Consistent with past policy announcements, the UK Government has now brought forward new legislation which will further restrict the ability of UK citizens and companies to deal with Russian companies and individuals. A key aspect of this is the restriction on engaging in new investments or business in Russia. This is obviously of key importance to anyone contemplating investing in Russia or growing their existing operations there. We set out the details below.
The Russia (Sanctions) (EU Exit) (Amendment) (No. 12) Regulations 2022 ("No. 12 Amendment") came into force on 19 July 2022. It has amended the Russia (Sanctions) (EU Exit) (Amendment) (No. 12) Regulations 2022 (the "2019 Regulations") by restricting additional types of new investments in relation to Russia by UK persons or other persons in the UK.
The prohibited activities are as follows:
- Land. Directly acquiring any ownership interest in land located in Russia or indirectly acquiring any such interest for the purpose of making funds or economic resources available: (i) directly or indirectly to a person "connected with" Russia; or (ii) for the benefit of such a person (the "Relevant Purpose").
- Shareholding. Directly acquiring any ownership interest in or control over an entity "connected with Russia", or indirectly acquiring such interest or control for the Relevant Purpose, or directly or indirectly acquiring any ownership interest in or control over a "relevant entity" for the Relevant Purpose.
- Joint ventures. Directly or indirectly establishing a joint venture with a person connected with Russia.
- Subsidiaries or trading operations. Opening a representative office or establishing a branch or subsidiary located in Russia.
- Investment services. Providing investment services directly related to any of the above activities ((1)-(4)).
Under 19A(2) the 2019 Regulations, an individual is regarded as "connected with" Russia if they are ordinarily resident or located in Russia. An entity is "connected with Russia" if it is incorporated or constituted under the law or Russia or is domiciled in Russia. Under the No.12 Regulations, a "relevant entity" means an entity which has a place of business located in Russia but is not connected with Russia.
The No.12 Regulations make amendments to the 2019 Regulations to provide certain exemptions from the above measures.
The Explanatory Memorandum to the No.12 Regulations can be seen here: https://www.legislation.gov.uk/uksi/2022/801/pdfs/uksiem_20220801_en.pdf
