SROs in construction: what has changed?

26.06.2017

Legal Update No. 600

Goltsblat BLP would like to remind you of the significant developments in the laws on self-regulatory organisations (“SRO”) involved in construction.

1 July 20171 will see Federal Law No. 372-FZ dated 3 July 2016 “On Amending the Town-Planning Code of the Russian Federation and Certain Legislative Acts of the Russian Federation” (the “Law” ) come into force.

The Law will modify the system of construction SROs, introduce closer supervision over their activities and increase their liability for their members’ work. The following developments are introduced:

1. The requirement whereby only persons cleared by an SRO could perform works affecting safety of capital structures2 is removed. The crux is now who does the work, rather than what type of work is being done (as was the case before this Law was introduced). The Law states that SRO membership is required for engineering surveys to be conducted, design documentation developed or construction/ reconstruction /overhaul performed by:

(a) the developer, or

(b) a person holding a permit for the use of land or land plots for engineering surveys under the Russian Land Code3, or

(c) a contractor carrying out such work under an agreement with the above persons;

(d) a contractor carrying out such work under agreements with parties in charge of the operation of buildings, or with regional operators in charge of major overhauls of apartment blocks.

The Law provides expressly, that in this case subcontractors do not have to be SRO members beginning from 21 June 20174. Where a technical customer enters (on the developer's behalf) into an agreement for engineering surveys, development of design documentation or construction, the technical customer also must be a member of the relevant SRO.

2. Exemptions from the SRO membership requirement extend, inter alia, to:

  • carrying out work under a construction contract agreement where the contractor's obligations under the agreement do not exceed RUB 3 m;
  • work performed by state or municipal unitary enterprises under agreements with the state or local governments, and work performed under other contracts where authorities act as, or actually exercise control over, the customer and the contractor.

3. The provisions regulating SRO membership have been amended:

(a) A legal entity or individual entrepreneur may be a member in only one SRO of each type (previously, membership with several SROs of one and the same type was permissible).

By 1 December 2016, members of existing SROs should have notified the relevant SROs of their intention to maintain or terminate their membership.

(b) Persons involved in construction must be members of an SRO registered in the same Russian constituent entity as them.

An exemption is stipulated for foreign legal entities (who may select any SRO) and cases when there is no relevant SRO in the given constituent entity (in which case membership in a neighbouring constituent entity’s SRO is allowed).

4. A concept of specialist managers for engineering surveys, architectural design and construction has been introduced:

  • specialists are included in national specialist registers kept by relevant National SRO Associations;
  • a mandatory requirement for SRO members is to have specialists in their employment who are hired under employment contracts;
  • specialist job duties have been enshrined in law.

5. Additionally, the SROs will now be secondarily liable for reimbursement of damage caused by their members' failure to perform, or improper performance, under contractor agreements for engineering surveys, design documentation development or construction:

  • which were signed within the public procurement, or
  • other agreements which, under the Russian legislation, may only be concluded through tender.

If a part of an SRO membership, as set out by the law, declares their intention to enter into such agreements, the SRO must set up an additional compensation fund to provide for the relevant liabilities.

6. The procedure for the placement and use of compensation funds is elaborately regulated. SROs must bring their compensation funds into compliance with the new statutory requirements by 1 September 2017.

7. From 1 October 2017, SROs not meeting the new statutory requirements will be excluded from the state register of SROs. We recommend verify that current and planned contractors are members of active SROs and that construction SROs comply with the territorial principle.

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1 Except for certain provisions in effect since 4 July 2016.

2 The relevant work list was approved by Order No. 624 of the Russian Ministry for Regional Development dated 30 December 2009.

3 For engineering surveys.

4Federal Law No. 126-FZ dated 18.06.2016 “On Amendments to article 552 of the Town-Planning Code of the Russian Federation and article 33 of the Federal Law “On Introduction of the Town-Planning Code of the Russian Federation”.

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