A bill proposing an Administrative liability code was introduced into the Russian State Duma upon the initiative of Ageyev A., a State Duma deputy. The proposed code is comprised of three sections: a general, a special and a procedural one. The new Administrative liability code was brought upon for public discussion on October 26, and it will last until November 28, 2015.

The proposed code is comprised of three sections: a general, a special and a procedural one. Among other things, the general section of the new Code includes a provision determining the causes of administrative liability. It also provides for such principles of administrative liability imposition, as individualisation and fairness. Moreover, the Code systematises conditions excluding imposition of administrative liability.

The special section of the new Code is based on the relevant section of the currently effective Administrative code. However, its provisions are systematised, supplemented, and clarified.

The procedural section defines notions, which are not defined in the currently effective Administrative Code, such as “administrative sanctions’ procedure”, “administrative case” etc. The section introduces two types of procedure available to the parties: a full trial procedure and a summary one, which is used in cases that require prompt action and generally involve a small number of clearcut issues, e.g. road traffic accident cases, where the accidents are recorded automatically.

The new Administrative liability code was brought upon for public discussion on October 26, 2015 (it can be found at http://veche.duma.gov.ru/), and it will last until November 28, 2015. We will keep our readers informed of the bill development.

Retail electricity rates indexation shall amount to 7.5% in 2016, 8% in 2017, and 7.2% in 2018. This data was provided in the forecast of the social and economic development of Russia, published on the official website of the State Duma among the set of documents related to the 2016 federal budget. The faster growth of electricity rates for the population in 2017-2018 is aimed at reducing cross-subsidies in the energy sector. As a result of cross-subsidies, electricity rates payable by companies in the industry sector are much higher than the rates payable by the population. 

Retail electricity rates indexation shall amount to 7.5% in 2016, 8% in 2017, and 7.2% in 2018. Notably, the said indexation does not take into account the introduction of the social electricity consumption norm. The rates will be increased on July 01.

According to the forecast, the faster growth of electricity rates for the population in 2017-2018 is aimed at reducing cross-subsidies in the energy sector. As a result of cross-subsidies, electricity rates payable by companies in the industry sector are much higher than the rates payable by the population. Therefore, companies in the industry sector pay above the odds to ensure that the population has access to electricity. The annual amount of cross-subsidies is approx. RUB 250 billion.

According to the forecast, in order to cease the practice of cross-subsidies, it is also planned to change the electricity tariff formula used by distribution companies, however the document does not give any details with this regard.

The Federation Council has approved the law releasing individual entrepreneurs and legal entities from the obligation to submit documents required during inspections carried out by monitoring state authorities. According to the Deputy chairman of the Federation Council Committee on economic policy Sergey Shatirov, the law is aimed at reducing the administrative burden on business representatives and increasing the quality of legal regulation in the relevant sphere.

According to the legal department of the Central Office of the Federation Council, the new law specifies the powers of monitoring state authorities during inspections. Among other things, state and municipal monitoring authorities will be empowered to request documents and information from other state and municipal authorities or subordinate departments that possess data necessary during the inspections.

Importantly, the monitoring officers will be prohibited from demanding that individual entrepreneurs and legal entities submit documents and information, including permits and authorisation documents, which are in possession of other state authorities. Monitoring authorities should request the relevant information from the relevant state authorities independently.

According to the Deputy chairman of the Federation Council Committee on economic policy Sergey Shatirov, the law is aimed at reducing administrative pressure on business representatives and increasing the quality of legal regulation in the relevant sphere.

The laws ‘On industrial policy’ and ‘On investment policy and investor support’ were enacted in October 2015 in Moscow. The laws are aimed at ensuring state support and development of industrial zones in Moscow (technological parks, industrial parks and similar industrialists’ unions) and attracting investment. The law ‘On investment policy and investor support’ provides for numerous benefits and will come into force on January 01, 2016.

The Moscow law ‘On investment policy and investor support’ provides for numerous benefits, including reduced corporate income tax and land tax rates, as well as subsidy assistance. Moreover, the law makes it possible to obtain land plots without participating in the bidding procedure, and sets forth reduced rental rates for land. The law will come into force on January 01, 2016.

Only persons carrying out high-priority investment projects (such as technological parks, industrial parks, as well as other companies that comply with the requirements set forth by the relevant Government Resolution) are eligible for the above mentioned benefits.

Moreover, persons carrying out high-priority investment projects will be entitled to payment of compensation if it is impossible to fully realise them, provided that the Moscow administration is liable for actions hindering the said project, e.g. by changing legislation, or terminating legal rights to land.

The Moscow law “On the corporate income tax rate for investors’ was adopted for the purpose of implementation of the said laws. It provides that investors shall enjoy a reduced corporate income tax rate amounting to 13.5%. The reduced rate will apply to companies carrying out high-priority investment projects, anchor tenants, and residents of technological and industrial parks. The tax benefit will be effective within the term of the relevant investment project. The law will also come into force on January 01, 2016.

Russia is now ranked 51st in the World Bank’s Doing Business report, which measures the ease of doing business in 189 countries worldwide. It climbed 11 positions from the 62nd spot last year. Russia is only 0.02 points lower than Peru that was ranked 50th. Improving the environment for doing business is one of the strategic tasks of the state. In 2015, Russia implemented 5 economic reforms that contributed to the improved ranking.

In 2015, Russia implemented the following 5 economic reforms that contributed to the state’s improved ranking:

• starting a business was made easier by reducing the number of days required to open a corporate bank account;
• transferring property was made easier by reducing the time required for property registration;
• access to credit was improved by adopting a new law on secured transactions that established a centralised collateral registry, and allows a general description of a combined category of assets granted as collateral;
• paying taxes was made less costly for companies by excluding movable property from the corporate property tax base;
• the process of obtaining an electricity connection was made simpler, faster and less costly by eliminating a meter inspection by electricity providers and revising connection tariffs.

Russia got 14 points out of 15 in the ‘dealing with construction permits’ indicator, 8 points out of 8 in the ‘getting electricity’ indicator, 12.5 points out of 18 in the ‘enforcing contracts’ indicator, and 26 points out of 30 in the ‘registering property’ indicator.

Nevertheless, the situation is yet to be improved in the ‘trading across borders’ sphere. Thus, documentary compliance for the exportation of goods is rather time-consuming (43 hours) as opposed to only 5 hours in OECD countries. Moreover, it will generally cost USD 500 to collect the documents necessary for the exportation of goods, which is significantly higher than the relevant figure in OECD countries (USD 6). Furthermore, border compliance costs amount to USD 1.125, whereas the relevant figure in OECD countries is USD 160.

According to the Doing Business ranking, Russia was one of the most active countries in terms of economic reforms this year. 

Statistics show that the court caseload of arbitrazh courts of appeal has increased in the past 9 months of 2015. According to the press office of the 12th Arbitrazh court of appeal, which hears cases in the Saratov, Astrakhan and Volgograd regions, one judge heard 49.1 cases monthly in January-September 2015. This is 3.6% greater than in 2014.

10.362 appeals were received by the 12th Arbitrazh court of appeal within the first 9 months of 2015, which is 4.95% greater than the relevant figure in 2014. 8.644 cases were heard by the court, which is 7.7% greater than the relevant figure last year.

52.9% of the total number of cases are civil, whereas 47.1% of the cases are of administrative nature. Most of the civil cases result from non-performance and poor performance of contractual obligations (3.490 cases in January-September 2015, as opposed to 2.683 cases in the relevant period of 2014). Most of the administrative cases result from the imposition of administrative liability (867 cases). The number of cases connected with appeals of non-regulatory acts, decisions and actions (omissions) of state and municipal authorities and officials has increased. Another increase of cases has been recorded in the sphere of insolvency (bankruptcy) and the application of customs legislation.

In January-September 2015, the 12th Arbitrazh court of appeal quashed or modified 773 decision of first instance courts (14.44% of the total number of cases), the main reason for this being wrong application of substantive law (336 decisions, or 27.56% of the total number of quashed or modified court decisions).

On October 26, a New York court convicted three partners of Alexander Fishchenko, a Russian businessman, over their roles in a scheme to illegally export microelectronics to Russia. Alexander Posobilov, Shavkat Abdullaev and Anastasia Diatlova were convicted of exporting and conspiring to export more than USD 30 million of microchips and other high-tech goods to Russia.

Abdullaev and Diatlova may face a maximum of 25 years in prison. Posobilov may receive a more severe sentence, as he was also convicted of conspiring to commit money laundering.

According to the prosecution, in 2008-2012 the defendants purchased high-tech goods from US manufacturers and illegally exported them to Russia by evading federal export controls.

Posobilov, Abdullaev and Diatlova worked at Arc Electronics Inc founded by Alexander Fishchenko. Notably, Fishchenko pleaded guilty to related charges in September.

The three defendants were among 11 individual defendants charged for evasion of federal export controls.

The case is U.S. v. Posobilov et al, U.S. District Court, Eastern District of New York, No. 12-cr-00626.