FAS to ease foreign investment into Russia's wharves

19.02.2014

Policy and Regulatory Report

Russia’s competition authority, the Federal Antimonopoly Service (FAS), is set to make it easier for foreign companies to invest in the country’s stevedore companies, by further amending the rules on foreign investment in Russia, Head of Control over Foreign Investments Department at FAS Armen Khanan told PaRR.

FAS amendments to foreign investment law are expected to come into force in March or April 2014, said Khanan.

FAS is going to remove wharves from the natural monopolies registry, where many of them are currently listed, he said. The registry contains companies that the regulator considers to be natural monopolies in various sectors, including stevedores of strategic importance.

Under current law, deals involving companies listed in the registry automatically attract foreign investment scrutiny, meaning that parties must notify FAS and obtain clearance regardless of whether the deal triggers merger control thresholds.

FAS then assesses, within 30 days, whether foreign investors would not pose “threat to national security”.

But FAS decided to streamline its resources and examine closely only deals involving stevedore companies where they indeed dominate the relevant market, explained Khanan.

The authority has prepared amendments to foreign investment law and they already went through the first parliamentary reading. Further amendments were added after the first reading. Khanan noted that the period between the second and third reading is normally quite short and it is the second reading that is the decisive one.

Unlike the fourth antimonopoly package, which provoked vigorous opposition leading FAS to rework the package significantly and provide it for the first reading again, the amendments to foreign investment law are generally supported, said Khanan.

Aleksey Ulianov, co-chairman of the National Union for the protection of consumer rights who actively campaigns against amendments to competition law, agreed that foreign law amendments are unlikely to face disapproval. This was echoed by Andrey Neminuschiy, a lawyer at Goltsblat BLP, the Russian practice of Berwin Leighton Paisner LLP. The amendments primarily clarify existing rules, he said.

Both Russian and foreign investor have recently targeted Russian docks, said Denis Vorchik, a sector analyst from Uralsib Capital. For example, US Cargill bought a stake in a deepwater terminal Stroikomplekt in December 2013, he noted.

Several recent transactions involved stevedores that have been included in the natural monopolies registry, said Vorchik referring to Vanino port and First Container terminal.

Notably, many deals between Russian parties are regarded to be “foreign on paper” because they are executed through offshore companies, he added.

One of the largest deals reviewed by FAS in five years since the country’s foreign investment law came into force was a purchase of First Container Terminal by Global Ports.

Author of the article: Natalia Lapotko

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