Legal Alerts

OFAC Issues General Licenses Enabling Certain Russian Debt Settlement

Washington D.C. (July 29, 2022) - On July 22, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued two new Russia-related General Licenses (GLs) authorizing certain financial transactions that are otherwise prohibited under U.S. sanctions laws and regulations. These general licenses grant U.S. persons and financial institutions greater latitude in settling Russian foreign sovereign debt through the wind down of agreements and participation in a credit default swap auction, respectively. The new measures follow Russia’s alleged default on a sovereign bond in June 2022 (caused by payment in rubles rather than U.S. dollars) and will help U.S. investors wind down their financial commitments and settle certain credit default swaps.

The first of the two GLs, GL 45, authorizes through 12:01 a.m. EDT, October 20, 2022, certain transactions involving Russian-issued debt and equity. Permitted transactions are those related to the wind down of financial contracts or agreements (covered contracts) entered into on or before June 6, 2022, that are connected with debt or equity issued by a Russian entity. For example, where ordinarily incident and necessary to the wind down of covered contracts, U.S. persons are authorized to (1) purchase and (2) facilitate, clear, and settle Russian-issued debt or equity. Such transactions were previously blocked under Executive Order 14071, which prohibits “new investment in the Russian Federation by a United States person, wherever located,” including the purchase or management of new and existing Russian-issued debt and equity.

Separately, GL 46 authorizes transactions incidental to an auction process to be established by the EMEA Credit Derivatives Determination Committee (EMEA DC) for the settlement of credit derivative transactions involving the Russian Federation. On July 25, the EMEA DC indicated that it is taking preparatory steps for such an auction, which would allow participants to settle credit default swaps connected to Russian foreign sovereign debt. To facilitate U.S. persons’ participation in such an auction, GL 46 allows “all transactions related to the establishment, administration, participation in, and execution of an auction process” to be announced by the ISDA’s Credit Derivatives Determination Committee, and authorizes U.S. persons to purchase or receive, and U.S. financial institutions to manage, Russian Federation debt obligations. Prior to the issuance of GL 46, U.S. persons and financial institutions were broadly prohibited from such transactions.

Lewis Brisbois’s attorneys are advising clients on the increasingly complex and quickly evolving issues related to Russian sanctions and are available to provide assistance on compliance and management of business, financial, and legal risks. For more information, contact the authors of this alert. Visit our Ukraine Conflict Response Practice page for more alerts in this area.


Thomas A. Brooks, Partner

George Leahy, Law Clerk

Jane C. Luxton, Managing Partner - Washington, D.C.

Andrew Pidgirsky, Partner

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