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Localization of production and import substitution: new business opportunities under sanctions

The weakening of the Russian economy, taking place against the backdrop of Western sanctions and falling world energy prices, has a negative impact on foreign trade, the volume of which has declined significantly over the past year. In the current situation, the desire of the Russian authorities to assist the development of internal industrial production appears to be expected and consistent.

A significant step in this direction was the adoption federal law"On industrial policy in Russian Federation» dated December 31, 2014 No. 488-FZ, which entered into force on June 30, 2015.

Who will be affected by the law?

The law applies to almost all sectors of Russian industry. Its effect extends to economic activity related to mining, manufacturing, supply of electricity, gas and steam, air conditioning, water supply, sanitation, waste collection and disposal, as well as the elimination of pollution.

Support for a domestic manufacturer - what business opportunities open up?

The law provides for a set of measures aimed at supporting the industry. In particular, such measures include financial support, including subsidies from budgets of various levels, the conclusion of special investment contracts, etc. In turn, the subjects to which these measures will be applied are legal entities and individual entrepreneurs operating in the industrial sector on the territory of the Russian Federation, its continental shelf and the exclusive economic zone.

As a separate incentive measure, the principle of priority of industrial products manufactured in the territory of the Russian Federation over foreign industrial products when making purchases to meet state and municipal needs and purchases has been established. certain types legal entities.

The procedure for applying incentive measures will be determined by the Government of the Russian Federation. It should be noted that for the application of the law in question, by-laws are required that develop its provisions. Some of them have already been adopted, including the Decree of the Government of the Russian Federation, which establishes criteria for recognizing products manufactured in Russia, as well as having no analogues manufactured in Russia (hereinafter referred to as the “Resolution”). Almost fully formed legal framework on the issues of concluding special investment contracts. Acceptance of all normative documents necessary for the full implementation of the law is likely to be completed by the end of 2015.

Who is domestic manufacturer?

Formally, neither the law nor the Decree uses the term “domestic producer”, but it is understood that if a person produces goods in Russia and the authorities agree that these goods are goods of Russian origin, then such person is a domestic producer and may be subject to incentive measures provided by the legislation on industrial policy.

Taking into account the goal pursued by law to support import substitution, it should be expected that incentive measures will be associated with the localization of production in the territory of the Russian Federation. The basis for such an assumption is, in particular, the provisions of the Decree establishing the criteria for recognizing the goods as industrial products manufactured in the territory of the Russian Federation. The proposed criteria provide for the localization of production to one degree or another. In turn, industrial products, in respect of which the project does not provide for special requirements, will be considered produced in the territory of the Russian Federation on the basis of the criteria determined by the Agreement of the Governments of the member states of the CIS countries dated November 20, 2009 "On the Rules for determining the country of origin of goods in the Commonwealth of Independent States ".

Also, industrial products manufactured in the territory of the Russian Federation will be recognized as products manufactured under special investment contracts.

It should be noted that the Decree does not establish the procedure for confirming domestic production itself. It will be determined by the order of the Ministry of Industry and Trade.

Practical advice - what should I pay attention to?

Since the regulatory framework for the application of the law has not yet been fully formed, we recommend that representatives of the business community carefully monitor the publication of draft documents that develop its provisions. Most likely, many of them will be submitted for public discussion, including within the framework of the regulatory impact assessment procedure.

In turn, when conditions are created for the "full-format" application of the law on industrial policy, perhaps the most pressing issues will be the recognition of industrial products manufactured in Russia and the application of incentive measures. For foreign investors can also become topical issues compliance of the measures applied in Russia with the requirements of the WTO.

Vladimir Chikin,

Partner, Customs law and international trade , Goltsblat BLP

Vladislav Safonov,

Senior lawyer, Customs Law and Foreign Trade, Goltsblat BLP

A series of articles dedicated to the largest Russian companies has been completed. The main reason for writing this series was the desire to analyze and describe the largest representatives of the Russian economy and business, as well as to try to assess the structure and development prospects of each large domestic company separately. I hope that the articles written by me will be able to help site visitors in analyzing and evaluating representatives Russian business. In this publication, to simplify the search for a company of interest, they will be sorted by industry structure.

Stock oil companies have always been of interest to investors. is the main item of Russian exports, accounting for about a third of all exports to monetary terms, and together with oil products, this share is almost 50%. In addition, prices for the third main component of exports significantly depend on the level of prices for oil and oil products. The largest representatives of the Russian oil and gas industry are such companies as:

• leading Russian companies
• extraction and transportation of oil and gas
• credit and financial companies
• telecommunications companies
• companies in the engineering industry
• energy industry companies
• chemical industry
• company consumer

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Russian business increasingly prefers to make transactions under domestic law and sue at home. According to a study by Legal Insight and the Internet Initiatives Development Fund, more than 65% of Russian lawyers are ready to use domestic jurisdiction when concluding investment transactions. Experts unanimously confirmed this trend. The fall of the ruble exchange rate and the “collapse” of demand are cited as reasons; undesirability for many state-owned companies in the current international situation to use foreign law; the deoffshorization of the Russian economy announced by Putin; and finally, changes to the Civil Code with clearer rules regarding guarantees, assurances of circumstance, etc.

Russia's legal and judicial systems may be celebrating victory - Russian businesses are increasingly choosing to transact under domestic law and sue in their native courts rather than in the UK. Although the proportion of transactions made with the so-called clause under English law is still high, there has been a clear trend towards a return to Russian justice, experts interviewed by Profile note. But just a few years ago, the problem of the mass exodus of businesses to foreign jurisdictions in the Russian legal community was considered one of the key ones. The reform of legislation, the judiciary, deoffshorization, the economic crisis, political isolation - all this led to the victory of the domestic Themis.

And yet, while it looks like one battle won, the end of the war is far away. And strategically, perhaps it is the UK that wins in it - and not Russia, but the whole world, since it is simply more convenient for business to use English law than any other.

Gentlemen's Preferences

Seemingly purely legal, the problem of leaving for a foreign jurisdiction has a fairly clear explanation. Actually, jurisdiction is the law of the country that the two parties agree to apply to their transactions, in the courts of which they will resolve disputes if they arise. That is why we have witnessed high-profile "showdowns" of Russian oligarchs in the UK. So, in the High Court of London in 2012, Oleg Deripaska and Mikhail Cherny divided the shares of Rusal. The late Boris Berezovsky, who claimed compensation for the shares of Rusal and Sibneft, then and there lost to Roman Abramovich. Among the well-known "cases" are also "VTB v. Nutritek, YUKOS v. Rosneft", "Slutsker v. Haron Investments. Those were the times when the oligarchs divided their millions, and the media relished how British lawyers replenished the lexicon with new terms - kidalovo, krysha, dolya, obschak, vor-v‑zakone.

But British justice was preferred not only by Russian business celebrities. As a result, in 2012 the problem of “flight” of Russian business to foreign jurisdictions was named one of the key ones. It was discussed in the State Duma and at round tables of the professional legal community. According to a study conducted at that time by the law firm Egorov Puginsky Afanasiev & Partners (EPAM), 57% of respondents either did not submit their transactions to Russian law at all, or assigned no more than 10% of them to it. Only 33% of the surveyed businessmen working in Russia issued Russian laws up to half of the transactions, and most of their contracts agreed to subordinate them to no more than 10% of companies.

The legal publications Legal Insight and The Lawer conducted a survey in the same year among representatives of the legal departments of leading Russian companies. " This study once again confirmed the existence of a long-discussed problem in Russia - the inconvenience domestic law for the needs of business,” the authors of the study noted. The consequence of this was "the widespread use in certain sectors of the domestic economy (primarily in the investment business, banking, development) of English law." According to the results of the survey, 77% of respondents worked in companies, the majority of whose activities were carried out in Russia. Of these, 37% were involved in litigation in foreign countries, mainly in the UK (12%) and Cyprus (8%). In addition, 56.5% of respondents called Russian law “uncomfortable” for doing business.

Comfort in English

The company is registered, operates and deals in Russia and often with Russian partners, but with a reservation under English law. This means that the lawyers write the contract in accordance with British contract law and entrust the resolution of emerging disputes to the English courts. Why does business do this? Because it is more convenient for him, and comfort is the key word here.

The Russians have become adept at this for a long time, says Evgeny Zhilin, a partner at the law firm YUST, and they are already not much inferior to the average English lawyers. “Russian lawyers have long since learned to draw up transactions in English law, and the participation of English lawyers in these transactions is not always significant,” he says. – It often happens that Russian lawyers on both sides take a deal in English law, negotiate, draw up draft documents, and then simply give them for verification to an Englishman who, for £5,000-15,000, says that everything is OK, or something corrects if, for example, a new precedent has appeared.

The advantage of the British system is simple, says Zhilin: “In English law, what works is what is agreed upon. If you don't do it, you will be forced." “In Russia, the parties do not yet always understand how much what is written, agreed upon will be executed through the judicial system,” he compares with the domestic system. “This moment of uncertainty about the consequences is a key deterrent.” English contract law is flexible, based on the principle of freedom of contract, adds Alexander Garmaev, head of the VEGAS LEX Corporate Projects Group. “English law allows the parties to settle the relationship at their discretion and does not establish unreasonable prohibitions,” he explains. - It is also believed that law enforcement practice with regard to provisions of English law is relatively predictable - it is possible to predict in advance how the court will interpret the disputed provisions.

However, other European judicial institutions also enjoy a high level of confidence in Russian business, says Garmaev, for example, the courts of Stockholm and Paris. “Various offshore jurisdictions are still popular, among which the largest is still in Cyprus,” continues Goltsblat BLP partner Matvey Kaploukhy, specializing in corporate practice, mergers and acquisitions. – Among non-offshore jurisdictions, Holland is often chosen. Key considerations when choosing a jurisdiction are taxes, including having a convenient double taxation treaty, as well as the cost of administering a company.” For commercial transactions, Zhilin notes, Swiss law is often used, it is considered quite neutral. Dmitry Stepanov, a partner at Egorov Puginsky Afanasiev & Partners, explains that Switzerland (like England and Austria) is chosen for business inheritance proceedings, and in trust disputes ( trust management property) is also dominated by Switzerland and England. And yet English law leads the way in most commercial transactions. “Although the place may not necessarily be London, but Cyprus, Jersey, Maine, the British Virgin Islands and others,” Stepanov explains.

How things have changed

Only four years have passed, and the picture has changed. According to a study conducted at the end of last year by Legal Insight and the Internet Initiatives Development Fund (IIDF), more than 65% of Russian lawyers are ready to use domestic jurisdiction when concluding investment transactions. In total, more than 500 lawyers from large companies and law firms were interviewed. Of these, 23% consider it acceptable to use Russian law for a transaction amount of up to 120 million rubles, 13% - up to 60 million rubles. And 80% of companies ready to use domestic jurisdiction for transactions from 2 billion rubles. and above, according to the survey, already have experience with Russian law. Approximately the same assessment is given by Zhilin from YUST. If earlier, according to him, the number of transactions in the English jurisdiction and in the Russian one was in the ratio of 90% and 10%, now it is "about 80% to 20% or 75% to 25%."

Experts unanimously confirmed the trend towards the return of business to domestic jurisdiction. “The number of transactions concluded within the Russian jurisdiction is growing. Clients are increasingly turning to just such installations: we will make a deal under Russian law, - says Zhilin. – I think that in the future the number of Russian transactions will gradually increase. Including foreign partners, if the main vector (areas of activity) is Russian, if the company is located in Russia, they often already recognize that the shareholders' agreement should be subject to Russian law. This year we have already supported several such major transactions of leading Russian companies. But, as a rule, we are talking about the creation of joint ventures, and not about buying and selling a business in its classic form.”

Legal Insight and IIDF researchers say that “today, more and more companies are “looking” towards Russian law in the face of the depreciation of the ruble and the “collapse” of demand.” Garmaev also noted this factor: “A sharp change in exchange rates has led to the fact that the services of foreign lawyers for supporting transactions and litigation have become significantly more expensive.” However, Zhilin considers the impact of the fall of the ruble unprincipled. “If we are talking about large transactions, estimated at least tens of millions of dollars, then the costs of lawyers against this background are insignificant,” he says. – This can be a defining moment only for micro-transactions – up to $10 million, where we are talking about start-ups or small companies. It can really be expensive to pay lawyers £100,000-200,000 there. Of course, the cost of the services of Russian lawyers is somewhat, and sometimes noticeably lower.” At the same time, he recalls that Russian lawyers with English law have long been on “you”.

The second reason is political. “For many public sector companies, the use of foreign law has become undesirable given the current international situation,” Garmaev stated. “The degree of state intervention is seriously increasing, there are more and more companies with state participation, including those in highly sensitive sectors of the economy,” agrees Zhilin. “Therefore, in a number of cases, the choice of Russian law is dictated by, as they say, installation aspirations - to apply Russian law in a revealing way, to hang an order on your chest.”

The third reason is of a legislative nature: the deoffshorization of the Russian economy initiated by President Putin. “More and more deals are being made under Russian law, and this is largely due to policies that make using offshore companies extremely onerous,” says Golsblatt BLP's Kaploukhiy. And Garmaev explains that as a result of the tax changes in the course of deoffshorization, “transactions with the use of foreign structures became inappropriate in terms of tax issues.”

But the changes made to the Civil Code. In recent years, it has been replenished with new rules governing legal relations that are important for business. “Now in Russian law, transactions on joint ventures (joint ventures), sale of business and individual assets, shareholder agreements, options to purchase or sell shares, shares, irrevocable powers of attorney to vote are easily concluded,” Stepanov lists from EPAM. Russian law has tightened up - some tools have appeared that were not there before, Zhilin confirms: “These are more detailed and understandable rules regarding the agreement of shareholders, conditional transactions, the so-called escrow (deposits that ensure the execution of transactions). There are clearer rules regarding guarantees, assurances of circumstances and so on,” he also gives an example.

British fashion

But the most big deals, says Zhilin, are still not in Russian law, and disputes over these transactions are not resolved in Russian arbitration. “Probably, it is too early to say that Russian law is on the same level as English law in terms of convenience and flexibility in regulating contractual relations,” the lawyer believes.

And there are reasons for that too. The first is the dubious quality of Russian justice, which all experts are talking about. Two years ago, the Russian Themis was seriously reformed. The Supreme Arbitration Court (SAC) was liquidated, and its functions were taken over by economic board Supreme Court. “Now they are summing up the first results: how efficiently and successfully the Economic Collegium is working,” says Zhilin. - The general message is that it was done in vain. Rather, the judicial system has lost rather than gained from this.” “The liquidation of the EAC can rather be called a step in another direction,” agrees Kaploukhy. - And the reform of the legislation on arbitration courts is controversial, as it is designed to bring order to arbitration courts, but at the same time it actually closed corporate disputes in Russian arbitration courts and the International Commercial arbitration court at the Chamber of Commerce of the Russian Federation. Gamaev, in turn, notes that business has "certain doubts about the transparency of the Russian judicial system." Without the institution of law enforcement, only "on paper", even the most progressive norms will not work, Stepanov sums up. "It is necessary to create an authoritative arbitration - a non-state arbitration court for commercial disputes, where Russian commercial law would be applied and, more importantly, developed," he is sure.

Legislatively, too, much would still need to be improved, lawyers say. “It is necessary to create mechanisms for transferring business to heirs, but without splitting the business, as happens in conventional inheritance, but with keeping the “business on the go,” Stepanov believes. – Because the captains of Russian business are getting old and are thinking about who and how to transfer their assets. It is necessary to introduce into our law some analogue of a trust (in continental law, and not only in English, it exists and works great), otherwise many complex corporate structures and will further structure holding companies outside the Russian Federation.

But actually the differences between the two systems of law - the Anglo-Saxon case law (England and the USA) and the continental (Europe, Russia) - are the main reason for the departure of business to British jurisdiction. We, Russians, Europeans, unlike the British, just have a different basic model of legal consciousness, says Zhilin. “We are not used to writing 200-page contracts, because we have the Civil Code, which itself is quite detailed and large, clearly regulating many relations,” he explains. - Therefore, contracts are often written on two or three pages, see the rest in the Civil Code. Not so in England. There, everything that you agreed on should be in the contract, they don’t have any Civil Code, and no one will help you. Therefore, the contracts are so large, long, detailed. To the uninitiated reader, they may even seem ridiculous in their casuistry and detail, but nevertheless, that is how they work.

And the codification of legislation - the desire to reduce disparate norms into codes - characteristic of the countries of the continental system of law, has become a problem not only for Russian business - everyone prefers Britain. “You won't find a single normal loan deal where foreign banks would lend money and which would not be concluded under English law,” says Zhilin. “That just doesn't happen. It is clear that here one clings to the other. Many banks originate from England and have historically been pulled forward by their own lawyers. But even German banks now very often make credit transactions under English law. That is, it is not typical Russian problem, this is a problem in so many jurisdictions, and everyone, in fact, is learning from more advanced legal orders.

The Russian legal system has one advantage. After the collapse of the USSR, although our country adopted in many respects the legal traditions of continental Europe, it also learned from the Anglo-Saxon system. There is potential for further improvement, Zhilin believes. “I am more than sure that Russian law has a fairly high adaptive capacity, because it absorbs not only the institutions of continental law, but also Anglo-Saxon law,” he says. “They don’t get along well, but it works.” The only thing left to do is realize this potential.

Currently, the Russian pharmaceutical industry is considered to be developing in comparison with the global industry. Figure 1 shows that the volume of production of medicines in domestic market increases every year. For example, in 2012, the volume of production in Russia amounted to 127.2 billion rubles, which compared with 2011 showed an increase of 25%.

Figure #1. Dynamics of production volumes medicines on the territory of the Russian Federation, 2003-2012

According to the Federal State Statistics Service, about 150 companies specialized in the production of medicines in Russia in 2012. At the same time, this figure did not include representatives of small businesses, which are becoming more and more every day. It should be noted that in 2011 the 20 largest companies produced more than 65% of the total output. This means that most of the demand from consumers for medicines is satisfied mainly by the leading pharmaceutical companies, the rating of which is presented in table No. 6.

Based on the data given in Table 6, we can say that among the leading manufacturers in the domestic market of Russia, enterprises of major foreign pharmaceutical companies prevail, for example, such as Sanofi-Aventis, Novartis International AG, Berlin-Chemie, F. Hoffman - La Roche", "Bayer", "Nycomed", "Teva Pharmaceutical", etc. It should be noted that only one of the 20 largest manufacturing companies in the domestic market Russian company, while taking an honorable third place in the ranking in terms of sales - JSC "Pharmstandard".

This company specializes not only in the production of medicines, like many Russian enterprises, but moreover, it develops new original medicines. Pharmstandard products meet the requirements Russian standards. In addition, the company is ready to adopt its production in accordance with international quality standards, having approved a plan for the transition to European standards by 2014. The main products of "Pharmstandart" are medicines that have received universal recognition from consumers in connection with their high quality and efficiency. Examples of such drugs include Arbidol, Pentalgin, Afobazol, Biosulin, etc.

As for the French pharmaceutical company Sanofi-Aventis, which ranked first in the ranking of the 20 largest manufacturers in the domestic domestic market, its success is due to the large number of public procurements (about 40%). Although the sales of this company decreased by 10% compared to 2010, this did not become an obstacle for the company to take a leading position. The second place belongs to the transnational pharmaceutical corporation Novartis international AG, which, like Sanofi-Aventis, sells in the state segment - about 40%.

It should be noted that among the major manufacturers in Russia there are domestic enterprises that are partners of foreign pharmaceutical companies. A striking example of this practice is JSC Nizhpharm, which took 24th place in the ranking of leading drug manufacturers. Since 2008, it has been part of the international holding Stada.

At present, the quantity foreign companies in the domestic market is increasing every year. At the same time, the share of Russian manufacturers is declining: according to research by the Pharmexpert CMI, starting from the late nineties and ending today, the number of domestic representatives in the domestic market has decreased from 58.4% to 20%. This situation is unfavorable for domestic companies. That is why the state provides support in the development of the Russian pharmaceutical industry. Experts say that according to pessimistic forecasts, in the near future the share of domestic pharmaceutical companies may be reduced to 5-10%, while the bulk of the market will be acquired by foreign manufacturers, occupying the remaining 90-95%. Naturally, it is impossible to allow the situation to reach such an outcome, since the pharmaceutical industry is a strategic one. If the health of our nation is in the hands of foreign companies, then this will make Russia dependent on them, and nothing good can be expected from this.

It is also worth noting that one of the main problems in the Russian pharmaceutical market is the production of counterfeit products. Naturally, this problem also occurs in foreign markets, where such organizations as the Association of International Pharmaceutical Manufacturers and the Coalition for the Protection of Intellectual Property Rights are actively fighting it.

According to official data, more than 15% of drugs that unscrupulous manufacturers supply to pharmacy chains for subsequent sale turn out to be unsuitable for consumption. This is due to the fact that these medicines are fakes that do not have any useful properties for the end consumer, and moreover, in some cases, they can even harm health, thereby worsening the patient's condition. It should be noted that the share of counterfeit pharmaceuticals produced by domestic companies reaches 67%.

In connection with the flourishing of falsification medical products in the domestic market large companies lose over $250 million every year: they spend a huge amount of money to fight counterfeit products, they suffer from lost profits that are appropriated by unscrupulous manufacturers of counterfeit medicines.

In order for the manufacturer to be able to prove that the products are manufactured in, he should indicate the level of localization of production as a percentage, says a government official who takes part in considering issues related to the implementation of the import substitution program.

In order to help resolve this problem, the Ministry of Industry and Trade has prepared a draft document that is designed to specify the criteria by which it will be possible to determine with certainty whether a particular product should be classified as a domestic product. In addition, he describes what should be considered as goods, the analogues of which the Russian industry does not produce. This week the examination of this project will be completed, and the commissioning can be expected closer to the middle of summer. This resolution has not yet come to the Ministry of Economic Development, officials of this department said.

Main distinguishing features inherent Russian goods several. The project outlines a list of conditions and processes in Russia, the percentage of the cost of raw materials and imported components in the selling price of the finished product. The calculation must be made according to the value declared at customs or according to the documented price of their primary sale in Russia, the cost finished products formed taking into account transport costs.

In addition, a special clause deduced an indispensable condition that the manufacturer is obliged to carry out research and development activities, give preference to Russian citizens, etc.

The head of the Ministry of Industry and Trade, Denis Manturov, said during his speech this month that as various criteria are prepared, this document will be supplemented with other items.

There are two signs by which the fact of the absence of Russian-made analogues will be determined. This kind of product should not have identical characteristics, physical, chemical and other properties that are not related to its appearance, and at the same time affect the operation by more than 20%. Another sign is the selling price and the level of operating costs.

With regard to products that are produced for the needs of the defense department, already now only components made in Russia are needed, says an employee of a company operating in the military-industrial complex. According to him, there are imported components in some civilian devices, which will need to be abandoned in order not to contradict the new rules. However, since the dollar has become more expensive, it is much more profitable to use Russian components.

For companies operating in the automotive industry, the criteria have been formulated and are already in effect, according to Sollers. It also clearly spells out the responsibilities of such companies related to the degree of localization, specific obligations regarding the creation of various research centers on Russian soil and the mandatory organization of a full engine manufacturing cycle.

Companies engaged in import substitution will be stimulated by subsidies.

Various representatives of the business community note that now, due to the increased attention of the authorities to the issue of import substitution, companies whose products fully meet the requirements for Russian manufacturer may, in theory, hope for certain bonuses. However, here a significant question arises, in what format the preference will be. Would prefer a carrot or a stick, asks the representative of the RSPP.

The government says that incentives in the form of targeted investment agreements are provided for enterprises that meet the criteria. He, in addition, indicates that it will still be possible to provide an order to only one supplier if it is a participant in a special investment contract.

The Ministry of Industry and Trade has already started accepting applications from companies wishing to take part in such projects, according to information on it. The conditions say that the state will provide subsidies that can be used to reimburse costs for servicing loans taken from Russian financial institutions in the period from 2014 to 2016. Russian enterprises with projects whose cost will not exceed 5 billion rubles can participate in this casting.

In parallel, the possibility of admitting Russian enterprises to public procurement is being considered. For this purpose, a number of documents will be developed, in accordance with which the main criterion for the admission of products to public procurement will be their production in the countries participating in the Eurasian economic union. AT Russian government note that in order for a product to be considered Russian, all components must be produced on the territory of the EAEU.

idea to force foreign enterprises who wish to take part in public procurement, for several years to build a full production cycle in Russia, has been studied in the government for more than one year. However, the requirements under which companies or their products are considered to be manufactured in the Russian Federation are not sufficiently specified, this state of affairs can lead to various abuses, some foreign entrepreneurs feared.