09.03.2018 — Vast Majority of German Companies Stand for Abolition of Anti-Russian sanctions
According to the report of the Russian-German Foreign Trade Chamber and the Eastern Committee of the German Economy, 94% of German companies operating in the Russian market support the lifting of sanctions imposed by the EU against Russia. According to the survey, most German companies are convinced that anti-Russian sanctions seriously impede the conduct of business in Russia. Furthermore, more than half of the companies believe that there was a moderately positive improvement in the overall business climate in Russia in 2017, and two-thirds of the polled representatives of German business expect the positive development of Russian-German economic relations in 2018.
The Russian-German Foreign Trade Chamber and the Eastern Committee of the German Economy published the results of a large-scale survey on the business climate in Russia conducted among German companies. More than 140 German companies with the aggregate turnover on the Russian market is more than 11 billion Euros took part in the survey.
According to the results of the study, the anti-Russian sanctions imposed by the EU somehow obstruct to the business of three-quarters of German companies operating in the Russian market. Thus, the vast majority of German entrepreneurs (94%) support the lifting of anti-Russian sanctions. At that 57% of the respondents favor step-by-stem abolishment of the sanctions, while 37% advocate for their complete abolition.
At the same time, German companies that conduct business in Russia, in general, express hope for the positive development of Russian-German relations. At the year-end of 2017, 53% of respondents believe that there was a moderately positive improvement in the Russian business climate. As for the forecasts, 78% of companies expect positive or relatively stable development of Russian-German economic relations in 2018.
08.03.2018 — Standard & Poor’s Affirms Russia’s Sovereign Rating at BBB- with Positive Outlook
On 23 February 2018, the international rating agency Standard & Poor’s upgraded Russia’s sovereign credit rating, affirming an investment (BBB-) credit rating with “positive” outlook. According to the analysts of the agency, the commitment to conservative macroeconomic policy will support the country’s strong external and fiscal balances. However, Russian sovereign credit rating still falls far behind the ratings of developed countries, and experts’ forecasts for Russia’s economic development are extremely cautious due to the unresolved global problems, as well as the lack of significant drivers for economic growth.
Rating agency Standard & Poor’s raised Russia’s rating in foreign currency from low (“junk”) (ВВ +) to investment-grade (BBB-) with a positive outlook. The analysts took into account the strengthening of domestic macroeconomic stability in the country (budget deficit in 2017 amounted to only 1.4% of GDP), as well as unrealized risks of escalation of Western sanctions. According to experts, the Russian authorities’ commitment to conservative macroeconomic policy has made it possible to adapt to lower oil prices and to international sanctions. Moreover, the agency’s analysts complimented the Central Bank’s successful policy, due to which the Russian financial system remained stable, despite the purging of the banking sector, including the fall of a number of large private banks.
At the same time, the Russian sovereign credit rating remains at a relatively low level and is barely equal to the credit ratings of Kazakhstan, India and Indonesia. Standard & Poor’s forecasts low economic growth rates (1.7-1.8% up to 2021) and mentions such unsolved systemic problems as reduction of the working-age population, dominant role of the state in the economy and difficult investment climate.
07.03.2018 — From 1 March 2018 Currency Control Requirements for Entrepreneurs are Lightened
The new Instruction of the Central Bank on currency control, which entered into force on 1 March 2018, provides for lightening the currency control requirements for foreign trade actors. From now, instead of issuing a passport of transaction, entrepreneurs must register contracts with authorized banks. Also, the threshold values that entail the need to execute currency documentation were increased, and from now amount to Rubles 3 million (approximately US Dollars 53,2 thousand or Euros 43,5 thousand) for import contracts and credit agreements, and Rubles 6 million (approximately US Dollars 106.4 thousand or Euros 87 thousand) for export contracts. Moreover, the timeframes for the banks for registration of the contract after the respective application is filed, were reduced, and requirement to draw up currency control forms has been abolished.
In accordance with the new Instruction of the Central Bank on currency transactions dated 16.08.2017 No. 181-I, from 1 March 2018, the statutory currency control requirements are lightened. From now, instead of issuing a passport of transaction, foreign trade actors will have to register with authorized banks contracts exceeding:
- Rubles 3 million – for import contracts and credit agreements (approximately US Dollars 53,2 thousand or Euros 43,5 thousand);
- Rubles 6 million –for export contracts (approximately US Dollars 106.4 thousand or Euros 87 thousand).
Thus, the new Instruction has slightly increased the threshold values (according to the previous requirements, the passport of transaction was to be drawn up if the amount of obligations under the agreement exceeded US Dollars 50 thousand, approximately Rubles 2.8 million).
For the registration, it is required to submit to the authorized bank the contract itself, as well as other documents established by the bank, on the basis of which the bank draws up a bank control record. As in the past, if a foreign trade actor in not willing to present the full text of the agreement to the authorized bank, it is allowed to provide an extract which contains all the necessary information. The new Instruction also reduces the timeframes during which the banks must register the contracts from three working days to one. Moreover, in accordance with the new procedure, the requirement to draw up currency control forms has been abolished.
06.03.2018 — Supreme Court: Bankruptcy Procedure Is not Ground for Ignoring Principle of Inadmissibility of Reviewing Arbitral Awards on Merits by State Courts
The Supreme Court adjudicated a case in which the bankruptcy administrator tried to challenge the decision of international commercial arbitration at the enforcement stage arguing that the state court shall refuse to issue the enforcement writ. The bankruptcy administrator claimed that the transaction was mock, and the company’s debt was artificial and aimed at withdrawing assets from the bankrupt company, and therefore enforcement of the arbitral award would be contrary to public order. Moreover, the bankruptcy administrator argued that the reduced standard of proof in challenging the arbitral award shall be applied, taking into account the commencement of the bankruptcy proceedings against the debtor. However, the Supreme Court ruled that there was no evidence neither of the fact that the debt was indeed artificial, nor of the use of arbitration for the purpose of abuse of rights, consequently the recoveror is entitled to obtain an enforcement writ and have his debt included in the register of creditors in bankruptcy proceedings.
In the case No. 308-ES17-12100 adjudicated by the Judicial Chamber for Economic Disputes of the Supreme Court, the bankruptcy administrator tried to prevent a foreign company from recognizing and enforcing the award of international commercial arbitration on the ground that the decision violates public order in the field of bankruptcy and the rights of the creditors. According to the bankruptcy administrator, the company’s debt was created artificially in order to obtain control over the company’s bankruptcy procedure. At the same time, the bankruptcy administrator argued that in such cases a lower standard of proof shall be applied, since the ability of the creditors in bankruptcy proceedings to prove the invalidity of the claim, confirmed by the arbitral award, is obviously limited, including in connection with the confidentiality of the arbitral proceedings.
Yet the Supreme Court decided that the arguments of the bankruptcy administrator were unreasonable, since no evidence of any reasonable doubt in connection with the award resulting in the need to review it or the recoveror’s abuse of right were presented to court. The applicant’s arguments on the absence of the customs declaration of the disputed transaction and the absence of the cargo ship in the Russian port, on the contrary, proved the reasonableness of the claimant’s claims in an international commercial arbitration on the recovery of the advance payment made to the supplier that has not performed its obligations under the supply contract.
The Supreme Court also emphasized that the arbitral tribunal has exclusive competence to consider the dispute on the merits and that it is inadmissible to review its decisions at the recognition and enforcement stage. The commencement of the bankruptcy procedure against the debtor cannot be a reason for ignoring this principle, thus the recoveror has the right to receive the execution writ and have his debt included in the register of creditors in bankruptcy proceedings.
05.03.2018 — Contractor Shall Not Be Liable for Delay in Performance of Works due to Customer’s Fault
In the case adjudicated by the Arbitrazh Court of the Urals District, the contractor performed construction works with delay, and the customer filed a claim to the court on the recovery of the penalty. At the same time, the court found out that the customer also acted in bad faith, because he failed to provide the contractor with the necessary technical documentation and the required statutory approvals. Moreover, the court noted that both sides acted in bad faith, having established in the contract unrealistically short timeframes for the performance of construction works. In the view of these circumstances, the court halved the penalty for the late performance of construction works.
In the case resolved by the court (case No. A76-1048 /2016), the parties entered into a construction contract, agreeing on a two-month timeframes for the performance of construction works. However, the works were performed late, and the customer filed a claim to the court on the recovery of the penalty from the contractor.
The court of the first instance agreed with the customer and granted the claim in full. The contractor disagreed with this decision and appealed against it, arguing that the late performance of the construction works was caused by, inter alia, the actions of the customer himself, who provided the technical documentation and received the necessary state approvals with delay. The appellate court agreed with the contractor’s arguments and concluded that both the contractor and the customer were responsible for the violation of the timeframes for the performance of construction works. The appellate court also pointed out that the parties initially agreed on unrealistically short timeframes for the performance of construction works, what contradicts the principles of reasonableness and caution. Having established the customer’s fault in the violation of the timeframes for the performance of construction works, on the basis of Art. 750, 307 and 401 of the Russian Civil Code, the court reduced the amount of the penalty awarded to the customer by half.
The Arbitrazh Court of the Urals District agreed with the arguments of the appellate court, and upheld the decision to reduce the penalty by half. Thus, in these decisions, the courts analyzed the customer’s behavior and took into account the fact that the customer shall also be responsible for the failure to perform his obligations under the contract and for agreeing on unrealistically short timeframes for the performance of construction works.