Federal Law No. 488-FZ on Industrial Policy in the Russian Federation of December 31, 2014

As stated in the Concept for the Long-Term Socio-Economic Development of the Russian Federation Until 2020,8 development of fundamental sectors of industry is one of the measures for increasing national competitiveness. However, until the Law entered into force on June 30, 2015, there was no regulatory act comprehensively governing relations for the implementation of Russia’s industrial policy.

The Law is general in nature, contains provisions about developing industrial policy and is intended to become a starting point to systematize measures for supporting Russian industry. It should be noted that the Law does not apply to the production of alcohol-containing food products, alcohol production or the production of tobacco products.

The Law defines Russian industrial policy as a set of legal, economic, organizational and other measures aimed at developing the industrial potential of the Russian Federation and ensuring the production of competitive products.

The Law contains a non-exhaustive list of measures for supporting the development of industry, and also basic descriptions of those measures: measures of financial, information and consulting support; support in the field of science, technology and innovation; support in the field of foreign trade, granting state and municipal preferences and other measures of support that can be set up by federal, regional and local legislation.

The Law enshrines a new form of investment agreement as one of the measures for promoting the development of activity in industry: a special investment contract under which the investor undertakes to create, modernize and/or master the manufacturing of industrial products, while the Russian Federation, RF constituent entity or municipality commits itself to implement incentives and support that investor.

The Law makes it possible to grandfather into such contracts a clause that the tax burden and other public liabilities of the investor, if they are increased by a statute, will remain unchanged for the investor. Incentives granted by a contract may also apply to other parties the investor may involve in implementing the project (for example, contractors). If the contract is terminated due to the investor’s fault, the investor is obligated to pay the public entity all taxes and other mandatory payments that were not paid when the incentives were applied.

The Law also sets forth special provisions about measures for promoting industry in industrial parks and industrial clusters.

A number of RF Government Resolutions were adopted in 2015 in performance of certain provisions of the Law. These include resolutions establishing rules for entering into special investment contracts and the model special investment contract9 for certain areas of industry; requirements to industrial parks and management companies of industrial parks in order for the industrial activity incentive measures to apply to them;10 requirements to industrial clusters and specialized organizations of industrial clusters for the industrial activity incentive measures to apply to them,11 etc.