The Russia Monitor

As I wrote last week, the FAS and other government agencies are just finishing up their proposed amendments to the Strategic Sectors Law.  The text of the proposed amendments is still not available, but the FAS did summarize some of the changes in a press release today.  The changes listed by the FAS:

• If a foreign investor already owns shares in a company, and acquires additional shares through the issuance of new stock, no agreement will be needed so long as the proportional ownership of all the owners does not change.
  
• Increase to 30 days the time for agreements on the implementation by foreign investors of conditions established by the Governmental Commission.  
• The bill will also clarify the the rights of the authorized body (i.e., the FAS) to monitor foreign investment in strategic enterprises.

FAS Head Igor Artemyev said, "Before we transfer the amendments to the government, we will hold a series of discussions with both foreign and Russian investors.  It is important for us to hear their opinions and suggestions on the proposed changes to the law, and to remove any ambiguities in the understanding and application of the law's norms."

So what should foreign investors ask for in these discussions with the FAS?  A few ideas:

•  Definition of Control - the law's provisions on what constitutes "control" - and thus what subjects foreign investors to the law's requirements - are still vague.  I assume that the FAS has borrowed legal concepts on control from its work in the anti-monopoly area.  Still, it would be better to have a binding set of criteria by which foreign investors can accurately predict whether or not a given deal will be covered by the law.
• Publication of Inquiries - since the law's adoption, the FAS has received more inquiries about the law than it has actual applications.  The FAS should make this process transparent while protecting the identities of the investors submitting the inquiries.  They could model this on the U.S. Department of Justice's FCPA Opinion Procedure Release.
• Adopt a Flexible Standard for Different Industries - if Russia must include the media industry and fisheries on the list of strategic sectors, it should at least differentiate them from the defense and nuclear industries.