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Presidential decree tightens government control over Russian Strategic Sectors Companies

Dechert LLP

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Russia September 24 2012

The President of Russia on September 11, 2012, issued a decree (the Strategic Company Decree) requiring Russian companies included in the list of strategic enterprises (Strategic Sectors Companies) to obtain government approval prior to carrying out certain actions with foreign governments/organizations. Many believe that the Strategic Company Decree was passed in response to growing pressure from the European Commission to obtain information on Gazprom in connection with a competition investigation into Gazprom’s activities in the EU, but the Strategic Company Decree will have much wider implications and will create uncertainty for companies operating in the strategic sectors in Russia.

Under the Strategic Company Decree, Strategic Sectors Companies are now required to seek government approval prior to: (a) providing information on their activities or the activities of their associated companies to foreign governments/organizations; (b) amending agreements concluded between them and/or their associated companies and foreign contractors; and (c) alienating their stake or the stake of their companies in foreign organizations, assigning rights for conducting entrepreneurial activity on the territory of a foreign state or alienating immovable property situated abroad.

The Strategic Company Decree does not, however, identify which government agency would grant such consent or the procedure for doing so, thereby in effect stopping the flow of information regarding such companies and hindering other activity of such companies until a procedure is established. According to the Strategic Company Decree, the government agency responsible for granting such consents should be determined by the Russian Government by October 11, 2012. The Strategic Company Decree exempts information that is subject to publication or disclosure under Russian law or under the requirements provided for issuance, circulation and acquisition of securities. Therefore, Strategic Sectors Companies may continue to publish their reserves and other information that may be necessary to comply with local securities law requirements.

Although the Russian government has always played a prominent role with respect to Strategic Sectors Companies, these new barriers constitute yet another nuance for companies investing in the strategic sectors in Russia. It remains unclear as to how the Strategic Company Decree will be implemented in practice, but in the interim Strategic Sectors Companies will need to consider whether disclosure of information or changes to business activities will require government consent. We will, of course update you on further developments affecting Strategic Sectors Companies.

Dechert LLP - Laura M. Brank
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Filed under

  • Russia
  • Company & Commercial
  • Dechert LLP

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Robert E. Armstrong
Partner
McDonald Carano Wilson LLP
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