Currency laws of Belarus commit its resident companies, as a general rule, to credit («repatriate») to their accounts at Belarusian banks:
• in the case of export – funds, e.g. resulting from payments for delivered goods, services, or the assignment of intellectual property rights;
• in the case of import – refunds resulting from non-resident supplier’s failure to honor, in whole or in part, its contractual obligations (e.g., if advance payment was made prior to the failed delivery).
The resident company sets the repatriation deadline depending on the terms and timetable for the parties to honor their obligations under their foreign exchange agreement on export and import. The National Bank of the Republic of Belarus establishes modalities for the deadline calculation.
Importanlty, Belarus-resident sole proprietors and notaries performing notarial services in notary offices must set the repatriation deadlines in the same way as other resident companies.
Belarusian business currently faces systemic problems with funds repatriation from their export and import operations in international markets. Failure to comply with repatriation deadlines entails both economic losses and potential administrative liability. At the same time, funds recovery often becomes a costly process that can worsen the company's reputation.
To avoid repatriation irregularities and reduce economic and time costs of potential non-payments by foreign residents, one should take the following precautions prior to contract signature:
• carefully draft related clauses of the contract;
• study the practicalilties of payment transfers by the parties' banks;
• collect all available information about your partner.
Let us look at the steps to take in each of the areas.
1. Drafting Specific Contractual Clauses:
1.1. Payments
From a Belarusian exporter’s viewpoint, the safest option is to get fully paid before the delivery of goods, services, work, or the transfer of intellectual property rights, undisclosed information, or property rights (hereinafter referred to as «delivery») takes place. Conversely, the best deal for an importer would be paying after delivery.
In the ideal case, the other party would be the first to honor its contractual obligation by delivering or paying in advance. Only then the Belarusian company’s counter-obligations would come into play. Such a deal would effectively eliminate the risk of missed repatriation deadlines, which are fixed only if the Belarusian resident honors its obligations prior to its non-resident partner.
As an alternative, the use of documentary transactions or the opening an escrow account may be considered. The contract may include:
1. A clause requiring the counterpart to open a secured letter of credit at the Belarusian resident's bank within a certain timeframe under the terms agreed by the parties.
The payer (counterpart) notifies the bank of the terms of the letter of credit, including the list of documents the beneficiary (resident) must provide to receive the funds deposited under the letter of credit, and deposits the funds.
Once the Belarusian resident has presented the necessary documents (e.g., a consignment note or other document confirming the delivery), the bank transfers the funds previously deposited by the counterpart to the resident’s account.
2. A clause requiring an escrow agreement to be signed between the beneficiary (resident), the depositor (foreign counterpart), and the resident's bank. Under the agreement, the depositor credits a dedicated escrow account at the bank and the parties agree on the conditions the beneficiary must meet (documents to present to the bank) to receive the funds.
The key difference between the two options is that escrow agreement does not permit suspension of escrow transactions, seizure, and foreclosure of funds in the escrow account to honour the depositor's (counterparty's) obligations to third parties or the beneficiary's (resident's) obligations.
1.2. Pre-trial Dispute Resolution
According to the law, repatriation deadlines are extended for the duration of pre-trial (claim) dispute resolution. Therefore, it is important to enshrine clear and detailed terms of pre-trial dispute resolution into a contract, i.a.:
• claim format and how to submit it;
• claim reply procedure and deadlines;
• ways to communicate as part of dispute resolution.
If the contract requires the claim to be sent by post or courier, reply deadlines must take delivery time into account.
However, given potentially problematic postal service with some countries, the contract may allow for electronic claim processing, i.a. sending documents to email addresses the parties have designated for that purpose.
1.3. Dispute Resolution Authority
The law requires the repatriation period to be extended, in particular, by the period necessary for the the Belarusian resident's claim to be reviewed by court or arbitration.
In practice, it is not uncommon for the parties to choose a competent foreign court for their contract. However, when it comes to claiming their rights in such a court or through international commercial arbitration, high costs can make debt recovery economically impractical. In such cases, the resident usually gives up on the debt. Once the repatriation deadline expires, the company has to face both economic losses resulting from unrecovered payments and the risk of administrative liability.
To minimize the costs, residents are well-advised to take their disputes to a Belarusian court. The choice of a competent authority should therefore be a special focus of any contract. Before opting for this or that court, one needs to make sure that its decisions are enforceable in the counterpart’s jurisdiction.
1.4. Right to Unilaterally Amend a Contract
Sometimes one is constrained to extend the payment or refund deadline. As it is normally fixed in the contract, all parties must agree to the change. However, it is not always possible to promptly come to such an agreement. If the resident fails to extend the deadline, he may also be late with repatriation.
In line with the civil law of Belarus, changes to a contract can be made by mutual agreement of the parties, unless otherwise demanded by the law or the contract itself. We believe that a contract may empower the resident to unilaterally change the contractual payment or refund deadline. For example, the contract may say that a unilateral deadline change is only allowed by way of its extension. In this way the Belarusian party would be able to extend the payment deadline and repatriate funds on time, without having to seek the other party’s prior agreement.
1.5. Obligation to Alert of Blocks to Funds Transfer
Repatriation timetable in a foreign exchange agreement normally includes two deadlines a non-resident must meet to: (i) honor payment/refund obligations, and (ii) transfer funds to the resident's account at a Belarusian bank.
The funds transfer deadline should not exceed 30 calendar days, except in cases of (i) freezing of funds by foreign banks, (ii) blocking of financial transactions due to the application of international sanctions, and (iii) internal due diligence procedures by foreign banks involved in the transfer.
Rapidly changing sanction norms and toughening internal controls of foreign banks are the marks of our times. Even if, at the moment the contract is signed, barriers to cash and goods flows are non-existent, this in no way means that they will not appear afterwards. Therefore, contracts should lay down the parties' modus operandi in cases when circumstances prevent them from honoring their obligations.
For example, a contract may require parties to alert each other without delay (e.g. within 2-3 business days), of facts blocking or seriously delaying the honoring of their obligations. It is advisable that such notifications be made in writing, include a description of the circumstances (possibly with reference to specific local norms) and enclose a confirmation document from that country’s bank.
2. Checking the Banks’ Capacity to Transfer/Receive Funds
Before signing a deal, one should make a point of checking that the servicing banks can technically transfer funds between the parties.
We recommend requesting prior assurances or other written confirmation from the counterpart that its servicing bank, correspondent bank, or the relevant foreign government do not restrict transactions involving the transfer of funds from its country to Belarus that could result in failure to credit the Belarusian resident's accounts.
Residents are also well-advised to ask their bank for information on the practice of receiving funds from the counterpart’s country and the relevant foreign bank.
3. Getting to Know Your Partner
Before the contract is signed, Belarusian residents should ask their counterparts for information of their active bank accounts in countries other than their own, of their subsidiaries and/or affiliates in Belarus and abroad.
Should direct contractual payments become difficult or impossible, such information would help identify alternative ways for the counterpart to honor its obligations. They may include, e.g. agreements to delegate obligations or transfer a debt to a third party who can technically transfer funds to Belarus.
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