Strategic Companies Abroad: New Requirements for Coordination of Actions

For Russian strategic companies and their foreign subsidiaries, the list of actions that require approval from authorized Russian authorities is being expanded. Now, prior approval may be required not only when fulfilling the requirements of foreign government agencies, but also in cases where the obligation to perform certain actions is directly established by the legislation of another country.

The changes affect information disclosure, reporting, document transfer, and certain contractual actions. As a result, companies will have to consider the requirements of two jurisdictions simultaneously.

What actions will need to be coordinated?

Previously, approval was required for a number of actions abroad, including the transfer of information about a company’s activities, changes to contracts with foreign counterparties, and the disposal of shares in foreign organizations and real estate.

Foreign legislation itself can now serve as the basis for approval. A separate order from a foreign government agency is no longer required.

The requirements apply to strategic enterprises and their subsidiaries. Therefore, it is important for companies to check whether they are covered by the new regulations.

How will the changes impact business?

The main consequence is an increase in administrative and legal burdens. Companies will be required to determine in advance which mandatory actions abroad require approval in Russia.

In particular, additional procedures may affect:

• submission of financial and corporate reports;
• disclosure of information about activities;
• transfer of documents to foreign counterparties;
• compliance with certain pricing requirements;
• change of contractual documentation.

Foreign subsidiaries will require special attention. Compliance with local requirements may require additional coordination with the Russian parent company.

However, certain exceptions are provided, in particular for the disclosure of information in accordance with Russian requirements and rules related to the circulation of securities.

What to do when the requirements of different countries conflict

The most significant risk arises when foreign law obliges a company to take action, but Russian approval cannot be obtained.

Refusal may be related to a threat to Russia’s economic interests, for example, the disclosure of confidential information about technologies, contractors, or commercial policies.

However, the absence of Russian approval does not in itself absolve a company from liability for violating foreign laws. The consequences of failure to fulfill obligations will be determined by the regulations of the relevant country.

Therefore, businesses must consider two independent risks: liability in Russia for uncoordinated actions and consequences abroad for violating local requirements.

How to prepare for new requirements

To reduce the likelihood of violations, strategic companies should review the procedures for fulfilling foreign obligations.

In particular, it is recommended:

1. Compile a list of mandatory reporting and other actions in each country of presence.
2. Determine which procedures may require prior approval in Russia.
3. Incorporate legal due diligence into the reporting and information dissemination process.
4. Allow additional time to obtain approvals.
5. Document decisions, legal opinions and correspondence with authorized bodies.

If fulfillment of a foreign requirement depends on obtaining Russian consent, consideration may be given to requesting a deferment or an alternative method of fulfilling the obligation. For example, partial disclosure of information, if permitted by foreign law.

The expansion of requirements increases the importance of preliminary legal due diligence for strategic companies’ foreign operations. Now, Russian restrictions will need to be taken into account not only when complying with the requirements of foreign authorities, but also when fulfilling obligations directly stipulated by the laws of other countries.

For businesses, the key task is to promptly identify such obligations and arrange approvals before their due dates. This will reduce the risk of simultaneously violating the requirements of multiple jurisdictions and avoid additional costs.