Presentation on theme: "Slide www.pgplaw.ru Russia: Legal News 2014 Sergey Pepeliaev, Managing Partner, Ph.D. in Law 9th Forum of Law Firms from CIS countries Vienna, Austria:"— Presentation transcript:
Slide www.pgplaw.ru Russia: Legal News 2014 Sergey Pepeliaev, Managing Partner, Ph.D. in Law 9th Forum of Law Firms from CIS countries Vienna, Austria: 27-29 June 2014
Slide 2 RUSSIA: LEGAL NEWS 2014 Table of contents Antimonopoly Legislation…………………………………………………………………………….… 3 Corporate Law………………………………………………………………………………………………. 7 M&A………………………………………………………………………….…………………….……………10 Land Law, Real Estate……………………………………………………………………….…………..12 Intellectual Property………………………………………………………………………….……………14 Employment and Migration Law…………………………………………………………….…………17 Tax Law………………………………………………………………………………………………….………18 Customs Law, World Trade Organisation.…………………………………………………...……20 Foreign Currency Legislation…………………………………………………………………………..21 Banking and Finance Legislation..……………………………………………………..……………23 Medicine and Pharmaceuticals …………………………………………………………..………….24 Regulation of oil and gas production and processing………………………………….…….25 Telecommunications……………………………………………………………………………………….26 The court System…………………………………………………………………………………………….28 Having rulings of foreign courts recognised and enforced………….……………………..29 Legislation on bankruptcy……………………………………………………………………………….30 Administrative Law Regulation…………………………………………………………………………32 Criminal Liability ………………………………………………………………………………………..…..33
Slide 3 RUSSIA: LEGAL NEWS 2014 Antimonopoly legislation (1) At the end of 2013 the Russian Federal Antimonopoly Service initiated a case in connection with a violation of antimonopoly law, which took the form of collusion during the tender for purchasing medical equipment in Yakutia. Since the Federal Law 'On protecting competition‘ has extra-territorial application, a number of foreign companies were involved as defendants, one of which was recognised as a party to the anti-competitive agreement. In March 2014, the Ninth State Commercial ('Arbitration') Court of Appeal upheld a fine imposed on a number of pharmaceutical distributors for participating in collusion during a tender for purchasing pharmaceuticals. The total fine exceeded RUB 400 million. The Supreme State Commercial ('Arbitration') Court (SSCC) is to determine whether it is lawful and legitimate on the part of the antimonopoly authority to conduct unscheduled audits before an antimonopoly case is initiated. The company filed a claim with the SSCC seeking to have invalidated the Guidelines for the Federal Antimonopoly Authority and its regional branches to conduct scheduled and unscheduled antimonopoly compliance audits.
Slide 4 RUSSIA: LEGAL NEWS 2014 Antimonopoly legislation (2) One of the most promising tools of antimonopoly regulation is for the company to implement an antimonopoly compliance system (a programme to prevent violations of antimonopoly legislation). Senior management of the Federal Antimonopoly Service and representatives of the antimonopoly authority have repeatedly drawn attention to antimonopoly compliance in their presentations and speeches. The objective of the Federal Antimonopoly Service is to motivate and encourage market players to implement their own antimonopoly systems, which will allow them to prevent and preclude violations of antimonopoly legislation in a more effective manner. One such incentive, according to the representatives of the Federal Antimonopoly Service, is to introduce programmes according to which administrative liability will be mitigated for violating antimonopoly legislation if the company has an antimonopoly compliance system in place. To this end, the relevant amendments may be made to the Code of Administrative Offence.
Slide 5 RUSSIA: LEGAL NEWS 2014 Antimonopoly legislation (3) The Federal Law “On the contract system in the area of public procurement for state and municipal purposes” entered into force on 1 January 2014* The new law has seriously changed the procedure for regulating the whole procurement cycle: from planning to performing a public contract. The main changes were made to the following aspects of the state procurement system: A common information system Planning, justifying and and determining standard amounts with regard to public procurement Requirements for participants of public procurement Methods for selecting suppliers; tenders became the main method for selecting suppliers Rules for providing guarantees against bids/contracts and anti-dumping measures Performing, amending and terminating contracts. * According to the position of the Federal Antimonopoly Service, clarifications of the antimonopoly authority that were issued previously apply to the current regulation of the area of public procurement.
Slide 6 RUSSIA: LEGAL NEWS 2014 Antimonopoly legislation (4) The Federal Antimonopoly Service is actively involved in drafting amendments to the Federal Law “On protecting competition” and other pieces of legislation (the so-called fourth package of amendments to the antimonopoly law'). The drafting of the law started a rather long time ago and a considerable number of amendments were made to it. The main innovations of the fourth set of amendments to the antimonopoly law, among other things, will be: The Presidium of Federal Antimonopoly Service will be created and a system will be established for challenging out-of-court decisions of regional branches of the antimonopoly authority. The Rules for Trade Practices will be drafted further to the instructions of the Federal Antimonopoly Service based on results of considering a case connected with abuse of the dominant position or with regard to economic concentration The ban on vertical agreements will no longer apply to agency contracts.
Slide 7 RUSSIA: LEGAL NEWS 2014 Reform of the Civil Code - invalid transactions On 1 September 2013 amendments came into force to the whole range of provisions of the Civil Code. Certain provisions regarding invalid transactions were amended as well. The approach significantly changed to transactions which are inconsistent with the law: they are treated not as void, but only as voidable, unless the law directly stipulates that the transaction will be void. Such transaction may be classified as void if it infringes third parties' rights or public interests; A provision appeared for the first time that a party which acts in bad faith may not dispute a transaction if its actions give reasons to believe that this transaction is valid; A tentative (open) list of factors was set which indicate that a party clearly acted under influence of a mistake. One of them is a mistake regarding a factor which was mentioned in the declaration of the party's will; It has been directly stipulated that concealing any facts which are important when transaction is entered into is treated as deception.
Slide 8 RUSSIA: LEGAL NEWS 2014 Reform of the Civil Code - new developments in the rules for an assignment of rights Provisions of the Civil Code were significantly amended regarding assignment (cession) of rights (come into effect on 1 July 2014): The right of the parties to directly prohibit, in a contract, rights from being assigned and the consequences of such prohibitions; Non-monetary obligations may be assigned only provided that such assignment does not make performance more onerous for the debtor; It was directly permitted for a future claim to be assigned in the context of business relationships; The prohibition was abolished for recourse liabilities to be assigned; The term "assignment of a contract" was introduced which assumes that all rights and obligations under the contract are transferred to another party; The party which assigns a claim (the transferor) is directly prohibited from performing any actions which may incur the debtor's objections against the claim which was assigned.
Slide 9 RUSSIA: LEGAL NEWS 2014 Reform of the Civil Code - corporate legislation Significant changes were made to the Russian legislation on legal entities – public and non-public joint-stock companies were introduced, while Companies with Additional Liability were removed from the list of legal entities. A closed list of non-commercial legal entities was set. A definition was introduced of the Sole Executive Body including multiple persons. Starting from 1 September 2014 members of non-public legal entities will have an opportunity to allow for several general directors to be appointed; A new procedure has been set for decisions of general meetings to be formalised. Starting from 1 September 2014 minutes of a General Meeting will have to be notarised (non-public JSC) or certified by the party which keeps the register of shareholders (public JSC). An LLC may use a simplified procedure; The procedure has been reformed for reorganising Russian legal entities. The major changes include it being prohibited for a commercial organisation to reorganise itself into a non-commercial one and the transfer act no longer being mandatory for reorganisation (the new provisions are to come into force on 1 September 2014); Starting from 1 October 2013 all newly created joint-stock companies must assign the task of keeping the registers of shareholders to professional participants of the securities market. Before 1 October 2014 all joint- stock companies must assign the task of keeping the registers to professional participants of the securities market.
Slide 10 RUSSIA: LEGAL NEWS 2014 M&A - new laws (1) On 1 July 2014 articles 860.7 – 860.10 of chapter 45 of the Civil Code come into force, which entrench an escrow agreement as one of the agreements included in the Civil Code and regulate the procedure for entering into such agreements. Previously parties entered into escrow agreements under a foreign law to ensure that payments are secure under the main agreement; now the parties may enter into such agreements under Russian legislation and this will make it possible for the parties to use the services of Russian banks and avoid the risks connected with decisions of foreign courts of law and arbitration courts being enforced in Russia; Founders and members of legal entities receive an opportunity to choose the applicable law for a founders' agreement for a legal entity with foreign participation and the agreement regulating the members' rights (shareholders' agreements, etc.), without violating the mandatory regulations of the local legislation of the place where the legal entity was established. Founders and members of legal entities will have an opportunity to submit to agreements of association and shareholders' agreements governed by a foreign legislation, BUT it remains unclear which provisions of the Russian legislation will be treated as mandatory for the purposes of such relationships.
Slide 11 RUSSIA: LEGAL NEWS 2014 M&A - new laws (2) Federal Law No. 423-FZ dated 28 December 2013 "On amending the Federal Law 'On protecting competition'", which came into force on 30 January 2014, has abolished the obligations of companies to notify the Russian Federal Antimonopoly Service (the "FAS") of transactions performed and has retained only the obligation to notify the FAS of transactions which have been performed within a group of companies. However, according to clarifications of the FAS, even after this law has come into effect, business entities must notify the FAS of the transactions which were performed before 30 January 2014. Result: The number of documents required for transactions has been greatly reduced with a view to lowering administrative barriers. This will have a favourable effect on medium-sized and large businesses and will stimulate growth in business activity.
Slide 12 RUSSIA: LEGAL NEWS 2014 Land Law, Real Estate (1) Increased number of disputes connected with identified cadastral value of real estate : − Not only land plots, but also items of real estate are subject to a cadastral assessment (the assessment must be performed not less than every 5 years); − The results of the cadastral assessment serve as the basis for calculating land tax and lease payments; − On 2 November 2013 a Federal Law was adopted which amended the Russian Tax Code (No. 307-FZ) and according to which the cadastral value is the basis for calculation of the corporate property tax for administrative, business and shopping centres, as well as any premises within their territory; − The difficulties with the new cadastral value being applied retrospectively for the purpose of the excessively paid tax and lease payments to be refunded) are caused by the case law not providing any settled approaches regarding this matter. Amendments to the Civil Code regarding pledge (come into force on 1 July 2014) − A possibility is introduced to pledge a future thing, future right or the whole property of the party which performs the business activity; − State registration is abolished of mortgage agreements; − The procedure is amended for pledged property to be disposed of; − The concept is introduced of a good-faith pledge holder; − Other significant changes.
Slide 13 RUSSIA: LEGAL NEWS 2014 Land Law, Real Estate (2) Draft Federal law No. 444365-6 "On amending the Russian Land Code and certain items of Russian legislation" (On 18 June 2014 approved by the Council of Federation and sent to the President for signing): Adopted pursuant to the instructions of the President as well as the roadmap for refining the legal regulation of town-planning activities and improving the entrepreneurial climate in the area of construction which was approved by Directive No. 1336-r of the Russian Government dated 29 July 2013: Significantly reforms the procedure for land plots to be provided which are state and municipally- owned; abolishes tenders and entrenches auction as a priority form of competitive bidding for land plots to be provided (the auction should be in the electronic form); The process for the land plot to be provided may be initiated by any interested party; A land plot may be provided for construction purposes on lease only; Limits are set for the durations for leasing out land plots for different purposes and terms and conditions are fixed for lease agreements (e.g. the lessee's pre-emptive right is abolished to enter into a lease agreement for a new time period, etc.) Closed lists are set of grounds on which ownership title to land plots may be transferred or on which land plots may be leased out for a fee or free of charge.
Slide 14 RUSSIA: LEGAL NEWS 2014 Intellectual property (1) Federal Law was adopted No. 35-FZ dated 12 March 2014 "On amending sections one, two and four of the Russian Civil Code and certain items of Russian legislation". The main set of the amendments comes into force on 1 October 2014. Pursuant to article 1246(5) of the Civil Code, Directive of the Russian Government No. 512 dated 4 June 2014 was adopted "On approving the Rules for paying remuneration for employee inventions, employee utility models, employee industrial designs". These Rules will not apply if the employer and the employees enter into an agreement which sets the amount, terms, conditions and procedures for remuneration to be paid.
Slide 15 RUSSIA: LEGAL NEWS 2014 Intellectual property (2) The following amounts of consideration have been set: — for creating an employee invention, 30 percent of the employee's average salary for the last 12 calendar months; — for creating an employee utility model or an industrial model, 20 percent of the employee's average salary for the last 12 calendar months; — The resolution becomes effective on 1 October 2014. Boosting the fight against infringing products in the Internet: extending the scope of anti-piracy law to all types of content — A draft law is being prepared to amend Federal Law No. 149-FZ "On information, information technologies and on data protection" dated 27 July 2006, and the Russian Civil Procedure Code.
Slide 16 RUSSIA: LEGAL NEWS 2014 Intellectual property (3) — The aim of the proposed changes is to extend the existing procedure for restricting access to video content owing to it being illegally posted in the Internet, to all copyright items and items subject to related rights, including books, music, photographs, and software. — The draft law clarifies the procedure for a communications provider to block illegal content. For instance, it sets out that if a communications provider has no technical capability of restricting access to an illegally posted copyright item or an item subject to related rights, such communications provider must restrict access to the whole information resource. — So far, the draft law has been passed in the first reading.
Slide 17 RUSSIA: LEGAL NEWS 2014 Employment and Migration Law A federal law has been adopted which considerably limits on supplying personnel from 1 January 2016. For instance, it will be permitted to supply personnel to (1) duly accredited private employment firms, or (2) within corporations (if a separate relevant federal law is adopted). 'Golden parachutes' for top managers of companies with public ownership are limited to the amount of an average salary for three months On 4 August 2014, a federal law becomes effective which obliges Russian citizens who have received a second citizenship or a permit for permanent residence in a foreign country, to report this to the Federal Migration Service which will keep records about such citizens. Not complying with this obligation may result in administrative and criminal liability. The reporting period for those who already have a second citizenship is until 3 October 2014. From 1 January 2015, foreign citizens applying for work permits, patents, and permanent or temporary residence permits, must evidence their knowledge of the Russian language, history and the fundamentals of Russian legislation. An exception has been made for individual categories of foreign citizens, including highly skilled professionals and members of their families.
Slide 18 RUSSIA: LEGAL NEWS 2014 Tax Law (1) For the purposes of ‘deoffshorising’ the Russian economy, a draft law has been prepared to establish the institution of controlled foreign companies, corporate tax residence and a beneficial owner; The Federal Tax Service has drafted laws concerning tax abuse, tax advising and 'tax monitoring' (submitted to the State Duma); The Ministry of Economic Development has drafted a law concerning cost sharing in a group of companies; The situation with taxing land and property has become more sensitive owing to legal entities being taxed based on the cadastral value and such cadastral value of citizens' and entities' land plots being overstated. The introduction of a new environmental charge to the state environmental fund is being prepared (for the disposal of batteries, plastic dishware, lamps, worn home appliances and other consumer goods); Legal entities may now create their own web accounts.
Slide 19 RUSSIA: LEGAL NEWS 2014 Tax Law (2) 1.Profit Tax (instead of 20%): 0 – 10 % for 5 years from when the first income is received from the investment project 10-18 % during the next five years The rate depends on the regional legislation 2.Conditions: Investments in manufacturing of goods in the specified regions Amounts of capital investment: RUB 50,000,000 over a period of not more than tree years or RUB 500,000,000 over a period of 5 years. 3.The law sets certain requirements and limitations. Taxation of investment projects in the Far East Federal District
Slide 20 RUSSIA: LEGAL NEWS 2014 Customs law and foreign trade regulation On 29 May 2014, an international treaty was signed by Russia, Belarus and Kazakhstan for the creation of the Eurasian Economic Union (EAEU), with effect from 1 January 2015. The EAEU is the next integration stage of some former Soviet states after the Customs Union (CU) was established; The main purpose of the EAEU is to ensure that not only goods but also capital, services and workforce may freely circulate across its member states; It is planned to draft a new EAEU Customs Code which will supersede the Customs Code of the Customs Union and will allow for the codification of many international treaties/agreements adopted when the Customs Union was being created; Armenia and Kyrgyzstan have already voiced their intention to join the EAEU by 2015. Within the obligations assumed when joining the WTO, Russia is continuously decreasing import duties for over 5,600 commodity headings in the Customs Tariff. The new rates will come into effect on 1 September 2014. The crisis with TIR carnets being used during customs transit still persists. Starting from 2013, the EAEU has introduced 4 anti-dumping countervailing duties; in addition, 6 anti- dumping investigations are now in progress (among other things, in relation to Chinese and Ukrainian goods). In December 2013, Russia (as a member of the World Trade Organisation) filed its first claim against the European Union in relation to a package of energy adjustments when conducting anti-dumping investigations into Russian companies of the metallurgical and chemical sectors; on 30 April 2014, Russia filed with the WTO a claim against the Third EU Energy Package which lays down that gas-extracting companies may not own main pipelines located in the EU.
Slide 21 RUSSIA: LEGAL NEWS 2014 Foreign currency legislation (1) The ban on funds being directly deposited into residents' foreign accounts has been approved. It is prohibited for high-ranking officials and their families to own property abroad. On 30 June 2013, tightened criminal liability regulations were enacted (article 193 and article 193.1 of the Russian Criminal Code). Criminal liability arises if amounts starting from RUB 6 million are not refunded from abroad (the previous figure was RUB 30 million); instances of outstanding amounts not being refunded during one year are added together. The new article 193.1 of the Russian Criminal Code punishes the transfer of cash abroad using false documents (a threshold amount is not set, the amount of RUB 6 million or more is considered to be a large amount, which serves as a qualifying feature for article 193.1(2)). Article 24 of the Law on currency regulation has been updated with an obligation on exporters to receive a portion of the export revenue in Rubles. Now the government should determine the exact proportion and the countries in the relationship with which this portion may be received.
Slide 22 RUSSIA: LEGAL NEWS 2014 Foreign currency legislation (2) Amendments regarding foreign salaries: it is expected that persons who work abroad but keep their currency residence in Russia, will be allowed to receive salary in their accounts with foreign banks. Amendments regarding factoring: it is expected that residents are allowed to sell the rights to claim towards residents (for example, from export contracts) with discount, without being subject to penalties for not receiving part of the revenue. The new lender will be responsible for repatriating the whole amount. The limitation period for being held administratively liable under article 15.25 of the Russian Code of Administrative Offences will increase to 3 years (now, the period is 1 year). It is expected that the liability for repeat violation of the time frame for drafting records and financial reports concerning currency transactions will be differentiated. Now, when a violation is repeated, a severe penalty of RUB 400,000 to RUB 500,000 is applied, irrespective of the length of the delay; whereas if the violation has been committed for the first time, the penalties are differentiated. Changes to be expected in 2014:
Slide 23 RUSSIA: LEGAL NEWS 2014 Banking and Finance Legislation To ensure smooth provision of payment services, a National System of Payment Cards is being created in Russia. From 1 July 2016, all domestic payments are to be effected within national payment systems (international payment systems may be used only for cross-border payments, including those which are denominated in foreign currency). All entities providing trade services (or performing work or other services) must ensure that payments can be made using national payment instruments, along with cash payments (at the customer's choice). From 1 January 2015, administrative liability will be introduced for violating this requirement. The procedure for using electronic means of payment is specified. The concept of the simplified identification of the client will be liberalised, and the rules for using non-identified means of payment will be toughened. From 1 July 2014 new rules of the Civil Code will be enacted which allow banks to open collateral accounts and escrow accounts. On 1 July 2014, the new law "On consumer credits (loans)" will be enacted which regulates in detail the limits of banks’ discretion when they enter into loan agreements with consumers. Negotiations with Visa and Mastercard are being held concerning the legislative provisions being eventually alleviated so that international systems may stay in the Russian market of payment services.
Slide 24 RUSSIA: LEGAL NEWS 2014 Medicine and Pharmaceuticals The Russian Government is close to finishing its consideration of fundamental draft amendments to the Federal Law "On the circulation of pharmaceuticals" which affect the sphere of state registration of pharmaceuticals, pre-clinical and clinical research, the circulation of biological and biologically similar drugs etc.; it is expected that the document will be submitted to the State Duma as early as at the end of summer; The government is heading for limiting state procurement of pharmaceuticals and medical products manufactured abroad in order to promote their localisation in Russia: a draft resolution of the Russian Government has already been prepared in relation to medical products; however, it it has been sent back to be revised owing to the comments it received; The Ministry of Healthcare has developed rules for approving and changing various lists of pharmaceuticals for different purposes - with a view to procuring them in accordance with their trade names, drawing up lists of vital and essential medicines, strict record keeping and storage, etc. In accordance with the amendments to the Federal Law "On the circulation of pharmaceuticals", pharmaceutical companies which finance professional events for future medical staff will be obliged to inform the Russian Federal Service for Surveillance in Healthcare about this fact, and observe a number of restrictions when financing and organising such events.
Slide 25 RUSSIA: LEGAL NEWS 2014 Regulation of oil and gas production and processing On 1 December 2013, Gazprom’s monopoly to export liquefied natural gas was cancelled. Now, Rosneft, Zarubezhneft and Novatek (Yamal-SPG) also enjoy such right. The requirements for state companies' subsidiaries have been eased: their minimum membership interest in the issued capital has been reduced from 100% to 51% (or 50% plus 1 share) (further to amendments to the Law on gas export); On 1 October 2013, a simplified procedure and right was introduced for users of mineral resources to engage any third parties for creating, operating and using production islands, facilities and structures, and for performing drilling work on the continental shelf (further to amendments to the Law on the continental shelf); On 1 January 2014, tax and customs benefits were introduced, as well as special terms for taxing offshore projects (further to amendments to the Tax Code and the Law on customs tariffs); On 1 September 2013, benefits in relation to the mineral extraction tax for deposits of tight oil (further to amendments to the Tax Code); On 1 January 2014, the mineral extraction tax rate for oil increased from RUB 470 to RUB 493 for 1 tonne of oil extracted (further to amendments to the Tax Code); From 1 July 2014 on, a new formula for calculating mineral extraction tax for gas and gas condensate becomes effective (further to amendments to the Tax Code).
Slide 26 RUSSIA: LEGAL NEWS 2014 Telecommunications Further regulation of Internet activities - the "law on bloggers" has been adopted. Among other things, this law has: — introduced the term "blogger": the owner of an Internet site and/or page where publicly available information is posted with more than 3,000 Internet users accessing such site or page during a day; — defined rights and obligations of bloggers; — imposed an obligation on those who organise the dissemination of information over the Internet (e.g. social networks) that they must notify the authorised state authority when they start their activities and they also must store for 6 months the information left by users. On 1 May 2014 amendments to legislation came into force which are aimed at combating mobile fraud: — the term "content services" was introduced: a category of telecommunication services which are inseparably connected with mobile communication services and aimed at increasing their consumer value (acquiring information, participating in voting, games, etc.); the fees for such services are paid by the subscriber to the telecommunication services provider with which it has entered into an agreement for telecommunication services; — the subscriber may request that the telecommunication services provider create a separate personal account for it specifically for the purpose of paying for content services;
Slide 27 RUSSIA: LEGAL NEWS 2014 Telecommunications (2) — a telecommunication services operator may provide content services to a subscriber only after the the subscriber's direct consent is obtained to pay for such services; — the telecommunication services provider must provide the subscriber with information regarding the fees for the services and brief description of the services, as well as regarding the company providing the service and the account from which the funds will be debited to pay the fees for such services. Draft law No. 410633-6 to combat text messaging spam was adopted by the State Duma in the first reading: — bulk or automatic text or other non-voice messages may be sent only provided that the party which ordered such messages to be sent obtains the subscribers' prior consent; — messages may be sent only on the basis of an agreement entered into by the ordering party with the corresponding telecommunication services provider; — at the subscriber's request the telecommunication services provider must stop sending the messages. Russian Ministry of Telecommunications is developing new Rules for providing telephone communication services. These will replace the existing Rules for providing mobile communication services and Rules for providing fixed communication services.
Slide 28 RUSSIA: LEGAL NEWS 2014 Court system Merger of the Russian Supreme State Commercial ('Arbitration') Court (SSCC) and Russian Supreme Court (SC) (the SC will 'absorb' the SSCC): ―Anticipated changes in the court operating rules ―Creating a uniform approach to interpreting legislation, including changing approaches to issues where positions of the SSCC and SC differed. Creating a uniform procedural code.
Slide 29 RUSSIA: LEGAL NEWS 2014 Having rulings of foreign courts recognised and enforced The reform of legislation regarding international commercial arbitration (still in progress). Its main objectives: reduce the timelines for proceedings up to the writ of execution being obtained with regard to a certain type of cases; leave less opportunity for abuse when a court ruling to recognise and enforce an arbitral award is challenged (there is a risk that this will be done by shortening the cassation stage); improve the quality of court work in Russia by 'moving' the first instance court with regard to a certain type of cases (possibly to the level of cassation courts); arbitrability of corporate disputes provided that the arbitration institution is located in Russia and special rules are complied with. Risks associated with having foreign arbitral awards recognised on the basis of reciprocity and international comity: in view of sanctions introduced in the US, Canada and the EU, which, among other things, restrict the right of Russian individuals and legal entities to justice.
Slide 30 RUSSIA: LEGAL NEWS 2014 Bankruptcy legislation (1) The Federal Law 'On insolvency (bankruptcy)' has been amended to include provisions that regulate the bankruptcy of certain categories of debtors, including with regard to real estate developers (i.e. persons that attract funds and/or property of those that participate in construction) (amendments introduced by Federal Law No. 189-FZ dated 2 July 2013); private pension funds (amendments introduced by Federal Law No. 410-FZ dated 28 December 2013), specialised financial institutions and mortgage agents (amendments introduced by Federal Law No. 379-FZ dated 21 December 2013); agricultural organisations and farming enterprises (amendments introduced by Federal Law No. 419-FZ dated 28 December 2013).
Slide 31 RUSSIA: LEGAL NEWS 2014 Bankruptcy legislation (2) insurance of contributions from individual entrepreneurs has been introduced in a case of a bank going bankrupt; the right to challenge transactions of financial institutions has been granted to the provisional administration acting in the period before the bankruptcy case goes to court; the status of the state corporation 'Agency for insurance of contributions' has been reinforced and performance of its additional functions has been ensured. This agency exercises the powers of a receiver for bankrupt banks that attracted contributions from individuals. Federal Law No. 410-FZ dated 28 December 2013 has made amendments to legislation on bankruptcy, which are aimed at improving guarantees for creditors of financial organisations, among other things:
Slide 32 RUSSIA: LEGAL NEWS 2014 Administrative law regulation The Russian Ministry of Labour and Social Protection has developed guidelines for organisations to take measures to prevent and fight corruption (published on the web site http://www.rosmintrud.ru as of 16 April 2014); http://www.rosmintrud.ru The Russian Constitutional Court has restricted the ability to apply administrative punishments below the lower level for an administrative sanction only in situations when the court is considering whether to apply an administrative fine of RUB 100,000 or more as a measure of administrative punishment, which cannot be replaced by a warning; The State Duma has adopted in the first reading a draft Russian Code of Administrative Court Proceedings introduced by the Russian President. However, at present a concept is being developed to draft a unified procedural code; The drafting of the new version of the Russian Code of Administrative Offences has started (new version).
Slide 33 RUSSIA: LEGAL NEWS 2014 Criminal liability for offences in the economic sphere (1) Anticipated abolition of a special procedure for initiating criminal proceedings with regard to tax offences On 11 October 2013, Russian President introduced to the State Duma draft law No. 357559-6 'On repealing certain provisions of pieces of Russian legislation'. This draft law was prepared by the Investigative Committee of the Russian Federation Article 140(1.1) of the Criminal Procedure Code (introduced by Federal Law No. 407-FZ dated 6 December 2011) is repealed. According to this article, only those materials that have been sent by the tax authorities in accordance with legislation on taxes and levies (i.e. based on results of a tax audit and if there is a decision to hold the taxpayer liable for a tax offence) to determine whether a criminal case should be initiated may be used as a ground for initiating criminal cases in connection with tax offences (articles 198 - 199.2 of the Russian Criminal Code). The right has been restored of law enforcement authorities to conduct inspections of taxpayers and to initiate criminal cases when there is no decision in place of the tax authority to hold a taxpayer liable for a tax offence. This has raised a great concern of the business community It is the 'longest' draft law in terms of time of all the draft laws submitted by the president. The authorities have to look for compromises
Slide 34 RUSSIA: LEGAL NEWS 2014 Criminal liability for offences in the economic sphere (2) Has a compromise been found? The procedure suggested by the Federal Tax Service for the tax authority to participate in criminal proceedings is theatrical props that do not affect the procedural decisions made by the investigative committee: The tax authority is not obliged to conduct audits based on the materials provided by the Investigative Committee. Data provided by the tax authority is of the nature of information or a notification and does not affect the decision taken by the investigator of the Investigative Committee to initiate a criminal case Result: the procedure for initiating criminal cases with regard to tax offences, which was in effect before, is now fully restored Forecast: the law enforcement system will put more pressure on business
Slide 35 RUSSIA: LEGAL NEWS 2014 Criminal liability for offences in the economic sphere (3) Law enforcement authorities will have more powers when conducting pre-investigation checks Federal Law No. 23-FZ dated 4 March 2013 'On amending articles 62 and 303 of the Russian Criminal Code and Criminal Procedure Code' The law enforcement authorities are entitled, when checking a communication informing them about an offence, before the criminal case is initiated, to take procedural actions, among other things to obtain clarifications, request and seize documents and items, to schedule and conduct forensic examinations, to review documents, to examine items and conduct desk audits or inspections, and to analyse documents and items. Increased importance of pre-investigation checks: the information received during a pre- investigation check is treated as evidence in the criminal case (earlier this information could be used only as a ground for deciding to initiate a criminal case) There is a trend according to which the guilt is established even before the pretrial stage. The fact that a criminal case is initiated = the guilt of the suspect has been established.
Slide 36 RUSSIA: LEGAL NEWS 2014 Criminal liability for offences in the economic sphere (4) The number of individuals convicted for offences in the economic sphere (articles 169 – 199.2 of the Criminal Code) keeps decreasing 2009 – 11,502 persons convicted 2010 – 8,175 persons convicted 2011 – 6,072 persons convicted 2012 – 4,276 persons convicted 2013 – 3,728 persons convicted Will this trend change if the special procedure for initiating criminal cases with regard to tax offences is cancelled?