Category: Belarus

Belarus’s Revera law firm has teamed up with Adamante Management to open the firm’s Cyprus office.

The new Cyprus office is headed by Partner Savvas Savva and focuses on providing services “to technology companies in business-efficient jurisdictions.”

The announcement follows Revera’s opening of its Ukraine office last year (as reported by CEE Legal Matters on June 7, 2021). 

“The office is fully licensed to provide legal and fiduciary services and the team speaks … Russian, Greek, and English,” the firm informed. “The members of the Cyprus team are experts in Cyprus taxation, corporate and real estate transactions, fiduciary and provider services, migration, and are familiar with the peculiarities of dealing with the government authorities in Cyprus.”

Revera announced it aims to “leverage its expertise in investment transactions, M&A, intellectual property matters, and other topical issues for the IT sector” and that it chose Cyprus because of its fast-growing IT community, the common practice of using English law, its well established corporate services, favorable tax regime, and simplified immigration procedures.

On July 9, 2021, substantial amendments to Belarusian currency legislation entered into force. We will briefly review the key amendments.

Registration and Conditions of Currency Agreements

One of the key changes to the Belarusian legislation is the introduction of the term “currency agreement,” which is defined quite broadly and covers any agreement on the basis of which currency transactions are conducted. Previously there was a requirement for Belarusian residents – Belarusian citizens (except for those permanently residing in a foreign state); foreign citizens and persons without citizenship permanently residing in Belarus; individual entrepreneurs and legal entities registered in Belarus – to obtain permits from the National Bank of Belarus (NBRB) for conducting certain currency transactions, among which the acquisition of securities from Belarusian non-residents and the provision or receipt of loans to/from Belarusian non-residents. After the introduction of the amendments, such a requirement was canceled, while a registration procedure was introduced.

Currently, Belarusian residents are required to register with the NBRB, on a special website, those currency agreements that cumulatively meet the following criteria: (1) they are concluded between a resident and non-resident of Belarus; (2) they envisage currency transactions of a certain nature specified in the relevant list of agreements subject to registration (for instance, providing for settlements in the export/import of goods, works, services); and (3) the amount of monetary obligations is equal or exceeds 2,000 basic units (approximately USD 23,000) for individuals and 4,000 basic units (approximately USD 46,000) for legal entities.

Belarusian residents need to provide documents and information on amendments to, and the performance of, the registered currency agreement. Failure to fulfill the registration obligation, when such registration is required, entails the imposition of fines on Belarusian residents. However, there are certain risks for Belarusian non-residents – Belarusian banks may deny conducting the relevant currency transactions. Additionally, Belarusian legislation currently requires the inclusion of special provisions into currency agreements, namely: (1) the amount of monetary obligations; (2) conditions of settlements; (3) deadlines for the fulfillment of payment obligations by non-residents and for the return of prepayments made by Belarusian residents (in case of non-fulfillment by Belarusian non-residents of their obligations); and (4) timeframes for repatriation of monetary funds.

Repatriation of Monetary Funds

Previously existing foreign trade formalities, such as deadlines for the completion of foreign trade transactions, are not effective anymore. Instead, a repatriation requirement was introduced to ensure crediting of funds received from export (or import, in case of a refund due to non-fulfillment of obligations by Belarusian non-residents) transactions to accounts in Belarusian banks. Belarusian legislation does not provide for strict repatriation deadlines – they are determined by Belarusian residents themselves as payment (performance of obligations) terms plus the time needed for bank settlements (not exceeding 30 days). In case such funds are credited to Belarusian residents’ foreign accounts, they need to be transferred to accounts in Belarusian banks within five business days from the date of crediting.

Currency Restrictions

According to the new rules, currency restrictions may be imposed by the NBRB jointly with the Council of Ministers of Belarus, for a period not exceeding one year, in case there is a threat to the economic security of Belarus and the situation cannot be resolved by other economic measures. Although not introduced at the moment, such currency restrictions may include a prohibition to conduct currency or foreign exchange transactions, a requirement to obtain special NBRB permits to conduct currency transactions, restrictions on opening and maintaining accounts with foreign banks, and other measures.

Opening Accounts with Foreign Banks

Generally, unless currency restrictions are introduced, Belarusian residents are allowed to open accounts in Belarusian rubles and foreign currency with foreign banks without restrictions and have the right to transfer funds in Belarusian rubles and foreign currency from their accounts: (a) in Belarusian or foreign banks to their accounts in foreign banks and (b) in foreign banks to their accounts in Belarusian or other foreign banks. Nevertheless, Belarusian residents may receive monetary funds to accounts opened in foreign banks only in cases directly specified in Belarusian legislation.

To sum up, the changes were aimed at the liberalization of the Belarusian currency legislation and may be positively assessed, however, it is too early to draw any conclusions.

By Dennis Turovets, Partner, and Anastasia Yarokhovich, Senior Associate, Egorov Puginsky Afanasiev & Partners

This Article was originally published in Issue 8.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Economic optimism in the face of adversity, the introduction of English law instruments, and some new potential for growth are the highlights in Belarus, according to Aleinikov & Partners Senior Partner Denis Aleinikov.

“The current situation will blow over, in my opinion, as time goes by and when the dust settles business will grow,” Aleinikov says. “I do recognize that the commercial sector is struggling, due to both the pandemic and the sanctions, but I firmly believe that things will pick up.” 

Aleinikov reports on significant updates with respect to commercial rules and regulations. “The parliament adopted in the first reading a draft law on amendments to the Civil Code which introduces some foreign law instruments into the domestic legal framework,” he says. Aleinikov points out that this is a crucial step forward, seeing how it opens the country up for more foreign capital flowing in. “Previously, a lot of M&A transactions were structured abroad, due to the availability of specific legal instruments – like options agreements, convertible loans, warranties and indemnities, among others,” he says. “Now, the parliament is about to approve these into our domestic legal framework.”

Aleinikov mentions that the firm’s previous work with the Belarusian High-Tech Park contributed to this. “In 2017, we developed draft legislation regarding the High-Tech Park which allowed for residents of the park to use certain instruments of foreign law in their activities, including, for example, entering into shareholders’ agreements under English law,” he says. “This experiment turned out to be beneficial. Foreign IT companies now tend to structure their investment transactions into Belarusian companies inside of the country, instead of through their foreign parent companies as it was usually done before. Now the parliament intends to spread this practice to other sectors of the economy. This is a good decision.”

“According to the statistics, our economy is currently doing better than it was forecasted to a year ago,” Aleinikov reports. “The IT sector still continues to drive growth, with some major transactions for the acquisition of Belarusian R&D companies being registered in 2021.” And it’s not only IT, he says. “The banking & finance sector shows good potential too. Like the recent, December 2021, Alfa-Bank acquisition of a local bank, which is evidence of trust in the domestic financial market,” Aleinikov reports. He says that these two sectors will remain key drivers of the economy. “I believe that our country has eventually exceeded expectations and that we are yet to see how far our economy can go,” Aleinikov concludes.

Aleinikov & Partners has advised Alfa-Bank on its acquisition of a 99.98% stake in Fransabank from Lebanon-based Fransabank SAL and Fransa Holding SAL.

Based in Belarus, Alfa-Bank CJSC is a universal bank owned by ABH Holdings. According to its company website, the bank currently holds eighth position in terms of assets and equity in the Belarusian banking market. Fransabank is the Belarusian subsidiary of Lebanon’s Fransabank SAL.

Aleinikov & Partners’ team included Partner Dmitry Matveyev, Senior Associates Anna Tsymbalist and Ksana Sidoruk, and Associate Elena Odintsova.

The firm could not provide additional information on the deal.

Borovtsov and Salei has advised SEW-Eurodrive on the greenfield construction of a production facility on the territory of the Free Economic Zone Minsk.

SEW-Eurodrive is an international German concern and a manufacturer of electric drive equipment.

Borovtsov and Salei’s team was led by Associate Partner Nikolay Artemyev.

Substantial changes for advocates, the economic impact of sanctions, and Russian banks and investors becoming more active as a result are the three topics at the top of Belarusian lawyers’ agendas, according to SBH Law Offices Partner Alexander Bondar.

“The new regulations on advocacy were the most crucial issue of 2021,” Bondar begins. Advocates are lawyers licensed to represent clients before Belarusian courts. “While previously we worked in advocates’ bureaus, owned by the partners themselves, it’s no longer possible for advocates to join such offices,” he says. “Starting several months ago, all advocates’ bureaus were liquidated and advocates now all work within the state’s territorial Bar associations.” He does note that “several advocate bureaus have received the right to create special associations within the territorial Bar associations. But in any case, all of them are regulated by the state and no longer belong to the partner-advocates themselves.”

Several new sanctions – by the EU, the US, the UK, and Switzerland – were passed, for some of Belarus’ largest state-owned companies, Bondar says. “These sanctions impacted the whole economic sphere. International banks, financial institutions, and companies are avoiding working in Belarus, or with companies in Belarus, even those not on the list.”

“The EBRD, for example, decided it will not work with the state (as of last year),” he notes, adding that “several weeks ago, it announced it will stop the private programs as well.” While it previously invested in state utility programs (for water supply and treatment plants) or the reconstruction of the M10 highway – both stopped, according to the SBH Partner – “the EBRD was also active in providing private loans and investments, to some of the largest privately-owned companies. It executed all projects that were already underway, but it has no further projects in the pipeline.” So, for those large companies – players in the production and delivery business in the country – such loans will no longer happen, he says. 

“That has created a space for a growing number of Russian banks and investors to become more active, which is what we’ve seen in the last two or three months,” Bondar says. He mentions Ozon (the largest IT retailer in the region) becoming more active. “As have Russian banks – while they were also investing before, they are now replacing the loans from international financial institutions.”

And this has led to a booming market for M&A transactions, primarily by Russian companies in the IT and high-tech sectors, according to Bondar. “Mail.ru did a number of deals, while Sberbank subsidiary Sbergames is looking for companies to acquire or invest in. Softline has also started looking at local companies, after completing its London Stock Exchange IPO.”

“Overall, the market feeling is that Russian companies offer better transaction conditions, multiples, and estimations – as they are less worried about the risks,” Bondar says. While the high-tech sector was already booming, with “more than 40 transactions between January and November 2021,” according to him, “due to sanctions and being perceived as a high-risk environment, foreign companies would ask for big discounts relative to valuation for these transactions.” So, in some cases, Bondar says “Russian players, caring less about sanctions, have become the more attractive investors, being able to offer better terms.”

There are a lot of legislative updates coming out of Belarus according to Revera Managing Partner Dmitry Arkhipenko, who highlights those on tax liability, company law, labor law, data protection, currency control, and the legal profession itself.

First, Arkhipenko reports that an exemption of criminal liability was introduced in tax law, “provided the offender repays the due taxes in full and also covers losses in the same sum.” He noted that the authorities have been very active in controlling tax obligations. “We see a lot of criminal cases in the field, so this was important.”

On company law, Arkhipenko says the changes were quite significant. “For instance, previously you could not conclude shareholder agreements with all the shareholders of a company, but this limitation was canceled.” He also notes some quality-of-life improvements were made. On labor legislation, for example, “the possibility of remote work was introduced, and remote work was regulated”.

From November 15, 2021, onward, Belarus will have data protection legislation, according to Arkhipenko. “Unlike in the EU, in Belarus, the circulation of personal data did not face any serious regulation. All companies working with personal data will now need to implement consent mechanisms and processing policies, and the National Center for Personal Data Protection was created, as a state regulator.”

Serious changes were made on currency regulation, for both individuals and legal entities, he reports. “A special permission was required for many capital currency operations – opening accounts, purchasing real estate or stocks, capital fund contributions, and others. A simple procedure of electronic notification was introduced.”

The most impactful change on the legal profession, however, is the recent update of the Law on Advocacy, according to Arkhipenko. “The advocacy bureau and the individual advocacy practice are being discontinued. Legal Consultation Offices (LCOs), established by regional Bar associations, will be the only possible form of practicing advocacy.” Advocates in those LCOs will work separately from each other, he says. “Clients will not be able to enter into a legal assistance agreement with some entity, group of advocates, or several advocates simultaneously and there is, apparently, no option for an advocate to hire another advocate. This means that advocates will only conduct individual practices under the LCO. Advocates will still have a monopoly on court representation, conducting criminal cases, and advising natural persons on nonbusiness matters,” he explains.

Arkhipenko does note that Belarusian legislation provides two forms of legal practice: advocacy on the one side, and law firms on the other. “Law firms will not be able to offer services such as litigation or representation in criminal cases. Prior to the advocacy reform, we also had an advocacy bureau. We currently have alliances with 15 advocates. We’re endeavoring to preserve our litigation practice and safeguard our staff.”

For the legal market, this might mean a decrease of structured groups, an increased number of individual advocates in LCOs, and not much growth, according to Arkhipenko. “It is necessary to admit, however, that it’s difficult to focus on several spheres, as an individual practitioner. It might become increasingly hard to find firms that can provide a deep, thorough, and complex approach to the matters.”

On the business side, Arkhipenko reports an increase in requests from businesses looking to expand abroad, especially IT companies, as well as numerous requests for personal immigration. The demand is such that it has led to some law firms opening offices abroad, in countries like Ukraine or Cyprus. He also emphasizes that “probably around 80% of M&A deals are happening in IT” and mentions activity in the e-commerce sector, with many offline businesses developing their own online platforms. “We also see the increase of requests concerning data protection, IP disputes, legal expertise on sanctions, and, interestingly, more international arbitration cases. Perhaps due to the sanctions or global trends, more companies are requesting the inclusion of arbitration clauses into their contracts,” Arkhipenko concludes.

Sorainen has advised the Latvia-headquartered Eleving Group on Belarusian law aspects of its EUR 150 million bond issuance and private placement with professional investors.

According to Sorainen, the bonds have an annual interest rate of 9.50%, are due in 2026, and were listed on the Frankfurt Stock Exchange.

The Eleving Group, formerly known as Mogo Finance, is a financial solutions provider in Central Europe, CIS, and East Africa. Founded in 2012, Eleving operates in 14 countries and serves more than 250,000 clients, with a team of 1,600 people. Its Belarusian subsidiary Mogo Credit started operations in 2018.

The Sorainen team consisted of Partner Kiryl Apanasevich, Counsel Ann Laevskaya, Associate Artem Melnikovich, and Legal Assistant Yana Kunkevich.

Sorainen did not respond to our inquiry on the matter.

Editor’s Note: After this article was published, TGS Baltic announced that it had advised the Eleving Group on the Estonian legal aspects of the issuance. The firm’s team included Partner Kirsti Pent and Senior Associate Olger Kaelep. 

With political issues and economic sanctions being an everyday norm, Belarus finds itself in a bit of a pickle, according to Borovtsov & Salei Partner Vassili Salei.

“No major political developments to report,” Salei begins. “Since the last Presidential elections that took place in August of 2020, the Government has continued to press civil society and public institutions heavily,” he says, adding that the election itself is widely considered in Belarus to have been illegal and falsified. “And not just the people – the Western world has similar opinions – it just was not right.”

Salei reports that a number of “non-governmental organizations were liquidated by local authorities and courts” and that “more than 35,000 citizens passed through the courts and were sentenced to criminal or administrative punishment.” He adds that more than 600 individuals were recognized as “political prisoners as well, as the situation has started becoming more and more severe.”

As for legislative updates, Salei says that “all effective changes that were adopted or are under discussion have but one goal – to give the state more control over any business of note.” Also, he says the legislative efforts of the government aim to introduce tax increases and make businesses more and more dependent on the state. “Criminal and administrative legislation has also become more severe, penalties and fines have increased, and court practice is very strict – as a rule, the maximum punishment is passed almost all of the time,” Salei reports. 

Belarus is currently still under sanctions – by the US, Canada, and the UK – and Salei reports that more are to be expected in the near future, perhaps almost as early as the “end of October. Our main trade partner, Russia, completely ignores these sanctions and continues to provide financial support as well, in the shape of loans and budget transfers,” Salei says. As for other major Belarus export goods, such as forestry products, tractors, or refined oil, Salei says that they are all “either under sanctions, or are expected to be, by the end of the year.” 

Still, even with the grim status quo, the Belarus economy has grown in the first half of 2021 – by 3.3%. “The current predictions of the World Bank have us at minus 2.7% for the end of the year, with our Government believing we will have a 1.8% growth, and some other financial institutions holding us at plus 1%.” It remains to be seen how the Eastern European country will fare by year’s end and into 2022.

Orrick has advised One Peak Partners as one of the participants in PandaDoc’s Series C financing round. Wilson Sonsini Goodrich & Rosati reportedly advised PandaDoc.

The round was led by OMERS Growth Equity and G Squared, with participation from Altos Ventures, Rembrandt Venture Partners, One Peak Partners, and Microsoft’s venture arm M12. According to the company, the concluded round values the company at USD 1 billion with proceeds intended “to accelerate the transformation of document experiences that move work forward.”

PandaDoc provides an all-in-one document workflow automation platform with eSignature capabilities that “helps fast scaling teams accelerate the ability to create, manage, and sign digital documents, including proposals, quotes and contracts, and more.” Founded in 2012 in Minsk, the company moved its headquarters to Silicon Valley in 2014 and currently has main offices in Minsk, Belarus, and St. Petersburg, Florida.

“Documents have always been at the core of how business gets done, but everything around how documents get created, sent, and signed has become so much more dynamic. It is time to transform how documents get done,” said PandaDoc CEO and Co-Founder Mikita Mikado. “We’re thrilled with this new investment from our venture and growth partners because it validates our vision of revolutionizing how businesses create and manage contracts, proposals, quotes, forms, and other business documents. This additional funding will allow us to continue to innovate, expand our team, and grow our global footprint to address new, highly lucrative markets.”

The Orrick team consisted of Partners Shawn Atkinson and John Harrison and Of Counsel Jason Wu.