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Digest 50

We are glad to present you the 50th issue of the St. Petersburg International Legal Forum Digest.

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“The primary task of all these innovations is to ultimately simplify the mechanisms that protect against breach of contract and to implement efficient contractual risk management practices that are currently successfully used by international and foreign businesses”

Vsevolod Baibak
Partner, Iusland Law Offices, Associate Professor at the Civil Law Department, National Research University “Higher School of Economics” (St. Petersburg)
Moderator of the session 1.6. Recovering of Contractual Damages in Arbitration Practice

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A little more than a year ago norms of contractual law vested in the Russian Federation Civil Code underwent a massive reform. In particular, the rules for the indemnification of damages incurred by breach of contract were significantly transformed. New instruments were introduced to the Russian law (agreement to compensate particular losses, or indemnity, precontractual liability). Standard practices to prove damages have also been revised. The primary task of all these innovations is to ultimately simplify the mechanisms that protect against breach of contract and to implement efficient contractual risk management practices that are currently successfully used by international and foreign businesses. The significance of the new rules is proved by the fact that the Plenum of the Supreme Court of the Russian Federation issued an extra document to provide relevant explanations.

The round table will cover such issues as forced performance of contract in kind or penalties imposed by court (astreinte), drafting agreements on remuneration of losses, standard practices to prove contractual losses and efficient implementation of precontractual liability instruments. The round table participants are expected to comment on the newest law enforcement practices and the explanations provided the Plenum of the Supreme Court of the Russian Federation.

The discussion will be of interest to consultants, lawyers, as well as lawyers, employed by companies that are facing contractual loss recovery challenges.

The round table will bring together professionals who were directly involved drafting the new norms of the Civil Code and members of the expert group responsible for drafting the executive resolution of the Supreme Court of the Russian Federation.

“An opinion exists that the Russian economy has hit rock bottom and the Russian market players have adapted to the new circumstances and became active again”

Maria Miroshnikova
Partner of Ivanyan and Partners Attorneys-at-Law
Moderator of the session 5.6. Establishing Joint Ventures in Russia: New Possibilities

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The Russian market has been affected by a range of adverse factors, including low oil prices, inflation, complex foreign policy situation, sanctions and debt financing shortage. An opinion exists that the Russian economy has hit rock bottom and the Russian market players have adapted to the new circumstances and became active again. However, the statistics, generally, shows the continuing outflow of investment from the Russian economy, withdrawal of foreign players from the Russian market and this negative trend is expected to persist in the short-term perspective.

Within the scope of our panel discussion we would like to consider how the complex investment background affects joint ventures, both new and existing. From that standpoint, how is the current situation in the Russian market different from last year’s? And how does the situation in Russia compare to global trends? Who decided to withdraw from the Russian market and who ventured on a new joint project? Do joint ventures recently established in Russia have any specific characteristics?

These are some of the issues we plan to address within the scope of discussion titled “Establishing Joint Ventures in Russia: New Possibilities”. In particular, the discussion will focus on:

  • Joint ventures a la russe and the difficulties the Russian market players may face when establishing joint ventures in Russia;
  • Prospects of cooperation between Russia and China and characteristics of joint venture projects involving the Chinese investors;
  • New instruments for structuring joint ventures established in Russia, focusing on whether the Russian corporate law, which has changed drastically in the recent years, offers new possibilities to JV participants;
  • Changes in regulatory sphere, in particular, the impact of the “4th antitrust package” amendments on establishment of joint ventures;
  • Challenges the foreign investors leaving the Russian market will face and specific character of implementation of the strategies of withdrawal from the Russian joint ventures.

Representatives of major financial and industrial companies, the direct investment fund and leading Russian and foreign legal firms will participate in our discussion. The discussion will be attended by a representative of the Federal Antitrust Service in charge of control over foreign investment in Russia.

We believe that our discussion will be of interest to the majority of direct investment market players and legal professionals.

“At a certain stage any large company expands into something bigger than a single entity and, thus, is inevitably bound to restructure into a set of legal entities”

Denis Novak
Vice-Director of the Department of the Economic Legislation, Ministry of Justice of the Russian Federation
Moderator of the session 1.3. Legal Regulation of Groups of Companies and Holding Structures

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The relevance of this round table devoted to legal regulation of groups of companies is justified by the fact that contemporary global economy cannot do without such major corporate economic entities, whereas the legislation should not ignore this fact. At a certain stage any large company expands into something bigger than a single entity and, thus, is inevitably bound to restructure into a set of legal entities. In this respect it is particularly important that law ensures successful management of the entire group of companies as an integral enterprise, on the one hand, and protects the rights of entities that are engaged into a legal relationship with subsidiary companies, on the other hand. At the same time, in Russia the focus of discussions is shifted towards the protection of shareholders’ rights, which is an important aspect, however, with all due respect, this aspect does not include a set of other urgent challenges in corporate legislation. Legislation must ensure a balance of rights both for investors and entities that perform business activities.

Traditionally, in Russia the most preferable approach is to overlook the fact that as economic entities businesses often imply a set of legal entities that interact in accordance with mechanisms of oversight and subordination or in accordance with relevant treaties; for the economy, however, these mechanisms are significantly different from the way independent entities of the civil turnover interact. The aim of the round table is, firstly, to raise awareness about this issue among the Russian participants; secondly, to learn best practices of legal regulation of groups of companies in different legal systems, disseminated by renowned European professors; and thirdly, to discuss issues of efficient corporate management and conflict resolution within groups of companies with Russian and foreign lawyers who posses ample hands-on experience. May I inform you that the Ministry of Justice of the Russian Federation is currently considering a relevant draft law to solve all the above-mentioned issues; therefore, one of the tasks for the round table is to set targets and to identify new dimensions for law-making efforts.

The round table includes two parts. The first part “In Search of the Best Model of Civil Legal Regulation of Groups of Companies – the Experience of Different Legal Systems” is devoted to cornerstone political and legal issues in holding management, such as: do groups of companies require any independent regulation; what are the challenges in the existing Russian legislation and what legal mechanisms implemented in different national jurisdictions are worth considering to solve these issues; what regulation practices are common for groups of companies in other countries and what are the differences? The participants of the discussion will address the following most relevant specific issues: finer points of subordinate company management, protecting the rights of shareholders of subordinate companies, recovering losses caused by daughter company managing bodies, how to conclude deals within holding companies and how to efficiently challenge them, etc.

In the first part of the round table the key speakers are members of the academia: Professor Pierre-Henri Conac (University of Luxembourg) and Professor Tobias Hans Troeger (The Goethe University of Frankfurt) will share European experience in managing groups of companies; may I also highlight the reports by John Demers (Vice President of The Boeing Company, USA) and Michael Bowes (Outer Temple Chambers, UK). The Russian experience will be presented by Aleksandr Kuznetsov (Ministry of Justice of the Russian Federation) and Irina Narysheva (KPMG).

The participants of the second part of the round table on “Building Up Effective Corporate Management and Conflict Resolution in Holding Structures” are primarily legal practitioners and representatives of the legal consulting sector; they are expected to address specific practical issues of corporate internal cooperation, the performance of managers and the board of directors in individual companies within a holding, as well as corporate culture and legal environment. The speakers will share their experience in implementing corporate procedures and in corporate conflict prevention and resolution by referring to specific examples of corporate conflict resolution through litigation.

Among the speakers on the list are Dmitriy Stepanov (Egorov Puginsky Afanasiev & Partners), Igor Kirman (Wachtell, Lipton, Rosen & Katz, USA), Denis Yurov (Delcredere), Polina Lebedeva (PJSC ROSBANK). The discussion will be co-moderated by Oxana Balayan (Hogan Lovells).

The round table should be of interest to a broad audience of colleagues who are concerned about corporate law – to both in-house lawyers of companies and representatives of legal consulting sector, as well as attorneys and members of the academia. We believe that the round table will be remarkable for both Russian participants of the Forum and our colleagues from other countries, because our initial vision was to make this round table a platform to disseminate best practices in legal regulation and corporate management.

“Growing energy consumption promises high returns on investments, whereas consistent governmental policies enhance the transparency of the Russian energy market making it friendlier for foreign investors”

Alexander Pakhomov
Member of the Management Board - General Counsel, JSC Inter RAO
Moderator of the session 5.12. Investment Prospects of Russian Energetics: National Legislation and International Experience

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As a permanent partner of the St. Petersburg International Legal Forum, PJSC “Inter RAO” is hosting a round table on “Investment Prospects of Russian Energetics: National Legislation and International Experience” within the framework of the VI SPBILF.

Energy is well-known as a key industry to the economy. It shapes the development of large regions, as well as individual countries. Fuel and energy sector is a contributor to national well-being and national budget, as well as a significant geopolitical driver to promote key economic entities in individual regions.

As a tool to boost national industrial and R&D capacities, investment policies are an indispensable ingredient of sustainable economic growth.

Amid current economic realities encouraging investment into Russian markets, including foreign investment, cannot be more relevant. Energy is among the top sectors in terms of investments.

Today foreign investors are expanding their presence in Russia thanks to the positive outlook for the transforming energy sector. Growing energy consumption promises high returns on investments, whereas consistent governmental policies enhance the transparency of the Russian energy market making it friendlier for foreign investors.

Remarkably, the Russian government does not subsidize the entire fuel and energy sector, which makes investment a significant contributor.

The forum will address aspects and principles of public-private partnership in the energy sector to establish an investment-friendly legal environment for the Russian economy.

Another important and interesting topic to address at the round table are legal regulatory issues for PPPs, from partnership project preparation to the conclusion, execution and termination of the PPP agreement, including the relevant powers of the government, as well as guarantees of rights and legal interests to parties to the agreement.

Other topics that should be covered at the round table include tax benefits and fiscal privileges for investors in the energy sector and individual legal regimes for specific economic zones and territories that demonstrate faster rates of social and economic development.

Moreover, guaranteed litigation in court together with stability of legislation in the host country are the top priority conditions for both Russian and foreign investors that determine their choices. Therefore, the round table will address specific investment disputes over relevant projects in the fuel and energy sector, as well as international dispute settlement practices.

The general attractiveness of the energy industry for Russian and foreign investors, existing restrictions and advantages are also worth discussing.

The relevancy of the topic is justified by the fact that in countries with unstable economies investment is the major source of finance in the energy sector, with industries and the balanced economy, largely depending on energy supply. After all, deficient financing of energy can inflict enormous damage on the country.

Importantly, the legal regime guaranteed by the host country in respect of foreign capital investments is one of the most crucial collaterals for foreign investors. Today stability of legislation and absence of administrative restrictions, out of a variety of applicable instruments, ensure transparency of such regimes to foreign investors in fuel and energy sectors and Russian economy in general.

Other potential drivers of investment in the Russian energy sectors include enhanced, or newly drafted, guidelines, standards and procedures that are crucial for successful implementation of existing regulations and strategic programs, efficient cooperation of relevant ministries, agencies, and governmental bodies, both on the national and local levels.

Meanwhile, the current situation and the outlook for the majority of enterprises in the fuel and energy sector depend on the efficient allocation of resources within various investment programs and projects in the situation of huge financial deficit.

Besides, in order to boost external investments inflow in Russian energy, another priority is to elaborate an investment mechanism allowing to reconcile contradictory interests of both the investors (fast and guaranteed return on investments) and the government (social security policies and the economic growth).

The relevance and significance of the above-mentioned issues, as well as the fact that many investment procedures in the fuel and energy sector are yet to be revised and solidified, shape the topic of the round table by channeling the discussion along the lines of contemporary capital investment practices in Russian fuel and energy sector.

Extra issues for discussion are related to the attractiveness of the Russian energy for investors in terms of existing rules and regulations, consistency of amendments, revised tax regimes and other guarantees for investors. The outlook for energy legislation, implementation of law and litigation practices requires consideration in this respect.

Although Russia is rich in energy resources, the forecast for alternative sources of energy is said to be positive. This is all the more important for regions that import fuel from other areas. It is therefore necessary to review the perspectives for investment in alternative energy and challenges down the road.

The agenda also embraces issues related to long-term bank loans, included ones with foreign banks, redesign and construction of existing and new energy facilities to apply innovative technologies and equipment, massive implementation of automatic control and monitoring systems in the energy sector.

The event will be of interest to public and private investors, Russian and international banks and foundations, energy companies and government bodies.

Among the round table participants are Sergey Esyakov, First Deputy Chairman, Committee of the State Duma of the Federal Assembly of the Russian Federation on Energy, Anastasiya Bondarenko, Head of the Legal Department, Ministry of Energy of the Russian Federation, Elena Sapozhnikova, Managing Director, United Capital Partners Advisory, as well as other high profile Russian and international experts in law and energy from government bodies and major Russian and international energy companies.

“Without exaggeration, nuclear power plants are the largest infrastructure projects that include both general issues common to all projects of the kind, and specific regulation, such as safety, management of nuclear waste and radioactive substances, civil liability for nuclear damage”

Andrey Popov
Director for Legal and Corporate Affairs and Property-related Issues - Director of the Department for Legal and Corporate Affairs, State Atomic Energy Corporation "Rosatom"
Moderator of the session 2.7. Peculiarities of Contracts for Implementation of Nuclear Power Projects

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What makes the topic of the round table relevant?

Large infrastructure projects are a relevant issue for all countries without exception. Implementation of such projects requires thorough legal supervision that involves an array of legislative aspects. Without exaggeration, nuclear power plants are the largest infrastructure projects that include both general issues common to all projects of the kind, and specific regulation, such as safety, management of nuclear waste and radioactive substances, civil liability for nuclear damage. The round table will address the most controversial issues in existing legislative regulation to ensure a well-balanced approach for all stakeholders.

What are the main topics to be discussed?

Our idea was to include the issues in the agenda that could be of interest to a broader audience, including those who lack first-hand knowledge in nuclear energy. Topics on the agenda cover several dimensions. Firstly, these are main gateways to project contracts and types of relevant contracts. Then come presentations about the body of such contracts, i.e. defining the subject of a contract, describing the facility to be constructed, intellectual property legislation and transfer of technology. Other issues on the agenda are related to decommissioning a nuclear plant, spent fuel and nuclear waste management, in particular. The relevance of these issues is justified by the fact that all the solutions about NPP decommissioning and spent fuel management must be at hand as early as the decision is made to construct an NPP.

In your opinion, who of the legal community could be strongly recommended to come to this round table?

We expect the round table to bring together professionals from various fields. The reason is that large infrastructure projects cover different issues that have a lot in common. Our round table should be of most interest to consultants, since legal supervision of foreign infrastructure projects, such as NPPs, at the stage of construction seems to be the job for high-caliber lawyers, as well as the most complicated and profitable segment of law as a business. Few law companies are able to demonstrate proficiency in this field, but all of them are apparently aspiring to gain it.

Who are the experts at your round table?

All the speakers are renowned professionals with ample experience. Among them are both in-house lawyers and high-profile international consultants. We believe that such a well-balanced compilation of speakers will yield a fruitful and exciting discussion.

“Different legal systems have different views of the range of disputes that are properly arbitrable (and the range of arbitrable disputes has recently widened in Russia)”

Michael Swainston QC
Barrister, QC, Brick Court Chambers
Moderator of the session 3.2. International Commercial Arbitration: Perspective and Reforms

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What determines the urgent character of the issues discussed at your roundtable?

Arbitration is acknowledged globally to be facing a number of challenges these days. To some extent it is a victim of its own success. There are regular complaints about cost and delays, perhaps because of high demand. The Lord Chief Justice of England recently lamented that too much arbitration is stifling development of the common law via published decisions, because fewer cases are going through the Courts. The fear is that this may hamper the evolution of international commercial law that all tribunals apply. At the same time, for some, the Courts are the perceived problem. Some systems of arbitration suffer because of the risk of interference posed by the courts of their seat. Further, and to disputed degrees, it is difficult to take some kinds of disputes into arbitration and out of the reach of courts. Different legal systems have different views of the range of disputes that are properly arbitrable (and the range of arbitrable disputes has recently widened in Russia). A very distinguished panel will present different perspectives from the major arbitral centres around the world on these and other challenges, and also, constructively, the panel members' proposed solutions. There will also be consideration of Russia's new legislative reforms in relation to arbitration, and an assessment of how arbitration in Russia will fare as a result.

What are the main issues to be brought up for consideration?

Current challenges, different international solutions and how new Russian arbitration laws will affect Russia's position in the international competition for the business of dispute resolution.

Whom could you recommend to attend your panel?

The session will suit lawyers involved in all aspects of arbitration, their clients and prospective clients and also policymakers. All have an interest in efficient and reliable dispute resolution.

Would you like to distinguish any speakers who are going to give speeches at your roundtable?

The speakers on the panel are all distinguished, and are closely involved with or have experience of the major arbitration systems in the world today. They are exceptionally qualified to assess current challenges, and to provide answers to them and also to assess the prospects for the Russian Federation's new arbitration initiative.

“We should hail the comprehensive efforts of the last years implemented both by individual states and the international community as a whole to combat cartels within both bilateral and multilateral framework”

Andrey Tenishev
Head of the Anti-Cartel Department, Federal Antimonopoly Service of the Russian Federation
Moderator of the session 2.3. Actual Issues of Antimonopoly Enforcement. International Legal Instruments to Combat Cartels

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What makes the subject of the round table relevant?

Since cartels inflict enormous harm on both consumers and manufacturers, anti-cartel policy is recognized as a top priority by antimonopoly authorities around the world. Today cartels expand far beyond single jurisdictions. Therefore, antimonopoly authorities in different countries face challenges in implementing successful investigation efforts, due to the absence of an efficient framework for interstate cooperation.

We should hail the comprehensive efforts of the last years implemented both by individual states and the international community as a whole to combat cartels within both bilateral and multilateral framework.

Thus, in an individual country cartels are a grievous breach of antimonopoly legislation and normally should bear heavy administrative or even criminal responsibility. However, a universal anti-cartel mechanism is lacking. Moreover, cartels are not a new challenge to cross-border markets. In his work “Cartels and Trusts” Professor Robert Liefmann, a famous German economist, referred to approximately 40 international cartels by 1897 and approximately a hundred of them by 1910. Individual experts estimate that by the beginning of the II World War there existed over 1200 international cartels that controlled up to one third of global trade turnover.

In my view, it is the high time to declare double standards of anti-cartel policies a legacy of the past, when authorities encourage domestic competition, but, on the contrary, are idle in case of international cartels. The key issue is when such policies will be eradicated and why some developed countries and multinational companies demonstrate disregard of common principles of market economy and competition that are the foundation of democracy. This issue requires both discussions and efficient action for solution.

Our preliminary international investigation is an evidence that the existing international anti-cartel legislation is indeed challenged.

A case in point is the breach of antimonopoly legislation on the market of trans-ocean container shipping between South-East Asia and Russia (St. Petersburg). The defendants were companies belonging to 10 different jurisdictions, including Russia, Asian and European countries. Geographically, the market stretched over 12 countries. The potential consequences of anti-competitive behavior could have had a global macroeconomic impact.

Without well-coordinated efforts of antimonopoly authorities in all countries involved, effective investigation and data collection on a global market is indeed a difficult task. The major obstacles for international cooperation to handle cartel investigations are:

· existing international conventions and treaties on legal aid regulate criminal and civil cases only, leaving beyond administrative cooperation practices between government bodies, in particular, breaches of anti-cartel legislation and their investigation;

· most of the existing bilateral and multilateral agreements between anti-monopoly bodies responsible for anti-cartel investigation are declarative and non-binding at the state level.

The adoption on the International Convention on Combating Cartels could be instrumental in establishing uniform policies for state signatories to handle most dangerous economic crimes, in introducing uniform and standard international terminology, as well as sanction policies against cartels.

The adoption and revision of the International Convention on Combating Cartels has been recognized as an imperative measure by experts in international law to fill the gaps in combating international cartels.

What are the main issues to be discussed?

· Relevant issues in international cooperation to combat cartels;

· Existing formats for international cooperation and cartel investigation;

· Perspectives to enhance international cooperation and development of international legal mechanisms to combat cartels.

In your opinion, who of the legal community could be strongly recommended to come to this round table?

The issues on the round table agenda should be of interest to scholars and experts in international competition law, attorneys, consultants, in-house lawyers, lawyers employed by Russian and international companies.

Who are the experts of the round table?

The speakers on the list represent competition authorities, public and community organizations:

· Andrey Tsarikovskiy, State-Secretary, Deputy Head of the Federal Antimonopoly Service of the Russian Federation;

· Nurlan Aldabergenov, Member of the Board, Minister in Сharge of Competition and Antitrust Regulation, Eurasian Economic Commission;

· John David James Davies, Head of Competition Division, Organization for Economic Co-Operation and Development;

· Theodor Thanner, President, Federal Austrian Competition Authority;

· Luisa Kharmandayan, Head of International Unit, Administrative Council for Economic Defense;

· Cecile Viton, Head of the Bureau for Commercial Law, Office for Civil Rights and Press, Ministry of Justice of France;

· Anna Numerova, Chairman of the General Council, Non-Commercial Partnership "Competition Support Association".

“The Convention provides definitions for a set of terms that are conceptually new for the Russian legislation (such as the rights of custody, the rights of access, child’s habitual residence) and stipulates new rules to identify the jurisdiction and applicable legislation”

Nataliya Trigubovich
Expert, Alexeev Private Law Research Centre under the President of the Russian Federation
Moderator of the session 1.5. International Parental Child Abduction: Practical Application of the 1980 Hague Convention

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What makes the subject of the round table relevant?

International exchange and cooperation inevitably lead to proliferation of various cross-border relationships and social bonds. This trend is particularly true for families. Mixed marriages are growing in number and so do divorces, regrettably; the number of families where parents live separately in different countries is increasing; therefore disputes arise regarding the child’s place of residence, his/her communication with the other separately residing parent and provision of parental care. These processes go hand in hand with an increasing number of child abductions by parents who failed to agree on the child’s place of residence, which results in the child’s relocation to a foreign state without the consent of the other parent.

The above-mentioned relations require specific international legislation taking into account their cross-border nature, as well as the imperative to protect children’s rights and interests.

The 1980 Hague Convention on the Civil Aspects of International Child Abduction (hereinafter referred to as “Convention”) provides such international regulation to protect children from wrongful removal or retention and ensures access and the prompt return of children to their country of habitual residence.

The Convention was concluded on October 25, 1980 at the Fourteenth Session of the Hague Conference on International Private Law, that was held in the Hague, and entered into force on December 1, 1983. The Convention is considered one of the most successful international documents developed under the aegis of the relevant international organization. Today 93 countries have joined the Convention. The international implementation has proved that the Convention is an efficient instrument that establishes procedures for relevant bodies in the signatory states to ensure protection of the rights of allegedly removed or retained children. Thanks to its clear and simple mechanisms the Convention has already proved instrumental in resolving thousands of cases of child abduction, as well as in preventing potential abductions.

Russia ratified the Convention on July 28, 2011. By now 49 countries have recognized Russia’s accession under their own domestic legislation.

In order to establish implementation mechanisms for the Convention, Russia adopted the Federal Law No. 126-FZ as of May 5, 2014 on “Amending in the Russian Federation Legislation in Respect of the Ratification of the Convention on the Civil Aspects of International Child Abduction ” to introduce relevant amendments in the Russian Federation Code of Civil Procedure, the Federal Law “On Enforcement Proceedings” and other legislation, that regulate the procedure of child search and return in case of his/her alleged removal or retention on the territory of the Russian Federation.

The Convention provides definitions for a set of terms that are conceptually new for the Russian legislation (such as the rights of custody, the rights of access, child’s habitual residence) and stipulates new rules to identify the jurisdiction and applicable legislation. These aspects challenge the practical implementation of the Convention and fuel heated debates. Nevertheless, Russia has gained two years of experience in implementing the Convention (since the country adopted the Federal Law No. 126-FZ) which seems worth reviewing.

What are the main issues to be discussed?

The round table agenda embraces the following issues:

1. main provisions and fundamental principles of the 1980 Hague Convention on the Civil Aspects of International Child Abduction;

2. bringing together the conceptual frameworks of the Russian legislation and the 1980 Hague Convention;

3. role of the Central Authority (experience of Russia and Finland);

4. the 1980 Hague Convention implementation and the first decisions of the Russian courts;

5. enforcement of the court ruling on the child return;

6. family mediation to resolve disputes on international child abduction.

The round table will include a presentation of the Academic and Practical Commentary to the 1980 Hague Convention on the Civil Aspects of International Child Abduction (ed. by O. Khazova and N. Trigubovich; Moscow: Statute, 2016), prepared and published by the Alexeev Private Law Research Centre under the President of the Russian Federation.

In your opinion, who of the legal community could be strongly recommended to come to this round table?

The round table should be of interest to judges, attorneys, bailiffs, representatives of guardianship and foster-care authorities, mediators, as well as to everyone who is concerned about the rights of parents and children and their protection.

Who are the experts of the round table?

The participants of the round table are Russian and international experts who represent the Hague Conference on International Private Law, the Central Authorities of the Convention, as well as attorneys. Among them are Christophe Bernasconi, Secretary General of the Hague Conference on Private International Law (the Netherlands), Irina Romanova, Department Deputy Director at the Ministry of Education and Science of the Russian Federation (Russia’s Central Authority), Merja Norros, Ministerial Counselor at the Ministry of Justice of Finland (Finland’s Central Authority), Marina Venalainen, Ministerial Counselor at the Ministry of Justice of Finland, Julie Losson, Attorney Adviser at the French Consulate in Moscow, Partner at Villard Cornec & Associés (France), Eli Ilya Gervits, President of the Russian-speaking Israeli Bar Association “Eli Ilya Gervits” (Israel).

“According to the Main Dimension of Russian Federation Tax Policy for 2016 and the planning period from 2017 to 2018, “in Russia such challenges are exacerbated by the recent sanctions and the mandate to mobilize resources to face the current economic environment”

Taliya Khabrieva
Director, Institute of Legislation and Comparative Law under the Government of the Russian Federation - Vice-President, Russian Academy of Sciences - Academician, Russian Academy of Sciences – Correspondent Member of the International Academy of Comparative Law - Doctor of Legal Sciences – Professor – Lawyer Emeritus of the Russian Federation - Member of the European Commission for Democracy through Law (the Venice Commission of the Council of Europe).
Moderator of the conference on “Financial Security of Russia: From Concept to New Legal Dimension”

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Global external challenges and threats, such as the frightening volatility of currency and financial markets, rapid development of financial technologies, increased mobility of capital and labour and fierce competition of tax regimes all urge us to intensively pursuit optimal and most effective ways to achieve financial stability and develop legal means to ensure financial security of the state. Together, these measures should provide an effective mechanism to counter the above indicated challenges and threats.

Speaking about safety of public finances, one of the challenges is lost tax revenue caused by the fact that tax payers are making full use of schemes to lower their tax liability, including foreign low-tax jurisdictions with beneficial taxation. According to the Main Dimension of Russian Federation Tax Policy for 2016 and the planning period from 2017 to 2018, “in Russia such challenges are exacerbated by the recent sanctions and the mandate to mobilize resources to face the current economic environment”. This prompts tax management bodies to step up close cooperation. The Russian federation represented by the Ministry of Finance and the Federal Tax Service is intensively implementing the OECD Action Plan on Base Erosion and Profit Shifting (BEPS (OECD/G20)), which was approved by the G-20 heads of states and governments in September 2013 during the Russian G-20 Presidency. Among other actions, this action plan stipulates measures to eradicate double tax exemption schemes.

Another dimensions for discussion is the balance between the following concepts – financial safety of the country in general (macrolevel) and financial safety of specific national tax-paying companies (microlevel). More and stronger efforts should be undertaken in this field to ensure a balance between public and private financial interests in a highly mobile external economic environment.

Rapid multilateral information exchange among tax bodies of different countries together with active participation of a larger number of countries that can pursuit different financial goals require implementation of relevant legal guarantees for Russian companies. The current standards of taxation transparency are still lagging behind the legislative support of the multilateral information exchange. In this respect, the information non-disclosure guarantees, that are crucial for businesses in terms of corporate, financial, and reputational risks and that are embedded into international treaties, have a declaratory character.

This is just one aspect that demonstrates the relevance of the topic on the agenda. The round table covers a broad range of issues related to financial interests of both businesses and the government. In particular, unlawful taxable income reduction, tax evasion and taxation consultancy services should be supplemented by a substantive discussion on such issues as financial sustainability of a country, financial risks insurance; financial transparency and combating legalization of illegal income (money laundering) and financing terrorism; trends in national payment system’s operation and development, as well as fraud using the tools of the national payment system.

As a fully-fledged member of international affairs, the Russian Federation pursues integral approaches to ensure financial safety, which is the reason why the round table is of interest to international and foreign experts. This is proved by the fact that foreign experts are among the speakers of the round table - Zlatko Knezevic, Member of the Venice Commission (Bosnia and Herzegovina), Vice-President of the Constitutional Court of Bosnia and Herzegovina, Gerard Marcou, Professor, Pantheon-Sorbonne University (France) and others.

“The key questions arising among stakeholders are the following: how will the new norms be applied by the national courts; whether the Russian jurisdiction for arbitration proceedings will become more attractive; will it be possible to establish a truly pro-arbitration policy and to provide independent and effective arbitration in Russia, demanded by the business?”

Vadim Chubarov
Vice President, Chamber of Commerce and Industry of the Russian Federation
Moderator of the session 3.1. Arbitration Reform: Will Russia Become More Comfortable Jurisdiction for Arbitration?

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On September 1, 2016 the Federal Law No. 382-FZ as of December 29, 2015 on “Arbitration (Arbitrage Litigation) in the Russian Federation” and the Federal Law No. 409-FZ as of December 29, 2015 on “Amendments to Individual Regulations of the Russian Federation and the Termination of Clause 3 Part 1 Article 6 of the Federal Law on “Self-Regulated Organizations” in Relation to the Introduction of the “Law on Arbitration (Arbitrage Litigation) in the Russian Federation”.

These laws were drafted to implement the instructions of Vladimir Putin, President of the Russian Federation, and Dmitry Medvedev, the Chairman of the Russian Federation Government.

The laws introduce significant changes in the field under consideration, in particular:

· the laws stipulate the establishment procedure for permanent arbitration institutions, as well government supervision of their operation with the right of liquidation;

· the laws set the procedure for foreign arbitration institutions on the territory of the Russian Federation;

· the arbitration procedure, both in Russia and internationally, is ultimately tailored to the international standards set out in the UNCITRAL Model Law on International Commercial Arbitration in its 2006 version;

· stricter requirements to arbitrators (arbitral tribunal);

· public courts acquire the authority to assist arbitration in such issues as appointment of arbitrators, their rejection or termination of their powers;

· elimination of the restriction for retired state court judges to staff arbitral tribunals;

· the preservation of the liberal approach in deciding whether a dispute is suitable for arbitration, in particular, specific types of corporate disputes and so many others are explicitly entitled to arbitration.

The key questions arising among stakeholders are the following: how will the new norms be applied by the national courts; whether the Russian jurisdiction for arbitration proceedings will become more attractive; will it be possible to establish a truly pro-arbitration policy and to provide independent and effective arbitration in Russia, demanded by the business?

The participants of the round table are welcome to address these and other issues.

To provide a comprehensive coverage of the arbitration reform in Russia the round table brings together different representatives of the legal professional community. All the speakers have ample expertise in law and specialize in general legal issues, as well as in arbitration, both on the in-house level and in commercial international arbitration.

The statements will be delivered by the experts who actively participated in drafting the new legislation on arbitration (arbitrage litigation); they are Aleksandra Usachiova, Vice-Director of the Department of the Economic Legislation, Ministry of Justice of the Russian Federation, Andrey Gorlenko, Deputy Chairman of the Committee on Budget and Taxation Policy, Russian Union of Industrialists and Entrepreneurs, and Aleksandr Muranov, Associate Professor of the Department of the International Private and Civil Law of the International Law Faculty, MGIMO University - Professor, Russian School of Private Law, as well as Wilfried Bergmann, Member of the Board, Petersburg Dialogue Russian-German Public Forum, Mark Friedman, representing the international law company Partner, Debevoise & Plimpton, and representatives of business community Vitaly Kisenko, Head of the Legal Department, Transneft, JSC, and Ruslan Ibragimov, Board Member – Vice President for Corporate and Legal Affairs, MobileTeleSystems PJSC - Executive Board Member, Russian Corporate Counsel Association.

I believe the discussion will be of interest to businesses, as well as a broad range of professionals in the field of arbitration, state court litigation, etc.

“The crisis of 2008–2009 was the starting point for reforms of the over-the-counter financial derivatives to enhance sustainability of the financial market”

Sergei Shvetsov
Central Bank First Deputy Governor
Moderator of the round table on “Centralized Clearance of Financial Derivatives Today: Issues, Challenges, Solutions. Russian and Global Experience”

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What makes the topic of the round table relevant?

The market, first and foremost, contributes to the relevance of centralized clearance of financial derivatives. The crisis of 2008–2009 was the starting point of over-the-counter financial derivatives reforms to enhance sustainability of the financial market. In 2009, for this reason, the G-20 heads of states and governments agreed on the general scope of the reform, in particular on centralized clearance of standard over-the-counter financial derivatives.

Within the framework of Russian membership in G-20, the Bank of Russia is implementing these agreements. Precisely, it is currently promoting the regulatory environment that will ensure efficient operation of central counteragents, the participation of central counteragents in clearance of standard over-the-counter financial derivatives, as well as risk minimization for financial derivatives that are not subject for central clearance.

What are the main topics to be discussed?

1. The Bank of Russia policies in central clearance of standard over-the-counter financial derivatives.

2. International experience of reforming the market of over-the-counter financial derivatives and central clearance practices.

3. Advantages of the central counteragent framework for the over-the-counter market of financial derivatives. Central counteragents as an efficient risk management mechanism.

4. The legal procedure for central clearance of deals.

5. The market of over-the-counter financial derivatives today: what hinders dynamic growth.

In your opinion, who of the legal community could be strongly recommended to come to this round table?

The issues related to centralized clearance of financial derivatives can be of interest to a broad audience of lawyers, including bank lawyers, law consultants, employed by both Russian and international companies providing services for financial markets, to legal counsels of companies that enter into financial derivatives to hedge risks, or are planning to do so, as well as to all lawyers who are concerned about financial markets.

Who are the experts of the round table?

Sergei Shvetsov, Central Bank First Deputy Governor, is expected to moderate the round table; Ekaterina Abasheeva (the Bank of Russia), Peter Malyshev (ReedSmith), and Alexander Smirnov (Moscow Stock Exchange) are also invited to participate in the discussion.

“There are both positive and negative examples of implementing PPP-based water projects in the practice of Russian water companies and their peers in foreign countries”

Marina Gassiy
Legal Support Director, SUE Vodokanal of St. Petersburg, Merited Lawyer of the Russian Federation
Speaker of the session "Models of the Organization of Regional and Local Governance: Best Management Practices for Economic Growth"

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Implementation of PPP-based water projects: success criteria and risk factors

Water supply and wastewater disposal in big cities are the important elements of public life related to ecology, sanitary welfare and comfortable living conditions of citizens.

Currently, Russia is faced with an urgent need to change its approach to organization of all activities in this sphere with a view to optimize water supply and wastewater disposal processes in the light of new technologies and, first of all, to raise finance for such changes.

When I joined Vodokanal St. Petersburg twenty-two years ago, the raising of private investments in the PPP format for projects related to operation or development of water systems was a growing trend all over the world. At that time, our Company was actively involved in cooperation with western, in particular, French, companies that steered such projects. Then, being the Company legal manager, I could gain an invaluable experience of liaison with such entities for promotion and implementation of PPP mechanisms. Today, a similar trend exists in Russia too. That is why discussion of this topic and analysis of extensive foreign experience as applied to the modern Russian reality are so important for the success of projects launched by our compatriots.

The public private partnership is a form of interaction between public and private entities for the purpose of achieving an important goal for the society. Indeed, it is a way to integrate public and private interests.

Concession is a classical form of PPP.

Concession agreement is a contract of transferring public-owned facilities (in the state or municipal ownership) to a private investor where the latter invests in modernization and then gets profit from commercial operation of the facilities.

The philosophy of concession is finding a balance between the state interest in the use of property for public purposes and the investor interest in getting profit. Such balance is a prerequisite for successful concession. Any concession agreement contains provisions for maintaining the balance. In my opinion, the success of concession (or any other PPP project) is guaranteed by the combination of the following components:

-stable business environment with established legal framework and business practices as well as favourable, predictable economic climate;

-efficient investors;

-effective legal mechanisms to defend public interests when a property is utilized under a concession contract.

Any disbalance of the concession participants’ interests leads to the failure of concession and losses for the participants. If any socially important facilities are transferred to concession, there is one more adversely affected party: the citizens using relevant infrastructure.

There are both positive and negative examples of implementing PPP-based water projects in the practice of Russian water companies and their peers in foreign countries. One negative example is the situation in Berlin at the turn of XX-XXI centuries where unjustified augmentation of tariffs by a private operator led to undue annual increase of water bills. Other examples are Paris where a similar situation necessitated remunicipalization of water and wastewater systems, and Great Britain where the policy of centralized water and wastewater systems privatization not only increased relevant bills for households but led to deterioration of the systems quality. The information on such cases can be found in publicly available sources. At the same time, I cannot but mention that Degremont, one of the leading French water companies, member of SUEZ ENVIRONNEMENT Group, is the author of the Water Treatment Handbook – a most popular publication among water companies. In 2005, our Company purchased the rights for the Handbook translation and publication in Russia, thus having reduced the shortage of sector-specific technical literature. So, speaking about the deficiencies of foreign PPP projects, by no means do we belittle technical or other accomplishments of those companies.

It should be noted that the countries where water and sewerage infrastructure had been in a poor condition or non-existing (Africa, South America) before the implementation of PPP projects, experienced significant improvements in this sphere, such as better water supply service quality and higher level of drinking water provision to households. However, the improvements were accompanied by a considerable increase of water bills.

I think that the above experience should be thoroughly scrutinized for Russian specialists to avoid the mistakes made by their foreign and national colleagues.

In my opinion, investment planning is the priority issue to be solved as regards the implementation of PPP projects for the water sector: a private investor entering into a concession agreement or any other similar contract sometimes lacks clear understanding of the physical condition of the water and wastewater facilities to be taken over and, therefore, cannot make an accurate estimation of investment needs. Manifestations of crisis in the national economy contribute to the problem by affecting the solvency of investors.

I would like to mention that when preparing to the presentation at VI Petersburg International Legal Forum we analyzed the publicly available information on the implementation of PPP projects both in Russia and in foreign countries, as well as examples of a reverse process: remunicipalization of water supply and sewerage systems. Hopefully, the format of the Forum will allow for a panel discussion of our conclusions with delegates of relevant states – if not now, then in the next year. I think that such discussion will be interesting and very important for future development of the PPP scheme in the Russian water sector.

Video-interview with V SPBILF's participants: Aleksandr Fedortsov, President, Court of the Eurasian Economic Union

Interview

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Leading experts in the spheres of law, economy and international relations, heads of world companies’ legal departments, members of international legal community have been interviewed by our journalist during the V SPBILF and shared their impressions on the Forum.

Find a video-interview in each issue of the Digest and enjoy viewing!



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