Following the reform of the Arbitration Law, most existing arbitral institutions must re-register and obtain a permit from the government to administer disputes in Russia before November 1 2017. The International Commercial Arbitration Court at the Russian Chamber of Commerce and Industry has used this opportunity to enhance significantly its previous rules governing international and domestic arbitration.
One of the most praised changes introduced by the recent arbitration law reform concerns the arbitrability of so-called 'corporate disputes'. The Russian Arbitration Association (RAA) was the first Russian arbitral institution to develop and release for public consultation draft arbitration rules for corporate disputes. While some institutions have already followed suit and many more will do so, the RAA's draft rules provide a better idea of what arbitral proceedings in corporate disputes could look like.
The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards requires state courts to respect arbitration agreements and refer parties to arbitration if one of them so requests. While the convention is silent on when a party must make the request, national legislation usually fills this gap. From a Russian law perspective, a recent case demonstrates once again that the timing of raising jurisdictional objections before the state courts is of key importance.
Recent amendments to the Arbitrazh Procedural Code introduced a mandatory pre-litigation procedure in the hope that many cases will be resolved before the disputes escalate. Although it is unclear whether the new rules apply to the enforcement of arbitral awards, there are strong indications in favour of a conservative interpretation. Parties may want to play it safe and take steps to comply with the new pre-trial procedures.
A recent decision from the commercial bench of the Supreme Court has reopened the question of whether an agent must be specifically authorised to enter into an arbitration agreement or whether the general authority to conclude contracts on behalf of the principal is sufficient. It previously seemed to be settled court practice that no special authority was needed. However, the recent ruling makes the position less certain.
Banks in Russia could until recently increase interest rates unilaterally for both corporate and consumer loan agreements. In 2010 federal law was amended to prohibit banks from unilaterally increasing interest rates on consumer loans. However, there are no statutory restrictions on unilaterally increasing interest rates on corporate loans, and there are a number of unresolved issues that should soon be clarified in court practice.
Transactions of Russian joint stock companies and limited liability companies require the consent of the general meeting or the board of directors if they qualify as material or interested party transactions. As the non-observance of the relevant requirements may be grounds for contesting these types of transaction, they should be observed not only by shareholders and members of the corporate bodies of the respective companies, but also by persons that wish to enter into such transactions with these companies.
The Supreme Court recently clarified parties' right to terminate a contract unilaterally (ie, the 'right to unilateral refusal of performance' in Russian terminology) or amend a contractual obligation unilaterally. The court also clarified the requirements regarding the fulfilment of payment obligations, including with regard to bank transfers, currencies and interest in the event of a default, among other things.
Russian law continues to develop with respect to the disclosure of beneficial owners of Russian businesses. New provisions came into force at the end of 2016, which require all Russian legal entities to take reasonable and available steps to identify their beneficial owners and disclose them on request, among other things. For this purpose, the law expressly entitles a Russian legal entity to request information from its shareholders, as well as from other persons who in any way control the entity.
The statutory deadline for holding the annual general meeting of a Russian limited liability company (LLC) is April 30 2017. The meeting must approve the annual results of the LLC's activities – in particular, its annual financial statements as of December 31 2016 and its 2016 annual report. Violation of the deadline or any formal requirements may result in administrative fines. The deadline for holding the annual general meeting of a Russian joint stock company is June 30 2017.
In March 2015 and July 2016 amendments to the Civil Code were introduced regarding compensation for damages and contractual penalties. In March 2016 the Supreme Court provided its interpretation of the March 2015 amendments. Together, they should make damages claims easier to assert, clarify the limitations of liability, define the criteria for the reduction of penalties and establish contractual means of protecting creditors against loss and damages.
The conclusion of special investment contracts was made possible in 2015 by the Federal Law on Industrial Policy. Special investment contracts can form the basis of investment incentives to promote industrial development and are a useful tool for investors, as the responsible state authorities can grant extensive tax and customs relief and, potentially, necessary legislative amendments.
At the end of 2017, a number of amendments to the Tax Code came into force which significantly increased the scope of information and documents that Russian divisions of some international companies must submit to the tax authorities. Russian companies and foreign companies subject to taxation in Russia must now provide a notice of participation in an international group of companies and so-called 'country information'.
The legislature is in the process of adopting a number of tax benefits intended to stimulate the development of innovative companies and marquee investments in Russia. A new law has expanded the list of expenses that can be excluded from taxable profits. Further, recently passed draft bills have introduced a new investment tax deduction and determined the terms for enforcing the concessionary income tax rates available to investors implementing large investment projects in certain areas.
Article 54.1 of the Tax Code recently came into force. It introduces new rules and definitions regarding legitimate tax optimisation and aims to clarify what is considered legitimate optimisation and what is considered tax evasion. Further, the new rules require the tax authorities to use a less formal approach when assessing the reasonableness of a tax benefit and strive to understand the economic intent of the relevant taxpayer's operations.
Russia recently signed the Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting (BEPS), which was developed to implement Action 15 of the BEPS Plan. Ratification of the convention will be a serious step towards implementing the measures envisaged in the BEPS Plan, which will change the existing double tax treaty system and have a significant impact on the functioning of international groups of companies in Russia.
The Federal Tax Service recently issued a notification entitled On Identifying the Circumstances of an Unjustified Tax Benefit, which summarises the law enforcement practice associated with assessing the validity of a tax benefit in disputes relating to bad-faith contracting parties. The notification will contribute to the reduction of companies' tax risks relating to an assessment of the validity of their tax benefit when dealing with contracting parties.