Russian Legislation Update: 25 April – 8 May 2011 | White & Case LLP International Law Firm, Global Law Practice
Russian Legislation Update: 25 April – 8 May 2011

Russian Legislation Update: 25 April – 8 May 2011

Refinancing Rate

On 29 April 2011 the Central Bank issued Directive No. 2618-U increasing the refinancing rate.

The Central Bank increased the refinancing rate from 8% to 8.25% per annum. The new rate applies as of 3 May 2011.

The Central Bank sets the refinancing rate for its financing of commercial banks. The rate is also used for calculating interest on commercial loans (if the rate is not specified in an agreement), tax payments and in other cases provided by law.

The Directive entered into force on 29 April 2011.

Securities

On 21 January 2011 the Federal Service for Financial Markets ("FSFM") issued Order No. 11-3/pz-n approving certain regulations for the implementation of provisions of Federal Law No. 224-FZ "On Combating Unlawful Use of Insider Information and Market Manipulation and on Amending Certain Legislative Acts of the Russian Federation", dated 27 July 2010 (the "Law").

The Order was registered with the Ministry of Justice on 1 April 2011.

According to the Law, insiders are to maintain the list of insiders and notify persons on their inclusion in / exclusion from such list, to deliver the list of insiders to organizers of trades. Insiders included in the list of insiders of an issuer or a management company are to notify these organizations and the FSFM of their operations with securities of such issuer or management company.

The FSFM has now established the procedure for: (i) notifying legal entities and individuals on their inclusion in/exclusion from the list of insiders (the term for such notification is 1 business day from the date of inclusion in/exclusion from the list); (ii) the transfer of the lists of insiders to organizers of trades through which operations with financial instruments, foreign currency and/or commodities are performed, as well as grounds for refusal to accept the list of insiders by organizers of trades; (iii) providing notifications by insiders on operations they have made (within 10 business days of the date of carrying out of operations with financial instruments, foreign currency and/or commodities). The regulations also contain recommended samples of notifications.

The Order entered into force on 3 May 2011.

On 23 December 2010 the Federal Service for Financial Markets ("FSFM") issued Order No. 10-77/pz-n providing for the coordination procedure when transferring documents and information constituting the registry system for securities' owners.

The Order was registered with the Ministry of Justice on 25 March 2011.

The Order establishes the procedure for exchange of documents and information between the issuer and a person maintaining the register of securities' owners (the "Register").

In particular, the Order establishes the coordination procedure between the issuer and the Registrar in connection with the conclusion/termination of the agreement on maintaining the register or replacement of the Registrar and provides for the procedure of storage of information and documents constituting the registry system for securities' owners. Documents and information are to be transferred within 3 working days and are documented by the transfer and acceptance act.

Registrars and issuers are to bring their activity into compliance with the requirements of the Order within 1 year of the date of entry of the Order into force.

The Order entered into force on 13 May 2011.

Real Estate

On 31 March 2011, the Government adopted Resolution No. 227 amending its Resolution No. 234 "On the Measures to Encourage Residential and other Construction on Federally-Owned Land Plots," dated 3 April 2008.

Government Resolution No. 234 aims to encourage residential and other construction on federally-owned land plots. In particular, it prohibited, until 1 January 2012, the federal executive authorities from disposing of (i) certain federally-owned land plots; and (ii) federally-owned immovable property located thereon and allocated to federal unitary state enterprises. The Resolution now extends this prohibition term to 1 January 2016.

The Resolution entered into force on 12 April 2011.

Employment/ Foreign Citizens

Quotas for Foreigners' Work Permits and Invitations
On 22 March 2011 the Ministry of Public Health and Social Development ("MHSD") issued Orders No. 223n and No. 224n on the apportioning of the 2011 quotas for foreign citizens' work permits and invitations to enter Russia for employment among Russia's regions.

The Orders were registered with the Ministry of Justice on 25 April 2011.

Order No. 223n amends MHSD Order No. 1080n dated 8 December 2010. It amends the quota for foreign citizens' work permits for certain regions. The respective quota for Moscow Region is increased from 108,090 to 116,448 work permits. The quota for Moscow is decreased from 128,803 to 126,623. The national 2011 quota reserve (i.e., the number of work permits that may be issued in addition to the above quota) has been reduced to 505,798 work permits.

Order No. 224n amends MHSD Order No. 1081n dated 8 December 2010. It amends the quota for invitations to foreign citizens to enter Russia for employment purposes for certain Russian regions. In particular, the respective quota is increased for Moscow from 39,553 to 40,764 invitations and for Moscow Region – from 9,874 to 10,114 invitations. The national 2011 quota reserve (i.e., the number of invitations that may be issued in addition to the above quota) is reduced to 145,973 invitations.

The Orders entered into force on 17 May 2011.

Concessions

On 29 March 2011 the Government issued Resolution No. 222 amending the model concession agreement for utility infrastructure systems and other public utility facilities.

Following recent amendments to the Law on Concession Agreements aimed at simplifying the procedure for concluding concession agreements for utility infrastructure systems and other public utility facilities including water, heat, gas and power supply, water drainage and sewage disposal facilities, facilities for processing and disposal of domestic wastes, lighting of cities and countryside settlements and beautification of the territories and facilities for social and domestic purposes (discussed in our update for 21 June 21 - 4 July 2010), the Resolution amends respectively the model concession agreement for such facilities, approved by Government Resolution No. 748, dated 5 December 2006.

The Resolution entered into force on 19 April 2011.

Electricity

On 27 December 2010 the Government issued Resolution No. 1172 approving the new Rules of the wholesale power (capacity) market in Russia.

The Rules represent an updated version of previously effective Rules approved by Government Resolution No. 643, dated 24 October 2003. They establish a legal framework for the functioning of the wholesale power (capacity) market including regulation of power (capacity) trade on the wholesale market in Russia starting from 1 January 2011.

The Resolution entered into force on 13 April January 2011 (except for certain provisions) and invalidated Government Resolution No. 643, dated 24 October 2003, on the same matter.

Oil Export Duty

On 25 April 2011 the Government adopted Resolution No. 311 approving new rates of export customs duties on crude oil and crude-oil products exported beyond the borders of the Russian Federation to countries outside of the Customs Union.

The Resolution increased the rate of customs duty payable on crude oil and crude-oil products extracted from bituminous formations (TN VED 2709 00) exported outside of the Customs Union member countries (i.e., Russia, Belarus, Kazakhstan, Kyrgyzstan and Tajikistan). The new rate is set at USD 453,7 per ton (the previous rate was USD 423,7).

The new rate applies as of 1 May 2011.

Moscow Real Estate

On 23 March 2011, the Mayor of Moscow signed Moscow City Law No. 10 amending Article 20 of the Moscow City Law "On Land Use in Moscow."

The Law amends the procedure for calculating rent rates for land plots either owned by the City of Moscow or under state ownership which is not delimitated ("land plots").

Pursuant to the amendments, land rent rates can now be calculated not only on the basis of the land plot's cadastral value (as it was prior to the amendments), but also on the basis of its market value. In addition, the amendments allow the landlord (i.e., the City of Moscow) to change the rent rates unilaterally, on the basis of a notification, if the owner of real estate located on the leased land plot changes the designated purpose of the real estate (or its premises).

The Law entered into force on 30 April 2011.

First Reading

Subsoil
On 22 April 2011 the State Duma adopted in the first reading Draft Law No. 511219-5 amending the Law on Subsoil in relation to the identification of subsoil plots of local importance.

The Draft Law aims to establish criteria for identifying subsoil plots of local importance and define the procedure for granting such subsoil plots. It also suggests that these subsoil plots are to be granted for use by regional authorities with approval of the Federal Agency for Subsoil Use or its territorial bodies. Besides, the Draft Law seeks to define an exhaustive list of grounds for denying such approval.

On 22 April 2011 the State Duma adopted in the first reading Draft Law No. 511235-5 amending the Law on Subsoil on matters related to a change of boundaries of subsoil plots granted for use.

Subsoil legislation does not provide a possibility to change boundaries of a subsoil plot granted for use. At the same time, in certain cases a subsoil deposit may go beyond the boundaries of the granted subsoil plot, in particular, its underlying boundaries. In such instances, the right to extract natural resources beyond the established boundaries of a subsoil plot may only be awarded by tender or auction. To avoid administrative burdens, the Draft Law aims to allow changing subsoil plot boundaries depending on the location of the subsoil deposit. It also authorizes the Government to establish the respective procedure. To change the boundaries, the subsoil user is to make relevant payments the amount of which is yet to be established by the Government.

On 22 April 2011 the State Duma adopted in the first reading Draft Law No. 483465-5 regarding the powers of regional authorities in relation to commonly occurring natural resources ("common resources").

The Draft Law aims to amend the Law on Subsoil and the Law on the Organization of Legislative and Executive Authorities of Constituent Entities of the Russian Federation regarding the organization of geological study of subsoil plots containing common resources. In particular, the Draft Law seeks to delegate to regional bodies the power to grant subsoil use rights for geological study with the purpose of exploration and evaluation of subsoil deposits containing common resources. It also seeks to specify the procedure for preparing the lists of subsoil plots containing common resources.

In addition, the Draft Law aims to resolve the situations where a subsoil user holding a subsoil license for conducting geological study of subsoil plots with common resources also explores other natural resources. In such instance, the granting of subsoil use rights only possible for those natural resources of a discovered subsoil deposit in respect to which a geological study was conducted under the subsoil license.

The provisions of the Draft Laws will apply if adopted by the State Duma in three readings, approved by the Federation Council, signed by the President, and officially published.

Court Practice

Administrative Offences Code
On 17 February and 24 March 2011 the Presidium of the Supreme Commercial Court adopted Resolutions Nos. 11 and 28 on application of the Administrative Offences Code.

The Court clarified certain issues with respect to application of the Administrative Offences Code, including administrative offences in the intellectual property, real estate and antitrust areas.

In particular, the Court clarified that if construction, reconstruction or overhaul repair of a capital construction facility is carried out in the absence of the construction permit, the contractor or subcontractor may be subject to administrative liability along with the developer.

If a capital construction facility is operated in the absence of the permit to put such a facility into operation, the individual or legal entity which operates the facility, is subject to administrative liability. If the facility is operated by several individuals or legal entities simultaneously, all of them are subject to administrative liability, not just the one who started operating the facility.

Further, the Court also clarified that when determining whether a particular action should be qualified as unfair competition, the courts should consider not only the definition of unfair competition established by the Russian Competition Law, but also the provisions of article 10bis of the Paris Convention for the Protection of Industrial Property. According to the Convention, unfair competition is any act of competition that violates fair customs in industrial and trade cases.

The Resolutions will serve as a guideline for lower commercial courts when considering similar issues.

 

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