08.03.2019 — International Agencies Raised Russia’s Rating To Investment Grade
International agencies Moody’s and S&P acknowledged improvement of Russian economic policy and raised Russia’s independent rating to investment grade. However, according to experts, the Russian economy needs structural reforms for the future development.
International agencies Moody’s and S&P raised Russia’s rating to investment grade «Baa3» and «BBB-», respectively, and Fitch confirmed the country’s investment rating at “BBB-” level with a “positive” outlook. Russian markets expectedly reacted to these changes by rise of stock prices in the Moscow Stock Exchange.
At the same time, the forecast for the Russian economy provided by experts of international rating agencies is not very optimistic. According to experts, Russia will not be able to achieve substantial economic growth in the absence of reforms focused on solving such structural problems as the predominant role of the state in the economy, the negative investment climate, the lack of competition and innovations. Thus, according to S&P outlook, GDP growth will be 1.7–1.8% in the next 3 years, the level of citizens’ savings in relation to GDP will drop to 1.7%, and the national currency will gradually devalue.
07.03.2019 — Construction Permit Issued in Circumvention of Procedures Provided for by Land Laws May Be Invalidated
In one of the cases, recently adjudicated by the Supreme Court, the developer originally received the land for recreational purposes. However subsequently changes to the lease agreement were introduced, allowing the construction of recreational facilities. This allowed the developer to receive the constriction permit, which was later invalidated by the local authorities with reference to the fact that the developer obtained the land plot in circumvention of the procedures established by the land laws. Lower courts declared the invalidation of the previously issued construction permit illegal. However, the Supreme Court overruled the decisions of the lower courts and remanded the case for a new trial, instructing the lower courts to review, whether the developer received the land plot for construction purposes in compliance with law.
In one of the cases cited in the Case Law Digest (case No. А76-17007/2016) the company leased from the local authorities the land plot with the type of permitted use “for recreational purposes”. Afterwards, in accordance with the local authorities’ administrative order, the type of permitted use of the land plot was changed to “for the construction of recreational facilities”, and the respective changes were made to the lease agreement. After that, the company obtained a constriction permit. However, soon the local authorities issued the order that invalidated this construction permit, because of the violations revealed in the procedures of providing the land plot and issuing the construction permit. The company challenged the order in court.
The courts of all three instances granted the company’s claim, but the Supreme Court reversed the decisions of the lower courts and remanded the case for a new trial. The Supreme Court explained that title documents in respect of the land plot are necessary to obtain the construction permit. The courts of lower instances ruled that the land lease agreement and the additional agreement thereto, in compliance to which the company was granted the right to possession and use of the controversial land plot, were sufficient to prove the company’s title to the land plot and its right to construct on it.
However, the Supreme Court emphasized that the lower courts had not taken into account that the Land Code sets different procedures for providing state land to private parties for construction purposes that as a general rule shall be provided as a result of tender procedures, and for purposes not related to construction – in this case the procedure is facilitated. Thus, the Supreme Court decided that the actual actions of the company and the local administration were aimed at bypassing the procedure established by law for provision of the land plots for construction purposes. Therefore, the Supreme Court ruled that the company did not have the title that allows construction on the land plot, and therefore the local authorities were not entitled to issue the construction permit.
06.03.2019 — Supreme Court Confirmed Legitimacy of 24-h/7-day Remote Access of Russian Federal Security Service and Ministry of Internal Affairs to Databases of Communications Service Providers
In one of the recent cases the communications service provider challenged his statutory obligation to provide the Russian Federal Security Service and Ministry of Internal Affairs with 24-h/7-day access to the databases of provider subscribers and store the relevant information for 3 years. In support of its claims, the provider referred to the fact that the provision of such access is not provided for by the federal legislation, leads to significant organizational and financial costs for communications service providers, as well as violates the constitutional rights of citizens to privacy. However, the Supreme Court disagreed with these arguments, pointing out that the citizens’ right to privacy may be limited by the federal law, and the need to provide state agencies with 24-h/7-day access to databases flows from the necessity to perform criminal intelligence and surveillance operations urgently, in some cases without court order.
One of the recent cases adjudicated by the Supreme Court concerned the legitimacy of the statutory rights granted to the Russian Federal Security Service and Ministry of Internal Affairs to enjoy 24-h/7-day access to databases of communications service provider, including the information on phone calls, SMS messages, Internet sessions, etc. Russian providers are obliged not only to ensure the government agencies’ access to this information, but also to keep it for 3 years. To challenge the respective legal provisions the provider argued that the provision of access to the database is costly for telecom operators, and the procedure for providing information by operators is not stipulated by federal law, further, the provision of such access to personal data without users’ consent and without court decision is against the Federal Law “On Personal Data”.
The Supreme Court disagreed with the arguments of the claimant and confirmed the legitimacy of the provisions in question (Decision of the Supreme Court of the Russian Federation dated 12.19.2018 in case No. AKPI 18-1109). To justify this decision, the Supreme Court referred to the Federal Law “On criminal intelligence and surveillance operations”, which stipulates that criminal intelligence and surveillance operations that restrict the constitutional rights of citizens to privacy of correspondence can by performed on the basis of a court order, and in some cases on the basis of a decision of the head of the police office, with subsequent notification of the court. In addition, the legislation does not establish a time frame for providing such access to databases. Moreover, the Federal Law “On criminal intelligence and surveillance operations” gives the right to conduct these activities immediately, including at night. The claimant’s argument about the high cost of the respective telecom operators’ duty was dismissed, because the Federal Law “On Telecommunications” obliges telecom operators to comply with all statutory obligations, necessary for the activities of the Russian Federal Security Service and Ministry of Internal Affairs. The argument that this procedure contradicts to the Federal Law “On Personal Data” was also dismissed, as far as according to the Russian Constitution the prohibition to disclose personal data to third parties without consent may be restricted by federal laws.
Thus, the Supreme Court confirmed the legitimacy of the statutory right of the Russian Federal Security Service and Ministry of Internal Affairs to receive 24-h/7-day remote access to databases of communications service providers.
05.03.2019 — President Instructed Ministry of Justice to Prepare Legislative Amendments, Mitigating Legislation on Administrative Responsibility
According to the results of the last forum of the All-Russian public organization “Business Russia”, the President Vladimir Putin instructed the Ministry of Justice to develop changes in legislation regarding the mitigation of legislation on administrative responsibility. Among the proposals were the prohibition of simultaneous application of administrative penalties to the company and its officials for the same action, the ban on the using of several administrative penalties for similar offenses and a number of other measures.
Following the results of discussion of business problems at the last forum of the All-Russian public organization “Business Russia” the President of the Russian Federation proposed to make changes in the legislation on administrative responsibility in order to improve the business climate and mitigate administrative legislation.
Currently, law enforcement agencies widely practice the simultaneous imposition of fines on both the company and its officials, as well as the imposition of multiple fines for similar violations, responsibility for which is provided for by one article of the Russian Federation Code on Administrative Offenses. The President proposed to eliminate this practice at the legislative level.
Also, in order to make available the objectivity of the cases consideration on administrative offenses, it was proposed to exclude the possibility of consideration of cases initiated as a result of inspections by government officials who participated in the inspection as inspectors.
04.03.2019 — FTS Clarified Procedure for Applying Newly Established Cadastral Value for Tax Purposes
The Federal Tax Service clarified when the new cadastral value of real estate becomes applicable for tax purposes. In particular, the results of determination of the cadastral value shall come into force on 1 January of the year following the year, when the cadastral valuation was conducted, but not earlier than one month after the date of official publication of its results. The beginning of application of the new cadastral value does not depend on the date, when the information was actually included in the Unified State Register of Real Estate.
On 1 March 2019 the Federal Tax Service published clarification on when the new cadastral value starts to be applied for tax purposes after it has been changed.
According to this clarification, the date when the newly approved cadastral value becomes applicable for tax purposes depends on the date of entry into force of the Act approving the results of the cadastral evaluation and does not depend on the date, when the information on the new cadastral value was included in the Unified State Register of Real Estate. At the same time, the above-mentioned Act enters into force on 1 January of the year following the year of the cadastral valuation, but not earlier than one month after the date of its official publication.
Thus, if the results of determination of the cadastral value of real estate are approved by legislative acts adopted in 2018, which enter into force on 1 January 2019, then the established cadastral value becomes applicable for the property tax of individuals and organizations, as well as for the land tax starting from the tax period of 2019.