22.09.2016 — Revenue of Major Foreign Companies in Russia Is Decreasing
According to the recently published Forbes rankings, the total revenue of 50 largest foreign companies working in Russia has decreased by 1.3%. This decrease is first of all associated with the lowering of customer demand levels in Russia, and the economic instability of the world economy.
German companies are leading the aggregate revenue rankings (1.13 trillion rubles), while the French business is runner-up (889 billion rubles). The third place is taken by companies from the US (784 billion rubles).
Be reminded that the Government of Russia offers many concessions to foreign companies conducting or planning to conduct business in Russia. In particular, the procedure for registering foreign representative offices and opening bank accounts has been simplified. Special economic zones and priority development territories with privileged taxation regimes and other benefits have been created in effort to attract foreign investments and localize industrial activity in Russia. However, the sharp decline in purchasing power has led to a delayed effect this year and has become the main behind the decrease in the revenues of the foreign companies in Russia.
21.09.2016 — Russian Economy Will Grow Slowly, but Steadily
The Russian Ministry of Economic Development has prepared three scenarios for the Russian economy for the following three years. The Ministry considers the scenario with oil prices at 40 USD the most likely outcome. Accordingly, the GDP growth will not exceed 2% until the end of 2019. At the same time, the federal budget in all three scenarios will run at a deficit, meaning that federal reserves will have to be spent, borrowings will have to be made both inside and outside the country, while certain state assets may have to be privatized.
The basic scenario further forecasts that actual incomes will only increase symbolically by 1.3% by 2019; the sales revenue should increase by 2.5% by 2019. In 2017 capital outflow from the country is forecast to be 20 billion USD, while this figure should decrease to 18 billion USD in 2018 and 16 billion USD in 2019.
Nonetheless, the Government believes that the production activity shall increase, while the ruble exchange rate and inflation should be stabilized by the end of 2016 already.
20.09.2016 — Liability of Directors: It Is Harder to Engage in Unfair Business Activity
The Federal Tax Service has taken a stance against directors of companies, which owned no assets, accumulated debts and consequently filed for bankruptcy. It has for the first time managed to recover the tax debts from a bankrupt company’s beneficiary, despite its location in another country (in Cyprus). The message the tax authorities wish to communicate is obvious: no offshore structures will enable to escape liability.
Such liability is practically an exception. Had the Cyprus offshore company not paid for the company’s debts, the directors would have been liable on their own, under the pain of personal bankruptcy or even criminal prosecution. Despite the fact that state authorities must prove the directors’ intent to cause the company’s insolvency, the Federal Tax Service hopes that the risk of personal bankruptcy and criminal liability will serve as an incentive for the top management to take more responsible decisions.
19.09.2016 — European Court of Human Rights: Absence of Prosecutor Discredits Independence of Judges
The European Court of Human Rights (ECHR) has issued a pilot judgment calling for reforms in the Russian administrative procedure aimed at implementation of prosecutors in administrative offence cases. Having analyzed the Code of Administrative Offences in detail, the ECHR concluded that the absence of a prosecutor in administrative procedure, despite being upheld by the Russian Constitutional Court, violates the judicial independence principle.
As a general rule, the Russian court may consider the case materials on administrative offences on its own, including by way of summoning officials and witnesses. According to the ECHR, such wide functions of the court are a threat to its impartiality.
Therefore, the ECHR requires that Russia ensure independence of judges through prosecutor’s involvement in administrative proceedings or through other similar mechanism, which most likely implies reformation of the administrative procedure in Russia.