President Dmitry Medvedev continues to face problems relating to an order he signed pertaining to areas of land near Russia’s borders that foreigners are not allowed to own. According to an article in Vedomosti, the Ukase also affects foreign investors who already own property near the border. The list incorporates 380 “prohibited” areas including Vladivostok, Sochi and some areas around St. Petersburg. The Finnish Ministry of Foreign Affairs has sent a diplomatic note requesting clarifications, as a significant number of Finns own property near the Russian border. It is not clear if the Ukase will apply retroactively and what the procedure would be for expropriation and compensation. Another category of the businesses that can be affected by the Ukase are Russian businessmen who own land plots near the state border through offshore corporate vehicles in countries such as Cyprus. Experts predict that the biggest issue for small and medium businesses in Russia in 2011 will be a sharp increase in taxes related to adopted amendments to the tax code. Not only are the rates of taxation are higher, but also the number of agencies that would have the right to control (read – extort bribes) has been raised dramatically.
Bankruptcies are on the increase in Russia. In 2010 in Moscow, according to official statistics announced by the chairman of Moscow Arbitrazh court Mr. Sviridenko, applications for bankruptcy slightly exceeded 3000 – which is an increase of 11,7%, as compared with the previous year. Note that the overall number of cases filed with the Moscow Arbitrazh court has fallen by 11% during the same period of 2010.French company “Total” has finally been handed a victory in the Highest Arbitrazh court in a case concerning VAT returns. Total is acting within “production sharing regime,” under which it is exempt from Russian taxation. Tax authorities have argued that because of this exemption the company does not have the right to VAT rebates as other taxpayers. Total referred to specific letters issued in its favor by Russian Ministry of Finance. The courts of all levels have rejected position of the tax authorities based on the tax code. Total is a partner of the Russian state in several high profile oil and gas projects.One of Russia’s most well known cases will go before the European Court of Human Rights. The case concerns a traffic accident – a head-on collision – involving the car of LUKOIL Vice President Anatoly Barkov. The accident claimed the lives of two women traveling in another vehicle, which the police later blamed for causing the accident in an official investigation. The case has caused a massive outcry and still is one of the most discussed topics in the Russian internet forums. The general public perception has been that evidence was falsified to derail the inquiry. Now the relatives filed an application with ECHR.The Highest Arbitrazh court has ruled that companies have the right to know whether or not they are dealing with tax-related problems, preventing the tax authorities from withholding information. It is habitual in Russia to refuse VAT debate alleging that trading partners are ¨bad faith taxpayers¨. Prior to the ruling, tax authorities refused to provide the information referring to the privileged character of the information.Legal database “Consultant Plus” has published a decree of the Russian government N 3 of January 14 (not yet published officially) concerning health examination of persons in pre-trial detention and listed the medical conditions which make custody in a pretrial detention facility unlawful. It took several highly publicized deaths in pre-trial prisons, Sergei Magnitsky being the most famous one, to adopt even rudimentary regulation. The fact that these regulations were not published before hand points to negligence on behalf of the state.Prior to New Year, the State Duma ratified a large number of bilateral and multilateral treaties in just one day. The most significant are:1. A treaty with Switzerland concerning facilitation of visas. The preamble states that the streamlining of visa procedures is a step toward the eventual visa-free travel between the two countries.2. A treaty with Spain concerning the regime of transit for Spanish troops engaged in the Afghan war.3. An analogous treaty with France. Both agreements underline a complex relation of Russia toward the NATO operation in Afghanistan. While not wanting to get involved directly, Russia facilitates logistics and wants to a certain degree control the operation.4. Bilateral investment treaties with Abkhazia and Ossetia. Despite a recent award in the Rosinvestco case, Russian government obviously continues to see BITs as an important element in an arsenal of treaties that each self-respecting state must have.