22.04.2016 — Developers Scrap Projects in Moscow and the Moscow Region
More and more developers freeze construction projects in Moscow and the Moscow region. The Knight Frank Agency claims that construction of premises with more than 600 000 sq m was stopped due to lack of investment. According to the Knight Frank’s experts, many of these objects will not be finished since the demand for shopping centers and the paying capacity of the population all over Russia keep on falling.
As reported by the agency, only 11 regional cities hold promises for the developers, and soon, with establishment of the next platforms, the number will be reduced to 7. Besides, considering the complicated procedure of obtaining construction permits again, even if resources for further development of frozen projects are obtained, this process can last so long that some projects run the venture of getting hopelessly outdated.
21.04.2016 — Early Loan Repayment Provides for Partial Reimbursement of Interest Paid
The Supreme Court of the Russian Federation ruled that banks are only entitled to charge interest for the actual loan use period and must reimburse any interest paid excessively. If a loan is returned early, the interest rate calculated based on the initial loan time and paid by the borrower is subject to recalculation with subsequent refund of all overpaid amounts.
The Supreme Court of the Russian Federation satisfied the claim on partial refund of the overpaid loan interest to a borrower who returned the bank loan early. The borrower paid the loan by annuity payment scheme, which meant that his payments firstly covered the interest rate accrued by the bank for the entire loan term, and only then counted towards the debt itself. The reason for the Court’s decision is that the loan interest is supposed to be paid for financial services and therefore the borrower has the statutory right to freely opt-out of the contract after compensating the bank its actually incurred expenses. With respect to loan agreements, such expenses include the loan itself and the interest accrued for its actual use period.
20.04.2016 — District Court of the Hague Makes Cornerstone Decision on YUKOS Case
The District Court of The Hague ruled that the decision of the Permanent Court of Arbitration (PCA) based in The Hague dated July, 2014 which obliged the Russian Federation to pay to the former YUKOS shareholders a compensation of 50 billion USD is illegal and out of jurisdiction of the PCA. However, this will unlikely end the dispute. Yet, Russia has already stated that it will demand release of its assets arrested in France and Belgium .
The PCA had no powers to consider YUKOS shareholders’ claim against the Russian Federation, according to the District Court of The Hague. As a result, Russian Federation was found to be under no obligation to comply with the decision on payment of an amount exceeding 50 bln USD as compensation for the alleged expropriation of the oil company.
In coming to such conclusion, The Hague Court focused on Russia’s arguments concerning the PCA’s lack of jurisdiction, as by virtue of international law state courts have no competence to review the arbitral award on the merits. The Court recognized that the PCA had no powers to consider the case and that Russia was not obliged to execute the award. At the same time, YUKOS shareholders have already stated that they would lodge an appeal to the second instance court in the Netherlands, which signifies that the case may proceed as far as to the country’s Supreme Court and remain unsettled for the next several years.
The question of whether other countries will execute the PCA’s decision after it was struck down in The Hague itself remains unclear. Russia contends that The Hague Court’s decision precludes further enforcement of the award, yet some countries consider that arbitration institutions are autonomous international tribunals, their decision’s enforceability must be decided upon by each country individually.
19.04.2016 — Rosreestr Will Help to Notify Co-owners on Sale of Real Property
The Russian government proposes to simplify the notification procedure of real estate co-owners in case someone wants to sell the shares. If the number of co-owners exceeds 5, the seller of a shаre can simply place the announcement of the intention to sell a shаre and conditions of its sale on the official site of the Federal Service for State Registration, Cadastre and Cartography (Rosreestr). Please note that these novelties do not concern the cases on alienation of shares in the right to residential properties.
The amendments are primarily directed towards simplification of the real estate sale process in case the number of co-owners makes compliance with the appropriate preliminary notification procedure of every owner too burdensome, for example, in case of joint owners of the land plots.
It is not yet clear what will be needed from the seller to get his announcement published on the Rosreestr’s website and whether such notice will be performed in time not harming the economic interests of the seller. Another uncertainty is whether this service will be on a paid basis or not.
18.04.2016 — Russian Government Ceased to Tolerate Improper Use of Agricultural Lands
The Russian State Duma adopted in the first reading a bill easing regulatory controls over expropriation of land plots (agricultural land) in case of its improper use. Besides, the first claim of the Ministry of Property Relations of the Moscow region for such expropriation of land plots was registered. This issue is of high priority for many developers who purchase agricultural lands intending to alter the designated purpose of the land plot to industrial lands. Due to the new trend their risks significantly increase in the transition period.
Firstly, the bill proposes to reduce the term until expropriation of the land plots to two years, including the land reclamation period. Public authorities are now obliged at risk of penalties to take the cases of expropriation of land plots promptly to court, while the assessment period of the improper use of the land plots is reduced from 3 years to 1 year.
Alongside with the adoption of the bill, the Ministry of Property Relations of the Moscow region filed the first claim on compulsory expropriation of a land plot in view of its improper use as agricultural land.
The changes under consideration directly affect the developers who purchase the agricultural lands intending to alter the designated purpose of the land plot to industrial lands or another category. According to the data provided in the explanatory note to the bill dated January 1, 2014, out of 200 million hectares of agricultural lands in Russia about 20-25 million hectares are used by natural and legal entities improperly.