Vassily Rudomino

The year 2023 was marked by the further strengthening of control over transactions involving the sale of Russian assets owned by “unfriendly” foreign entities, as well as over Russian strategic companies. As for antimonopoly regulation, after several years of discussions and revisions, the fifth antimonopoly package was adopted, and a number of precedent-setting cases were considered. Please see below for more details about the key developments and highlights of 2023. 1. Countersanctions The procedure has become clearer for obtaining approvals from the Subcommission of the Government Commission for Control over Foreign Investment (the “Subcommission”) for transactions (operations) pursuant to decrees concerning countersanctions: the consideration process has become more transparent, and approval criteria have been established that must be met in order to obtain a positive decision. When making decisions on transactions (operations), special attention is paid to financial issues in the context of the impact on the volatility of the domestic currency market, as well as to the candidacy of the buyer. At the same time, businesses that must be sold should be able to operate and develop successfully afterwards. 2. Control by the Russian President In 2023, Russian President Vladimir Putin adopted 34 decrees authorizing transactions (operations) in accordance with Decree No. 520 dated 5 August 2022 “On the Application of Special Economic Measures in the Financial and Fuel and Energy Sectors in Connection with the Unfriendly Actions of Certain Foreign States and International Organizations”. The assets that are to be acquired are mainly part of the fuel and energy sector and the oil and gas sector. As for large Russian assets of “unfriendly” foreign entities with significant influence on the relevant parts of the Russian economy, the instrument of introducing the interim administration regime established by the Russian president was actively used. This mechanism was introduced as a response to “unfriendly” states illegally depriving or restricting Russian entities of their ownership rights. 3. Foreign Investments in Strategic Companies Following amendments to Federal Law No. 57-FZ dated 29 April 2008 “On the Procedure for Foreign Investments in Companies of Strategic Importance for National Defence and State Security”, Russian citizens who have obtained a residence permit or other valid document confirming the right to permanent residence in a foreign state are now recognized as foreign investors. Now such individuals are also obliged to file an application for approval to establish control over a strategic company. In addition, clarifications were made about the consequences of concluding transactions without complying with the requirements of legislation on strategic investments. If the parties to a transaction had an intent to violate the law, the shares (participatory interests) or property of the strategic company, as well as income acquired as a result of such a transaction, may be recovered as the income of the Russian Federation. 4. Antitrust Investigations and Litigation In 2023, a number of precedent-setting antimonopoly cases were considered and challenged. In particular, construction companies (Koshelev-Project case) belonging to the same group were held liable for rigging bids. The companies challenged this decision by the antimonopoly authority by citing the existence of actual control. However, the courts did not accept this argument and ruled that immunity of control for participants in a cartel agreement cannot be applied. In addition, the courts upheld the decision of the antimonopoly service to find large metallurgical companies guilty of setting monopolistically high prices on the market for flat rolled steel products. 5. Developments in Antimonopoly Regulation The Fifth Antimonopoly Package was adopted to improve antimonopoly regulation in the context of the digital economy and to prevent and suppress the monopolization of digital markets. In particular, the Fifth Antimonopoly Package introduced the definition of “network effects”, expanded bans of monopolistic activities on digital markets, subject to certain conditions, established new threshold criteria for merger control clearance, expanded the institution of expert examinations, and introduced new mechanisms within the procedure of obtaining clearance.

On July 16, 2023 the President of the Russian Federation signed Decree 'On Amendments to the List of Movable and Immovable Property, Securities, Shares in the Authorized (share) Capital of Russian Legal Entities and Property Rights, in respect of which Interim Administration is introduced, approved by the Decree of the President of the Russian Federation dated April 25, 2023 No. 302' No. 520 (“Decree No. 520”)1. Decree No. 520 comes into force immediately as of the date of its publication. By Decree No. 520 shares in the Russian divisions of the brewing company Baltika Brewing Company LLC (“Baltika”) and Danone Russia (“Danone”) held by foreign companies were transferred under the interim administration of the Federal Agency for State Property Management (“Rosimushchestvo”). In April, control over Unipro and Fortum similarly changed (see for more details on news and practical implications of mechanism ). According to Decree No. 520, Rosimushchestvo receives into temporary management: 98.56% share in the charter capital of Baltika owned by Carlsberg Sverige Aktiebolag; 1.35% share in the charter capital of Baltika owned by Hoppy Union LLC; 0.09% share in the charter capital in Baltika owned by Carlsberg Deutschland GmbH about 83.3 billion ordinary shares of Danone owned by Produits Laitiers Frais Est Europe; 85,000 ordinary shares of Danone owned by Danone Trade LLC. Interim Administration mechanism means that Rosimushchestvo has all property rights to the assets placed under the Interim Administration. At the same time, Rosimushchestvo only operates and exploits the assets and has no right to dispose of them. In other words, the original shareholders will be temporarily deprived of the rights of possession and use over the affected assets but will keep the legal ownership title to them. Revenues received as a result of asset administration are used to compensate the expenses incurred during Interim Administration. Rosimushchestvo is also responsible for ensuring the inventory and safekeeping of the assets handed over under the Interim Administration. Interim Administration can only be terminated by a relevant act of the President of the Russian Federation. Although formally any assets under control of persons associated with “unfriendly” states can be targeted by the Interim Administration mechanism, the current application of this mechanism to four companies from the top 50 foreign companies playing significant role in the security of the state and economy in Russia indicates that this mechanism is likely to affect only some foreign businesses taking into account their potential impact on these areas. You can read the Decree by clicking here. In Russian only.

We would like to inform you that the Extract1 from the decision of the Sub-Commission No. 171/5 as of July 07, 2023 was published on July 12, 2023. In accordance with the Sub-Commission's decision, the following amendments are made to the conditions for carrying out transactions (operations) aimed at alienating securities, including shares, participatory interests (contributions) in the authorized (share) capital of Russian companies (“Assets”) by foreign persons associated with unfriendly foreign states or persons under the control of such foreign persons (“Unfriendly persons”), which should be fulfilled in order to obtain the Sub-Commission's approval: Voluntary contribution to the federal budget (“Exit tax”) must be paid within 3 months from the date of implementation (execution) of the transaction (operation); In case of acquisition of shares constituting the authorized capital of a public joint stock company, public offering of up to 20% of the acquired share, provided that: {{✓}}date of commencement of such offer may not exceed 1 year from the date of execution of the transaction (operation), and the term of such offer may not exceed 3 years from the date of commencement of such offer; {{✓}} in case of reorganization of a company in the form of merger with a public joint stock company - public offering of shares of the public joint stock company in the amount of up to 20% of the shares of the merged company, taking into account the exchange ratio of the shares of these companies in case of merger, within 3 years from the date of implementation (execution) of the transaction (operation). In case of termination of public status of a joint stock company or liquidation of such company as a result of implementation (execution) of a transaction (operation) - public offering of up to 20% of shares of a public joint stock company (newly established or as a result of obtaining public status of the joint stock company), with the term of obtaining public status of the joint stock company and implementation of such public offering not exceeding 3 years from the date of implementation (execution) of the transaction (operation). Establishment of KPIs for the acquirer and/or the acquired company, which should provide, inter alia, for the preservation of the technological potential and the main type of economic activity of such company, preservation of jobs and the fulfilment of obligations under contracts concluded by it with other entities, with a recommendation to the federal executive body to exercise control over the achievement of such indicators. Buy back of asset at the market value on the day of exercising such option, existence of economic benefit for the resident owner of the asset and limitation of the term of validity of the permit (as a general rule, not more than 2 years from the date of implementation (execution) of the initial transaction (operation))- for a transaction (operation) providing for the possibility of buy back of the asset. Transfer of funds in the course of transactions (operations) with unfriendly persons to 'C' type accounts, or settlement of transactions (operations) in RUB in the banking system of the Russian Federation without transfer of funds outside the Russian Federation, or in case of transfer of funds in the course of transactions (operations) with foreign persons to accounts of such persons opened in banks and other financial market organizations located outside the territory of the Russian Federation, the availability of installment payments. Presence of other approvals granted to the applicant provided for by the legislation of the Russian Federation, necessary for the implementation (execution) of the transaction (operation), the information on which is provided by the applicant. The extract also introduces a new condition for the payment of profits (dividends) to foreign creditors in cases established by counter-sanctions decrees of the Russian President, which supplements previously existing conditions that should be met to obtain the approval of the Sub-Commission: Fulfillment by the applicants of their obligations to achieve KPIs, confirmed by federal executive bodies (Bank of Russia). Separately, please note that the Extracts from the previous minutes of the Sub-Commission’s meetings No. 118/1 of December 22, 2022 and No. 143/4 of March 02, 2023 are no longer in force. You can read the Extract by clicking here.

We would like to inform you that today the President of the Russian Federation signed the Law dated April 28, 2023 No. 139-FZ significantly amending the Federal Law dated April 29, 2008 No. 57-FZ Federal Law “On Procedures for Foreign Investments in Companies having Strategic Importance for the National Security and Defense” (hereinafter – the “Strategic Investments Law”). The following amendments establish the consequences of transactions and actions made in violation of the requirements of the Strategic Investments Law: {{1.}} Transactions and actions made in violation of the requirements of the Strategic Investments Law entail the consequences of invalidity established by Clause 2 of Article 167 of the Civil Code of the Russian Federation. {{2.}} The court is entitled, if the intentional guilt of the parties is established, to recover to the federal budget: shares (participatory interest) that constitute the authorized capital of a strategic company, or property that belongs to the main production assets of a strategic company, as well as income received as a result of such a transaction (action). {{3.}} Moreover, a strategic company is also entitled to file a claim in a court against a foreign investor to recover losses in connection with the unfair exercise of the rights acquired by foreign investors as a result of transactions or actions performed in violation of the requirements of the Strategic Investments Law. Separately, the above amendments establish the fact that the citizens of the Russian Federation with a residence permit of a foreign state will be considered as foreign investors along with citizens of the Russian Federation with foreign citizenship. Such persons, having control over strategic company, who receive a residence permit or other valid document confirming the right to permanent residence in a foreign state, is required to file an application to the Governmental Commission for obtaining approval to establish control over a strategic company.

The “Law Firm Management Conference” was held at the InterContinental Hotel on 1 December. At the event, experts discussed topics such as partnership in law firms, “Old” and “New” players of the reemerged local legal market, changes on the legal market and a strategy for resolving operational issues. Vassily Rudomino, Senior Partner of ALRUD Law Firm and Head of Competition/Antitrust practice, acted as a moderator of session “New puzzles of partnerships in law firms” which featured the following speakers: Andrey Dontsov (Stonebridge Legal), Andrey Zelenin (Lidings), Konstantin Olefir (Orion Partners), and Nikolay Voznesenskiy (ALUMNI Partners). The session was held in a question/answer form, in which Vassily Rudomino aimed at finding out what difficulties and problems the speakers encountered when discussing the organization of the partnerships in their teams, what colleagues found most important or most problematic when forming the partnerships, how the experts see the further development or expansion of partnerships in the firms, how decisions will be made and what criteria will be used, and whether the experts plan to cultivate partners within the firm or to attract partners from the market. Historically the 'Law Firm Management Conference' offers a unique platform that unites lawyers from different regions of Russia and around the world in discussing issues faced by the legal business. This conference allows partners of law firms to exchange experience, learn about the current trends and make new business acquaintances.

On October 20th, ALRUD Law Firm held a webinar “2020 Opportunities and Challenges: Legal Encyclopedia of Russian Life”. During the webinar, ALRUD experts introduced the main trends of modern legal Russian life, by considering the legal consequences of the current crisis due to the pandemic, and discussing the key points, in legislation and in practice, relating to various fields of law and industry. In addition, the speakers presented typical problems and challenges of commercial contracts. Also, issues related to changes in work regimes and key aspects of HR digitalization were introduced. During the discussion, ALRUD experts described the current legal view on the data protection in relation to the pandemic and evaluated what to expect further on this issue. Speakers mentioned the trend towards greater control over business, both by the regulators and the public. At the same time, the range of impact of the pandemic, on changes in Russian legal proceedings, was detailed. In addition, new realities for leasing, construction and other transactions were identified. Among other things, ALRUD experts touched upon the legal aspect of taxation in Russia. In particular, the speakers specified new tax conditions for IT companies and described changes in some aspects in the Double Tax Treaties with Russia, which will come into force in 2021. All listeners of the webinar received answers to their questions from ALRUD experts: Magomed Hasanov, Partner of Dispute Resolution Practice and Vassily Rudomino, Partner of Antitrust Practice, contributed to the discussions during the webinar. Petrova Anastasia, Senior Consultant of Data Protection and Cybersecurity Practice, Egiazarova Margarita, Senior Consultant of Labor and Employment Practice, Akhundov Teymur, Senior Consultant of Corporate Practice, Boris Ostroukhov, Senior Consultant of Commercial Law Practice, and Stanislav Veselov, Senior Consultant of Real Estate Practice also shared their understanding the modern Russian legislation. Denis Becker, Consultant of Dispute Resolution Practice, and Sergey Artemiev, Consultant of Tax Practice, presented some legal changes in Russia, too. To apply for a video recording (in the English language), please click here.

Best Lawyers – one of the most authoritative international legal ratings – has published the results of the Russian legal market research 2021. The rating is based on the estimates of internationally recognized market players. This is not the first time that ALRUD has taken a leading position in key practices, and this year our experts have managed to expand their presence in the rating. Maxim Alekseyev, Senior Partner, is the winner of the Lawyer of the Year 2021 rating in the field of business administrative regulation. For the second year in a row, the labor practice team brings ALRUD the title of the Law Firm of the Year in Russia 2021. This year, Irina Anyukhina, Partner and Head of the Labor practice, becomes the winner of the Lawyer of the Year 2021 in the field of Labor law. Best Lawyers recommends ALRUD experts in the following fields of law: Arbitration and Mediation - Vassily Rudomino, Senior Partner, Magomed Gasanov and Sergey Petrachkov, Partners and Dmitry Kuptsov, Senior Associate Banking and Finance Law - Alexander Rymko, Partner Capital Markets Law - Vassily Rudomino, Senior Partner and Alexander Zharskiy, Partner Competition / Antitrust Law - Vassily Rudomino, Senior Partner, German Zakharov, Partner, Ruslana Karimova and Ksenia Tarkhova, Senior Associates, Roman Vedernikov, Associate Construction Law - Irina Anyukhina, Partner and Stanislav Veselov, Senior Associate Corporate Law - Maxim Alekseyev and Vassily Rudomino, Senior Partners, Alexander Zharskiy, Partner, Olga Pimanova and Oleg Ezhov, Of Counsels, Sergey Khanaev, Senior Associate, Dmitry Pashkov and Alexander Kleschev, Associates Corporate governance and Compliance - Alla Azmukhanova, Associate Criminal Defense - Alexander Mikhailov, Associate Information Technology Law - Irina Anyukhina, Maria Ostashenko and Anton Dzhuplin, Partners and Ksenia Erokhina, Senior Associate Insolvency and Reorganization Law - Vassily Rudomino, Senior Partner, Sergey Petrachkov and Alexander Zharskiy, Partners Intellectual Property Law - Irina Anyukhina and Maria Ostashenko, Partners and Ilya Khodakov, Associate Investment - Vassily Rudomino, Senior Partner Labor and Employment Law - Vassily Rudomino, Senior Partner, Irina Anyukhina, Partner, Olga Pimanova, Of Counsel, Margarita Egiazarova and Anastasia Petrova, Senior Associates Litigation - Vassily Rudomino, Senior Partner, Magomed Gasanov and Sergey Petrachkov, Partners, Boris Ostroukhov, Senior Associate, Denis Bekker, Associate Media Law - Irina Anyukhina and Maria Ostashenko, Partners Mergers and Acquisitions Law - Vassily Rudomino and Maxim Alekseyev, Senior Partners, Alexander Zharskiy and Andrey Zharskiy, Partners, Timur Akhundov, Senior Associate Privacy and Data Security Law - Irina Anyukhina, Partner Real Estate Law - Irina Anyukhina and Alexander Zharskiy, Partners and Aleksey Kalinkin, Associate Regulatory Practice - Maxim Alekseyev, Senior Partner and Dina Kravchenko, Associate Tax Law - Maxim Alekseyev, Senior Partner, Elena Novikova, Of Counsel, Sergey Artemiev, Associate Technology Law - Anton Dzhuplin, Partner Telecommunications Law - Irina Anyukhina and Maria Ostashenko, Partners Trusts and Estates - Kira Egorova, Of Counsel, Ekaterina Vasina, Senior Associate

The Association of International Petroleum Negotiators (AIPN) and ALRUD Law Firm held a seminar on urgent issues of applying the Law “On the procedure for making foreign investments in business entities, that are of strategic importance for ensuring the national defense and state security” to the transactions and projects in the Russia's oil and gas industry. Andrey Tsyganov, deputy head of FAS Russia, Vassily Rudomino, ALRUD Senior Partner, German Zakharov and Andrey Zharskiy, ALRUD partners, Ruslana Karimova, ALRUD Senior Associate, together with other representatives of the legal community and heads of legal services of major Russian and foreign oil and gas companies, took part in the seminar. During the seminar, Andrey Tsyganov spoke about the approaches of FAS Russia to analyzing the deals with foreign investments. The deputy head of the antimonopoly service explained the legal basis for reviewing the deals by FAS Russia, and commented in more detail on the mechanisms for control of foreign investment in strategic economic entities. He explained that the Strategic Investment Law sets certain restrictions upon foreign investors, liability and sanctions for non-compliance with the Law’s requirements, as well as the decision-making process related to the transactions’ review. Andrey Tsyganov also explained in more details the procedure for reviewing the filings by FAS Russia, and reported on the statistics of consideration of the applications in respect of strategic entities, which were submitted to FAS Russia from 2008 to date. In addition, the representative of FAS Russia dwelled, at length, on the oil and gas transactions reviewed by the Government Commission over the past 10 years. He also provided the statistics on the volume of foreign investment in production of fuel and energy natural resources in Russia. The deputy head of FAS Russia concluded his presentation with information about the planned release of the second, supplemented edition of the Commentary on the Strategic Investment Law. In the second part of the seminar, ALRUD experts and participants had a discussion on the most complex and controversial issues of the application of the strategic investment legislation faced by oil and gas companies, in their mergers and acquisitions, or in creating joint ventures in Russia, as well as ways to resolve a number of problematic issues in this area. In particular, the experts discussed the criteria for assigning the Russian entities to be classified as the ‘strategic’ ones, complex situations of emerging the foreign investors’ control rights in relation to the ‘subsoil strategic companies’, as well as procedural issues of information disclosure about beneficiaries of a foreign investor. It is very important for all AIPN members, and other business representatives, to understand the clear ‘rules of the game’ when planning the transactions in the oil and gas industry. Therefore, we are grateful to the antimonopoly service for its transparency and willingness to engage in direct dialogue with the business, even on the most difficult aspects of regulation, said German Zakharov, ALRUD Partner and the moderator of the session, after the seminar The intense interest of the oil and gas business to the topic of investments in strategic companies, demonstrates the need for further dialogue between the business and the regulator, and clarification of problematic issues that still often arise in practice, in the course of planning such deals. Having extensive experience in advising private and public investors on strategic investments (like China Gold, CEFC China Energy and others), ALRUD experts of Antitrust Practice and Energy, Natural Resources and Infrastructure Practice are ready to provide a full support to the clients on all complex issues of planning and receiving the clearance for the strategic investments in Russia.

Vassily Rudomino, Senior Partner, German Zakharov, Partner, Roman Vedernikov, Associate, and Daniil Lozovsky, Attorney, prepared a chapter on Russia for the 'Kartell Compliance' book. This was published by the German publishing house CF Müller, which specializes in professional literature for lawyers. The authors reviewed the current Russian antitrust legislation in the area of countering anti-competitive agreements, described responsibilities and investigation procedures in the event of breaches of legislation, and discussed finer points of compliance. Read more about the book: follow the link.

Vassily Rudomino, ALRUD Senior Partner, Ksenia Tarkhova and Ruslana Karimova, ALRUD Senior Associates, Roman Vedernikov, ALRUD Associate, and Anastasia Kayukova, ALRUD Attorney, once again became the authors of the chapter on Russia, for the seventh edition of the book ‘The Foreign Investment Review’, a publication of the Law Reviews. The Foreign Investment Review is a guide to the current legislation, regulations and practices in the field of foreign investment in key jurisdictions. The annual edition includes materials from leading experts, working for recognized law firms around the world. The Russian chapter addresses the specifics of investment climate, regulatory environment for foreign investments, and the main forms of investment and legal mechanisms for protecting the rights and legitimate interests of investors in Russia. The full text of the publication is available in English at the following link.