Category: News

Support measures have been announced per May 1, 2020 for SME’s that were included in the list of affected industries published in Government Order Nr. 434 of 03.04.2020.

Companies that as of March 1, 2020 are in the register of small and medium enterprises and work in the affected industries, will receive a subsidy: 12,130 rubles per month per employee for April and May. To get such support, companies must meet three criteria:

1. Retain the jobs of at least 90% of the number of employees during the month for which the subsidy will be received, compared to the number of employees in March.
2. Not to be in liquidation or bankruptcy and not to be excluded from the Unified State Register of Legal Entities.
3. Not to have a deficit in taxes and insurance premiums totaling more than 3,000 rubles as of March 1, 2020.  

The Federal Tax Service has set up services on nalog.ru, which will allow you to check whether your company is entitled to a subsidy:  https://www.nalog.ru/rn77/business-support-2020/subsidy/

Our local lawyer in Ukraine and Belarus is sharing some tips on options to invoke force majeure for non-performance of a contract.

Many businesses are increasingly interested in recourse to force-majeure as a means to postpone obligations under a contract as well as to avoid penalties.  In Ukraine and Belarus the possibilities to invoke force majeure are different.

In Belarussian law there is no actual term “force majeure”.  The Civil Code in clause 3 Art. 372 speaks about “circumstances of insuperable force”.  However, there is no list of which circumstances may be considered as such.  Ukrainian law uses force majeure as a synonym for circumstances of insuperable force.  Also, it is more specific. In clause 2 Art. 14 of the Law on Chambers of Trade and Commerce in Ukraine there is a non-exclusive list of circumstances of insuperable force, in particular: “long-term transport disruptions due to decisions and acts by state authorities” as well as “epidemics”. 

Whatever the terms are, both laws stress the same features of force-majeure. The circumstances shall be:

– unavertable, i.e. having exercised due diligence and care it was impossible to avert the consequences of extraordinary events;

–extraordinary, i.e. the circumstances occurred all of a sudden; they could not be foreseen and are unique under given circumstances.

Thus, we need to underline that due to a certain ambiguity as to definition and list of force-majeure circumstances, their influence on execution of a particular contract shall be judged on a case-by-case basis.

Having said that, here are some useful tips if you consider recurring to force-majeure due to coronavirus:

1. The coronavirus and the epidemic caused by it are not circumstances of insuperable force (force-majeure) by themselves. However, restrictive and other measures by state authorities aimed at preventing virus transmission and its consequences adopted after the conclusion of a contract may be considered force-majeure.

Thus, if a contract was concluded just recently, there is no use to refer to force-majeure:  coronavirus and restrictive governmental measures are a reality and not anything extraordinary and unavoidable.

2.  A reference to force-majeure to get exemption from liability under a contract is valid only if such circumstances led to absolute inability to fulfill duties under the contract.  The referring parties shall first do everything to fulfill a contract. 

For instance, if a seller invokes force-majeure due to inability to get materials from his supplier abroad because of closed borders, it will not lead to automatic exemption from liability for non-fulfillment of the contract.  The seller shall try to find an alternative supplier, even if the materials turn out to be more expensive.  The Plenum of the Supreme Economic Court of Belarus has ruled that non-performance by the debtor’s partners, absence of the goods necessary for fulfilling of the contract, absence of funds of the Debtor are not considered circumstances of insuperable force.  The Ukrainian practice is the same.

3.  Unprofitability of the contract caused by the measures taken against coronavirus (i.e. a need to find a more expensive supplier, etc.) is not a force-majeure clause.  We believe that in such a case a party may instead demand termination or alteration of the contract due to material change in circumstances.  However, court practice shows that it rarely happens in Belarus and in Ukraine.

4. Force-majeure is confirmed by issuance of a certificate by a Chamber of Trade and Commerce of a corresponding state. But, where can you apply for a force-majeure certificate?  Who can apply?

You need to file an application to the chamber of the country that imposed the measures leading to inability to fulfill a contract.  In case of Ukraine, it is possible to get a force-majeure certificate due to acts of the Ukrainian government (termination of movement of people, postponement of flights, etc.)  However, there are limited chances to get it from the Belarusian Chamber of Trade and Commerce, as Belarus has introduced almost no restrictive measures due to coronavirus. Applications can also be introduced by foreign companies.

5. It must be remembered that a reference to force-majeure does not exempt a party from its obligations under a contract.  It only provides for temporary relief of liability for the period of duration of such circumstances. Thereafter, the contractual obligations still need to be fulfilled – except if the contract provides for an option of termination. In all other cases, you may end up in court trying to escape from liability due to a material change in circumstances.

6.  As claiming force-majeure is not as easy as it seems, we recommend that you take measures while drafting a contract: you should insert reservation clauses allowing for alteration or termination of the contract without a need to go to court.

© AEB

Congratulations to Lodewijk! The AEB Council of National Representation  (“CNR”) re-elected Juralink’s managing partner Lodewijk Schlingemann as its Chairman.

The Association of European Businesses is the main representative body of European foreign investors in Russia. Its 500 plus European and Russian member companies are committed to boosting cooperation between the EU and Russia, and improving the investment climate of the Russian Federation. The CNR acts as the advisory and consultative body to the Board.

See also: https://aebrus.ru/en/news/the_aeb_council_of_national_representation_cnr_elected_its_chairman_and_his_deputy/

Foreign companies who cannot (timely) fulfil their contractual obligations to a Russian partner due to COVID-19 may obtain a force majeure certificate from the Russian Chamber of Commerce and Industry.

This certificate will serve as evidence that the non-performing party cannot be held liable for any damages or penalties as a result of its late or non-performance.

The Chamber of Commerce and Industry (‘CCI’) grants the force majeure certificate only in regard to the liabilities arising from contractual obligations and having occurred on the territory of Russia. The basis of the force majeure circumstances is not the coronavirus epidemic itself, but legal measures implemented by the Russian authorities, which contain direct prohibitions and restrictions and, in this regard, make it impossible for the parties to fulfil their obligations.

Measures restricting access to Russia in an effort to combat the virus are recognized as circumstances of force majeure. Such measures make it temporarily impossible for foreigners to enter the Russian Federation for performance of installation, maintenance, repair and other services under a contract. Other circumstances cannot be attributed to force majeure, but are considered normal entrepreneurial risks, in particular: deterioration of the economic condition of the enterprise, a change in the exchange rate, and the devaluation of the national currency.

A force majeure certificate can be obtained by filing a request with the CCI. It requires the submission of an application, accompanied by the complete contract and addendums hereto, as well as the detailed argumentation referencing all force majeure circumstances with evidence thereof from relevant authorities. The application shall be in Russian, and can be submitted via an authorized representative.

The Russian CCI in Moscow issues force majeure certificates specifically for international transactions. It is making special efforts to review all applications.

Please note, that even if invoking force majeure releases a party from liability (for damages and penalties) for (partial) non-performance of contractual obligations, it must still perform its obligations as soon as the circumstances of force majeure have ended. A right of termination of the contract exists only if explicitly stipulated in the contract. Any issues with relation to the fulfillment of contractual obligations and other impact of force majeure to a specific contract must be decided by court.

We will be happy to assist you.

The Russian Ministry of Work has given explanations about work during the non-working “quarantine days” announced by president Putin. Remote working does require signature of a an addition to the employment contract by employer and employee.

The transition to remote working can temporarily be done via electronic exchange of employment documentation with the employees. If necessary, hard copies can be executed afterwards. This allows companies which did not organize remote working yet to continue work. At all times, the employees should respect the quarantine requirements implemented for the prevention of coronavirus infection.

Please contact us, if you have any questions how to organize the implementation of remote working in your Russian company.

Prime Minister Mikhail Mishustin gave the Russian Ministry of Finance one month to review all double taxation agreements (DTAs) for increase of dividend withholding tax to a minimum of 15%. This follows from President Putin’s speech on March 25 mentioning the increased rate.

Vladimir Putin took this decision with reference to a more fair distribution of incomes, and presumably as higher taxation would allow state support of those individuals and companies suffering from Covid-19.

Raising the rate to 15% is in conflict with agreements made between Russia and partner-countries in bilateral DTAs. Russia has more than a hundred DTAs. In case of refusal of DTA partner-country to make changes, Russia envisages to unilaterally withdraw from such DTA. The result would be that, a company paying dividends abroad will need to withhold and pay taxes for its shareholders at no less than 15%.

We urge you to contact us asap to review the issue of dividend distribution in your annual general meeting of shareholders which is due by April 30, 2020.

MIA of Russia: applications for work permits resumed and all categories of visas extended from March 19 due to the spread of COVID-19.

From 19 March, foreign nationals will be granted an extension of their temporary stay in the Russian Federation. All categories visas and temporary stays (for foreigners who don’t need a visa) can be extended. This is also true for those with visas that have already expired.

To do so, foreign citizens must apply to the nearest territorial body of the Ministry of Internal Affairs of the Russian Federation with a statement drawn up in an arbitrary form.

Temporary residence permits and residence permits can also be extended if they expire.

In addition, the Ministry of Internal Affairs of Russia (‘MIA’) resumes the receipt of applications for authorization to hire foreign workers and work permits for foreign nationals that are already on the territory of Russia. Applications for foreign citizens abroad are still suspended.

Also, migrant workers may apply for new patents without traveling outside Russia and without being liable if they fail to respect the deadline for submitting such applications.

For your reference: https://мвд.рф/contacts/presscenter/comments/item/19813472 (only in Russian) 

From March 18, 2020 until May 1, 2020 there will be very severe restrictions for entry of foreigners into the Russian Federation. This measure is taken to prevent the spread of Covid-19. It is set out in the Russian Government Order № 635-Р issued on March 16, 2020.

Foreign business travellers, tourists and foreign family members will not be permitted to enter the Russian Federation, and this also applies to entry via Belarus and to citizens of Belarus.

Also, the Ministry of Foreign Affairs of the Russian Federation temporarily suspends the acceptance of documents, execution and issuance of all categories of visas to foreign citizens and stateless persons.

Some categories of foreigners are exempted from the Order, such as diplomats, representatives of international organizations and their family members, people working in international road, rail, maritime and air transport and people visiting for the funeral of a close relative.

Persons with permanent residence in Russia can also return back home.

The Ministry of Internal Affairs of Russia and its territorial bodies likewise temporarily put on hold the acceptance of applications, execution and issuance of:

– invitations to enter the Russian Federation, and

– work permits for these citizens.

Please contact us if you require more information.

For your reference: Order 635-р (Russian only): http://publication.pravo.gov.ru/Document/View/0001202003170002