The Legal 500

It is well known that most Russian M&A transactions, especially private equity deals, are governed by English law.

There was a milestone event in Saint-Petersburg in the beginning of 2012. A school offering general education for 285 students was opened in the city on the river Neva. It is the first public facility to be constructed by investors under a public-private partnership (PPP). The key feature of using a PPP to build social infrastructure is that the investor is responsible for construction and the subsequent operation of the facility for the period laid down in the agreement. However, this type of cooperation in Russia is still quite rare.

Legal Update No. 343

Goltsblat BLP advises that, on 27 March 2012, the Constitutional Court of the Russian Federation adopted Resolution No. 8-P on a case of examining the constitutionality of clause 1, article 23 of the Federal Law "On International Treaties of the Russian Federation".

Legal Update No. 341

Goltsblat BLP advises that, by its Resolution No. 213 of 21 March 2012, the Russian Government has amended the lists of products subject to mandatory certification and of those compliance by which is confirmed by a compliance declaration. These amendments come into effect on 26 May 2012.

Legal Update No. 339

Goltsblat BLP hereby advises of new Russian Government Resolution No. 191 dated 6 March 2012 introducing new rules for determining the customs value of commodities exported from Russia (the Resolution). The Resolution comes into effect on 14 April 2012, superseding the previous rules.

In 2011, Russia completed negotiations regarding its accession to the World Trade Organization (WTO). Membership of the WTO will give Russia the advantages of being able to play a role in setting world trade rules, of Russian manufacturers not seeing their goods discriminated against on foreign markets, and of trade disputes between Russia and other partners being able to be resolved using procedures within the WTO framework.

clinical trials conduct monitoring 

Pepeliaev Group advises that the Ministry of Healthcare and Social Development of RF issued Order No. 1091n dated 09/29/2011 “On adoption of Federal Service for Surveillance in Healthcare and Social Development (Roszdravnadzor) Administrative Regulation regarding the performance of state controlling function over medicines pre-clinical trials and medications for medical usage clinical trials”( hereinafter the “Regulation”), which came into effect on the 1st of April, 2012.

By Yuri Vorobyev

In February 2009, the Moscow City State Commercial (‘Arbitration’) Court handed down a decision allowing russian company to recover debt from the Israeli-registered company (the “Defendant”) under a supply contract. The court also awarded interest of more than EUR 5 million on the amount due.

Legal Update No. 336

Goltsblat BLP advises that Moscow Region Law No. 11/2012-OZ dated 17 February 2012 “On Amendments to the Moscow Region Law “On Land Regulation in the Moscow Region” (hereinafter - “the Law”) has come into force.  

Negotiating is an art and not a science and there is never a “right” way to negotiate. When it comes to Russian deals, a general rule of thumb is to be patient, keep your cool but always remain firm and consistent in your approach and tactics.

Alexander Kosov, Head of Customs and Foreign Trade Regulation, Pepeliaev Group

In December 2011, adjustments were made to the Russian Federal Law On customs tariffs, the changes coming into force in the same month.  

On February 1, 2012 the Russian Federation ratified the Convention of the Organization for Economic Co-operation and Development (OECD) on Combating Bribery of Foreign Public Officials in International Business Transactions (the “Convention”).

Last year the Russian legislation underwent considerable modifications, and in this review we tried to highlight those, which we expect to be of top significance for business in Russia.

Pepeliaev Group advises that the Russian Supreme Arbitration Court (the “SAC”) has published on its web site Resolution No. 8654/11 dated 15 November 2011 in the case of OAO Coal Mine Severny Kuzbass touching upon the issues connected with the application of the Russian thin capitalisation rules.

their price

Legal Update No. 326

Goltsblat BLP advises that a number of car companies have lately been held administratively liable by the Federal Anti-monopoly Service for not providing the requisite information in commercials advertising credit proposals broadcast by central and cable television channels at their request.

Legal Update No. 324
 
Goltsblat BLP advises that Resolution of the Government of the Russian Federation No. 1137 “On the Formats and Rules for Completing (Maintaining) Documents Used in Value Added Tax Settlements” was adopted on 26 December 2011 (the Resolution).

Legal Update No. 323
 
Goltsblat BLP advises that, on 17 January 2012, the Presidium of the Russian SAC issued a Ruling under Case No. А40-89211/10-30-762 recovering real damage and lost profit from the Federal Customs Service in favour of an exporter owing to an unlawful order.

Legal Update No. 320

Goltsblat BLP advises of publication of Resolution No. 81 of the Plenum of the Supreme Arbitration Court of the Russian Federation “On Certain Aspects of Applying Article 33 of the Russian Civil Code” dated 22 December 2011 (the “Resolution”) regarding penalty reduction. 

In January 2012, the Federal Law ‘On organised trades’ came into force

This law governs the relationships that arise when trades are organised on commodities and financial markets. It establishes requirements on those organising such trades, and on the members, management bodies and employees of the organiser of the trades. It defines the fundamentals for the state regulation of and control over this activity.  

The third set of antimonopoly measures, which comes into force on 6 and 7 January, significantly amends antimonopoly legislation, affecting business across the board. The most important new developments include:

Legal Update No. 308

Goltsblat BLP advises that:

• Federal Laws No. 380 of 3 December 2011 "On Economic Partnerships"  and No. 393 of 6 December 2011 "On Amending Article 50 of Part I of the Civil Code of the Russian Federation following adoption  of the Federal Law "On Economic Partnership"" will come into effect on 1 July 2012.

5 December 2011 saw the entry into force of Federal Law No. 334-FZ dated 22 November 2011 On amending the Russian Federation Labour Code to improve the regime for resolving collective labour disputes. This Law amends the Russian Labour Code in terms of both the time limits and procedure for examining and resolving collective labour disputes.

Financial Markets

Decree of the RF Government on Certain Issues of State Regulation in the Sphere of Financial Market of the Russian Federation, dated August 29, 2011, No. 717, in pursuance of the Presidential Decree of 04.03.2011, No. 270, by which the Federal Service for Insurance Supervision was attached to the Federal Service for Financial Markets (“FSFM”), redistributes the functions between the RF Ministry of Finance and the FSFM. In particular, it approves the Regulations on the FSFM; amends certain acts of the RF Government, including the Regulations on the RF Ministry of Finance; and recognizes as stale certain acts of the RF Government.

Pepeliaev Group advises that on 23 November, the State Duma adopted a Federal Law that amends the rates of insurance contributions payable to the state social security funds.

Pepeliaev Group advises that Federal Law No. 322-FZ dated 16 November 2011 “On amending article 6 of Federal Law ‘On foreign investments into the Russian Federation’ and Federal Law ‘On the procedure for making foreign investments in business entities of strategic importance for national defence and public safety’”  came into force on 18 December 2011. The law lays down measures for easing control over foreign investments in strategic areas of the Russian economy.

Legal Entities

On December 6, 2001 the Federal Law “On Amendments to Article 50 of Part 1 of the Civil Code of the Russian Federation in Connection with Adoption of the Federal Law “On Business Partnerships”, No. 393-FZ, was promulgated. The amendments which will go in effect as of July 1, 2012 introduce a new legal form for commercial organizations.

Legal Update No. 301

Goltsblat BLP advises that Federal Law No. 329-FZ of 3 December 2011 “On Amendments to Certain Legislative Acts of the Russian Federation in Connection with Improving Federal Anti-Corruption Regulations”  has been adopted and will come into effect on 3 December 2011 (apart from its tax secrecy provisions which will take effect from 22 December 2011).

and Customs Tariffs

Legal Update No. 299

Goltsblat BLP advises that the following Customs Union Resolutions dated 18 November 2011 have been published: 

Legal Update No. 300

Goltsblat BLP advises that Federal Law No. 379-FZ of 3 December 2011 “On Amendments to Certain Legislative Acts of the Russian Federation Pertaining to Tariffs for Insurance Payments to State Extra-Budgetary Funds” (the Federal Law) was adopted and will come into effect on 1 January 2012.

Legal Update No. 297

Goltsblat BLP advises that Federal Law No. 374-FZ dated 01 December 2011 has ratified the Eurasian Economic Commission Treaty signed by Russia, Belarus, and Kazakhstan on 18 November 2011. The Treaty applies provisionally starting from the signing date and will come into effect once the depositary is notified by the parties that they have fulfilled the relevant domestic procedures.

Legal Update No. 303

Goltsblat BLP advises that:

Federal Law of 3 December 2011 No. 381-FZ “On Amendment of the Federal Law ‘On Additional Measures  to Strengthen Stability of the Banking System during the Period up to 31 December 2011’” came into effect on 16 December 2011;

Legal Update No. 289

Goltsblat BLP advises on adoption of Federal Law No. 322-FZ, dated 16 November 2011, “On Amendments to Article 6 of the Federal Law “On Foreign Investment in the Russian Federation” and the Federal Law “On Foreign Investment in Companies of Strategic Importance for National Defence and Security” , which comes into force on 18 December 2011.

Legal Update No. 287.
 
Goltsblat BLP advises that Russian Federation Government Resolution No. 924 dated 11 November 2011 "On Approval of the List of Technically Sophisticated Goods" comes into effect on 24 November 2011.

Starting from 1 January 2012, amendments to the Russian Civil Procedure Code (CPC) will come into force by virtue of Federal Law No. 358-FZ dated 09 December 2010.

Pepeliaev Group advises that Federal Law No. 103-FZ dated 1 June 2011 has ratified the Agreement on the Rules for Determining the Origin of Goods in the Commonwealth of Independent States, signed in Yalta on 20 November 2009 (the "Agreement"). According to the CIS Executive Committee, the Agreement came into force forussr the Russian Federation on 23 July 2011.

Foreign investors doing business in Russia have come to believe that Russian law falls short when it comes to safeguarding their interests properly. More specifically, it does not have enough flexibility to deal with the issues faced by particular businesses. It is small wonder that investors are keen to ensure that their Russian transactions are governed by more flexible foreign law. This is undoubtedly due to the fact that Russian law is underdeveloped in corporate matters and far from being perfect on the protection of investments.

Legal Update No. 285.

Goltsblat BLP advises that Resolution of the Government of the Russian Federation of 3 November 2011 No. 881 “On the procedure for setting start (maximum) prices for contracts (separate lots) for individual types of medical equipment for the purpose of their inclusion in the documentation on tenders to supply such equipment” (the Resolution) comes into effect on 19 November 2011.

Nina Belozertseva , Head of Group, Healthcare and Pharmaceuticals

New Russian public health laws that will begin coming into effect on Jan. 1, 2012, reflect an unprecedented surge in interest, following the first proposals to amend Russia's core legislation on public health protection, just over a year ago. Industry players and the public need to be aware of what the changed laws mean.

Executive Summary/Highlights:

The UK Bribery Act 2010 has far reaching territorial application and can even apply to Russian companies.

Affected companies must now have in place adequate internal anti-bribery procedures and ensure the same compliance of any of its associated persons. Strong contractual protections may prove necessary to limit exposure to prosecution under the Act.
The increased scrutiny may lead to fewer deals being concluded successfully and a short-term decrease in foreign investment in Russia.

Khristofor Ivanyan and Vasily Torkanovskiy

1 International anti-corruption conventions To which international anti-corruption conventions is your country a signatory? Russia is a signatory to the following international anti-corruption conventions:

• the Criminal Law Convention on Corruption (Strasbourg, 27 January 1999) (the 1999 Strasbourg Convention), came into force in the Russian Federation on 28 July 2006;

• the UN Convention against Corruption (31 October 2003) (the 2003 UN Convention), which came into force in the Russian Federation on 8 June 2006;

• the UN Convention against Transnational Organised Crime (15 November 2000), which came into force in the Russian Federa¬tion on 25 June 2004; and

• on 7 March 2009 the Russian Federation signed the Additional Protocol to the Criminal Law Convention on Corruption (15 May 2003), but has not yet ratified it.

14 October 2011 saw the entry into force of the Russian Government’s Resolution No. 802 dated 30 September 2011 On approving the Rules for deactivating a capital construction facility (the “Rules”).

Nikolay Voznesenskiy , Head of Competition Practice
Andrey Neminuschiy, Associate

Almost from the time the Second Anti-Monopoly Package came into force on Aug. 23, 2009, the Russian Federal Anti-Monopoly Service (FAS) embarked on developing further amendments to the Russian antitrust law. 

Continuing our practice of regularly updating our clients on changes in the Russian legislation, in this legal alert we would like to inform you that as of September 1, 2011, the Ministry of Health and Social Development of the Russian Federation will introduce a new procedure for assessing working conditions in workplaces. 1 [1] Results of workplace assessments with respect to the working conditions conducted before September 1, 2011 (in accordance with the procedure currently in effect 2 [2]) will remain valid up until the next regular assessment.

This summer, the Russian Supreme Arbitration Court drew a line under a promissory note dispute that had dragged on since 2009. By its Resolution No. 16623/10 dated 21 June 2011  in case No. A40-120754/09-55-921, it corrected the lower courts which had considered the only lawful basis for issuing a promissory note to be, in essence, a loan relationship and which had stated that a promissory note may not be paid if issued to secure a third party’s obligation.

FOR CURRENCY CONTROL PURPOSES 

Pepeliaev Group advises that court practice has become harsher in cases on filing statements with banks for currency control purposes.

NEW LEGISLATION ON INSPECTIONS AND PROVIDING A LEGAL BASIS FOR THE EXTENSION OF AN ADMINISTRATIVE SUSPENSION OF ACTIVITY

What’s new

A new version of the Regulation on the Procedure for Importation of Medicinal Preparations and Pharmaceutical Substances Into the Territory of the Customs Union (hereinafter – the “Regulation”)1 that abolishes import licensing of registered medicinal preparations was issued on August 16, 2011 by the Commission of the Customs Union of Russia, Belarus and Kazakhstan and comes into effect on October 2, 2011.

INTRODUCTION

FORMS OF BUSINESS ENTITY

FOREIGN INVESTMENT

THE BANKING SYSTEM...

On September 15, 2011 the Government of the Russian Federation again changed the procedure for approval and implementation of projects for reduction of greenhouse gases carried out in accordance with Article 6 of the Kyoto Protocol of the UN Framework Convention on Climate Change by Russian Government Resolution No. 780 of 15 September, 2011 “On measures to implement article 6 of the Kyoto Protocol to the UN Framework Convention on Climate Change”, which adopted the Regulations “On implementation of Article 6 of the Kyoto Protocol to the UN Framework Convention on Climate Change” (jointly – the “Resolution”).

A new law is to provide the legal regime governing artificially created land plots in federally-owned bodies of water, bringing more certainty to urban and infrastructure development market.

Commercial Concession (Franchise)

Federal Law on Amendment of Part Two of the Civil Code of the Russian Federation, dated July 18, 2011, No. 216-FZ, introduces changes in the Civil Code provisions on commercial concession (franchise), namely Article 1033 concerning limitation of rights of the parties to a franchise agreement, Article 1035 concerning the franchisee’s primary right to renew the agreement for another term, and Article 1037 concerning termination of the agreement.

On 21 December 2010, new anti-monopoly requirements that apply to agreements between banks and insurance companies came into force and will be valid until 19 May 2013. As a result, banks and insurance companies can now co-operate within the framework of mortgage lending, and the position of insurance companies has been strengthened when dealing with banks on the borrower risk insurance market.

This handbook has been prepared by the attorneys of the Kyiv office of Baker & McKenzie as a general guide for companies operating in or considering investment into Ukraine. It is intended to present an overview of the key aspects of the Ukrainian legal system and the regulation of business activities in this country.

Pepeliaev Group notes that 2 March 2011 saw the publication on the official website of Russia’s Federal Financial Markets Service (the “FFMS”) of the FFMS’s Order “On approving the Regulations on the procedure and timeframes for a joint stock company to keep documents”, which stipulates changes to the list of documents which must be kept and the time periods for which they must be kept.

Pepeliaev Group advises that on 4 May 2011 the President of the Russian Federation signed Federal Law No. 99-FZ “On licensing specific operations” (the “Law”) that will replace the current licensing law.

Sergey Pepeliaev, managing partner of Pepeliaev Group, took part in a meeting hosted by the Russian President to discuss the new version of the Russian Civil Code drafted by the Russian President’s Council for the Codification of Civil Law.

Common forms of business structures for foreign investors

Tax system

Customs regulations

Energy efficiency...

It is noteworthy that stimulating innovation has recently become a top priority of Russian legislators, and this includes tax legislation. For example, tax incentives for innovation activities are marked as one of the main guidelines of Russian tax policy for 2011 and the period planned for 2012 and 2013¹.

On 8 December 2010 the Moscow State Commercial Court issued a decision in a case involving an analysis of whether the collection of information by Bloomberg LP's representative office in Moscow resulted in the creation of a permanent establishment under Russian law and the double tax treaty between Russia and the United States.

Each year, Baker & McKenzie lawyers produce Doing Business in Russia - a general guide for companies operating in or considering investment into the Russian Federation. The guide presents an overview of the key aspects of the Russian legal system and regulation of business activities in this country.

The Supreme Arbitrazh Court of the Russian Federation (“SАС”) approved, in a plenary session on 17 February 2011, Resolution No. 10 “On Certain Matters Relating to Enforcement of the Legislation on Pledge” (the “Resolution”). The resulting document sums up court practice of application of the legislation on pledge and mortgage in light of reform thereof in 2008, and provides interpretations to a number of controversial issues. However, the Resolution does not cover all situations and the issue of providing security in favor of an agent, bank in syndicated lending, for example, remains unresolved.

Federal law 7-FZ “On clearing and clearing activity” dated 7 February 2011 and Federal law 8-FZ “On implementation of amendments to certain Russian laws in compliance with the Federal law “On clearing and clearing activity” dated 7 February 2011 (“the new clearing legislation”) have been adopted by the State Duma, approved by the Federal Council, signed by the President and officially published. They will enter into force on 1 January 2012.

Amendments to the rules for migration registration of foreign nationals and to the rules for employment of certain categories of foreign nationals in Russia have been published and came into legal effect on March 25, 2011. 

A draft of new Federal law 418463-5 was proposed by the Government of the Russian Federation in November 2010, significantly amending legislation concerning the procedure for the issue of securities.

Generally, Russian individual taxation rules are distinguished by their comparatively low tax rates and the absence of a progressive taxation scale (as opposed to the majority of European countries). While the second issue is permanently under discussion by the Russian state authorities1, it is unlikely that the first one will change in the near future. Moreover, new Federal Law No. 86-FZ dated 19 May 2010 "On amendments to the Federal Law "On the legal status of foreign citizens in the Russian Federation" and certain legislative acts of the Russian Federation” (hereinafter – the “Law”) even provides for new, reduced, rates of personal income tax for several categories of Russian non-residents.

Warranties, Representations and Indemnities under the English law in Structuring Cross-Border M&A Transactions.

On April 12, 2010 the President of the Russian Federation signed the new Federal Law “On the Circulation of Medicines” (the “New Law”) thus completing the procedure of its adoption. The New Law is to replace the existing Federal Law No. 86-FZ “On Medicines” dated June 22, 1998, as amended (the “Law on Medicines”). The initial draft of the New Law attracted a great deal of attention and criticism when it was published on the website of the Russian Ministry of Healthcare and Social Development on July 8, 2009 and a substantially redrafted version was presented to the Russian Parliament on December 26, 2009. Its subsequent review and adoption was quite rapid for a law of this size and complexity. The New Law will come into force from September 1, 2010.

Although Russia's foreign trade turnover contracted by 40% in 2009 compared with 2008, the Russian customs authorities still managed to meet the target budgeted for the remittance of customs proceeds, which was reduced by the Russian Government only by 20%. According to the Federal Customs Service of Russia, this became possible owing to the increased efficiency of customs administration of imports.

In a continuation of the existing practice of regularly updating our clients about changes in Russian legislation and law enforcement practice, in this legal alert we inform you that the period initially set by the Federal Law "On Personal Data"1 (hereinafter the “Law”) for bringing personal data information systems into compliance with the requirements of the Law has been moved from 1 January 2010 to 1 January 2011. Also, changes have been made to the Law concerning the requirements for personal data information systems.

On October 28, 2009, the Russian Government adopted two enactments concerning joint implementation projects under the Kyoto Protocol to the United Nations Framework Convention on Climate Change (the "Kyoto Protocol") in the Russian Federation, namely:

Russia, Belarus, and Kazakhstan will adopt new unified customs tariff and non-tariff regulations from January 1, 2010, and the Customs Union (the “CU”) of the three countries of the Eurasian Economic Community (the “EurAsEC”) will become a reality. The CU Customs Code (the “Customs Code”) is expected to take effect from July 1, 2010 to regulate the resulting integral customs zone.

Federal Law of the Russian Federation No. 241-FZ of 30 October 2009, "On Making Amendments to the Criminal Code of the Russian Federation and Article 151 of the Criminal Procedural Code of the Russian Federation" ("Law No. 241") was published on November 3, 2009.

A number of regulatory acts, which introduced amendments to the rules of antimonopoly regulation and control, were adopted in July 2009. In particular, material amendments were introduced to the Law “On the Protection of Competition”.

Summary of the Speech of Dr. Andrey Gorodissky at the First Russian and CIS Mergers and Acquisitions Conference of the International Bar Association

In view of the promulgation of the Federal Law that significantly amends the legal regulation concerning limited liability companies established in Russia, this memorandum gives a brief description of basic amendments, their effective date and the deadline for bringing constitutive documents of a limited liability company in compliance with the new regulation.

Russian Government Introduces Important Amendments into the Rules on Pricing of Medicines

Before the financial crisis, the information space was filled with announcements of mega projects being started up in Russia, but the situation today is a different one. Federal projects have been replaced by some smaller ones planned to be implemented at the regional and municipal levels. This review will consider key aspects of this trend, analyse and assess the most promising projects and identify ways to develop further the infrastructure and investment in Russia in the near future.

Doing Business in Russia 2009 has been prepared as a general guide for companies operating in or considering investment into Russia. It is intended to present an overview of the key aspects of the Russian legal system and regulation of business activities in Russia.

It is against this backdrop that at the end of 2008, CMS commissioned mergermarket to interview 100 Russian M&A and corporate decision makers. We wanted to find out what they thought of the current situation and what their views on the future are. We also wanted to test our own view that Russia remains an attractive jurisdiction in which to invest. The Russian M&A market has taken a hit in the current environment - of that there is no doubt. However, what was discovered during the research is that despite the gloomy headlines, there remains a stronger level of optimism, and overall the message is clear that, the Russian market has a positive future.

In view of forthcoming amendments to Russian antimonopoly legislation (relating inter alia to agreements and concerted practices that restrict competition), the authors of this article will analyse the practice applied by European antitrust agencies and the Federal Antimonopoly Service of the Russian Federation (FAS Russia) to detect and investigate respective cases.

Translation of the Federal Law on Limited Liability Companies as effective from 1 July  2009

12/03/2009 - It is against this backdrop that at the end of 2008, CMS commissioned mergermarket to interview 100 Russian M&A and corporate decision makers. We wanted to find out what they thought of the current situation and what their views on the future are. We also wanted to test our own view that Russia remains an attractive jurisdiction in which to invest. The Russian M&A market has taken a hit in the current environment - of that there is no doubt. However, what was discovered during the research is that despite the gloomy headlines, there remains a stronger level of optimism, and overall the message is clear that, the Russian market has a positive future.  

The amendments to Russian Federal Law “On the insolvency (bankruptcy)”, adopted and came into force in January, 2009, affected both general and procedural provisions of the Law.

New rules governing Russia’s limited liability companies, which take effect on July 1, 2009, change the competence of their governing bodies, establish new procedures for the transfer of shares and allow shareholders to enter into shareholder agreements.

On December 30, 2008 the newly adopted Russian anti-corruption legislation (the “Anti-corruption Legislation”) was officially published. Its adoption signals the increased attention of the Russian authorities to issues of corruption, which should eventually lead to an intensification of practicalefforts to eradicate the same.

Doing Business in Azerbaijan has been prepared as a general guide for companies operating in or considering investment into Azerbaijan. It is intended to present an overview of the key aspects of the Azerbaijani legal system and regulation of business activities in this country. Click here to read the guide.

Doing Business in Russia 2008 has been prepared as a general guide for companies operating in or considering investment into the Russian Federation. It is intended to present an overview of the key aspects of the Russian legal system and regulation of business activities in this country. Read more...

In response to numerous requests for information from companies interested in entering the Russian market, the law offices of Brzobohaty Broz and Honsa, BBH, has assembled a comprehensive guide through many of the particularities of doing business in Russia. Read more...