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New laws to encourage investment activities

Three new federal laws recently became effective in Russia: the Law on Special Economic Zones, the Law on Concession Agreements and the Law on Credit Histories. These laws will facilitate and protect foreign investment, enhance predictability when dealing with Russian investment targets and help to develop the Russian business landscape.

Law On Special Economic Zones

The new Law on Special Economic Zones 116-FZ of July 22 2005 defines a special economic zone (SEZ) as a part of the Russian Federation where special favourable conditions for business apply. After the law took effect on August 27 2005, all special and free economic zones established prior to its enactment ceased to exist, except for two zones in Kaliningrad and Magadan.

Under the law, the Russian government can establish two types of SEZ for no more than 20 years. These are industrial production zones and technical innovation zones. Presidential decree 855 of July 22 2005 states that the new Federal Agency for Management of Special Economic Zones will administer the SEZs. In the SEZ territories, foreign-manufactured goods will be subject to a free customs zone (which means they can be imported and used without payment of customs duties or VAT, and without economic restrictions applicable in the Russian Federation).

Russian-manufactured goods in the SEZs will be subject to the export regime, which involves paying excise tax but not export customs duties. Additionally, there are certain benefits in the Tax Code, the Customs Code, the Land Code and other legislative acts.

Law on Concession Agreements

The new Law on Concession Agreements 115-FZ took effect on August 8 2005. The aim of this landmark act is to boost investment activities, ensure effective use of state and municipally owned property, and enhance the quality of goods and services in Russia.

Under a concession agreement, a grantee (either a Russian or foreign legal entity, participants in a joint-venture agreement or an individual entrepreneur) shall at its own expense create or reconstruct the concession facility owned by a grantor, and then operate it. Meanwhile the grantor (either the Russian Federation, a constituent of the Russian Federation or a municipal unit) gives the grantee the right to possess and use the facility.

The concession facilities may include the following types of immovable property: transport and municipal infrastructure, sea and river ports and vessels, airport infrastructure, pipelines and waterworks, public transport, and medical, recreational, sports or educational facilities. The list of immovable property subject to concession is exhaustive and does not include industrial objects such as mining facilities.

Law On Credit Histories

The Law on Credit Histories (218-FZ), which contributes to the stability of financial relations in Russia, became effective on June 1 2005. Russian credit institutions were given until September 1 2005 to choose at least one credit bureau to enter into agreements with. The bureau had to be included in the state register of credit bureaus maintained by the Federal Service for Financial Markets.

The law provides a framework for credit bureaus to generate, process, store and disclose data on the performance of borrowers' credit obligations. It also enhances the creditors' and borrowers' security by mitigating credit risks and making financial organizations more efficient. As of October 2005, four credit bureaus have been registered in Russia.

Sergey B Komolov

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