The Ministry of Economic Development and Trade of Russia has released a Federal Draft Law to amend the Russian Civil Code and other regulations that are intended to develop project financing (the “Draft Law on Project Financing”).

Project financing includes the funding of construction, reconstruction and/or infrastructure operations, mining activities or any other object which is conducted via debt financing to be repaid primarily out of the proceeds from operating the object being financed.

The Draft Law on Project Financing proposes the following:

  • setting up a new structure and special-purpose business entity whose features may contain an exhaustive list of deals that it could effect for the purpose of implementing a project;
  • establishing provisions on inter-creditor agreements;
  • setting out the status of a pledge manager; and
  • stipulating provisions on the pledge of future property and property rights.

The authors of the Draft Law on Project Financing have indicated that the current regulations in the area of project financing are insufficient and fragmentary. This results in Russian sponsors and lenders having to use foreign law governed agreements to enter into project finance deals.

The Draft Law on Project Financing, if adopted, should create more efficient mechanisms that can be used to protect investments.

[Draft Federal Law “On Amending the Russian Civil Code and Other Laws of the Russian Federation (Specifically the Development of Project Financing)”, dated 15 March 2011, can be found in Russian at http://www.economy.gov.ru/minec/activity/sections/corpmanagment/doc20110315_02]