ANNOUNCED AS TEMPORARYNo
Public procurement localisation
Decree No. 1470 introduces a new article 1.1. concerning the notion "national treatment". It introduces a regime of national treatment with respect to the public procurement of goods for national defense and security orders on condition that they originate from the Member States of the Eurasian Economic Union. In contrast, it preserves the existing ban with respect to the access of other foreign countries to the public procurement of goods for national defense and security orders. An exception to this rule is only possible if the sought to be procured by public procurement state orders cannot be fullfilled by the Member States of the Eurasian Economic Union due to lack of production of these particular goods in their territory.
Furthermore, Decree No. 1470 specifies when a product can be considered to be produced on the territory of the Russian Federation. An important new rule that affects foreign commercial interests concerns specific foreign investments in Russia. Concretely, the creation or modernisation of production under a Special Investment Contract ("SIC") is recognised as locally produced in a time span of 5 years counted from the date of the signature of the SIC and in a time span of not more than 3 years counted from the start date of local production.
Legal background concerning the SIC concept:
The SIC notion was introduced on 16 July 2015 with Decree No. 708 “On special investment contracts for selected industries” under the general provisions of Federal Law No. 488-FZ of 31 December 2014 “On the industrial policy in the Russian Federation”. The SIC is a specific type of agreement that guarantees long-term incentives in Russia for investors that undertake to modernise existing industrial production or to create new production. The maximum duration of such a contract is up to ten years. The contractual parties are the Russian Government (respectively its regions and municipalities) and the investor.
Not every investor can be a SIC-investor. S/he must be approved by the Russian Government. The investor is defined as a juridical person or a sole trader who undertakes the obligation under the conditions of the SIC contract to create or modernise with own know-how and effort or by attracting of third parties industrial production on Russian territory.
A principal characteristic of this public-private partnership is non-participation of any budgetary funds. The Russian Government guarantees by means of SIC stable business conditions in terms of applicable legal regimes concerning SIC, and has the purpose to motivate the investor to create new production facilities on Russian territory. Hence, it is thought likely to reduce market and political risks.
An assessment of the impact of Decree No. 1470:
Decree No. 1470 forms part of the policies of the Russian Government aimed at creating a legal basis in the area of localisation of production on Russian territory and import substitution. Its realisation must enhance the achievement of the goals and indicators, set by Russian state industrial programmes in which framework SIC operate. Furthermore, it reinforces the existing policy of provision of a national treatment regime to the Member States of the Eurasian Economic Union.
A technical note:
Decree No. 1470 does not introduce changes in the affected HS codes that were specified initially in Decree No. 1224 of 24 December 2013. Hence, the latter was used for the identification of the affected HS codes for this new state intervention.
Decree No. 1470 entered into force on 1 January 2016.
⚑ Please report this page in case you detect an inaccuracy in its content.