Law and regulation of Covid-19 loan moratoriums in Russia

1.1 Is there a moratorium on loans legislation implemented in your jurisdiction?

Yes

1.2 If no: Are there any ongoing discussions regarding a potential introduction of such measures?

Not applicable.

1.3 What is the name of the relevant legislation (the “Relevant Act”)?

The Federal Law No. 106-FZ dated 3 April 2020 “On amending the Federal Law “On the Central Bank of Russia” and certain legislative acts in the respect of changing terms of the credit agreements and loan agreements.”

1.4 What is the duration of the measures (period of moratorium)?

Until 30 September 2020 eligible borrowers are entitled to ask for a moratorium on loan repayment (or reduction of repayment amounts) for a period of up to 6 months (the “Repayment Moratorium Period”).

1.5 Does the legislation provide for an extension of the period of moratorium?

The Government is authorised to extend the deadline for applying for the loan repayment moratorium.

The duration of the Repayment Moratorium Period is agreed at the parties’ discretion (but cannot exceed 6 months).

1.6 Is the moratorium mandatory, or can each borrower opt out should they wish to simply continue payments, or opt in if they want to be protected by the moratorium?

The borrower applies for the application of the moratorium at his/her/its own discretion.

The borrower may terminate the moratorium at his/her/its own discretion at any time during the Repayment Moratorium Period or prepay unpaid amounts without termination of the Repayment Moratorium Period (subject to certain conditions).

2.1 Is the moratorium available for both corporate and consumer loans?

Yes, eligible borrowers are:

• SMEs (as defined in the Federal Law No. 209-FZ dated 24 July 2007 “On Development of Small and Medium Entrepreneurship”), working in the sectors mostly affected by COVID-19. These sectors are defined by the Government and include, inter alia, aviation, transport, culture and entertainment, sports, HORECA, repair and cleaning services, etc.
• Individual borrowers (consumers) and individual entrepreneurs whose income decreased by 30% (in comparison with their average monthly income in 2019). 

2.2 Who are the affected Lenders?

Russian banks and microfinance organisations

2.3 Does it make a difference whether loans are granted by a foreign entity and governed by foreign law?

Not applicable to loans granted by foreign lenders.

No specific clarification regarding loans governed by foreign law.

3.1 Is there a cut-off date with respect to loan agreements to which the Relevant Act will apply (e.g. not applicable to loan agreements entered into after the cut-off date)?

The moratorium applies to loans granted to eligible borrowers prior to 3 April 2020.

3.2 Does the moratorium apply to principal only, or also to interest and/or fees?

The moratorium applies to principal and interest amounts. The default interest on unpaid amounts is not applicable during the Repayment Moratorium Period. 

3.3 Will the maturity of the loan automatically be extended by the moratorium period?

Yes, the maturity is extended by the Repayment Moratorium Period (for consumers and individual entrepreneurs) and for the period agreed with the lender (for SMEs). 

3.4 Are repayments and interest which have become due and payable under the contract before the Relevant Act has come into force covered by the moratorium?

Yes. The interest and default interest which were accrued before the Repayment Moratorium Period are fixed on the first date of the Repayment Moratorium Period.

After the end of the Repayment Moratorium Period, the borrower will be obliged to repay all principal and accrued interest for the Repayment Moratorium Period in accordance with the terms of the loan agreement effective before the Repayment Moratorium Period. If the borrower is a consumer or an individual entrepreneur, the interest accrued during the Repayment Moratorium Period is calculated as two-thirds of average market interest for consumer loans (as calculated and published by the Central Bank of Russia) (not applicable to loans secured by mortgage).

3.5 Will lenders be able to terminate a loan due to an event of default other than non-payment (e.g. breach of financial covenants)?

A lender is not allowed to demand early repayment of a loan during the Repayment Moratorium Period. There is no specific clarification regarding termination of a loan agreement.