Immunity to collect from 'C' accounts not applicable when compensating for damages to Russian govt, Central Bank - source

MOSCOW. July 16 (Interfax) - The ban on collecting and seizing funds located in the special ruble "C" accounts will not apply in cases when protecting the rights that the Russian Federation government and the Central Bank of Russia have to property that a foreign government has forcibly seized, and the draft of the corresponding document is currently undergoing interdepartmental approval, a source familiar with the situation told Interfax.

President Vladimir Putin in May this year signed the decree "On the special procedure to compensate for damage caused to the Russian Federation and the Central Bank of the Russian Federation in connection with the unfriendly actions of the United States". Specifically, decree No. 442 stipulates the possibility to compensate for damages through the courts by collecting and seizing the property of the United States/United States citizens in Russia, including securities, shares in the capital of Russian legal entities and property rights. The document instructed the government to take measures to establish a special procedure to compensate for damages, thus a new draft was prepared pursuant to this clause, the Interfax source said.

The amendments are planned for implementation in decree No. 95, dated March 5, 2022, "On the temporary procedure to fulfill obligations to certain foreign creditors", which is one of the system-forming elements in the process to restrict capital, as formed in response to the sanctions imposed against Russia. The current version of the decree stipulates a ban on judicial collections, encumbrances, and seizures of assets in "C" accounts.

Accounting for the emerging judicial practice, the only exception implemented following the actual ban envisages that the decree is not applicable to judicial decisions rendered prior to January 3, 2024. The draft now indicates that there are to be two exceptions, namely that the ban will also not be applicable "to cases arising in connection with a foreign state depriving the Russian Federation and the Central Bank of the Russian Federation of rights to [the latter parties' respective] property".

"In order to protect the rights of the Russian Federation and the Central Bank of the Russian Federation effectively, it seems correct to provide them with the opportunity to seize funds in these accounts," Interfax's source said, quoting the explanatory note to the draft.

The amount of monetary funds that could theoretically become available to compensate the Russian Federation and the Central Bank of the Russian Federation for damages once the decree has been signed is unknown.