The Central Bank is preparing a fund of frozen foods – Newspaper Kommersant No. 166 (7367) of 09.09.
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The Central Bank advocates the creation of a fund to compensate for the losses of Russian investors, whose funds were frozen abroad, at the expense of income from investing funds of foreign investors from unfriendly countries frozen in Russia. Experts emphasize the risks of foreclosure on foreign property of the Russian Federation at the request of foreign investors. But, lawyers admit, since there is no talk of confiscation or seizure, it is possible to implement the scheme with careful legal study.
The head of the Bank of Russia, Elvira Nabiullina, said at a plenary meeting of the Moscow Financial Forum that the regulator is discussing with representatives of banks the idea of creating a compensation fund for investors whose assets have been frozen in foreign structures. This includes the creation of “a compensation fund, possibly on the basis of the DIA, so that income from funds frozen from non-residents can compensate, for example, this part for mass investors.”
The Central Bank explained that the source of the formation of the fund will presumably be the income from investing DIA funds of “unfriendly” non-residents, which are currently in type “C” bank accounts. “At the same time, the volume of non-residents’ rights to the funds themselves held on type C accounts will not change,” the Bank of Russia emphasized. They added that specific mechanisms for the creation and functioning of the fund, the procedure for making payments and other parameters for the implementation of the project “are under discussion.”
The scheme is somewhat reminiscent of the actions of Euroclear, which receives income from the placement of funds received from the frozen assets of Russian investors. According to Frank RG, in the second quarter the volume of assets doubled, reaching €103.6 billion, and the income from their placement in the first half of the year reached €110 million.
President of the National Association of Stock Market Participants (NAUFOR) Alexei Timofeev estimated the volume of assets of foreign investors in Russian stocks and bonds at about $312 billion.
First Deputy Chairman of the Central Bank Vladimir Chistyukhin specified that the amount of foreign securities of Russian residents blocked by the European Union in the NSD is approximately 6 trillion rubles. (about $100 billion).
Deputy Finance Minister Alexei Moiseev, quoted by Interfax, considers the idea of the Central Bank at least worthy of discussion. So far, the vice-president of the Association of Banks of Russia, Alexei Voylukov, says that the regulator has not talked about specific ways to implement the plan with the participants in the association. Other surveyed associations of financial market participants also say that there were no discussions. According to Andrey Yemelin, the head of the NSFR, such a project “should be approached with a particularly careful study of all legal aspects, otherwise you can completely fall out of the legal field.”
Lawyers believe that it will not be easy to quickly launch the mechanism described by Ms. Nabiullina. According to Ilya Sorokin, a partner at Novator Legal Group, “it is difficult to find a legal mechanism in Russian legislation that would allow the proposed scheme to be implemented on the fly.” The lawyer believes that its implementation will require the adoption of a special law or a presidential decree that could “legitimize the proposed approach.”
“However, there is a risk that, as a result, on the basis of international treaties on the mutual protection of investments, which continue to operate in Russia with a number of “unfriendly” states, foreign investors will be able to file claims, including collective ones, within the framework of investment arbitration,” emphasizes Mr Sorokin. K&P.Law lawyer Alexander Rubin notes that “international legislation may provide for similar measures in relation to the assets of foreign investors blocked in Russia.”
However, Ekaterina Makeeva, head of the AB A-PRO sanctions practice, clarifies that this is not about requisitioning the assets of foreign investors, which significantly mitigates the situation. “Based on the wording of the proposal, it is supposed to use the profit from the frozen funds, that is, foreign investors do not lose their property, but by analogy with a bank deposit, these assets will work,” the lawyer explains.
According to Ms. Makeeva, in this case, the key task of the state and financial institutions will be to ensure the safety of assets. So, the lawyer clarifies, in addition to creating a fund, it is necessary to “think over a system of insurance and compensation, as well as the procedure for returning property to foreign owners if the grounds for freezing disappear.”
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