Russia and the economic recession 

As declared prior to and at the Russian parliamentary (December 2011) and presidential (March 2012) elections, under the current economic conditions Russia’s objective is to switch from a commodity-based to an innovation-driven economy. Key goals are technical modernisation, renovation in science and education, effective use of resources, and energy efficiency. The legislation is used, therefore, for concentrating resources on the country’s most important areas of development.

During 2011-2012, the Russian economy has been growing falteringly, still experiencing the impact of the European and international economic recession. Yet the crisis also resulted in agreement, after 18 years of negotiations, on Russia’s admission to the World Trade Organization (WTO). Russia, together with Belarus and Kazakhstan, is improving the Customs Union and Common Economic Space, which is to advance to an ambitious Eurasian Economic Union by 1 January 2015. A Free Trade Zone Agreement including Ukraine has been signed. Establishment of such a zone is being discussed with some other states and associations of states. Russia is also making serious efforts to accede to the Organisation for Economic Co-operation and Development.

The high cost of economic modernisation, upgrading of the armed forces and weaponry, and social commitments, as well as the fluctuating world prices for traditional export items such as oil, gas, metals, mineral fertilisers and wood, will, however, lead to a Russian federal budget deficit in 2012, despite the current positive foreign trade balance.

Russia’s accession to the WTO in 2012 will engender fiercer competition on the legal services market, thus promoting higher-quality services. Although this market is expanding, it is not yet favourable enough to lift the restraints on the scope of outside legal assistance or the pressure to lower prices. Enactment of a federal law on free legal support for low-income and certain other population categories should also be emphasised. Even so, the country's movement towards scientific and technical regeneration is opening up new prospects for the legal profession.

Legislative developments 

The Russian legal system consists of the Constitution of the Russian Federation and other federal laws; constitutions and other legal acts of the 83 constituent entities of the Russian Federation; and municipal laws. It also includes the generally accepted principles and rules of international law and international treaties to which Russia is party. Court judgments are not sources of law, yet they create case precedents.

In 2011-2012, measures have been taken to build a favourable business climate, lift administrative barriers and attract foreign investment. An agency is being set up to insure export credits and investments against business and political risks. Federal laws have come into effect providing for new legal forms of investment activity and tax benefits for venture business. Foreign investors have been granted easier legal access to participating in Russian strategic companies in the subsoil and some other areas. Foreign exchange control procedures have been simplified. The list of activities subject to licensing has been reduced. An Intellectual Property Rights Court will start functioning in 2013.

There is intensive preparatory work under way to establish an International Financial Centre in Russia for the purpose of internationalising the Russian financial market and improving circulation of securities. Much is being done to elaborate contemporary changes to the civil legislation. Federal laws have been adopted on organised bidding (exchanges), clearing and clearing activities, a central depository, and a new law on accounting (the aim being to use International Accounting Standards and International Financial Reporting Standards). A law on combating illegal use of inside information and market manipulation is now in force. It is anticipated that notaries’ rights to verify and certify transactions will be significantly expanded.

In tax law, transfer pricing issues have been regulated and the concept of a consolidated group of taxpayers has been introduced for the purposes of corporate income tax accounting and payment.

To encourage business, the rules on acquiring, using and disposing of land are being constantly revised and requirements on construction are being eased. However, these areas of legal regulation are far from harmonised.

Company law is being developed. Shareholders'/participants' agreements have been permitted. It is proposed to introduce far more stringent rules governing the liability of members of management bodies towards companies and their shareholders for losses caused.

Amendments to the legislation on insolvency (bankruptcy) are aimed at a real financial restructuring and preservation of viable businesses.

Activities to protect competition have also been stepped up and a 'third package' of amendments to antitrust laws has now been adopted. The next task is to ensure its application in practice in order to achieve the relevant results.

Much attention is being devoted to approving technical regulations within the Customs Union, implementing the federal law on energy saving and raising energy efficiency.

The narrowing of the powers of the Police and of the Investigatory Committee of Russia to interfere in company business is having a positive effect. The legislation on administrative and criminal penalties in relation to entrepreneurial activities is being further liberalised.

Specifics of the business environment 

The considerable legislative and organisational efforts to improve the Russian business climate are yielding results, though Russia is not yet always perceived, for some reason, as an easy place for investing and doing business.

Some unnecessary administrative barriers remain in the country’s economic life: too many approvals, permits, reports, and audits are required, though efforts are being made to restrict their number and scope.

The legal framework and the practice of dispute resolution in the Russian Federation are being improved. On the basis of a federal law, an alternative type of dispute resolution involving an intermediary (mediation) is being implemented. A federal law on providing information about the activities of courts in the Russian Federation has gained wide recognition; appeal courts of general jurisdiction are being set up; and the court procedures for considering commercial disputes are being improved. The powers of arbitration tribunals are being extended. Yet cases of improper court proceedings and issue of unjustified or biased court judgments are rightly noted. There is quite a lot to do to improve enforcement proceedings and the work of court enforcement bailiffs. Even so, the country is undoubtedly striving towards true justice.

Corruption remains an open problem, even though its scope is shrinking as a result of the counter-measures being taken. Russia has adhered to several anti-corruption and anti-money laundering international conventions and made appropriate changes to its domestic laws. A programme of anti-corruption measures has been adopted and is being implemented in the country. The legislation on public and municipal procurements, which are often accompanied by significant violations, is being improved.

In any event, precise and sustainable compliance with the legislation of the Russian Federation and renunciation of attempts to get round it should ensure any businessman in Russia legal success.