On 23 May 2024, the President of the Russian Federation signed Decree No. 422 (the “Decree”)[1], which has been adopted as a retaliatory measure to counteract attempts led by the U.S. Government to seize assets and property of Russia and Russian persons in the United States and abroad.
The Decree provides that Russian courts may rule for assets and property of U.S. organizations, companies and institutions to be taken over under certain preconditions. These include the following procedure:
- Only the Russian Federation and the Central Bank of Russia are entitled to such remedy and can initiate a case in a Russian state commercial court to establish whether an event of unjustified seizure as prescribed by the Decree has occurred.
- Should the court find that an event under the Decree is in place, it requests the Government Commission[2] to provide a list of U.S. assets that are located in Russia and can be used for compensation (all transferable assets, including movable and immovable property located in Russia, Russian securities, shares in Russian companies, and other tangible rights, etc.).
The Decree potentially affects assets of the U.S., U.S. nationals and entities associated with the U.S., including U.S. citizens and residents, U.S.-incorporated entities, entities with their primary business or center of profits in the U.S., as well as entities incorporated elsewhere but controlled by U.S. persons.
- The court resolves that the fact of unjustified seizure shall be deemed established, and certain US assets (corresponding to the amount of losses) shall be transferred to the injured party.
The Decree does not provide that private companies and individuals have rights to compensation in connection with U.S. losses.
The Decree does not provide for an exhaustive framework for it to be applied immediately. The Russian Government has a four-month deadline to enact other legislation to implement the Decree.
Factors to Watch:
- Government resolutions that set detail for the implementation of the Decree;
- Any seizures of Russian assets in the US;
- Possible court cases considering whether the seizure of Russian property in the U.S. is legal.
[1] Decree No. 422 of the President of the Russian Federation dated 23 May 2024 “On the Special Procedure to Compensate Damage Caused to the Russian Federation and the Central Bank of the Russian Federation as a Result of Unfriendly Actions by the United States of America”.
[2] The Government Commission for Control over Foreign Investments in the Russian Federation.