Amendments to federal laws

Federal Law No. 431-FZ dated 30 December 2015 “On Geodesics, Cartography and Spatial Data and on Amendments to Certain Legislative Acts of the Russian Federation”

The law under consideration enters into force on 1 January 2017 substituting the current Federal Law No. 209-FZ dated 26 December 1995 “On Geodesics and Cartography”.

The law stipulates that geodetic, levelling and gravity networks are put in place and use in order to procure geodetic and cartographic works. Such networks are created on the territory of the Russian Federation by locating points. Protection zones may be arranged to secure such points. The title holders to real estate property where the points of such networks are located shall notify the authorised agency of any damage or demolition of such points and shall ensure access to the points for the purposes of geodetic, repair and restoration works.

Federal Law No. 250-FZ dated 13 July 2015 “On Amendments to the Federal Law “On Protection of Competition” and Certain Legislative Acts of the Russian Federation”

On 10 January 2016 the amendments to Federal Law No. 135-FZ dated 26 July 2006 “On Protection of Competition”, Administrative Code of the Russian Federation and Federal Law No. 191-FZ dated 29 December 2004 “On Enactment of Town-Planning Code of the Russian Federation” entered into force.

The federal law empowers the Federal Anti-Monopoly Service with authorities to consider complaints on violations of the procedures included into the exhaustive lists of procedures in construction areas with respect to violations of terms and requests to complete the procedures not included into the lists, as well as complaints on actions and omissions of resource supplying companies. In its turn, the Administrative Code is supplemented with a new infringement - violation of the procedures included into the exhaustive lists of procedures in construction areas providing for executives’ liability to a fine up to 5,000 rubles or, in case of a repeated violation, a fine up to 50,000 rubles or a disqualification for 2 years.

The law stipulates the cases when the term to prepare and approve a site development plan may be extended. One of those cases is when draft site development plan is submitted to public hearing for consideration. At the moment St. Petersburg legislation does not provide for consideration of draft site development plan at the public hearing. Therewith, Moscow legislation provides for such procedure with respect to site development plans for certain residential territories.

Federal Law No. 6-FZ dated 31 January 2016 “On Ratification of the Agreement Between the Government of the Russian Federation and the Government of the People’s Republic of China on the Avoidance of Double Taxation and Prevention of Income Tax Evasion and Protocol Thereto, and the Protocol on Amendment of the Agreement Between the Government of the Russian Federation and the Government of the People’s Republic of China on the Avoidance of Double Taxation and Prevention of Income Tax Evasion”

The law ratifies the new agreement, intended to replace a similar international treaty that dates back to 1994. Among other things, the agreement envisions a more preferential arrangement for the taxation of dividends: 5% with equity in the source-company of no more than 25% and 10% in all other cases1. The regulation of corporate property tax remains unchanged compared to the previous version of the agreement.

The law entered into force on 11 February 2016, although the agreement will only gain practical application once China completes the required domestic procedures (RF FTS Letter No. ОА-4-17/2773 dated 19 February 2016).

Federal Law No. 18-FZ dated 15 February 2016 “On Amendment of the RF Arbitration Procedure Code and RF Administrative Court Procedure Code to the Extent Dealing with the Establishment of a Procedure for the Court Consideration of Cases on Challenging of Certain Acts”

In the furtherance of RF Constitutional Court Ruling No. 6-P dated 31 March 2015, a procedure has been adopted for challenging legislative clarifications published by executive-agency and deemed to be statutory in nature. According to the general rule, such clarifications can be challenged in the courts of general jurisdiction under the rules of the Administrative Court Procedure Code, with the exception of clarifications published in the field of IT/IP, which are challenged in the Intellectual Property (Copyright) Court.

Grounds for challenging, aside from the traditional violation by the disputed act of the claimant’s rights, now include the failure of such clarifications to comport with the actual meaning of the legislative provisions being clarified. It should be noted that the concept of “actual meaning” itself has not yet been explained by the courts of higher instance.

The law entered into force on 17 March 2016.

Federal Law No. 47-FZ dated 2 March 2016 “On Amendment of the RF Arbitration Procedure Code”

As of 1 June 2016, the filing of any claim in a dispute stemming from civil-law relations necessarily requires the preliminary observance of complaint procedures. Excepted from this requirement are corporate disputes, disputes involving the challenging of arbitration-tribunal decisions, etc. Statements of claim can only be filed in court upon the expiration of a 30-day period from the date on which the respective complaint was sent to the counterparty.

As concerns disputes stemming from public-law relations, complaint procedures continue to be mandated only in those cases explicitly established by applicable law (for instance, in the challenging of decisions by the tax authorities).

Moreover, the law adds simplified proceedings to the arbitration process that are similar to the writ proceedings found in civil procedural law.

Order of the Ministry of Culture of Russia No. 2877 dated 27 November 2015 “On the Procedure for the Transfer to the State of Archaeological Finds Discovered by Private Individuals and (or) Legal Entities as a Result of the Performance of the Survey, Design, Excavation, Construction, Reclamation and Commercial Work Cited in Article 30 of RF Federal Law No. 73-FZ dated 25 June 2002 “On the Cultural Heritage Sites (Historical and Cultural Landmarks) of the Peoples of the Russian Federation”, Forestry Work and Other Types of Works”

As of 23 January 2016, upon the discovery of an archaeological find2 in the course of the performance of excavation, construction and other types of works, the works must be suspended and the find must be reported to the regional agency on preservation of cultural heritage for the purposes of organizing its recovery and removal. The recovery and removal may be performed by a party licensed by the RF Ministry of Culture to engage in archaeological field works. If the find is confirmed to be devoid of historical-cultural value, it is returned to the party who had been performing the construction works, while the works themselves are resumed on the basis of the respective permit issued by the regional agency for the preservation of cultural heritage.

That said, the Order leaves open the question of the resumption of works should the find in fact bear the hallmarks of historical-cultural value.

Order of the Federal Tax Service of Russia No. MMV-7-14/41@ dated 28 January 2016

Pursuant to Art. 386 of the RF Tax Code, the RF Federal Tax Service has affirmed the form, presentation format and completion/filing procedure for statements reporting the participation by private individuals and public companies in foreign organizations (structures without an incorporated legal entity), in cases where such participation exceeds 5%.

The Order entered into force on 15 March 2016. As you may recall, the duty to file such a reporting statement extends to legal relations arising on or after 1 January 2015, so the corresponding statement for 2015 should have been sent by 30 March 2016, inclusively (together with the respective corporate property tax declaration).

Orders of the Ministry of Industry and Trade of Russia No. 303 and No. 304 dated 9 February 2016

Pursuant to the RF Federal Law “On Industrial Policy,” the RF Ministry of Industry and Trade has affirmed the procedure for administering registers of industrial (commercial) parks and their management companies, industrial clusters and their specialized organizations. Inclusion in such registers is a necessary step in obtaining the measures of state support applied within the scope of the aforementioned federal law3.

The orders entered into force on 26 March 2016.

Decree of the Government of Russia No. 29 dated 23 January 2016 “On Approval of Requirements to Ensuring Transport Safety of Transport Infrastructure Facilities by Transport Types at the Stage of Their Design and Construction and Requirements to Ensuring Transport Safety of Facilities (Buildings, Structures, Facilities) Other Than Transport Infrastructure and Located on the Land Plots Adjacent to Transport Infrastructure Facilities and Attributed to Protection Zones of Transport Lands in Accordance with Land Legislation of the Russian Federation, as well as On Amendments to the Regulation on Composition of Design Documentation Sections and Requirements to Their Contents”

The decree adopts requirements to ensuring transport safety of transport infrastructure facilities by transport types at the stage of their design and construction. In particular, the law provides that the design documentation being developed for construction of a transport infrastructure facility shall envisage certain safety design solutions.

The requirements to ensuring transport safety of facilities other than transport infrastructure and located on the land plots adjacent to transport infrastructure facilities and attributed to protection zones of transport lands provide for an obligation of title holders thereof to arrange for control, including video surveillance, over access of individuals and vehicles, freight delivery and dispatch in order to prevent explosive devices laying. The adopted requirements do not apply to facilities located in more than 200 m from borders of a land plot for siting transport infrastructure facility, as well as to residential premises.

The decree entered into force on 3 February 2016.

Decree of the Government of Russia No. 197 dated 16 March 2016 “On the Affirmation of Requirements Governing the Composition and Content of Territorial Arrangements for the Treatment of Waste, Including Solid Municipal Waste”

By virtue of the provisions of the RF Federal Law “On Production and Consumption Waste,” for the purposes of organizing and conducting activity involving the collection, transportation, processing, recycling, detoxification and landfilling of waste, the responsible executive agency at the level of the respective RF constituent entity affirms the territorial arrangement for waste treatment, including the treatment of solid municipal waste. The Decree, which entered into force on 26 March 2016, consolidates the exhaustive list of information and documents forming part of territorial waste-treatment arrangements.

Letter of the Ministry of Construction of Russia No. 7064-OG/08 dated 29 February 2016 “On the Clarification of Governmental Decree No. 1300 dated 03.12.2014 “On Approval of the List of Facility Types Eligible for Installation on Federally- or Municipally-Owned Land or Land Plots, Without Allotment of the Underlying Land or Establishment of Servitude””

In the Letter, the RF Ministry of Construction clarifies that communications lines and other facilities can be installed on land plots without the formalization of servitude or assignment of rights thereto in cases where such installations are temporary or auxiliary, just as no special construction permit is required for their construction pursuant to applicable RF constituent entity law. The rule does not apply to facilities built prior to 1 March 2015, insofar as these were constructed prior to the entry into force of RF Governmental Decree No. 1300.

Letter of the Ministry of Economic Development of Russia No. 6013-PK/D23i dated 4 March 2016 “On the Procedure for the State Registration of Rights to Installations Built with the Use of Horizontal-Directional Drilling Technology”

The formalization of rights to land plots by the owners of underlying subterranean pipeline infrastructure is not required, provided such infrastructure qualifies as linear objects. In this connection, the RF Ministry of Economic Development has indicated that the registration of title and other rights to such utility lines is conducted without the presentation of titling documents thereto. This conclusion also pertains to the underground sections of installations forming part of a wider system consisting of above- and below-ground elements (the registration of title to installations passing through numerous land plots only requires the presentation of titling documents with respect to the plots on which above-ground elements are located).

Information of the Federal Tax Service of Russia dated 4 March 2016

As of March 2016, the amount of payable land tax can be automatically calculated on the official RF FTS website4 according to the cadastral number of the respective land plot (other information is automatically retrieved from the Rosreestr electronic-database system).

Resolution of the Chamber of Commerce and Industry of Russia No. 173-14 dated 23 December 2015

The RF Chamber of Commerce and Industry has determined the procedure for witnessing insurmountable (force majeure) circumstances according to the terms of foreign-trade transactions and RF international agreements and the issuance of force majeure certificates.

Interestingly, according to the RF Chamber of Commerce and Industry, insurmountable (force majeure) circumstances do not include entrepreneurial risks, such as breach of contract by a debtor’s counterparty, the market unavailability of goods essential to the performance of contractual obligations, the debtor’s lack of financing, or even – and particularly crucial given the ongoing financial-and-economic situation – exchange-rate changes, devaluation of the national currency, and financial-economic crisis.

The RF Chamber of Commerce and Industry does not witness insurmountable (force majeure) circumstances occurring beyond the scope of contractual relations.

Regulatory acts in the development of Federal Law No. 218-FZ dated 13 July 2015 “On the State Registration of Real Estate”

Within the scope of preparations for the entry into force of the RF Federal Law “On the State Registration of Real Estate,” the RF Ministry of Economic Development has adopted a series of orders:

  • No. 860 dated 19 November 2015, which affirms the procedure for the administration and informational composition of the register of state title registrars. Rosreestr is responsible for the administration of the electronic, Russian-language version of the register. The register is entered both with general information about state title registrars (full name, employment status and tenure, date of successful exam completion and certification), as well as with details about decisions adopted on the suspension/denial of state cadastral registration and (or) state title registration, including those that have already entered into force and been declared void by the court. Information from the register of state title registrars is not public;
  • No. 877 dated 24 November 2015, which affirms the procedure for the cadastral division of RF territory and procedure for the assignment to real estate properties of cadastral numbers, registration numbers and boundary registration numbers. Following the Order’s entry into force, the principle of the cadastral division of RF territory into cadastral regions, cadastral districts and cadastral units will remain. Cadastral numbers assigned to real estate properties prior to the entry into force of the new procedure affirmed by the Order will remain the same (that said, the rules governing the assignment of cadastral numbers themselves have not changed and remain the same as those in place since 2011). The freshly-affirmed procedure envisions a new registration-number structure that makes it possible to establish the entity and territorial agency making the respective decision on state registration, as well as the number of registration actions made with real estate property;
  • No. 883 dated 26 November 2015, which, inter alia, establishes the procedure for filing applications for the state cadastral registration of real estate, state title registration and required documents attached thereto. The Order explicitly references the possibility of filing such applications according to the extraterritorial principle, i.e. with any title-registration authority or multifunctional center – irrespective of the physical location of a real estate property;
  • No. 920 dated 08 December 2015, which affirms the application forms for different types of Rosreestr services (cadastral registration, title registration, correction of technical errors) and the requirements to complete them;
  • No. 921 dated 08 December 2015, which affirms the form and informational composition of demarcation plans and requirements governing their preparation. Demarcation plans must now include the conclusion date and number of the respective agreement on the performance of cadastral works;
  • No. 943 dated 16 December 2015, which affirms, inter alia, the procedure for administration of the Unified State Register of Real Estate Property (EGRN). As you may recall, the EGRN will be administered in electronic form;
  • No. 953 dated 18 December 2015, which affirms the forms of a real estate property’s technical plan and declaration and requirements to complete them. The technical plan form will be identical for all types of real estate property, unlike the current differentiated forms;
  • No. 967 dated December 25, 2015, which affirms the procedure for collecting and refunding fees for providing data contained in EGRN. As a general rule the payment shall be made after filing request for providing data contained in EGRN based on a unique payment identifier obtained by an applicant. The payment shall be made within 7 calendar days;
  • No. 975 dated 25 December 2015, which affirms the forms of EGRN excerpts (excerpt about a particular real estate property; excerpt about the property title-holder’s adjudicated legal incompetence/limited legal competence; excerpt about a property’s cadastral value; excerpt about the contents of titling documents; except about registered shared-construction participation agreements). Please note that EGRN excerpts concerning real estate property will now simultaneously contain information about the property parameters entered in the real estate cadastre and information on registered property rights.

The orders enter into force at the same time as the RF Federal Law “On the State Registration of Real Estate” – on 1 January 2017.

Letter of the Federal Tax Service of Russia dated 21 January 2016 № BS-4-11/697 “On Calculation of Corporate Property Tax with respect to Residential Buildings and Premises”

Federal Tax Service has clarified the taxation procedure with respect to residential buildings and premises (“residential objects”) when the ownership title is registered with the developer.
The residential objects registered in the State Real Estate Cadastre and recorded on the firm's balance sheet as goods or finished products are taxed at their cadastral value up to registration of title transfer to a buyer.

Amendments to the laws of St. Petersburg and Leningrad region

Law of St. Petersburg No. 67-7 dated 18 February 2016 “On Amendment of the St. Petersburg Law “On Strategic Investment Projects, Strategic Investors and Strategic Partners in St. Petersburg””

The list of projects eligible for the assignment of strategic-investment status5 has been supplemented with projects involving the development of hotels with investments of at least RUB 1.5 bln.

The law entered into force on 1 March 2016.

Law of St. Petersburg No. 69-8 dated 18 February 2016 “On Amendment of the St. Petersburg Law “On Urban-Development Activity in St. Petersburg””

As of 1 March 2016, it is no longer required in St. Petersburg to obtain a building permit with respect to such facilities as ETL with a voltage rating of up to 110 kV; transformer substations and distribution points with a voltage of 20/10/6/0.4 kV; gas pipelines with a pressure of up to 1.2 MPa; underground heating networks, water mains and sewerage networks of all types, with the exception of extremely-hazardous, technically-complex and uniquely-configured facilities; gasline-inlets, connecting gas-lines and thermal inlets, including thermal points and heat chambers, water-main and sewerage connections.

Law of the Leningrad Region No. 1-oz dated 11 February 2016 “On the Criteria That Must Be Satisfied by Social-Cultural Facilities, Municipal Facilities and Major Investment Projects Whose Installation (Implementation) Entails the Provision of Land Plots Under Lease Without Tender”

Pursuant to the RF Land Code, land plots owned or controlled by Leningrad Region can be provided without tender for the construction of social-cultural facilities or municipal facilities, or for the implementation of major investment projects, provided such facilities or projects are envisioned by the region’s strategic-planning documents or territorial arrangement for the treatment of waste.

Moreover, the criteria according to which such projects are classified as major investment projects have been established. Recognized as such are projects involving the construction of industrial (commercial) parks, projects involving the construction of residential buildings erected for the purposes of emergency-housing resettlement, and investment projects with financing of at least RUB 300 mln (in certain districts – RUB 50 mln) in Leningrad Region’s priority areas of investment activity: production and manufacturing, warehousing, hospitality, publishing, water transport, etc.6

The law entered into force on 15 February 2016.

Order of the Leningrad Regional Committee for State-Property Management No. 2 dated 11 January 2016 “On Establishment of the Land Plot’s Permitted Use Coefficient”

New coefficients have been established for use in the determination of lease fees for land plots owned or controlled by Leningrad Region that can be provided without tender. The coefficients became applicable as of 11 January 2016.

Among other things, the Order envisions the doubling of coefficients in cases of the failure to meet the contractual deadline for design and survey works or construction works – irrespective of whether or not this deadline is extended, as well as in cases of failure to obtain the required building permit by the end of the first year of lease.

Information of the St. Petersburg Committee for Urban-Development and Architecture (KGA) dated 10 February 2016

The official KGA website has published the composition and form of materials that must be submitted for approval of the architectural and urban development appearance of residential properties7. Please note that these KGA clarifications are strictly of an informational, as opposed to statutory, nature.

In January 2016, the official KGA website published draft St. Petersburg urban-planning regulations (hereinafter – “UPR”) that are substantially different from the current regulations affirmed in 2014. As you may recall, UPR establish the standards governing the construction of social facilities and utility infrastructure. The draft UPR presuppose, among other things, a change in the standards governing the construction of kindergartens (from 55 to 62 places for every thousand residents) and schools (from 120 to 111 places for every thousand residents). Furthermore, the draft UPR “freeze” the housing-provision indicator at the level of 28 sq. meters until the adoption of the new general plan. It had been expected that the new UPR would be adopted in Q1 2016; however, as of the date hereof, there is no information in publicly-available sources indicating their adoption.

Legal precedents

Ruling of the Constitutional Court of Russia No. 3-P dated 15 February 2016

According to the conclusions reached by the Court, the arbitrary ten-year restriction on the limitation of actions – introduced by RF Federal Law № 100-FZ dated 07 May 2013 – is unconstitutional with respect to claims arising prior to the entry into force of the restriction (i.e. before 1 September 2013).

The Constitutional Court was tasked with ruling on the constitutionality of application of the ten-year limitation of actions period to loan agreements concluded in 2000 and remaining valid until called. The conclusions reached by the Constitutional Court Proceeding, from a literal reading of the Ruling, pertain solely to obligations whose performance timeframe is undetermined or set as “until called.” At present, it is unclear whether this ten-year restriction would be applicable to other legal relations in which the respective breach occurred prior to 1 September 2013.

Ruling of the Plenum of the Supreme Court of Russia No. 7 dated 24 March 2016 “On the Application by the Courts of Certain Provisions of the RF Civil Code on Breach of Contract”

The Plenum clarified certain provisions of amendments to Part One of the RF Civil Code (hereinafter – the “RF CC”) that entered into force on 1 June 2015: the new procedure for determining the extent of damages, the reduction in late penalties, liability for the improper use of outside funds, liability for engaging in unscrupulous negotiating practices, loss compensation, and so forth. Among other things, the Resolution in question indicates that the procedure for determining losses under Art. 406.1 of the RF CC may be established by the parties as “all resulting losses.” That said, the party demanding payment of compensation must prove the cause-and-effect relationship between the onset of the given circumstance and its losses. For that reason, the recovery of losses cannot, unfortunately, be viewed as an unconditional mechanism.

The Resolution also clarifies certain provisions of the RF CC pertaining to liability for engaging in unscrupulous negotiating practices. In particular, the Plenum indicates that the unmotivated cessation of negotiations or other breach itself is not evidence of the negotiator’s unscrupulousness, and that violation of the good-faith principle must be proven by the other party (aside from cases in which this is assumed by virtue of applicable law). That said, the requirements imposed on the compensation of losses stemming from unscrupulous negotiating practices are governed by the general rules of the RF CC on liability for causing harm (Chapter 59 of the RF CC).

The Plenum also pointed out that statutory interest in the sense of Art. 317.1 of the RF CC does not constitute a measure of liability, and therefore cannot be reduced by the court and is compounded with late penalties or compensatory interest in the sense of Art. 395 of the RF CC.

The Resolution establishes that the new provisions of Art. 317.1 of the RF CC are not applicable to rights and obligations arising from agreements concluded prior to 1 June 2015. An exception is the new version of Art. 395 of the RF CC, insofar as its provisions are applicable to the calculation of interest for periods starting from 1 June 2015 – even if the agreement was concluded and (or) the breach occurred prior to that date.

Ruling of the Supreme Court of Russia dated 29 March 2016 in Case No. 305-ES15-16772, A41-58990/2014

The justices were tasked with determining the fate of an agreement on the lease of a land plot provided for construction purposes following the commissioning of a non-residential property in a case in which, following the completion of construction, the non-residential space located in that property was transfered to the investors. The RF Supreme Court disagreed with the position of the lower courts, which had analogously applied the norms of the RF Housing Code on the termination of lease agreement as of the moment of registration of title to the first apartment in a residential building.

According to the position taken by the RF Supreme Court, lease rights survive the completion of construction of a non-residential property, and in the event of transfer of the space to investors, the lease rights pass to them in the commensurate shares (giving rise to a multiplicity of parties on the side of the lessee).

Ruling of the Supreme Court of Russia dated 03 March 2016 in Case No. 305-ES15-15053, A40-129910/2014

The RF Supreme Court ruled that, in cases of the impossibility of obtaining an urban-development plan for a land plot (caused by changes to applicable urban-development legislation) envisioning the construction thereon of the property for which the respective lease agreement was originally concluded, the agreement may be terminated at the lessee’s request. The Court determined that the inability to terminate the agreement in such cases would give rise to the obligation on the part of the lessee to make lease payments for property that it is not entitled to use according to its previously agreed-upon purpose. As grounds for termination, the Court cited Clauses 2 and 4, Art. 620 of the RF CC (property defects causing it to be unfit for use according to purpose, arising due to circumstances beyond the control of the lessee).

Please note that in similar situations, the courts do not permit the recovery of damages (if, from the time of conclusion of the lease agreement to the time of changes to applicable land-use and development rules or other norms, investments were already made in the project but the respective building permit was not obtained) from the state agencies responsible for changing the concerned urban-development documents. An exception to this rule are the situations in which the changes have been acknowledged in accordance with the procedure established by applicable law as failing to comply with controlling regulatory acts.

Resolution of the Arbitrazh Court of the Western Siberian District No. F04-28885/2015 dated 27 January 2016 in Case А46-1359/2015

The Court determined that the termination of an encumbrance registered in the Unified State Register of Real Estate Rights and Transactions Therewith (lease) does not constitute an exercise of rights. In this connection, by virtue of the RF CC, termination of encumbrance can be performed by a representative under simple written – not notarized – power of attorney.

Resolution of the Ninth Arbitrazh Appellate Court No. 09AP-8243/2016-GK dated 29 March 2016

The appellate instance reversed the famous decision by the court of the first instance in the Vimpelcom case, which had amended the terms of a lease agreement by changing the exchange rate used for calculation of lease fee, expressed in foreign currency, on the grounds that if the lease agreement had been left as is, the lessor would have gained unfair enrichment.

The court of the appellate instance substantiated its decision by pointing out that the parties to the lease agreement could – and should – have foreseen the risks associated with a change in currency exchange rates, and noting that it would be inappropriate to assert the lessor’s abuse of rights or unfair enrichment for the simple reason that it is only insisting on the proper performance of the contractual terms voluntarily agreed upon by the parties.