluded in a simplified manner (clause 4 of article 9.1 of the Bankruptcy Law).
(a) a majority of the votes of creditors whose claims are included in the register is required;
(b) the consent of all secured creditors whose claims are included in the register is required.
(a) a majority of the votes of the creditors who participated in the meeting of creditors is required;
(b) the consent of all secured creditors who participated in the meeting of creditors is required.
If a settlement is approved, the court terminates the bankruptcy proceedings. If the debtor violates the terms of the settlement, the court, at the request of an interested creditor, resumes the proceedings.
Companies that are not in bankruptcy are entitled to negotiate with creditors a debt restructuring. In this case, creditors may conclude a restructuring agreement or provide the debtor with consent in advance to the terms of a bankruptcy settlement agreement. The resulting agreement is not approved by the court.