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Ukraine: FX restrictions on operations with annexed Crimea
Kyiv, Ukraine, Thu, Nov 12, 2014
On 3November 2014 the National Bank of Ukraine (the "NBU") issued Regulation No. 699 "On Application of Certain Provisions of CurrencyLegislation during Regime of Temporary Occupation in the Territory of FreeEconomic Zone in Crimea" (the "Regulation").The Regulation became effective on 5 November 2014 and was adopted in line withseveral pieces of legislation passed following the annexation of Crimea by theRussian Federation, including the Law of Ukraine "On Establishment of theFree Economic Zone "Crimea" and Special Aspects of EconomicActivities on Temporarily Occupied Territory of Ukraine” No. 1636-VII dated 12August 2014 (which we analysed in our previous law-now article).
Accordingto the Regulation:
1.Legal entities and individuals registered (or permanently resident) in theterritory of the free economic zone in Crimea (hereinafter – the "FEZ") shall betreated as non-residents for the purposes of the NBU regulations and those whoare involved in investment transactions shall be treated as foreign investors;
2.Payments from mainland Ukraine to the FEZ (and vice versa) shall be treated ascross-border payments;
3.Contracts entered into between residents of mainland Ukraine and residents ofthe FEZ shall be treated as foreign economic contracts. Therefore, foreignexchange restrictions shall apply to such contracts, including the so-called90-day rule (which applies to export / import transactions);
4.Investments by Ukrainian residents to Crimea are prohibited;
5. Thefollowing transactions cannot be conducted in the currency of Russia (theRouble) in mainland Ukraine: (i) accepting bank deposits (including theincrease and extension of deposits accepted before 27 September 2014), and (ii)providing loans (including overdrafts and extending the term of loan agreementsentered before 27 September 2014); and
6.Ukrainian banks shall stop any transactions on the bank accounts of legalentities registered in the FEZ and take all other measures required to closesuch accounts.
Legislation:Regulation of the National Bank of Ukraine “On Application of CertainProvisions of Currency Legislation during Regime of Temporary Occupation in theTerritory of Free Economic Zone in Crimea” No. 699 dated 3 November 2014.
Authors:
OlexanderMartinenko, Senior Partner, Olexander.Martinenko@cms-cmck.com
VyacheslavOvechkin, Senior Associate, Vyacheslav.Ovechkin@cms-cmck.com
Tetyana Mykhailenko, Lawyer, Tetyana.Mykhailenko@cms-cmck.com
