Frozen Assets in Russia

Action Plan for Foreign Nationals with Frozen Assets in Russia

Frozen assets in the Moscow Stock Exchange (MOEX) or National Settlement Depositary (NSD)

Foreign nationals who find their assets frozen on the MOEX/NSD face a complex landscape due to the geopolitical tensions and the extensive sanctions imposed on Russia.

The Russian government has proposed different mechanisms to alleviate these challenges, particularly through asset swap schemes tailored to both "unfriendly" and "friendly" countries. Here’s a focused action plan to guide foreign nationals in navigating these challenges.

Action plan for the Russian swap scheme

More about Frozen Assets

Understanding the different swap schemes

Scheme for so called unfriendly countries

  • Eligibility: Nationals and companies from countries that Russia deems "unfriendly" are subject to specific rules. These typically include countries that have imposed sanctions on Russia.
  • Mechanism: Foreigners can participate in a swap where they bid for Russian-owned foreign securities using their frozen assets as currency. This process allows them to convert frozen rubles or securities into more liquid assets.
  • Legal Risks: Participants need to review sanctions compliance closely, as engaging in certain transactions might violate the sanctions imposed by their home countries.

Scheme for so called friendly countries

  • Eligibility: Nationals from countries not on the “unfriendly” list may have more favorable terms and fewer restrictions in participating in the swaps.
  • Mechanism: These investors might have access to a more straightforward process for swapping assets, with potentially lower bureaucratic hurdles and fewer compliance issues.
  • Opportunities: Assess if the more lenient scheme for friendly countries offers a safer pathway to liquidity without significant sanctions risk.

Action steps for navigating the swap schemes

We recommend that those affected consider the following steps.

Legal Consultation

  • Sanctions review: Immediately consult with legal experts specializing in international sanctions and Russian regulations to understand permissible transactions.
  • Compliance strategy: Develop a comprehensive compliance strategy to ensure that all steps taken are within the legal frameworks of both Russia and the investor's home country.

Financial Assessment

  • Asset valuation: Determine the current value of the frozen assets on MOEX. This step is crucial for understanding potential losses or gains from participating in the swap.
  • Liquidity analysis: Analyze the liquidity prospects of the assets being offered in the swap. Higher liquidity assets might reduce overall risk.

Engagement with Russian Authorities

  • Registration: Ensure all necessary registrations and applications are completed by the deadlines, particularly for the swap scheme relevant to your status (unfriendly or friendly).
  • Documentation: Prepare and submit all required documentation in compliance with Russian legal requirements, ensuring clarity and adherence to the stipulated formats.

Risk Management

  • Market risks: Assess the market risk, including volatility and potential price manipulation, as these factors could significantly impact the outcome of the swap.
  • Reputational risks: Consider the reputational implications of engaging in a swap scheme with Russia, especially for investors from countries with strong positions on sanctions.

Bidding Strategy

  • Preparation: Prepare for the bidding process by understanding the structure of the lots and the types of securities available.
  • Strategic bidding: Develop a bidding strategy that maximizes the chances of acquiring assets that will provide the best potential for liquidity and value retention.

Post-Transaction Planning

  • Exit strategy: Plan for the eventual sale or further swap of acquired assets, including timelines and target markets that are not affected by sanctions.
  • Continued monitoring: Keep a close watch on geopolitical developments and regulatory changes that could impact the assets or the conditions of the swap.

Advice for law firms assisting foreign nationals with frozen assets

Law firms play a crucial role in navigating the complex legal, regulatory, and financial terrain for foreign nationals whose assets are frozen on MOEX/NSD. A strategic and methodical approach is essential for these law firms to effectively assist their clients. Here are some important points that law firms can follow to aid their clients in unfreezing assets:

Initial assessment and client onboarding

Client consultation

  • Conduct an initial consultation to understand the full scope of the client’s situation, including the type and value of assets frozen on MOEX/NSD.
  • Determine the client’s nationality and residency to identify if they fall under the "unfriendly" or "friendly" country categorization according to Russian regulations.

Sanctions check

  • Review all applicable international sanctions that might affect the transaction, particularly those imposed by the U.S., EU and other regions where the client has significant operations.
  • Assess potential legal risks associated with efforts to unfreeze assets, including any implications of sanctions evasion or breaches.

Legal and strategic planning

Detailed asset analysis

  • Perform a thorough analysis of the frozen assets, including their current market value, legal status, and any encumbrances that may impact liquidity.
  • Evaluate the historical and projected performance of these assets to advise on potential recovery scenarios and outcomes.

Regulatory compliance

  • Map out the regulatory landscape in Russia and the client’s home country to develop a compliance framework for the asset recovery process.
  • Identify any legal barriers or bureaucratic challenges that could impede the unfreezing process and plan for contingencies.

Engagement and negotiation

Preparation for swap scheme participation

  • If the client is eligible and opts to participate in the asset swap scheme, prepare all necessary documentation and registrations as required by the Russian authorities.
  • Advise on the strategic implications of participating in the scheme, including analysis of the assets offered in exchange versus the frozen assets' value.

Negotiation with Russian entities

  • Initiate contact with relevant Russian financial institutions, including MOEX and NSD, to negotiate the terms of unfreezing assets.
  • Engage with Russian broker(s) to understand the procedural nuances of the asset swap for foreigners.

Execution and transaction management

Transaction oversight

  • Oversee the entire transaction process, ensuring that all legal and regulatory requirements are met without any violations.
  • Manage the bidding or exchange process, providing real-time advice and adjustments to strategy based on market conditions and legal developments.

Legal documentation and finalization

  • Ensure that all transaction documents are accurately prepared, verified, and submitted within the required timelines.
  • Handle any legal disputes or challenges that arise during the transaction process efficiently and effectively.

Post-transaction support and monitoring

Asset repatriation and liquidation

  • Assist in the repatriation of any assets acquired through the swap or the sale of unfrozen assets, ensuring compliance with international financial regulations.
  • Advise on the liquidation of assets if that forms part of the client’s strategy, including identifying potential buyers and markets that are not affected by sanctions.

Ongoing monitoring and advice

  • Provide ongoing monitoring of the geopolitical and regulatory environment for any changes that could affect the client’s assets or future transactions.
  • Offer continuous legal support to adapt to new regulations or sanctions that may impact the client’s repatriated or newly acquired assets.

For law firms assisting foreign nationals with assets frozen in MOEX, a proactive, informed, and meticulous approach is essential. By understanding the intricate web of sanctions, regulatory requirements, and market conditions, law firms can guide their clients through the complexities of unfreezing assets. This comprehensive action plan is designed to ensure that all potential legal and financial challenges are anticipated and managed, enabling the most effective recovery and protection of the client’s investments.

WINHELLER advises on assets frozen in Russia

Foreign nationals with assets frozen in Russia, particularly on the MOEX, must navigate a minefield of legal, financial, and geopolitical challenges. By following a structured action plan that emphasizes legal compliance, financial prudence, and strategic engagement, investors can mitigate some of the risks associated with these asset swap schemes. As always, the importance of legal advice cannot be overstated, especially in such a dynamically changing landscape where new sanctions or rules could emerge at any moment. Please contact us with your questions!

Do you need support?

Do you have questions about our services or would you like to arrange a personal consultation? We look forward to hearing from you! Please fill in the following information.

Or give us a call: +49 69 76 75 77 85 25