The Сongress on International Settlements held in Minsk in February, sparked significant interest in the business community. The event brought together 400 participants, featured informative discussions were held and numerous questions raised in a specially created Telegram channel. The results of informal conversations demonstrated that such events are essential for business entities: they provide a platform to discuss a wide range of challenges arising in foreign economic activity. The Congress moderator, Vitaly Vabishchevich, shared the results of the past event and outlined the current state of international payments.
Vitaly Vladimirovich, international settlement issues have always been among the most relevant and topical concerns for FEA participants. What challenges have business entities faced in this regard since the introduction of restrictive measures in 2022?
The obligation to make payment is one of the key obligations in the performance of a contract under international sale of goods, services, or works. It is hard to imagine an international trade without it. In a compensatory agreement, the counter-performance is typically monetary: one party provides goods, services, or intellectual property, while the other pays for them. This obligation has always been important – both before and after 2022.
The sanctions imposed against our country have created significant difficulties for Belarusian businesses in processing international transactions. These challenges go beyond direct prohibitions or the inclusion of domestic banks and individuals in sanctions lists by unfriendly states.
Challenges also emerge in conducting payments with friendly countries, particularly when correspondent banking services are still provided by European, American, or other Western financial institutions. The second problem is that a number of such countries have branches of European and American banks that do not co-operate with Belarusian banks. Third, there is the problem of overcompliance – where banks not formally prohibited fr om handling payments still reject them due to fears of secondary sanctions, particularly when Belarusian residents are involved in the transaction.
As we can see, the relevance of this issue is widespread – it has affected everyone. In such circumstances, it is crucial to determine how to act. The BelCCI has extensive experience in handling issues related to international settlements. One of its key services aimed at supporting businesses is the certification of force majeure events. For example, many business entities turn to us for assistance when they are unable to make an international payment, and the consequences of failing to fulfill contractual obligations include penalties and financial losses. There are also situations wh ere a Belarusian company cannot transfer payment for delivered equipment or components, resulting in the foreign supplier refusing to proceed with the deal. Consequently, our business entities are unable to fulfill related contracts, including those with residents of the Republic of Belarus and other international partners. Each such case is reviewed individually, and decisions are made based on the specific circumstances.
How can the BelCCI assist Belarusian FEA participants with issues related to international payments?
It all depends on the stage at which the business entity seeks support. If the issue has already arisen and involves certifying force majeure, the aid consists of assessing the situation and providing a qualified response – determining whether it constitutes force majeure or not, as well as guiding the business representative on further actions.
For example, a resident may apply for force majeure certification if a payment has been made but the funds have not reached the seller due to restrictive measures. In such a case, the applicant – the one invoking force majeure – is technically the party in breach. We carefully review the contract: if it states that the payment obligation is considered fulfilled once the funds are debited fr om the Belarusian resident’s account, then the resident is not regarded as being in breach of the contract. In such cases, force majeure is not applicable, and a different legal position must be taken. Accordingly, if the foreign trade participant is not at fault, then penalty sanctions do not apply to them.
The BelCCI also provides sanctions compliance services. That is, prior to the conclusion of a contract between any enterprise and a counterparty, we assess the potential risk of sanctions affecting the transaction – starting with the composition of the involved parties, including financial institutions, and extending to the subject matter of the agreement itself. This is crucial, as banks often refuse to process payments if they are intended for goods included in sanctions lists.
The third area of assistance provided is in drafting or reviewing foreign economic agreement. In particular, special attention is paid to matters related to payment terms. There are many nuances regarding this matter that can be temporarily specified in advance in the contract to avoid potential problems in the future.
Did enterprises manage to adapt quickly to the new realities?
The state of the Republic of Belarus’s foreign trade in 2022, as well as in 2023 and 2024, demonstrates that domestic enterprises have switched to a new track and adapted to the current conditions. Despite the ongoing challenges with international settlements, many enterprises have identified viable channels and mechanisms for conducting transactions, and payments are being successfully processed. The spectrum of available solutions is employed ranging from the establishment of novel settlement frameworks and modifications to the currencies of payment, to amendments of the relevant contractual provisions and the adoption of alternative transactional modalities. Multiple solutions are available, all requiring case-specific adaptation. At the same time, these matters require discretion and a personalized approach. During the International Payments Congress, participating delegates from 21 Belarusian banking institutions (totaling 80 specialists) consistently stressed - in both formal sessions and informal discussions – the imperative of conducting exhaustive preliminary due diligence on all payment mechanisms.
And what was the situation with contracts that had been concluded prior to the imposition of sanctions?
The central provisions in the sanctions documents stipulated that contracts and agreements concluded prior to the imposition of restrictions were granted a transitional period to complete the transactions. In practice, however, the outcomes varied: some contracts were indeed fulfilled within the specified timeframe, while in other cases, despite the formal opportunity to make payments, the transactions still failed to go through. This was a clear example of so-called over-compliance, wh ere institutions, although not legally prohibited from processing payments, refrained from doing so out of caution or fear of secondary sanctions. For each such contract, efforts were made to identify a viable solution to close the transaction.
Why was the Congress on International Settlements focused specifically on documentary operations?
We are referring to documentary operations as banking instruments of trade finance, which currently provide the highest level of security and help reduce risks in payment transactions. These instruments primarily include letters of credit, documentary collection, and bank guarantees. Their essence lies in the following: a payment by a Belarusian resident for delivered goods will only be made when the bank receives the appropriate shipping documents, a signed acceptance certificate, and so on.
Their essence is as follows: payment by a Belarusian resident for the delivered goods will be made only after providing the bank with the relevant shipping documents, signing the act of acceptance of the goods, etc.
Meanwhile, the application of these instruments under current conditions remains complex and continues to raise many questions within the business community. Moreover, restrictive measures have not spared them either. Practice shows that the use of trade finance instruments has declined since 2022 – primarily due to difficulties with foreign banks that had previously been active participants in such transactions but later withdrew their involvement.
However, over time, we have observed a positive trend in the use of these instruments by Belarusian residents. This is largely due to changes in the structure of foreign trade and the currencies in which contractual obligations are expressed. We have a large volume of trade with the Russian Federation, and in this case, the Russian ruble is used as the primary currency in documentary operations. In other words, it is not necessary to use unfriendly currencies such as the US dollar or the euro. Furthermore, documentary operations are actively developing in the domestic market as well.
Therefore, the goal of the recent Congress was to explain to our business entities the nuances of using banking instruments under new conditions, to suggest possible options for international settlements, to exchange experiences and best practices, and to hear alternative viewpoints. At the same time, the BelCCI is committed to continuing to organize practical events in areas that are essential for the functioning of Belarus’s foreign economic activity.
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