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14 October 2011 saw the entry into force of the Russian Government’s Resolution No. 802 dated 30 September 2011 On approving the Rules for deactivating a capital construction facility (the “Rules”).
The Rules establish a procedure for deactivating a capital construction facility (a “Facility”), and contain particular features concerning facilities which are in federal ownership.
It should be noted that the legal regulation of relationships relating to the deactivation of facilities was previously set out in two provisions: on the obligation of a construction manager (developer) to deactivate a facility when work terminated or was suspended for a long period (article 52(4) of the Russian Town Planning Code) and on the construction manager’s obligation to reimburse to a contractor the latter’s expenses caused by the cessation of work and deactivation of construction (article 752 of the Russian Civil Code, subsequently referred to as the “Code”).
Also, since 20 May 2011, the Collected Rules 48.13330.2011 have been in force: “Organising construction. Updated version of the Construction Rules and Regulations 12-01-2004”, which contains a series of provisions on deactivation. However, this is applied on a voluntary basis (according to article 6 of Federal Law No. 384-FZ dated 30 December 2009 “Technical Regulations on the Safety of Buildings and Structures” and to Order No. 2079 dated 1 June 2010 of the Federal Agency for Technical Regulation and Metrology). Moreover, there are a series of legal and regulatory acts that govern the procedure for deactivating specific types of facility.
The Rules are the single regulatory act that governs the deactivation of capital construction facilities.
The key new aspects in the Rules are:
1) there is a definition of what deactivation entails: it is bringing a facility and construction site into a state which ensures that construction, equipment and materials are durable, stable and safe, as well as keeping the facility and construction site safe for the public and the environment;
2) it regulates in detail the order of actions of a developer (construction manager) and contractor after a decision is taken to deactivate the facility.
A decision to deactivate the facility and on the source of funds to pay the expenses associated with deactivating it, is taken, as a general rule, by the developer (construction manager) [1] if:
1) construction (reconstruction) is terminated; or
2) it is necessary to suspend construction (reconstruction) for a period of more than 6 months with the prospect of it being renewed in future.
On the basis of a decision that I taken to deactivate a facility, the developer (construction manager) will, together with the contractor, make an inventory of the work performed in the construction (reconstruction) of the facility with the aim of recording its actual state, and the presence of project documentation, structures, materials and equipment.
It is the developer (construction manager) that ensures that the technical documentation is prepared that is necessary for the deactivation work to be arranged and performed; moreover, it must, within 10 calendar days of the decision to deactivate the facility being taken notify the contractor of this, as well as the authority which issued the building (reconstruction) permit and also the state supervisory construction authority (if the construction (reconstruction) is subject to state construction supervision).
When construction resumes, the developer (construction manager) must, in good time but no later than 7 working days before construction (reconstruction) of the facility resumes, sent a notice to the above authorities that construction (reconstruction) of the facility has resumed.
In conclusion, we would highlight the following.
Article 752 of the Russian Civil Code establishes that a construction manager has an obligation to pay a contractor in full up to the point at which work is deactivated, as well as to reimburse expenses caused by the need to stop work and deactivate the construction, deducting the benefit the contractor obtained or may have obtained as a result of the work being terminated, if the facility is deactivated for reasons beyond the control of the parties. In certain cases, the courts, on the basis of this rule, have rejected a contractor’s claim for payment of work performed when there is a deactivation on the grounds that it was not shown that the reasons for the work being stopped or suspended were beyond the control of the parties (see, for example, the Resolution of the Federal Arbitration Court for the North West Region dated 30 January 2002 in case No. A56-4950/01). The Rules stipulate that a decision on the source of funds for paying expenses associated with the deactivation of the object is taken by the developer (construction manager). In this regard, parties to a construction contractor agreement would be advised to include terms in the contract to regulate the payment procedure relating to work carried out and the reimbursement of expenses associated with deactivation, as well as a contractor’s rights and construction manager obligations with regard to settlements associated with deactivation.
For further details, please contact:
in Moscow – Alexey Konevsky, Head of Land, Real Estate and Construction Practice, at (495) 967-00-07 or by a.konevsky@pgplaw.ru
in St Petersburg – Yrii Khalimovsky, Senior associate, at (812) 640-60-10 or by y.khalimovsky@pgplaw.ru; Elena Krestyantseva, Associate, at (812) 640-60-10 or by e.krestyantseva@pgplaw.ru
