The regime for the movement of funds on special accounts of types “C” and “I” has been tightened

The authorities continue to rethink the regime for the movement of funds through accounts of type “C” and “I”, where the income of non-residents and payments on Eurobonds of the Russian Federation are blocked. The Kremlin’s latest decree retained the ban on the recovery and seizure of assets in such accounts, but it will not be applied retroactively: court decisions made before 2024 will be enforced. At the same time, funds in accounts of types “C” and “I” will be protected from collections for taxes and other obligatory payments. According to lawyers, until now, without a direct ban on the transfer of funds based on court decisions, banks have complied with them, which contradicts the logic of the blocking. The tightening of the regime for the movement of funds is explained by the lack of funds in accounts for the exchange of frozen assets of Russian investors.

Vladimir Putin signed a new decree (No. 244 of April 8, 2024), adjusting the possibilities for the movement of funds in special accounts of type “C” and “I”. At the first level, the income of unfriendly non-residents from securities and funds from the sale of assets of foreigners who left the Russian Federation are blocked. Ruble payments are credited to type “I” accounts to fulfill obligations on Russian Eurobonds – part of the funds in these accounts were allowed to be used to compensate Russians for lost income on assets frozen in foreign depositories.

BBNP Managing Partner Maxim Barashev recalls that special accounts of type “C” and “I” were introduced into legislation in the early 2000s, but only in 2022, with the start of the military operation, they began to be used to block funds. Thus, foreign investors cannot withdraw funds from type “C” accounts, but can use them to pay taxes, duties, fees and other mandatory payments. At the same time, as law enforcement practice has shown, blocked funds were not protected from penalties and seizure in court.

Partner at the law firm atLegal, Andrey Toryannikov, says that the absence of a direct ban on the collection and seizure of accounts of type “C” and “I” has led to an increase in the number of claims and demands for interim measures.

According to him, Yu. M. Vasiliev and Ingria Management Company LLC were among the first to try to overcome the restrictions of the decrees through the court, including those relating to the amount of compensation (case No. A56–100550/2023). At the same time, the judge of the Arbitration Court of St. Petersburg and the Leningrad Region, A. A. Korostashov, on November 27, 2023, seized funds in accounts of type “C” and “I” in the amount of the stated claims – 2.7 billion rubles. “The Central Bank, which has the right to give explanations about the regime of these accounts, gave very vague explanations. Subsequently, the courts began to refuse to impose arrests, as well as to cancel previously taken measures,” the lawyer adds.

According to Mr. Barashev, it was not even about claims, but about the execution of court documents, primarily writs of execution, which were presented to banks for execution (therefore, it is difficult to estimate the volume of such penalties). “Without an express ban on the transfer of funds, banks had no choice but to transfer funds to creditors. This distorted the meaning of the introduced regulation, which was aimed specifically at blocking money,” he says.

At the beginning of 2024, the “judicial” loophole was closed: the president signed decree No. 8 of January 3, 2024, banning encumbrances and seizures of assets in accounts of type “C” and “I”. After this, Interfax writes, the companies tried to challenge decisions on encumbering assets, including the former VTB Bank Europe asked for this as part of a dispute with VTB (the appellate instance rejected the petition). The new decree No. 244 clarifies that the prohibition of encumbrances no longer applies retroactively – it has been in effect since January 3, 2024, leaving previously adopted court decisions in force. At the same time, notes Tomashevskaya and Partners lawyer Valeria Zibareva, the provisions of the decree have been expanded to prohibit the collection of obligatory payments – taxes and fees – from these funds.

The tightening of the regime for the movement of funds in special accounts is explained by the authorities’ plans to exchange blocked foreign funds for frozen assets of Russian investors abroad.

Previously, the Bank of Russia reported that the money in such accounts (500 billion rubles, according to the latest official data from the Central Bank as of April 2023) is not enough for this. At the end of March, the regulator also excluded the possibility of transfers between type “C” accounts of different persons and the purchase of securities of Russian issuers on them.

Diana Galieva