How frequent UAV attacks affect real estate owners – this is the subject that was reported at the Legal Committee of the Russian-German Chamber of Commerce by Artem Sirota, the managing partner of the bureau, and Anastasia Fomenko, the associate.

First of all, the owners of real estate objects from certain categories, an attack on which may have the most critical consequences (in particular, energy, transport and sensitive industries such as microbiology), have additional responsibilities to prevent UAV attacks and strengthen protection measures for the object. Such measures include both technical equipment and expanded powers in some cases to repel UAV attacks.

Failure to take such measures may result in both administrative and criminal liability.

For the owners of the affected civil and industrial facilities, the state offers compensation, which, however, may be insufficient.

In this regard, it is recommended to obtain insurance of the object against the risks of damage. However, there are some nuances with insurance. The risks of a terrorist attack and sabotage are usually insured - but a specific UAV attack may not be qualified as such events by the investigative authorities.

In addition, a military clause may prevent the obtaining of insurance compensation if the damage is caused as a result of military actions. But case law supports the victims - insurers have no reason to refuse payment with references to the military clause because the regime of military actions has not been introduced.

Details of the report are available in the presentation.

On 24 June 2024, the European Union adopted the fourteenth package of sanctions against Russia. Among other measures, this package introduces two measures aimed at protection for EU operators in light of Russia’s counter-sanctions regulations.

A transaction ban has been imposed on those Russian companies that transfer disputes to Russian courts despite the arbitration agreement. This measure responds to Russia’s amendment to Article 248.1 of the Russian Commercial Procedure Code adopted in 2020 that allows Russian parties to transfer the dispute to Russian state courts and not to enforce arbitration agreement if foreign sanctions were imposed on a Russian party that impair the party’s access to justice. Russian courts take the position that the imposition of foreign sanctions on a Russian party is by itself sufficient for the Russian courts to assume exclusive jurisdiction.

EU individuals and companies are allowed to file claims in EU courts for the recovery of compensation from Russian individuals and entities that caused damages to them. That includes damages suffered in connection with a contract or a transaction the performance of which was affected by the EU sanctions implementation.

EU persons may also claim the recovery of damages caused as a result of Russia’s measures taken on the basis of Presidential Decree No. 302 dated 25 April 2023 “On temporary management of certain assets”, which introduced temporary management by Rosimushchestvo (the Russian Federal Agency for State Assets Management) in respect of certain EU companies.

In both cases, the compensation could be claimed under the condition that the EU national or company concerned does not have effective access to remedies, for example under the relevant bilateral investment treaty.

We are glad to provide you with our Information Letter, where we discuss the landscape of the most important emergency laws and regulations introduced over past two years in Russia. We concentrate on select risks which foreign business currently faces in Russia.  

First, we will look at key new terms that have proliferated in Russian law (section 1). Then we will focus on some of the key novelties of Russian business law:

• corporate restrictions and restrictions on the sale of companies in Russia (section 2);
• restrictions on payments to foreign counterparties and set-offs (section 3);
• restrictions on payment of dividends and royalties to foreign persons (section 4);
• new grounds for introducing external administration over foreign companies in Russia (section 5);
• restrictions on the export of goods and relaxation of the import regime for certain foreign goods (section 6);
• new approach to parallel import (section 7);
• criminalization of the calls to introduce sanctions against Russia and the risks of liability for complying with foreign sanctions (section 8);
• new grounds to transfer disputes with a foreign element to Russian courts by reference to sanctions (section 9);
• possibility of opening bankruptcy proceedings against foreign companies by Russian courts (section 10).

The Information Letter is available at the following link.

Since Russian countersanctions were first introduced, certain directions in their application have been crystallized. In particular, the Government Commission has clarified its expectations as to the terms and conditions of selling Russian assets by foreign parties in order to obtain the Government Commission’s approval when required under the Russian countersanctions. Apart from that, new case law has emerged on this topic which says that contracts that breach the Russian countersanctions will be invalidated by Russian courts. As a significant number of restrictive measures were prolonged for 2024 – 2025 and the Russian Parliament is considering bills to further penalize failure to comply with Russian countersanctions, the topic remains highly relevant for both for foreign businesses and local entities.

The Russian countersanctions were introduced by several Presidential Decrees in the spring of 2022. They impose certain restrictions on contracts and other transactions with foreign parties associated with the so-called “unfriendly” jurisdictions that have imposed sanctions on Russia. In particular, countersanctions require deals with certain types of Russian assets (such as real estate or shares in Russian entities) to be pre-approved by the Government Commission or the Russian Central Bank.

Since then, state authorities have issued important clarifications to explain their expectations on the terms and conditions of the asset sale transactions involving such foreign parties in order to maximize the chances for their approval. In particular, the Government Commission has explained that it normally expects that the sale price comes with a discount of at least 50% compared to market value. Apart from that, the Government Commission expects sellers to make a voluntary contribution to the federal budget of up to 10% of the market value of the assets sold.

If a given contract or transaction does not comply with the countersanctions, Russian courts are prepared to invalidate the sale. The relevant lawsuit may, for instance, be brought by the Russian entity’s management. A number of prominent court judgments to this effect are already published in Russia (e.g., the case of Bauer Technologiya LLC No. А41-101031/2022).

In addition, the Russian countersanctions have recently been renewed and will remain in place in the foreseeable future. For example, foreign shareholders of designated Russian companies will remain limited in their right to vote on corporate affairs until 2024. Apart from that, the prohibition to sell or otherwise dispose of shares in Russian entities operating in the financial, fuel and energy sectors has been extended until the end of 2025.

The Russian Parliament (the State Duma) is considering a number of legislative bills which would allow the Russian authorities to charge a public fine based on the price of a given transaction in case the Russian countersanctions are breached. The State Duma is also considering a bill that could impose criminal liability for compliance with foreign sanctions against Russia.

The Russian Supreme Court has recently issued new clarifications on the so-called “unauthorized construction objects” which are structures erected or modified in breach of Russian construction or land law. In particular, the Supreme Court has clarified the legal test which Russian courts should use to decide if a structure is an “unauthorized construction” or not. Apart from that, the Supreme Court has elaborated on the ways to legalize an “unauthorized construction” and prevent its demolition. In particular, the courts have power to approve a settlement agreement that resolves an “unauthorized construction” dispute and would cure the owner’s title to the relevant property. Apart from that, a court may enter an “alternative judgment” to order the respondent to either demolish or rectify the “unauthorized construction” at the respondent’s choice to cure its breach of land law or construction law, where relevant.

The Supreme Court approved Ruling of the Plenum dated 12 December 2023 No. 44 on disputes related to unauthorized construction objects.

An unauthorized construction is a construction erected in violation of construction norms and town-planning requirements. However, not all violations require a demolition of the relevant structure. Instead, the court may “legalize” an unauthorized construction object in case of minor deviations that do not threaten public safety. At the same time, non-compliance with the maximum number of floors or the maximum height of the building is normally a material deviation.

Unauthorized reconstruction of a lawfully constructed building does not necessarily require the demolition of the entire construction object if it can be brought into compliance by undoing the reconstruction.

At the same time, some buildings and structures are protected from being declared as unauthorized. This includes constructions for which the competent authority previously issued a permit but subsequently cancelled it in the process of internal review, and constructions which violated land-use restrictions which were unknown to the developer (for example, if information on such restrictions was not available in the Unified State Register of Real Estate).

In addition, the developer may be entitled to cure its title to the structure if it is tainted only by a failure to timely obtain construction permits or similar consents rather than by a substantive defect, provided that the developer in good faith (and not for the sake of appearance only) took reasonable measures to obtain the required permits or consents.

Another option to legalize an unauthorized construction is to enter into a court-approved settlement agreement. However, courts are required to ensure that the relevant structure can be safely used before approving a settlement agreement in an unauthorized construction matter.

But even where the court refuses to legalize a structure and finds that it is an unauthorized construction, the court may still enter an alternative judgment to enable the developer to choose whether to demolish the structure or to rectify the relevant defects. In this case, the defendant has the right to choose the method of execution of the court decision.