Titre de la prsentation 1 Background Foreign currency lease - PowerPoint PPT Presentation

Oct 14, 2023 •45 likes •115 views

Legal protection of lessees interests in case of foreign currency lease April 28 th , 2016 Titre de la prsentation 1 Background Foreign currency lease Article 317 of the Civil Code of the Russian Federation allows nomination of price in

Legal protection of lessee’s interests in case of foreign currency lease April 28 th , 2016 Titre de la présentation 1
Background Foreign currency lease ► Article 317 of the Civil Code of the Russian Federation allows nomination of price in foreign currency (or conventional units), while payment shall be in Russian rubles only, so foreign currency lease is technically legal ► Common practice over the years ► Goal – to shift currency loss risks onto lessees (as developers/owners have their credits in foreign currency as well) ► As a result, after destabilization of ruble lease expenses increased up to 20%-40% of the turnover of the lessees ► IS IT FAIR? 2
Government reaction Bill on prohibition of foreign currency lease ► Drafted by the Ministry of Industry and Trade (“ Minpromtorg ”) ► Goal is to establish a legal ban on denominating rental and other payments under lease agreements (such as maintenance charges, service charges, marketing fees, etc.) either in a foreign currency or in so-called "conventional monetary units“ ► So far still under discussions within the Government ► Strong lobby against this Bill from landlords and potential investors ► Business is pessimistic (lot of loopholes in the Bill, therefore ”dead law”) 3
Legal protection of the lessee Possible negotiation options ► Currency rate corridor (or fixing the maximum exchange rate) – see VimpelCom case ► Currency grace period (fixing the ruble rent for short-term period: 6M, 1Y … ) ► In case of foreign lessor – change the governing law and court jurisdiction outside Russia … 4
Legal protection of the lessee (cont’d) Usual tricks (points of attention) ► Fixing the rent in rubles, but regular recalculation according to some coefficient (foreign currency exchange rate, gold/oil index … ) ► Main rent in rubles, but other payments (such as maintenance charges, service charges, marketing fees, etc.) in foreign currency ► Turnover fee: Conversion into foreign currency at the end of the reporting period or at the day of each transaction? ► Warranty deposit: Fixed amount in foreign currency (therefore, replenishment at the beginning of each prolongation period) ► Warranty deposit: Return in rubles at the exchange rate at the date of payment, or at the exchange rate at the date of return? 5
Eugene Korotkikh Senior Manager eugene.korotkikh@mazars.ru THANK YOU! QUESTIONS? Date 6
Our contacts: www.mazars.ru Mazars in Moscow Nizhniy Susalniy pereulok, 5/19 Tel: +7 495 792 52 45/46 Email: info@mazars.ru Mazars in Saint-Petersburg V.O. Maly prospect, 22, lit. A Tel: +7 812 325 70 02 Email: info@mazars.ru www.mazars.kg Mazars in Kyrgyzstan 20011 Bishkek – Kyrgyz Republic 191 Abdrakhmanova str. Hyatt Regency Hotel, Office 124 Tel: +996 312 62 38 47 Email: infokg@mazars.ru

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