Russian Legislation Update: May 2016
Welcome to the most recent issue of our Russian Legislation Update, covering the period of 11 April – 8 May 2016.
In this issue…
On 13 April the Government adopted Resolution No. 300 regarding, among other things, currency control bodies.
Due to the abolishment of the Federal Service for Fiscal and Budgetary Supervision, its functions of a currency control body were transferred to the Federal Customs Service and the Federal Tax Service. The Federal Customs Service is entitled to exercise supervision and control over currency operations related to the transfer of goods across the customs border of the Eurasian Economic Union, export and import of goods from/to Russia, whereas the Federal Tax Service—over residents’ and non-residents’ compliance with the currency legislation (save for control over the above currency operations) and residents’ compliance with the duties related to their overseas accounts.
The Resolution entered into force on 18 April 2016.
On 7 April 2016, the Bank of Russia issued Directive No. 3990-U amending Instruction No. 139-I “On Mandatory Economic Ratios for Banks”.
The Directive was registered with the Ministry of Justice on 22 April 2016.
With respect to capital adequacy ratios the Directive provides for increased degrees of risk for (i) foreign currency loans granted to companies after 1 May 2016 and (ii) investments in foreign currency securities as per agreements made after 1 May 2016. Under certain conditions, the increased risk requirements will not apply where borrowers have foreign currency revenues.
The Directive entered into force on 25 April 2016.
On 21 March 2016, the Bank of Russia issued Directive No. 3982-U amending its Instruction No. 135-I.
The Directive was registered with the Ministry of Justice on 13 April 2016.
The amendments relate to the payment of a bank’s charter capital with foreign currency funds. In particular, they introduce an exhaustive list of eligible foreign currencies.
The Directive will enter into force ten days after its official publication.
On 9 March 2016, the Bank of Russia issued Directive No. 3973-U amending Directive № 3444-U of the Bank of Russia dated 16 November 2014 “On the Procedure for Investing Insurance Reserve Funds and the List of Assets Eligible for Investment.”
The Directive was registered by the Ministry of Justice on 4 April 2016.
The amendments provide for an additional source of financing of concession projects due to the expansion of investment opportunities of insurance companies. In particular, there is a possibility of investing insurance reserves in bonds issued by the concessionaire but in the amount not exceeding 45% of the total value of insurance reserves. For this, the following conditions shall be met: (i) a concession agreement must be concluded in accordance with the concession legislation of the Russian Federation; (ii) a grantor under the concession agreement is the Russian Federation, the constituent entity of the Russian Federation or a municipality with the population over one million people; and (iii) the aggregate nominal value of all outstanding bonds of the issuer specified for each day does not exceed 110% of the volume of investment provided for all Concession Agreements concluded by this issuer. Such investment into concession bonds is also possible in the absence of the assigned rating from one of the rating agencies to the issuer (issue of bonds).
The Directive entered into force on 23 April 2016.
On 14 April 2016, the Government issued Decree No. 670-r on the approval of the Paris Agreement on climate change.
Pursuant to the Federal Law “On International Treaties of the Russian Federation,” the Russian Government approved the Paris Agreement adopted on the basis of the decision of the 21st Conference of the Parties to the United Nations Framework Convention on Climate Change in December 2015. The Paris Agreement, which is to replace the existing Kyoto Protocol after 2020, reaffirms the goal of limiting global temperature increase well below two degrees Celsius above the pre-industrial level while urging the countries” efforts to limit the increase to 1,5 degrees.
In particular, the Paris Agreement requires parties to set intended “nationally determined contributions” with respect to greenhouse gas (“GHG“) emission reduction targets and to pursue domestic measures to achieve them. Russia committed to achieve a reduction in emissions to 70–75% by 2030 compared to its 1990 levels, subject to maximum possible account absorbing capacity of forests. The Paris Agreement also requires parties to report on its commitments every five years and the progress made in implementing and achieving them.
It shall be noted that Russia currently has, in force, regulations that provide for limitation of GHG emissions. In particular, on 30 September 2013, the President issued Decree No. 752 “On Reduction of Emission of Greenhouse Gases”, which establishes a national goal to achieve by 2020 a level of GHG emissions in the country not exceeding 75% (consistency) of the 1990 level of such emissions. Following this Decree, on 2 April 2014, the Government approved a national action plan (specific measures) to achieve this national goal.
Starting from 22 April 2016 and through 17 April 2017, the Paris Agreement is open for signature (Russia signed the Agreement on 22 April 2016) and will enter into force when at least 55 country parties, together representing at least 55% of global GHG emissions, adopted the Agreement. For Russia, the adoption would yet require a federal law ratifying the Paris Agreement.
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—Russia remains a party to the Kyoto Protocol, however, it does not undertake any quantitative commitments on reduction of GHG emission under the second period of the Kyoto Protocol (2013–2020).