Professional Documents
Culture Documents
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Philadelphia
February 26, 2009
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I. Recent Anti-Crisis Measures
Banking
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I. Recent Anti-Crisis Measures
Banking (cont’d)
Compensation of Losses
¾ The CBR has been granted the right to partially compensate commercial banks’ losses
resulting from operations on the interbank loan market, provided that such losses are
caused by a revocation of a counteragent bank’s license.
¾ The CBR apparently has entered into loss compensation agreements with several Russian
banks (e.g. ZAO Raiffeisen Bank, Sberbank, OAO MDM-Bank, VTB and ZAO Russian
Standard Bank).
The CBR’s Right to Demand Charter Capital Decreases in Russian Banks
¾ The CBR has established a procedure under which, as one of the measures to help to
prevent banks from going bankrupt, the CBR may demand that a bank decrease its charter
capital to the value of its own assets (capital) without the usual right of creditors to demand
early repayment of obligations (CBR Directive No. 2108-U, dated October 29, 2008;
Federal Law No. 175-FZ ‘On Additional Measures for Stabilization of the Banking System
for the Period until December 31, 2011’, dated October 27, 1008).
Refinancing Rate
¾ The CBR refinancing rate was increased from 11% to 13% starting from December 1, 2008
(CBR Directive No. 2135-U, dated November 28, 2008).
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I. Recent Anti-Crisis Measures
Banking (cont'd)
Reorganization of Banks
¾ Detailed requirements on the procedure for reorganization of credit institutions through
consolidation (sliyaniye), merger (prisoedineniye) and reorganization (preobrazovaniye)
have been introduced (by Federal Law No. 315-FZ, dated December 30, 2008) relating to
the disclosure by the bank of information on its reorganization by way of, inter alia,
notification to the CBR, and publication of the notice of reorganization on the bank’s
website in order to notify creditors, etc.
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I. Recent Anti-Crisis Measures
Industrial Support
Vnesheconombank’s Loans
¾ Until December 31, 2009, the State Corporation “Bank for Development and Foreign
Economic Affairs” (Vnesheconombank) may grant foreign currency loans to Russian
companies to refinance or repay loans from foreign lenders under loan/credit facility
agreements concluded before September 25, 2008. Vnesheconombank has already issued
resolutions to grant USD13.3 billion in loans, with a reported USD9.1 billion already
released (Federal Law No. 173-FZ, dated October 13, 2008).
¾ The CBR will deposit up to USD50 billion with Vnesheconombank for a one-year period in
order to provide funding under this program.
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I. Recent Anti-Crisis Measures
Industrial Support (cont'd)
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I. Recent Anti-Crisis Measures
Industrial Support (cont'd)
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I. Recent Anti-Crisis Measures
Industrial Support (cont'd)
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I. Recent Anti-Crisis Measures
Industrial Support (cont'd)
The following top-priority sectors will receive various types of support on the
national level:
¾ Oil industry
¾ Car manufacturing industry
¾ Agricultural engineering industry
¾ Military-industrial complex
¾ Small- and medium-sized businesses
¾ Air transportation
¾ Retail trade
¾ Agribusiness industry
¾ Infrastructure projects
The Profit Tax Rate
¾ The Profit Tax Rate was decreased from 24% to 20% as of January 1, 2009 (Federal Law
No. 224-FZ, dated November 26, 2008, Article 2).
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I. Recent Anti-Crisis Measures
Employment
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II. Out-of-Court Foreclosure and Other Related Positive Developments
Historical Background
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II. Out-of-Court Foreclosure and Other Related Positive Developments
Major Changes to Laws Governing Secured Transactions
Amended Legislation
At the end of 2008, a number of important statutes with some bearing on security were
amended in Russia, including:
¾ Civil Code
¾ Law “On Pledge”
¾ Law “On Mortgage (Pledge of Real Property)”
¾ Law "On Limited Liability Companies“
Main Changes
The amendments introduce the following main changes to the regime of security in
Russia:
¾ Broadening of Out-of-Court Foreclosure Procedures
¾ Methods for Sale of Assets in Out-of-Court Foreclosures
¾ Mandatory Valuation of Security for Out-of-Court Foreclosures
¾ Pledges of Participatory Interest in LLCs — Formalities
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II. Out-of-Court Foreclosure and Other Related Positive Developments
Major Changes to Laws Governing Secured Transactions (cont'd)
Now:
¾ pledgor and pledgee may enter into an out-of-court foreclosure agreement (via
the main pledge/mortgage agreement or a separate document, the ‘Enforcement
Agreement’) prior to an event of default; and
¾ executive signature (“исполнительная подпись”) of a notary may be applied for
in cases where the pledgor fails to discharge its obligations under the
Enforcement Agreement.
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II. Out-of-Court Foreclosure and Other Related Positive Developments
Major Changes to Laws Governing Secured Transactions (cont'd)
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II. Out-of-Court Foreclosure and Other Related Positive Developments
Major Changes to Laws Governing Secured Transactions (cont'd)
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II. Out-of-Court Foreclosure and Other Related Positive Developments
Major Changes to Laws Governing Secured Transactions (cont'd)
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II. Out-of-Court Foreclosure and Other Related Positive Developments
Major Changes to Laws Governing Secured Transactions (cont'd)
Note that since the recent amendments are untested it remains unclear whether the new
procedures will work in practice
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*Such examples are not deal specific and amendments to actual pledge/mortgage agreements should be 18
considered on a case by case basis
III. Strategic Sectors Law – Application and Effect on Investment
Introduction
Nine months ago, the long-awaited Strategic Sectors Law came into effect. This law
will have a significant impact on investment in Russia over the next few years and is
already having an impact on investment into and financing of strategic companies.
The Foreign Investment Law already contained a general principle that foreign
investment could be restricted for defense and national security, among other reasons.
However, the Strategic Sectors Law clarifies:
¾ to which (42) sectors the restrictions will apply;
¾ who will be considered “foreign” for the purposes of the law; and
¾ (to some extent) how the approval process will work going forward.
Further regulations will be needed to clarify certain requirements of the Strategic
Sectors Law.
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III. Strategic Sectors Law – Application and Effect on Investment
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III. Strategic Sectors Law – Application and Effect on Investment
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III. Strategic Sectors Law – Application and Effect on Investment
Approval Requirements
The transaction will need the preliminary approval of the Government Commission for
Control over Foreign Investments in the RF (“the Commission”).
Any transaction entered into in breach of the Strategic Sectors Law will be deemed
void and may be unwound as a result. Other measures, including limitation of voting
rights, could also be imposed.
In addition, the Strategic Sectors Law mandated that by November 7, 2008, foreign
investors were required to notify the Federal Antimonopoly Service (“FAS”) of each
interest in which they directly or indirectly hold more than 5% of the voting shares or
participation interest in a Strategic Company.
However, the order setting forth the notification procedure came into force after the
November 7 deadline had passed, and to date there is no officially published list of
Strategic Deposits.
As a result:
¾ Strategic Companies were unable to notify FAS before November 7 in accordance with
any established procedure; and
¾ some subsoil companies are not certain whether their deposits will be considered
strategic.
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III. Strategic Sectors Law – Application and Effect on Investment
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III. Strategic Sectors Law – Application and Effect on Investment
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III. Strategic Sectors Law – Application and Effect on Investment
Barrick Gold Limited, controlled by Barrick Gold (Canada) was apparently allowed to
acquire 30 percent of the additional shares in CJSC Fedorovo Resourcing, thereby
increasing its share from 50% to 80%. The founders of the CJSC Fedorovo Resources
are Barrick Gold and Open Joint Stock Company “Pana”.
On the same date, TNK BP’s application to increase its shareholding in OJSC
Verkhnechonskneftegaz from 68.5% to 73.98% was supposed to be considered.
However, the application was apparently put on hold until the next meeting of the
Commission (the date of which has not been announced yet).
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III. Strategic Sectors Law – Application and Effect on Investment
Universal Cargo Logistic Holding B.V. (Cyprus, Beneficiary: Mr. V.S. Lisin) was
apparently allowed to acquire 100% of the shares in OJSC Taganrog Ship-Repairing
Factory (Taganrogsky Sudoremontny Zavod).
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III. Strategic Sectors Law – Application and Effect on Investment
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Conclusion
The RF Government, the CBR and other state bodies have moved quickly to try and
support the Russian economy by implementing various measures, including measures
intended to fund banks, to protect important industries, and to give some comfort to
investors and workers.
The changes to the laws governing secured transactions are generally favourable,
however, it remains to be seen how they will work in practice.
At the same time, while the Strategic Sectors Law is a step in the right direction in
terms of making the system more transparent, the law is too broad and ambiguous and
is causing investors and banks to re-consider investments in such companies,
particularly subsoil companies, at a time when the RF Government should be trying to
attract such investors.
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