Foreign Investment and Strategic Investment Laws Amended
Legal update No 641
Bryan Cave Leighton Paisner (Russia) LLP advises that, on 12 June 2018, a Law1 (the “Law”) came into force amending primarily the Strategic Investment Law2 and the Foreign Investment Law but also a number of other legal acts3.
The key amendments are as follows:
The Strategic Investment Law provides an exhaustive list of foreign investors (this term was previously generally used as referred to in the Foreign Investment Law);
For applying Article 6 of the Foreign Investment Law, the concept of “a controlled person” was introduced and the updated term “foreign investor” given a narrower meaning;
The term “offshore company” previously specified in Article 2 of the Strategic Investment Law is replaced by “foreign investors not providing information”, meaning foreign legal entities or unincorporated foreign organisations that have not provided the Federal Antimonopoly Service (FAS) with information about their beneficiaries, beneficial owners and controlling persons (the “beneficiaries”)4.
This means that the bans established previously for offshore companies are now applicable to all foreign persons that have not disclosed information about their beneficiaries to the FAS of Russia. Under the Law, such information may be disclosed as prescribed by the Russian Government5 or by means of a request for transaction (action) clearance under part 6, Article 8 of the Strategic Investment Law;
An exception is made to the rule under which offshore companies (currently, “foreign investors not providing information”) not belonging to the same group were previously recognised as controlling persons if they were entitled, in total (directly or indirectly), to more than 50% of the votes attached to the shares in the capital of a strategic company6. Under the new amendments, this rule no longer applies to foreign investors holding shares in a public company as defined by Article 11 of the Russian Tax Code, unless international organisations and/or foreign states and/or organisations under their control act as such investors;
The FAS of Russia is now entitled to clarify how the Strategic Investment Law should be applied.
1Federal Law No. 122-FZ “On Amendments to Certain Legislative Acts of the Russian Federation with Respect to Updating the Definition of Foreign Investor”.
2Federal Law No. 57-FZ dated 29 April 2008 “On Foreign Investment in Companies of Strategic Importance for National Defence and Security” (the Strategic Investment Law) and Federal Law No. 160-FZ dated 09 July 1999 “On Foreign Investment in the Russian Federation” (the Foreign Investment Law).
3In particular, Law of the Russian Federation No. 2395-1 dated 21 February 1992 “On the Subsoil” and Federal Law No. 178-FZ dated 21 December 2001 “On Privatisation of State and Municipal Property”.
4These terms are used as referred to in Article 3 of Federal Law No. 115-FZ dated 07 August 2001 “On Combating Legalisation of Criminally Derived Proceeds (Money-laundering) and Financing of Terrorism”.
5As of the date of this letter, such procedure has not been approved.
6Part 2.1, Article 5 of the Strategic Investment Law.
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