18.11.2016 — Shock for Investors: Liberal Minister of Economy Detained on Bribery Charges

The Investigative Committee has launched a criminal case on charges against Minister of Economic Development Mr. Alexey Ulyukaev. He is accused of receiving a USD 2 million bribe for granting approval to Rosneft for 50.08% share acquisition in Bashneft. According to the Investigative Committee Alexey Ulyukaev also used threats to block the Rosneft’s operations in future.

Many commentators say that it is a first time in the modern Russian history, when a member of Government is charged with corruption. Despite the Kremlin’s calming statements, this case will seriously hurt Russia’s investment climate, which is already affected by a number of external factors.

17.11.2016 — Constitutional Court to Review the European Court of Human Rights’ Conclusions on the YUKOS Case

The Russian Ministry of Justice has filed an application with the Constitutional Court of Russia, requesting it to find that the ECHR’s decision in favor of YUKOS shareholders is inconsistent with the Russian Constitution and therefore non-executable. The ECHR previously ruled that Russia had to pay 1.866 billion Euro to YUKOS shareholders for violating their property rights.

The application to the Constitutional Court manifests Russia’s disagreement with ECHR’s conclusions and the record high compensation awarded to YUKOS shareholders. Previously, the Strasbourg Court relied on the property rights guarantees enshrined in the European Convention on Human Rights to rule that Russia was obliged to return the tax fines paid by YUKOS in 2000-2001 in the total amount of 1 billion EUR. The Court stated that Russian commercial courts’ decision to overcome the statute of limitations as well as the authorities’ decision to recover 7% of those sums as an enforcement fee, largely causing YUKOS’s liquidation, were unlawful.

Initially, Russian authorities did not use their right to seek review of the ECHR’s decision in its Grand Chamber. Moreover, in 2013 Russia provided the Council of Europe with a roadmap for executing the decision, assuring that similar violations would not occur in the future. Yet, currently the Ministry of Justice attempts to get the ECHR’s reasoning reviewed at the national level, which is at odds with the fundamental principles of international law.

The application is to be considered by the Constitutional Court on December 15. However, even if the application is granted, Russia will still be obliged to comply with the ECHR decision on the international level. 

16.11.2016 — It Will Be Possible to Conclude Employment Contracts Online

The Ministry of Labor and Social Welfare (Mintrud) is currently working on the unified web portal for concluding employment contracts online. Both employers and potential employees will have direct access to the state system, which is to be titled “Electronic Employment Contract”. This is expected to reduce the expenses associated with contract conclusion and will facilitate legalization of de facto employment.

If the amendments are passed, the employment law will directly allow to conclude employment contracts online, subject to voluntary consent of both parties. This is first and foremost aimed at simplifying contract conclusion with remote employees, whose number in Russia currently exceeds 5 million.

Contract signing will take lace via the unified system of identification and authorization of the Governmental Services Portal (Gosuslugi). After signature, the employee will also have an option of obtaining the contract in paper in the nearest multifunctional state services center. 

15.11.2016 — Russian Hotel Business Shows Rapid Growth

Russian newspaper Kommersant reports that the overall investment into Russian hotel business has skyrocketed by 18 times over 2016. Thus, investments in Russian hotels amounted to 627 million USD this year, as compared to 34 million USD only in 2015.

Investors appear to be positive about real estate and hotel business in Russia as a method for securing capital and deriving revenue, which was particularly fueled by the recovery of prices in this industry, as well as the growing demand for domestic tourism destinations caused by sanctions. The demand for hotels has also been rapidly growing, with tourists actively seeking comfortable residencies. Hotels in Moscow and Saint Petersburg experienced a record-high load in history over the summer, while the average revenue per hotel room in Russia increased by 14.9%.

Despite the economic and political crisis, the rates of Russian hotel business growth remain higher than in most European countries. Experts note that many other investment deals in this sphere are forthcoming, which will contribute to further development of this market. 

14.11.2016 — Companies May Be Obliged to Report Their IP Addresses to State Authorities

The Russian Ministry of Communications has proposed legislative amendments to the Federal Law “On Communications”. Under the amendments, all companies using the Russian Internet via IP addresses or autonomous networks will be obliged to report their internet addresses to the state authorities, for inclusion into a new state information system. The procedure and other specificities of such reporting are to be determined separately if the bill is passed into law.

The amendments are officially aimed at ensuring integrity, stability and security of the Russian internet. If the amendments are adopted, they will apply to all companies within the jurisdiction of the Russian Federation and will therefore not only affect companies established in Russia, but also foreign companies, whose activities are aimed at the Russian market.

Currently the amendments are at their public hearing stage, which means that the public is free to provide feedback (