Post on 10-Jan-2016
www.mannheimerswartling.se
European Business towards the Russian Market
Russia’s Legal Framework
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“Look, I’m not saying it’s going to be today. But someday – someday – you guys will be happy that you’ve taken along a lawyer.”
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MANNHEIMER SWARTLING
• 1990 Carl Swartling Advokatbyrå (Sthlm) + Mannheimer Zetterlöf (Gbg) = Mannheimer Swartling
• more than 300 lawyers
• 4 offices in Sweden; 5 outside Sweden (St. Petersburg, Berlin, Frankfurt, Brussels, New York)
• In Russia since April 1990
• In Russia the focus is on foreign clients investing in the Russian economy
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Corporate Profits Tax in Russia and some European countries
0
5
10
15
20
25
30
35
Ryssland
Sverige
Norge
Finland
Danm
ark
Storbritanien
Luxem
burg
Frankrike
Spanien
Italien
Tyskland
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Individual Income Tax in Russia
100 200 300 400 500 10.000
Wages in USD
%
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Social Contributions in Sweden and Russia
200 500 1 000 1 500 2 000 2 500 20 000Lön i USD
0
5
10
15
20
25
30
35
40
Wages in USD
200 500 1 000 1 500 2 000 3000
Sweden
Russia
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EU vs. RUSSIA
Differences
Slide A – Authorized bodies
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“CODES”
EU vs. RUSSIA
Differences
Slide B – Legislation
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Sources of law
EU Russia
Legislation
Court precedents
Legislative pre-history
Academic writing
Trade practices and customs
Legislation
EU vs. RUSSIA
Differences
Slide C – Legislation
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Characteristics of Russian Legislation
• Legislation approaching west as regards ”coverage”
• New legislation is ”market oriented” (more than in Nordic countries)
• Still certain remaining problems: No legislative pre-history Few commentaries to law No precedents (”prejudikat”) Legislation is in practice only source of law
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What surprises a foreign businessman most when he comes to Russia in terms of law?
• There are many laws and they are well developed
• Formalistic approach to law by Russian officials
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1. Legislation and agreements are interpreted literally
2. Agreement with a Russian party must be in writing
3. A Russian party may insist on Russian form (graphical form) of agreement
4. A Russian party may insist that agreement be stamped with company stamp
5. Some agreements must be notarized
6. Importance to keep originals
7. Foundation documents (Articles of Association) are large
Specific Features of Russian Law and Legal Practice
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Fundamental Agreements effective in most EU countries and Russia
United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980)
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Fundamental Agreements effective in most EU countries and Russia
Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958)
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Fundamental Agreements effective in most EU countries and Russia
Convention providing a Uniform Law for Bills of Exchange and Promissory Notes (Geneva, 1930)
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Fundamental Agreements effective in most EU countries and Russia
Convention Abolishing the Requirement of Legalization for Foreign Public Documents (The
Hague, 1961)
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Fundamental Agreements effective in most EU countries and Russia
Conventions on Protection of Intellectual Property (e.g. Paris, 1883, Washington, 1970, Madrid, 1891, etc.)
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Fundamental Agreements effective in most EU countries and Russia
Conventions and Agreements on Avoidance of Double Taxation of Income and Capital
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EU vs. RUSSIA
Differences - Bureaucracy
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1. Antimonopoly Law - 1991
2. Law on Currency Control - 2004 (no restrictions since 2007)
3. Customs Code - 2003
4. Civil Code 1994-1996
5. Law on Joint Stock Companies - 1995
6. Law on Limited Liability Companies - 1998
7. Tax Code – 1998
8. Law on Foreign Investments - 1999
9. Land Code - 2001
Development of Russian legislation - most important acts
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1. Supplies to unrelated Russian wholesaler (Representative office to market trade mark and goods)
2. Supplies via Russian daughter – wholesaler
3. Production in Russia
Levels of Market Penetration by Manufacturer of Goods
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(1) Supplies to unrelated Russian wholesaler
Producer
Russian wholesaler
Intermediaries
Retailers
Retailers
Representative office
EX WORKS
Customs procedures Russia
EU
Daughter ofproducer
??
?
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(2) Supplies via Russian daughter - wholesaler
Producer
Russian daughter- wholesaler
Intermediaries
Retailers
Retailers
EX WORKS
Customs procedures
EU100%
Russia
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(3) Production in Russia
supplies ofraw materials
EU mother
Russian daughter- producer
Intermediaries
Retailers
Retailers
Russia
EU
Supplies of raw material
XYZ
100%
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Accreditation of Representative Office
• Takes approximately 1 month
• Accreditation period – up to 3 years
• Is not a separate legal entity
Registration of Russian Daughter
• Takes approximately 1 month
• Registration may be valid indefinitely
• Is a separate legal entity – Russian resident
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Buyer Seller
Target
100%
Alternative: buying existing business
Share Purchase
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Tax liabilities
Strange agreements
Committments to employees
Social infrastructure
objects
Buyer
Target
(subsidiary)
Alternative: buying existing business
Due Diligence
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EU Co RusCo
Target
100%
Alternative: buying existing business
Asset Purchase
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Asset Purchase
EU Co RusCo
Target
100%
Russian Sub
100%
Asset Transfer Agreement
Alternative: buying existing business
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RusCo
Target
100%
EU Co
Russian Sub
100%
Result:
1. EU Russian Sub is clean and has all assets of Target
2. Target has cash and all old liabilities
Alternative: buying existing business
Asset Purchase
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Import to RussiaKey Issues to Consider
• Import VAT – 10% or 18% depending on products imported• Import Duty depends on products, most common – 15% • Mandatory certification of products prior to import to Russia:
- testing of products- obtaining a certificate of compliance- marking product units with a special mark of conformity
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Certification
• May be performed inside and outside Russia by certification organizations accredited with Gosstandart
• Outside Russia (examples)- SGS Sweden AB, Maskingatan 5 SE-417 64,
Göteborg, Sweden tel. +46 (31) 755 05 00 www.sgs.com alina_lundberg@sgs.com
- TÜV Rheinland, Brunnsgatan 21B S – 111 38 Stockholm tel. +46 (8) 21 05 65
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Usual ways to finance Russian company
• Bank credit
• Inter-company loan
• Charter capital contribution
• Financial assistance (conflict with the Civil Code but may be tax free)
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Usual Kinds of Security
• Mortgage
• Pledge of equipment
• Pledge of goods
• Bank guarantees (expensive)
• Insurance (very rare)
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Mortgage
• Must be notarized
• Must be registered with a special governmental agency and included in the register of mortgages
• Must be governed by Russian law
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Foreclosure (Enforcement)
• Mortgages and pledges are very difficult to foreclose
• This is in line with Russia’s biggest problem – enforcement
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MANNHEIMER SWARTLING
Sweden House
Malaya Konyushennaya gatan 1/3 a
191186 S:t Petersburg, Ryssland
Telefone: + 7 (812) 329 25 05
Telefax: + (812) 329 25 07
ANDREI GUSEV
Avokat, S:t Petersburgsregistret
E-post: agu@msa.spb.ru (ryskt)
agu@msa.se (svenskt)
Mobil: +46 (709) 777562 (svenskt)
Mobil: +7 (812) 938 2990 (ryskt)