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Arbitration

The Supreme Arbitrazh Court has issued Resolution 831/12, reaching a conclusion on the invalidity of alternative (asymmetrical) arbitral clauses. The resolution will have a significant impact on practice despite the fact that it does not completely resolve the issue of the validity of arbitration selection as a means of dispute resolution in alternative arbitral clauses.

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Aviation

The government has passed an order amending the customs tariffs for aircraft imported into Russia. Customs duties for aircraft with between 50 and 300 seats remain at the previous level of 20%. However, a 0% customs duty was introduced for certain cargo aircraft.

A new policy regarding the acceptance of commercial aircraft for registration and certification in Bermuda affects cross-border leases into Russia. At the request of the Russian Civil Aviation Authority (CAA), commercial aircraft over 10 years old that are offered for registration and certification in Bermuda by a Russian airline must first be accepted by the CAA.

When a foreign-owned aircraft is leased by a Russian airline, it is imported under the temporary import customs regime, which allows for the deferment of import duties and taxes. However, violation of the regime may result in a fine of up to 200% of the aircraft's customs value and the confiscation of the aircraft, despite the fact that the importing airline is not the owner. A recent case illustrates the risk for lessors.

The new Law on State Registration of Rights to Aircraft and Related Transactions provides for the establishment of a unified registry of rights to aircraft. Among other things, it includes a procedure for registration, details of the documentation required and possible grounds for suspension or refusal.

The Committee on the Improvement of Sustainable Economic Development has approved a list of core Russian companies - including six airlines - which are of strategic national importance. The committee's working group will review the airlines and prepare plans for their rehabilitation, but inclusion on the list is not a guarantee of financial support.

A recent resolution makes permanent the temporary 0% customs duty rate for imports of civil aircraft with over 300 passenger seats and a basic operating weight of over 15,000 kilograms. However, it remains to be seen whether airlines are prepared to commit to operating more large aircraft in a market poised for further downturn.

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Banking

Overview
Including: Credit organisations; Foreign participation; Banking activities; Lending; Legal and regulatory framework; Deposit insurance; Money laundering; Capitalisation; Financial statements and reporting standards.

One of the most recent and far-reaching legislative changes is the revision of pledge and mortgage laws, which significantly amends the procedure for a levy of execution against pledged and mortgaged property and increasing notary fees. Among other things, the new law restricts the use of the procedure for levying execution without recourse to the courts.

After a long road to adoption, the Law on the National Payment System focuses on the regulation of e-money and payment systems, as well as dealing with issues related to money transfers. Among other issues, it addresses the global nature of payment operations and seeks to localise certain payment system functions.

The Resolution on Certain Matters Relating to Enforcement of Legislation on Pledges reviews court practice in the application of pledge and mortgage legislation and examines a number of controversial issues. However, it does not cover all situations - the issue of providing security in favour of an agent, such as a bank in a syndicated lending arrangement, remains unresolved.

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Capital Markets

After a prolonged and controversial debate, Russia has finally adopted new legislation on market manipulation and insider trading. Legislation was required in order to ensure the recognition of Russian securities regulators by foreign regulators, and thus to enable the trading of Russian securities in foreign markets.

Bonds are widely used as a means of raising funds for corporate expansion and the state has encouraged the development of the exchange-traded bond market. However, since the final quarter of 2008 Russian bond issuers have increasingly been defaulting on their bonded loans, exposing uncertainties in bond market legislation and its application in practice.

New procedures for and principles of securities registration, which were recently introduced by the Federal Commission of the Russian Federation on the Securities Market, should simplify the securities issue registration procedure and clarify this area for companies and shareholders alike.

Commercial Property

Overview
Including: Forms of ownership and privatisation; Choosing a property; Land Register; Valuation and purchase price; Financing; Purchase agreements; Acquisition costs and taxes.

A bill to amend the Civil Code, which is under debate in the Duma, contains important provisions to improve the protection of good-faith legal activity in commercial property transactions. Among other things, the bill officially positions the Uniform State Register of Rights to Property and Legal Transactions Therewith as the focal point of legal protection and clarifies the limitation periods for certain property-related claims.

A new law introducing amendments to the Civil Code was enacted late last year. The changes, the majority of which will come into force in early March, are the first step of large-scale reform of the Civil Code. The amendments aim to strike a balance between the interests of all parties involved in property transactions and ease registration obligations.

Significant amendments to the Civil Code were recently published for consideration by the State Duma. The amendments provide for significant changes to the law governing real estate transactions, including with respect to registration of property, in rem rights, leases, mortgages and good-faith purchase protection.

Amendments have been made to certain laws aimed at resolving issues that have arisen in the course of the extension of Moscow's city limits. Amendments to property registration may now be entered into the register based on the resolutions of state government bodies and without the property owner's participation.

The Ministry of Economic Development and Trade has established a new procedure for receiving information from the Unified State Real Estate Register, making such data available online. A schedule of costs has been published, as well as new rules on access to information. The rollout of the new system to all parts of Russia is expected to be completed by the end of 2012.

A new resolution firmly establishes the principles of state policy on the use of land resources for the period from 2012 to 2017. Among other things, it seeks to streamline the procedures for land privatisation and clarify the powers of various authorities in overseeing both state and municipal land.

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Company & Commercial

A law containing several significant amendments to the Civil Code was recently signed into law by the president. Among other things, the new law regulates the delivery of 'legally significant notifications', imposes restrictions on the challenge of bad-faith transactions, introduces the concept of an irrevocable power of attorney and stipulates new requirements regarding the statute of limitations.

Recent months have seen several developments affecting company registration and organisation. Among other things, a bill has been introduced imposing stricter penalties on compa­nies located at an address other than that specified in the Unified State Register of Legal Entities, significant amendments relating to associations are now in force and a new form of non-profit legal entity has been proposed.

A bill to amend the Civil Code contains important provisions to improve the protection of good-faith legal activity. However, despite these proposed improvements, legal protection under Russian law still has many gaps with regard to commercial transactions. For this reason, an investigation of the rights of contracting parties through thorough due diligence is indispensable in major investment projects.

In considering a particular dispute, the presidium of the Supreme Arbitrazh Court has held that the parties to a paid services contract may specify the obligations of the service provider to be both the fulfilment of certain actions and the provision of particular deliverables connected with those actions (eg, contracts, applications or other documents) to the customer.

A shareholder in a Russian limited liability company (LLC) can ask the courts to exclude another shareholder if the latter is in severe violation of its duties or impedes the LLC's activities. The Supreme Arbitrazh Court is due to give guidance on certain key issues, including whether shareholders can be excluded for causing damage while acting in another capacity, and whether the size of a shareholding affects exclusion.

A new law amends the rights of creditors of limited liability companies in connection with a reduction in the company's charter capital. These rights are significantly restricted and are more consistent with the provisions of the Law on Joint Stock Companies. However, a potential creditor may now, at any time, request information from limited liability companies and joint stock companies on their net asset value.

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Competition

The Law on Protection of Competition clearly states that its provisions extend to both Russian and foreign legal entities. Moreover, they apply even to agreements and transactions between such entities that are concluded outside Russia. This application is limited to cases in which the agreements or transactions affect competition in Russia; however, this limitation is unclear and gives rise to certain issues.

Unlike in most countries, the concept of 'discrimination' in Russian competition law primarily refers to non-pricing conditions. However, although the concept might seem transparent and explicit at first glance, practical application has revealed a number of issues that distort this initial focus of the legal construction of discrimination. Companies should be aware of recent regulatory activity to ensure compliance with the law.

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Construction

The terms and conditions of engineering, procurement and construction (EPC) contracts – which are not yet widely used in Russia – are well suited to public-private partnership projects. However, standard forms for EPC contracts are poorly adapted to the Russian legal system. Therefore, an adaptation of the contract to bring it into line with Russian law will be required.

Agreements to terminate construction contracts should be concluded and signed in a form similar to that of the contract itself, unless otherwise provided. However, if the parties fail to reach an agreement, both are entitled to file a court claim for contract termination. The Civil Code provides explicit guidance regarding claims for termination due to the contractor's violation of specified timeframes for performing work.

Contractors often insist on transferring completed works to the client even where these are not fully compliant with the contractor's agreement or are of low quality. So what should the client do if the works are inconsistent with the requirements of the agreement? This update outlines the available options.

A draft law proposes the use of design documentation that has already been developed and used in a foreign state, subject to the particular seismic and climatic requirements in Russia. It is hoped that the use of such reapplied foreign design documentation will boost investment in Russia's construction sector.

Clients often fail to meet their obligations to contractors - for example, by failing to provide necessary materials or documentation. However, in a bid to meet deadlines, a contractor will often neither notify the client in writing of the latter's failure to perform its obligations, nor suspend the works. Certain steps will give a contractor a stronger basis on which to repudiate the agreement and seek compensation for losses in the event of a dispute.

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Corporate Immigration

A new bilateral agreement between the Russian and US governments will simplify visa procedures for nationals of both countries who seek a business, private, humanitarian or tourist visa. Among other things, the agreement provides that visas will be valid for up to three years and will allow a stay of up to six months at a time, as opposed to the current 90-day limit.

A new decree states that foreign nationals who wish to obtain work permits must pass an examination that covers the Russian language, Russian history and basic knowledge of Russian laws. Highly qualified specialists are exempt, but the requirement will particularly affect the representative offices of foreign companies, as they are ineligible to employ highly qualified specialists.

According to unofficial estimates, 90% of business travellers to Russia have business visas with an inviting party that has nothing to do with them or the purpose of their visit. How did this strange situation arise, and what should multinational corporations and others do to discover whether they are complying with the correct procedure?

The Federal Migration Service has fined foreign performers who travelled to Russia on tourist visas to play at a Moscow music festival. The decision clarifies that the key factor is the type of activity that an individual will carry out, not the period that he or she will remain in Russia. However, with no special visa category for foreign artists, the fines also create confusion for entertainers and event organisers.

The immigration authorities and other state bodies have recently made a number of announcements regarding immigration law. Among other things, the Federal Labour Service has approved quota distribution between the regions of Russia and the Ministry of Health and Social Development has issued a revised list of non-quota positions.

An employer that wishes to hire an employee who is classifiable as a foreign highly qualified specialist should be aware that certain specific obligations apply, particularly in terms of notifications to the tax authorities and the Federal Migration Service. Further requirements apply in the event of the premature termination of the labour agreement.

Corporate Tax

The Supreme Arbitrazh Court has held that it was lawful for a taxpayer's representatives to recover nearly Rb3 million in expenses from the authorities. However, the court's comments on the reasonableness of costs suggest that companies may need to explain why they chose their legal representative ahead of similar candidates. The case could lead to a larger number of less complex tax disputes being resolved out of court.

The Federal Arbitrazh Court of the Urals District recently ruled in a case which demonstrates a potential alternative to lengthy and difficult information-gathering processes in support of tax dispute claims. The case is particularly significant in view of the new protocol to the double taxation agreement between Russia and Cyprus.

A position letter from the Ministry of Finance at the end of 2011, setting out its view on beneficial ownership and the taxation of interest on Eurobonds, cast doubt on the tax status of a commonly used structure for Russian companies. After much debate, a draft law appears to have addressed the immediate concerns of investors, but identifying beneficial ownership remains as big an issue for the authorities as for taxpayers.

The Supreme Arbitrazh Court is due to decide a case involving value added tax on trade bonuses. It has previously held that such bonuses are normal retail practice and are closely connected with the main business purpose. However, if the court agrees with the tax authorities' position that such bonuses are payments for separate services, retailers could face serious problems and an increase in their tax burden.

The recently signed tax treaty between Russia and the United Arab Emirates is unusual because it is not based on the Organisation for Economic Cooperation and Development's Model Tax Convention. Its tax benefits will apply only between public entities in the two countries. However, it may prove fiscally advantageous for private entities as well.

The Supreme Arbitration Court recently published a ruling that prohibits taxpayers with foreign capital from deducting the interest they pay on loans "with a foreign element". Apart from the prospect of reducing foreign investments, this ruling may already entail the additional assessment of considerable taxes on Russian borrowers when tax audits take place.

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Derivatives

An amendment to the Civil Code has greatly enhanced the confidence of the financial markets when dealing with derivatives, but the wording of the provision still leaves room for doubt. Various derivatives transactions now in use are not covered by the amended article because either the participants or the characteristics of the transaction fall outside its scope.

E-commerce

Overview
Including: Electronic Signatures; Domain Name Registration; Cybersquatting; Other Intellectual Property Rights; Consumer Protection Legislation; Personal Information; Content Liability; Russian Taxation

The unauthorized use of trademarks in domain names is a growing problem. Owners of registered trademarks sometimes discover that a domain name identical or similar to their trademark is being used by a third party. In such cases it is important for the legal owner of the trademark to obtain the cancellation of the cybersquatter's registration and re-register the domain name.

Current regulation on the use of electronic signatures by banks is quite flexible - a wide variety of signatures are acceptable and there is no direct state involvement. However, a draft law that was issued in January only recognizes digital signatures that can be verified by cryptography and introduces a state-licensed certification centre. Banks will have to keep watch.

Since Russia lacks a clear legislative framework with regard to the registration of internet domain names, several cases have been heard concerning the infringement of trademarks and corporate names by domain names. However, the case law remains inconsistent.

Employment & Labour

The relevant authorities have become more diligent in their quest to ensure that employers comply with the provisions of labour protection legislation. They have the right to impose penalties and take other measures against employers who fail to comply with this legislation, especially if an employer tolerates dangerous or hazardous working conditions.

The Moscow government recently announced a decision to decrease the number of foreign nationals entitled to work in the city. This will affect companies that wish to employ non-Russian workers who are skilled but who do not fall into the class of 'highly-qualified specialists'.

Energy & Natural Resources

Overview
Including: Basic Legislative Framework; Subsurface Resources; Production Sharing Agreements; Upcoming Developments

If signed into law, new amendments to the Subsoil Law will dramatically change the political balance in Russia between the federal centre and the regions. The amendments will change the way in which mineral rights are granted in Russia and will streamline the relationship between subsoil users and the licensing authorities.

It seems that Russia has not given up on the idea of using production sharing agreements (PSAs) for the development of its natural resources and is now making some progress in establishing the legal framework under which PSAs will operate. The most recent initiatives concern the procedure for tax registration of PSA investors and operators.

Despite the enactment of amendments to the Production-Sharing Agreement (PSA) Law in 2003, which effectively killed off most future PSA projects, the Russian government issued a number of regulations in January 2004 clarifying the application of certain tax exemptions under the PSA regime.

A new federal law has changed both the circumstances in which Russia's production-sharing agreement (PSA) regime may be availed of and the procedure for awarding PSAs. Use of the PSA regime has been restricted to mineral deposits for which no investors are available to develop them under the regular licence/tax regime.

The US government views Russia as a vital alternative source of oil, and US government lending agencies have clearly been instructed to facilitate financing for Russian energy projects. However, opposition from Russian oil companies to foreign oil companies’ involvement in production sharing agreement (PSA) projects could stall the negotiation of new PSAs.

Facing major electricity shortages, Russia has embarked on important new efforts to attract capital to the sector, including restructuring the national utility, offers of shares in existing generators, tariff liberalization and licensing reform to permit new types of competitors. However, significant obstacles remain.

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Franchising

Overview
Including: No pre-franchise disclosure requirements; Minimum content of franchise agreement; Registration; Franchisor liability; Restrictions on termination rights; First refusal rights; Policing trademarks; Resale price maintenance, non-compete provisions and refusal to deal; No registration deadlines; Exclusive licence not equivalent to exclusive use; Choice of law.

Significant amendments to the Civil Code were recently published for consideration by the State Duma. Among other things, the draft amendments will make the registration of franchise agreements easier, while giving parties to franchise agreements greater legal protection during negotiations and with respect to payment obligations.

Russia's highest commercial court, the Supreme Arbitrazh Court, recently ruled that where a franchisor with a Russian-registered trademark grants a franchisee an exclusive licence to use that trademark within a defined territory, the exclusive licence does not, by itself, prohibit the franchisor from also using its trademark in that territory.

A number of business-friendly amendments to the Civil Code will come into force shortly, improving the franchising framework in Russia and simplifying market entry for non-Russian companies. However, despite these positive changes, two significant restrictions will remain in effect.

The Russian State Duma recently gave preliminary approval to a number of business-friendly amendments to the Civil Code regarding franchise agreements. These amendments, which will almost certainly become law, will align Russia more closely with the West with respect to franchise law and will simplify market entry for non-Russian companies intending to conduct franchise operations in Russia.

Although all franchise agreements in Russia must be registered, franchisors and franchisees can commence operations without registration and register their agreement with retroactive effect, sometimes years later. However, deferring registration can have serious disadvantages for a franchisor.

Information Technology

Overview
Including: Protection of Software and Databases; Chip Design; Licensing and Certification; Computer Crime; Electronic Russia 2002-2010

A growing number of Russian customers want to use state-of-the-art information protection in business communications, yet the leading companies in the IT industry face numerous problems due to an ambiguous legal framework. Valid certification of encryption software in the Russian Federation is particularly important if the product is to be sold to government or state bodies or used in conjunction with them.

Draft amendments to the law on digital signatures clear up inconsistencies with international practice and other domestic legislation, and establish an effective regulatory framework for digital signatures. They are expected to have a significant impact, accelerating trade and promoting the use of modern information technologies.

The IP rights of a foreign proprietor of licensed software imported into Russia are protected both by international conventions and by national legislation. Where a transfer of user rights to software involves the delivery of media containing the software, various Russian customs and tax law provisions must be observed.

The Russian Agency for Patents and Trademarks (Rospatent) has passed a new resolution approving regulations for the submission and registration of chip layout designs. Registration is optional, but applications may not be submitted in respect of chips that contain state secrets or other secrets protected by law.

The Federal Agency of Governmental Communications, Russia's principal licensing and certification authority in the area of state secrets and encryption technology, will be shut down on July 1 this year. Its functions will be shared between the Federal Security Service, the External Intelligence Service, and the newly created Service for Special Communications and Information.

Recent amendments have brought the Law on the Legal Protection of Computer Programs and Databases into compliance with the Russian Constitution and with the requirements of the Trade Related Aspects of Intellectual Property Rights agreement. They also set out the government's rights in cases where computer programs are created under governmental procurement.

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Insolvency & Restructuring

Creditors have been given an effective legal tool to enforce the liability of shareholders and chief executive officers, including foreign companies and citizens, for a Russian debtor's bankruptcy. Creditors can now recover their debts from such parties' property if the debtor's property is insufficient to satisfy the debts. However, pursuing any claim requires an understanding of Russian bankruptcy proceedings.

Insurance & Reinsurance

In 2010 the State Duma passed Federal Law 225-FZ on compulsory insurance for owners of hazardous objects. The provisions of the law that regulate the establishment of professional insurers' associations became effective upon the law's publication, while most of the remaining provisions came into force in 2012.

The plenum of the Supreme Court has approved a decree on consideration by the courts of civil cases involving consumer protection disputes. According to Article 2 of the decree, consumer protection legislation will apply to relationships arising from insurance contracts that are not regulated by specific laws, as well as to relationships arising from other financial services and mandatory health insurance.

Legislation issued in 2011 mandated Vnesheconombank, the bank for development and foreign economic affairs, to create a joint stock company to provide insurance services to exporters of Russian goods and investors outside Russia. Since then, the government has taken further steps towards developing export credit and investment insurance against entrepreneurial and political risks.

Having paid the indemnity for cargo loss or damage, insurance companies often face various problems in the course of recovery of subrogation claims. In particular, it is important to be aware that the applicable limitation period may be less than the general limitation period of three years under the Civil Code, and that this period may be further reduced by pre-action time limits.

Debates about the necessity and practicality of certain types of mandatory professional liability insurance are periodically rekindled in Russia. At present, the lack of judicial guidance from the courts has more to do with low demand than with an absence of problems in this area. However, there are reasons to be optimistic about the future of professional liabilty insurance in the Russian market

Defining the limits of a carrier's liability, especially in international transportation, is one of the most important aspects of structuring a relationship between the insured, the insurer and the carrier. However, all too often insufficient attention is paid to the question of how much compensation the insurer can subsequently recover from the carrier.

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Intellectual Property

Overview
Including: Regulatory environment; Patents; Trademarks, service marks and appellations of origin; Company names and trade names; Copyright and related rights; Topologies of integrated microcircuits; Trade secrets and know-how; Domain names.

The Russian courts have generally sustained claims for the cancellation of bad-faith trademark registrations where the trademarks in question were registered in respect of similar goods only. However, two precedent-setting decisions suggest that Russian court practice has taken a welcome turn and widened the scope of protection for trademark owners against bad-faith registrations and dilution of famous brands.

Rospatent, the Russian patent and trademark office, has published its new official fees on its website. The changes are due to Russia becoming a member of the World Trade Organisation and will remove the previous discriminatory higher fees for non-residents.

The Patent Prosecution Highway is an initiative which provides applicants with the means for accelerated patent prosecution procedures by sharing information between contracting national patent offices that are party to an agreement under the programme. It greatly improves the efficiency of the Russian patent office and can also improve the quality of the patents granted.

Patent statistics show an increase in the number of utility model patents obtained by foreign companies in Russia, but also an increase in disputes arising from such patents. Companies should be aware of the regime for invention and utility model patents, the peculiarities of Russian law in this area and the practicalities of securing strong protection.

The Supreme Arbitrazh Court has clarified the tests for holding hosting providers liable for IP rights infringement. Elaborating on principles that it had set out in a previous ruling, the court established a number of tests to be followed by courts when considering whether to impose liability.

Russia is increasingly becoming an important market for international business. However, certain categories of IP case, especially patent cases, have historically proved difficult for the regular court system. The president recently signed two laws, prepared and introduced by the Supreme Arbitrazh Court, in connection with the creation of the Intellectual Property Court.

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Litigation

Overview
The Supreme Arbitrazh Court has ruled on the application of Tax Code provisions on the rate of value-added tax applicable to services relating to imports. A panel of judges noted the lack of uniform practice across the circuits and the Constitutional Court is considering whether appeals may be brought to review cases on the issue - a worrying prospect for many companies.

As litigation risks in Russian courts are very high due to the lack of uniformity in court decisions, the question of legal costs allocation is particularly pressing. Careful consideration should therefore be given to the procedure for recovering the cost of legal representation in arbitrazh courts and its practical application.

One of the most significant new changes to the Civil Procedure Code is that a full appeal stage - allowing for the re-examination of evidence presented at first instance - has been introduced into litigation procedure. Previously, a court judgment could be appealed only if the ruling had been issued by a justice of the peace.

The Supreme Arbitrazh Court has drawn a line under a dispute about promissory notes that had dragged on since 2009. It corrected the approach of the lower courts, which had held that the only lawful basis for issuing a promissory note was, in essence, a loan relationship, and had stated that a promissory note may not be paid if it is issued to secure a third party's obligation.

The Supreme Arbitrazh Court has ruled on two issues that are likely to affect companies in Russia with foreign employees. The court specified whether social security payments should be made in respect of foreign employees who do not plan to reside in Russia permanently. It also ruled on the need for professional translations in dealings between the tax authorities and foreign taxpayers.

Although the Supreme Arbitrazh Court has previously issued clarifications on the timing aspects of the application of the Bankruptcy Law, a number of key issues continue to arise in practice. All parties with a potential connection to an insolvency procedure can learn the lessons of recent case law.

In a case in which additional value-added tax (VAT) had been assessed, the taxpayer unsuccessfully challenged the amount before the Supreme Arbitrazh Court, submitting evidence of tax deductions that exceeded the additional VAT. In another case, the court held that if a violation of tax legislation is identified during a tax audit, a taxpayer cannot avoid a fine by filing adjusted statements and paying tax arrears.

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Media & Entertainment

Russia has a well-established legal framework for advertising and promotion. The general 'truth in advertising' requirements are straightforward and compliance is simple. However, the regulations for contests and sweepstakes are strict and present more of a challenge for both Russian and foreign companies.

Projects & Procurement

Overview
Including: Securing the Project; Provision of Loans to Russian Borrowers; Governing Law of the Project Agreements; Government Approvals; Environmental Protection Matters; Rouble Risks; Political Risk Insurance

Making project financings in Russia more attractive for foreign lenders appears to be one of the reasons behind the liberalization of the mandatory currency conversion rules, although at present only export-oriented Russian companies with significant foreign currency revenues may benefit from them.

Favourable production sharing agreement legislation is generally recognized as one of the major conditions of attracting investment in Russia's economy. Although changes in this field have been slow and contradictory at times, recent developments described may be viewed as reassuring.

Existing legislation limits foreign ownership of shares in RAO UES, Russia's power monopoly, to 25% of all types of shares. In order to increase the market capitalization of the company and further the reform of the energy sector, a draft law proposes that these restrictions be eliminated.

The main principles governing the reform of the Russian electricity market have now been approved, while plans to restructure the gas industry and to sell off the goverment's stakes in certain coal companies are also underway. It is hoped that these initiatives will boost investment across the sector.

The government and RAO Unified Energy Systems (UES) are continuing with their efforts to restructure UES and sell off its assets. To attract western investors, the restructuring system should allow for the acquisition of UES's most profitable assets and operations, as well as protecting against potentially adverse changes in Russia.

Russia’s largest energy producer, Unified Energy Systems, is planning to restructure the energy industry by improving payment collection, regulating tariffs and breaking up the monopolistic structure. It is hoped that these measures will convince foreign lenders to invest the estimated $70 billion needed to replace assets and add new capacity.

Shipping & Transport

The government recently issued an order to establish the Administration of the Northern Sea Route. The creation of this state institution was one of the measures indicated in the recent Federal Law 132-FZ, which provides the foundation for the new regulation of issues relating to the Northern Sea Route. The new rules will facilitate better access to the route for the international shipping community.

Parallel registration of ships under the Russian flag was first made possible in 1999, when the current Merchant Shipping Code replaced the Soviet Merchant Shipping Code. The new code made it possible for ships that are permanently registered under flags of other countries to be temporarily transferred to the Russian flag with the permission of the central authority responsible for merchant shipping.

At the start of the 1990s the Soviet Union boasted one of the largest fleets in the world, but over the past 20 years Russia has lost a significant share of the market. A new law will encourage the registration of ships under the Russian flag and support the country's shipyards. It also signals significant opportunities for international shipping businesses and financial institutions.

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Trade & Customs

Recent amendments to the Russian Customs Code introduce a number of changes to the customs clearance mechanism. Among other things, the code replaces the licensing of customs-related services with a registration system, and introduces special customs procedures related to the transportation of vehicles, their spare parts and equipment.