On May 20, 2024, Presidential Decree No.430 "On temporary procedure for acquisition of exclusive rights of certain rightholders and performance of monetary obligations to certain foreign creditors and persons they control" (the "Decree") was published, which establishes the following changes to the procedure for alienation of exclusive rights and payment of remuneration for the alienation:

1. APPROVAL OF TRANSACTIONS ON ALIENATION OF EXCLUSIVE RIGHTS FROM "UNFRIENDLY" RIGHTHOLDERS AFTER MAY 20, 2024

1.1.  The Decree establishes that starting from May 21, 2024, transactions involving the acquisition of exclusive rights from "unfriendly" rightholders (including Russian companies controlled by a person from an "unfriendly" state) in favor of Russian residents are subject to mandatory approval by the Government Commission for Control over Foreign Investments in the Russian Federation (the "Government Commission").

Notably, the Decree does not contain a direct exemption for companies from "unfriendly" jurisdictions controlled by Russian residents.

1.2.  The Government Commission, when authorizing such a transaction, can include a condition concerning the procedure for transferring remuneration and other payments (including penalties) under the transactions to a special type O ruble account in accordance with Presidential Decree No.322 dated May 27, 2022, as well as other conditions determined at the discretion of the regulator.

1.3.   Transfer of funds from a type O ruble account to other accounts of the rightholder (including foreign accounts) can be done only on the basis of a separate authorization from the Government Commission for such a transfer.

2. SPECIAL PROCEDURE FOR FULFILLING MONETARY OBLIGATIONS AFTER MAY 20, 2024 UNDER DEALS ALREADY ENTERED INTO WITH "UNFRIENDLY" RIGHTHOLDERS

2.1.   The Decree does not require subsequent Government Commission approval for transactions already entered into before May 20, 2024, but does change the procedure for fulfilling monetary obligations of the buyers under such transactions.

2.2.   If the monetary obligations of a buyer under a transaction entered into before May 20, 2024 are not fulfilled as of the time the Decree is published, they are to be fulfilled only by transferring funds to a special type O ruble account of the rightholder. This requirement of the Decree applies to payments that have not been made in violation of the time limit for fulfilling obligations under the transactions.

2.3.   It is not clear from the text of the Decree whether the indication of violation of the terms of fulfillment of obligations is in fact a reduction of the range of transactions (the obligation to settle through a type O account arises only if fulfillment of the obligation is delayed) or a clarification (the obligation to settle through a type O account under transactions entered into previously arises, among other circumstances, in case of delay in fulfillment of the obligation).

Until this issue is clarified, we recommend presuming the stricter and more formal approach of extending the type O account settlement requirements to all cash obligations of the buyer outstanding as of May 20, 2024.

2.4.   The obligation to settle through the type O account with respect to transactions not performed by May 20, 2024 seems unusual in the context that, when approving new transactions, the Government Commission has the authority (but not the obligation) to include a condition on paying through a type O account in the transaction authorization. We hope this issue will also be clarified.

EXEMPTIONS FROM THE DECREE:

Provisions of the Decree (including on transfer to a type O account) do not apply to:

• Transactions involving the acquisition of rights to works of science, culture, literature and art, to performances, phonograms and messages of radio or cable broadcasting organizations;

• Transactions where the buyer's liabilities do not exceed 15 million rubles or an amount in foreign currency equivalent to 15 million rubles.

In its current edition, the Decree significantly changes the procedure for disposal of rights under transactions on alienation of the most liquid IP assets (trademarks and patents) for which the amount of liabilities exceeds 15 million rubles.

That said, the Decree currently contains a number of unclear provisions that are likely to be clarified by way of additional comments concerning the Decree.

In addition, the Government of the Russian Federation is to approve the procedure for issuing the authorizations provided for by this Decree: we believe that the new statutory act could shed light on the nuances that are still unclear.