Amendments to legislation on controlling foreign investments in strategic enterprises
Pepeliaev Group advises that Federal Law No. 322-FZ dated 16 November 2011 “On amending article 6 of Federal Law ‘On foreign investments into the Russian Federation’ and Federal Law ‘On the procedure for making foreign investments in business entities of strategic importance for national defence and public safety’” came into force on 18 December 2011. The law lays down measures for easing control over foreign investments in strategic areas of the Russian economy.
In the area of extracting minerals that are vital to the national interest, the law states that companies will be treated as being controlled by a foreign investor if the investor has 25% of the votes attributable to voting shares (participatory interests) forming such companies’ issued capital, as opposed to the current 10% threshold. Consequently, foreign investors are now obliged to obtain approval for acquiring an interest of 25 percent or more of the votes in a company that is vital to the national interest and that is involved in extracting minerals of federal importance.
Under the amended law, transactions where the parties are administered by Russian owners shall not be controlled by the state. Transactions involving international financial organisations that are founded under international agreements to which Russia is a party or that have international agreements with the Russian Federation are also beyond the scope of state control. The list of such organisations is approved by the Russian Government.
Moreover, the following types of activities have been excluded from the list of operations that are classed as strategically important for the country’s defence and security:
- operation of radiation sources by companies of the civil sector for which this activity is not a core line of business;
- operations involving distribution and technical maintenance of encryption tools, as well as supply of services connected with data encryption, if performed by banks that no part of their issued capital is Russian-owned.
The amendments developed by the Russian Federal Antimonopoly Service are aimed at improving the procedure of examining applications from foreign investors.
Pepeliaev Group lawyers are ready to advise on applying the legislation with regard to foreign investments in business entities of strategic importance for national defence and public safety and represent the client in the course of obtaining approvals for transactions as required by foreign investments legislation.
[1] In accordance with article 3 of the Law, the document came into force in 30 days after the date of its official publication (the Law was published on the official website http://www.pravo.gov.ru on 17 November 2011).
For further information, please contact:
in Moscow – Elena Sokolovskaya, Head of group "Anti-Monopoly Regulation", at: (495) 967-0007 or by e-mail
in St Petersburg - Andrey Pekhovsky, Head of Corporate Practice (St. Petersburg), at (812) 640-60-10 or by e-mail;