On 24 February 2022, promptly following the outbreak of Russian military aggression against Ukraine, the martial law was declared across the entire territory of Ukraine. With effect from the same date, the National Bank of Ukraine (“NBU”) passed resolution No. 18 “On the Functioning of the Banking System during the Martial Law”. This resolution introduced a number of extraordinary measures regarding, in particular, the local banking system, foreign currency market and cross-border payments.
Importantly, the resolution prohibits cross-border payments out of Ukraine, save for certain limited exemptions. As of the date of this alert, these exemptions for legal entities included, among others, the following:
- own operations of Ukrainian banks;
- payments for critical imports and as needed for the purposes contemplated under the national security and defence laws; and
- payments to and from international financial institutions (such as the EBRD or IFC); and
- payments in performance of obligations covered by a sovereign guarantee of Ukraine.
Absent a clear exemption, the resolution also provides that cross-border payments can be made based on individual permits to be issued by the NBU at a request from the Cabinet of Ministers of Ukraine, individual ministries or other state authorities of Ukraine. The resolution is silent about any further details on the procedure (e.g., timing, documents to be filed etc.) for the issuance of such individual permits.
In practice, this means that a Ukrainian company (seeking to make a cross-border payment that is not expressly permitted under the resolution) would first need to contact the relevant state authority and then that state authority would need to formally apply to the NBU for the individual permit.
The above restrictions do not apply to any payments by the Government of Ukraine. In particular, Ukraine continues to service the sovereign and sovereign-guaranteed debt.
These extraordinary measures will remain in effect as long as the martial law is effective. As of the date of this alert, the martial law is declared until 24 April 2022.