Settling a commercial dispute with a Russian counterparty currently requires navigating a layer of currency-control and sanctions-related licensing requirements before any payment or formal agreement can take effect. Foreign companies must obtain authorisation from the relevant Russian authorities – most commonly the Government Commission on the Control of Foreign Investments – before executing a settlement agreement, payment plan or standstill arrangement with a Russian entity. Understanding the procedural steps, the documentation required and the realistic timelines is essential to avoid delays, voidable agreements and unintended regulatory exposure.
Why a Licence Is Required
Since the introduction of capital-control measures in 2022, transactions between Russian residents and counterparties from so-called "unfriendly states" have been subject to restrictions under Russian currency legislation and a series of presidential decrees. A settlement agreement, even one that merely restructures an existing payment obligation or establishes a deferred payment plan, may constitute a cross-border financial transaction requiring prior governmental clearance.
The legal basis sits primarily in Federal Law No. 173-FZ on Currency Regulation and Currency Control, supplemented by decrees of the President of the Russian Federation and decisions of the Government Commission. The Arbitrazh court system – Russia's commercial court network – and the Supreme Court of Russia have both acknowledged that agreements concluded without the necessary authorisation risk being treated as void or unenforceable under Russian law. For foreign companies engaged in pre-litigation or post-judgment recovery, this creates a significant procedural hurdle that must be addressed before any substantive negotiation can advance.
If your organisation is considering a standstill agreement as a means of managing limitation risk during negotiations, it is worth reviewing how similar instruments operate in comparable jurisdictions. Our analysis on standstill agreements and limitation risk in the United Kingdom provides a useful comparative reference when structuring cross-border arrangements.
Who Needs to Apply
The licensing obligation typically falls on the foreign party, although the practical burden of preparing the application is often shared with local Russian counsel. The requirement applies broadly to:
- Companies incorporated in states designated as "unfriendly" by the Russian Government, which includes all EU member states, the United Kingdom, the United States and a number of other jurisdictions.
- Foreign investors and funds seeking to settle disputes relating to Russian assets, subsidiaries or contractual obligations.
- Creditors wishing to agree a payment plan or debt restructuring arrangement with a Russian debtor outside of formal insolvency proceedings.
- Parties to Arbitrazh court or international arbitration proceedings who wish to execute a mediation or settlement agreement rather than pursue a final award.
Even where the primary counterparty is a Russian subsidiary of a foreign group, the authorisation requirement may still apply depending on how the settlement cash flows are structured and which entities are party to the agreement.
Step-by-Step Application Procedure
Step 1 – Assess Whether Authorisation Is Required
Not every settlement is caught by the licensing regime. A preliminary legal assessment should map the proposed transaction against the current list of restricted operations, the identity of the parties, the currency of settlement and the direction of the payment flows. Transactions that are purely non-monetary – for example, an agreement to transfer assets in lieu of payment – may engage different regulatory instruments. This assessment should be carried out by a lawyer in Russia with current knowledge of the applicable decrees, as the regulatory landscape has changed frequently.
Step 2 – Prepare the Application Package
Applications are submitted to the Government Commission, which sits under the Ministry of Finance of the Russian Federation and is responsible for reviewing transactions involving parties from unfriendly states. The required documentation typically includes:
- A formal application letter setting out the identity of the parties, the nature of the underlying dispute or obligation, and a description of the proposed settlement terms.
- Corporate documents for the foreign applicant: articles of association, certificate of incorporation, evidence of good standing, and details of the ultimate beneficial owner.
- A draft of the settlement agreement or payment plan, including any standstill agreement or letter before action that forms part of the pre-litigation or mediation process.
- Supporting financial documentation, which may include the original contract, invoices, account statements or court filings demonstrating the existence and quantum of the claim.
- A statement of compliance confirming that the foreign party is not subject to additional restrictions that would independently prevent performance of the settlement.
All documents originating outside Russia must typically be apostilled or legalised and accompanied by a certified Russian-language translation. Failure to meet these formalities is one of the most common errors made by foreign applicants and routinely leads to the application being returned without substantive review.
Step 3 – Submit and Track the Application
Submission is ordinarily made through the Ministry of Finance or through the relevant sectoral ministry, depending on the industry of the Russian counterparty. There is no single universal online portal available to foreign applicants at the time of writing, so the submission route should be confirmed with Russian counsel before filing. Applications are typically submitted in hard copy and by electronic means simultaneously.
Following submission, the Commission may request additional information or clarifications. Responding promptly and completely to such requests is critical: delays in responding can significantly extend the review period and, in some cases, may result in the application lapsing.
Step 4 – Await the Commission's Decision
The Government Commission does not operate on a fixed statutory deadline for all categories of application. Review timelines vary depending on the complexity of the transaction, the sector involved and the current volume of applications. Foreign applicants should budget conservatively and not structure commercial deadlines around an optimistic approval date. Where a matter is time-sensitive – for example, because a limitation period is approaching or Arbitrazh court proceedings are already on foot – this urgency should be communicated clearly in the application, with supporting documentation.
If your dispute has a restructuring or insolvency dimension, you may also wish to consider the interaction between the settlement authorisation process and Russian bankruptcy procedure. Our bankruptcy and restructuring practice in Russia advises on the coordination of these parallel tracks.
Step 5 – Execute the Settlement Agreement
Once a positive decision is received, the settlement agreement or payment plan should be executed strictly in accordance with the terms set out in the authorisation. Any material departure from those terms – including changes to payment amounts, currency, timing or parties – may require a fresh application or a formal amendment. The authorisation itself may be time-limited, so execution should not be delayed unnecessarily after the decision is received.
If the settlement is intended to be recorded before an Arbitrazh court as a consent order (mirovoe soglashenie under the APC RF, the Arbitrazh Procedure Code of the Russian Federation), additional procedural steps are required to obtain the court's approval of the agreed terms. The court retains a supervisory role and will not approve a settlement that it considers contrary to the law or the rights of third parties.
Common Errors by Foreign Applicants
Based on the types of matters that arise in cross-border disputes with Russian counterparties, the following errors occur with particular frequency:
- Submitting agreements in draft form that differ from the final intended terms. The Commission evaluates what is submitted; discrepancies between the approved draft and the executed agreement create legal uncertainty.
- Underestimating the translation and legalisation requirements. Certified translations must be prepared by a qualified translator; notarised translations prepared abroad may not be accepted without further verification.
- Failing to address sanctions compliance on both sides. Russian counterparties may themselves be subject to obligations or restrictions under Russian law that affect their ability to enter into and perform a settlement. This should be investigated before negotiations proceed.
- Treating the licensing process as a formality. The Government Commission exercises genuine discretion. Applications that do not clearly articulate the benefit to the Russian side or that involve sectors subject to heightened scrutiny may be refused or significantly delayed.
- Issuing a letter before action or commencing Arbitrazh court proceedings without a strategy for the settlement pathway. Litigation and licensing timelines interact; an uncoordinated approach can foreclose settlement options or create unnecessary costs.
Cost Drivers and Practical Considerations
The cost of obtaining a settlement licence is driven primarily by legal fees for local Russian counsel, translation and notarisation costs, and the internal management time required to gather and verify supporting documentation. State fees, where applicable, depend on the category of application. Foreign companies should also factor in the cost of maintaining their legal and compliance position during the review period, particularly if Arbitrazh court proceedings are running in parallel.
Currency considerations also arise at the execution stage. Russian currency control rules may restrict the currency in which settlement payments are made and the accounts through which they may be routed. These mechanics should be addressed as part of the settlement agreement drafting, not as an afterthought once authorisation has been received.
Where the underlying dispute has a negotiation or mediation component, Ferraz & Whitmore's experience in commercial negotiations may offer relevant perspective on structuring the pre-agreement phase in a way that supports a durable outcome.
Decision Checklist Before You Apply
Before initiating the application process, it is advisable to work through the following questions with legal counsel:
- Has a preliminary legal assessment confirmed that the proposed settlement falls within the scope of the licensing requirement?
- Are the identities of all parties – including ultimate beneficial owners – fully established and documented?
- Is the draft settlement agreement, payment plan or standstill arrangement in a form that is sufficiently advanced for submission?
- Have all foreign-originating documents been apostilled and translated?
- Is the submission route (ministry or agency) confirmed for the relevant sector?
- Has the interaction with any ongoing Arbitrazh court proceedings or limitation periods been assessed?
- Has the Russian counterparty's own legal capacity to perform the settlement been verified?
- Is there a contingency plan if the Commission requests additional information or if approval is delayed?
If you are at an early stage of assessing your options, or if you have already commenced the process and encountered difficulties, we welcome the opportunity to discuss your situation. Please write to us at info@ferrazwhitmore.com or visit our contacts page to arrange a consultation.
Looking Ahead
The regulatory framework governing settlements with Russian counterparties continues to evolve. Presidential decrees and Government Commission decisions have been issued with some frequency, and the practical application of the rules is shaped by administrative practice that is not always fully reflected in the published legal texts. Monitoring this landscape requires sustained attention from advisers with an active Russian practice.
Foreign companies that maintain ongoing commercial relationships with Russian entities – or that hold claims arising from pre-2022 contracts – would be well served by keeping the settlement licensing pathway under regular review, even where litigation is not immediately contemplated. A well-timed and properly structured application can preserve options that might otherwise be lost.
For a preliminary discussion of your specific circumstances, please contact our team at info@ferrazwhitmore.com or use the enquiry form on our contacts page.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.