ANNOUNCEMENT 16 Jul 2015
In July 2015, the government of the Russian Federation introduced "special investment contracts" to improve business conditions.
NUMBER OF INTERVENTIONS
The Russian Government (2015). РАСПОРЯЖЕНИЕ ПРАВИТЕЛЬСТВА РФ ОТ 16 ИЮЛЯ 2015 Г. N 708 "О СПЕЦИАЛЬНЫХ ИНВЕСТИЦИОННЫХ КОНТРАКТАХ ДЛЯ ОТДЕЛЬНЫХ ОТРАСЛЕЙ ПРОМЫШЛЕННОСТИ". (Resolution of the Government of the Russian Federation of July 16, 2015 No. 708 "On Special Investment Contracts for Certain Industrial Sectors"). Available at http://pravo.gov.ru/proxy/ips/?docbody=&nd=102376302&rdk=0
The Russian government updated its treatment of special investment projects in 2015.
On 16 July 2015,the Government of the Russian Federation approved 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' (see related GTA Report No. 9354).
A Special Investment Contract ('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 constitutional 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 a 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.
The minimal SIC investment amount must be not less than 750 million RUB (ca. 13.24 million USD as per the USD/RUB exchange rate for 16 July 2015). Decree No. 708 does not set out specific incentives that can be provided to an investor. Incentives are to be determined and provided on a case by case basis to each investor, depending on the terms and conditions of the proposed investment. A commission decides within 60 days after submitting of a list of documents what preferences will be provided for the concrete case. There are no explicit limitations SIC to be combined with other mechanisms (for example, special economic zones and public procurement).
Assessment: Decree No. 708 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.