The dive of the rouble – Important aspects for international suppliers to Russia
International suppliers observe with concern the fall of the rouble. In the current year, the rouble has fallen in relation to the US dollar by almost 40 % and in relation to the Euro by almost 25 %. The Central Bank of the Russian Federation has now given notice that the rouble exchange rate will be free-floated from 2015. It is therefore to be feared that the currency will continue to fall in the coming months. In business with Russian customers, suppliers from abroad must therefore be prepared.
The weakness of the rouble has no direct legal effects on contracts between international suppliers and Russian companies since, in most cases, the prices are agreed in Euros. If payment in rouble is provided for, the purchase price is mostly to be fixed on the basis of the US dollar or Euro exchange rate of the Central Bank of the Russian Federation on the date of payment.
The weakness of the currency, however, increases the amount of roubles due under the contract. Russian courts do not usually regard this as a basis for claims of the purchaser to amend or rescind the contract. In the rouble crisis 1998, the lower Russian courts sometimes issued conflicting decisions. Some claims to amendment because of the change in circumstances were admitted if the burden of the debtor had increased by more than four times due to the exchange rate. Ultimately, the Supreme Commercial Court of the Russian Federation left the question open. How the Russian courts in the present situation will decide cannot be predicted with certainty.
Even if, from a legal point of view, it seems that everything is clear, suppliers, having regard to the uncertainty of legal enforcement, should act judiciously in the difficult situation for Russian customers:
- Companies with existing contracts are often well advised in the event of payment difficulties of the Russian customer to remain in contact and seek a joint solution as to how the contract can be processed in a manner acceptable for both sides. The customer is given time to acquire liquidity and the seller retains a solvent debtor.
- In future agreements, appropriate measures to protect against further fall of the rouble and any resulting payment difficulties of the Russian purchaser should be made. It is important in any event that payment is provided for in a strong currency such as the Euro or the US dollar. The payment obligation should be reasonably secured. Payment by letter of credit or by securing a long-term payment moratorium by bank guarantee or pledge should firstly be considered.