28.10.2016 — No Remedy against State: the Commercial Court of Moscow Dismissed Mr. Antonov’s Lawsuit against Lithuania on Summary Basis

On 28.10.2016 the Commercial Court of Moscow terminated the case of Vladimir Antonov v. the Republic of Lithuania (No А40-165646/2016). Mr. Antonov, a former shareholder of the Lithuanian bank Snoras, claimed damages caused by the nationalization of the Snoras bank as well as compensation of goodwill impairment caused by the public sayings of the Lithuanian President Dalia Grybauskaitė. The claimed amount was over 40 billion rubles.

Lithuania referred to the state immunity concept, which has been recently incorporated in the Russian law. This concept precludes claims against foreign states save for when such claims arise from non-sovereign activity such as commercial transactions.

Mr. Antonov’s lawyers provided evidence of Lithuanian conduct’s commercial nature. They also referred to a number of precedents in which the Lithuanian courts were limiting sovereignty of Russia and stated that according to the reciprocity principle Russian courts may limit the state immunity of Lithuania as well. However, the judge found these arguments unconvincing and terminated the case. Mr. Antonov has an opportunity to appeal this decision within one month from now.

27.10.2016 — New US Sanctions against Glavgosekspertiza of Russia: It May Be Much Harder for American Residents to Be Involved With Major Construction Projects in Russia

The US sanctions list has been broadened yet again in response to the construction of Kerch bridge, which is supposed to connect the Russian mainland with the Crimean peninsula. All entities involved with the construction have been sanctioned, including Glavgosekspertiza, which reviewed the design documentation for the project. As a result, it may be much more difficult or even impossible for American companies and citizens to participate in major federal construction projects in Russia, especially by way of financing them.

Glavgosekspertiza of Russia is a state institution whose review of design documentation is mandatory for major projects of federal importance, including construction of dangerous, technically complex or unique objects. Inclusion of Glavgosekspertiza into the US sanctions list means that US persons are prohibited from entering into transactions or otherwise dealing in property with Glavgosekspertiza, which effectively implies that American companies or citizens may no longer take part in the projects whose design documentation requires review by Glavgosekspertiza, at least during their initial stages. Similar problems may also arise for companies controlled by US persons and if financial transactions associated with such projects go through the US banking system.

Throughout the history of the Ukrainian political crisis, the US sanctions have never been applied to Russian institutions with such broad governmental functions, potentially affecting ordinary American businesses in Russia. This issue was therefore brought to the attention of the US authorities by the American Chamber of Commerce in Russia, with no response thus far published. Importantly, the US sanctions against Glavgosekspertiza have not been matched by the European Union thus far.

26.10.2016 — Usurious Interest Planned To Be Prohibited Starting From 2017

In the beginning of 2017, the State Duma will consider a bill aimed at prohibiting excessive interest rates in loan agreements. In the event that the bill is passed into law, the permissible interest rate will be determined on the basis of weighted average interest rates for loans in a given region. Interest rates significantly exceeding the stated amount will be deemed invalid.

According to the Chairman of the State Duma Committee on Civil, Criminal, Arbitral and Procedural Legislation Pavel Krasheninnikov the primary purpose of the bill is to prevent abuse taking place in practice. Currently, loan interest often exceeds 600-700% per annum. The only legislative mechanism to challenge such transactions, however, is Art. 179 of the Russian Civil Code prohibiting oppressive contracts. However, the stated provision of the Civil Code is rarely applied in practice due to the high standard of proof to be met by the claimant.

Due to this, it is proposed to re-introduce to the Russian legislation the notion of “usurious  interest”, as it existed prior to 1917. Interest rates significantly exceeding the weighted average interest rates for loans   in a given region of Russia will be deemed usurious and therefore invalid. The same proposal was discussed by the State Duma in its previous composition, but was delayed due to the need to coordinate with the Central Bank of Russia and the Russian Government.

25.10.2016 — Weekends and Holidays in 2017

The Government of Russia has approved the dates of public holidays in 2017. New Year’s holidays will be the longest, lasting for 9 days from December 31 until January 8. Four days in February (February 23 - February 26) and four days in May (May 6 – May 9) will also be days off.

March 8 will be a public holiday. Short time off will also take place in April (April 29 – May 1), June (June 10 – June 12) and November (November 4 – November 6). 

24.10.2016 — Russia Has Fallen Four Positions in the Doing Business Rankings

According to Doing Business-2017 Rankings published by the World Bank Group, Russia has fallen from the 36th position, which it held in 2016, to the 40th place in the overall rankings of countries in terms of business appeal. The three leaders are New Zealand, Singapore and Denmark.

Worsening of Russia’s overall rankings is caused by reduction of its performance in practically all areas of business life, including ones that Russia has been traditionally strong at, such as contract enforcement (the 12th place as opposed to the 8th place last year) and registration of ownership (the 9th place this year against the 8th place last year).

Nonetheless, Russia has improved its position in some areas because of newly conducted reforms. Thus, Russia is now ranked 61st in protecting minority investors (up from the 53rd place in 2016). A significant improvement is also evident in ‘starting a business’ area, where Russia’s rank is up to the 37th from the 26th last year. As earlier, Russia has the worst results in terms of dealing with construction permits (the 115th place as opposed to the 117th position last year) and international trade (the 140th place down from the 138th last year).