CEE Legal Matters

Category: Russia

  • Russia: Legal Requirements for Home Office Work

    Russia: Legal Requirements for Home Office Work

    Due to the spread of COVID-19 the Russian Ministry of Labor and Social Protection and the Mayor of Moscow recommended all employers to switch to home office work where it is possible.

    Furthermore, based on the recent order of the Mayor of Moscow persons aged over 65 shall stay at home while the employers shall support them in self-isolation; upon their consent these persons are to be transferred to a home office or shall be provided with paid vacation.

    Unfortunately, the Russian employment law is not flexible enough and currently does not provide for legally safe options of mandatory transfer of employees to a home office or transformation of a regular employment agreement into a distant work employment agreement.

    Note: A distant work employment agreement – introduced into Russian law in 2013 – provides for performance of job functions by an employee outside of the employer’s premises and allows avoiding the employer’s tax registration at the location of the employee. This agreement implies the use of the Internet and other communication means for concluding/terminating the agreement as well as performance of work. This type of agreement is rather beneficial for the employers; in particular, it may provide for additional (i.e. contractual) grounds for employment termination at the employer’s initiative and provides less work safety obligations.

    In order to apply the available options, e.g. to change the employee’s place of work, the employer has to comply with a relatively complicated process on the change of essential terms and conditions of employment if the employee is not cooperative. This option requires a two-month notice and still remains rather questionable from a legal point of view.

    Given this legal uncertainty the Russian Ministry of Labor and Social Protection published on 23 March 2020 on its webpage the recommendations for the employers on the option to arrange for a smooth transfer to a home office.

    The recommendations and the best practice, inter alia, include:

    1. Adoption of the list of employees to be switched to the home office (taking into account operational capacities);

    2. Development of the internal policy on the remote work covering inter alia,

    • the procedure for the exchange of data, documents, assignments and results of work, for provision of equipment to the employees (pc, stationary, etc.) or compensation to an employee for the use of personal equipment for work purposes,
    • the employer’s rules and forms of control over the employees for the duration of remote work (e.g. regular participation in conference calls, mandatory availability during business hours via  mobile phone and e-mail, etc.).

    3. Issuance of the employer’s internal order on the remote work and arrangement for acknowledgment of the concerned employees with this document;

    4. Conclusion of an additional agreement on the remote work with the employees.

    Please note that on 25 March 2020 the Russian President announced the next week from 30 March until 3 April to be a non-working week with an obligation for the employers to pay salary.

    In response to the new work environment, it is widely discussed in mass media that the Russian State Duma will introduce changes to the Russian Labor Code soon that will allow a mix of office and remote work.  We monitor regularly the upcoming legislative changes due to COVID-19 and will keep you updated.

    By Anna Fufurina, Senior Associate, and Olga Mokhonko, Counsel, Noerr

  • Clifford Chance Moscow Advises GE on Russian Merger Clearance for Sale of BioPharma

    The Moscow office of Clifford Chance has formed part of a multi-jurisdictional team helping GE obtain US and global merger clearance in connection with the USD 21.4 billion sale of its BioPharma business to Danaher.

    The deal was reviewed by antitrust authorities in eight jurisdictions and was cleared by all: the European Commission, Brazil’s CADE, China’s SAMR, the Japan Fair Trade Commission, the Korean Fair Trade Commission, the Israeli Competition Authority, the Russian Federal Antimonopoly Service, and the US Federal Trade Commission.

    Clifford Chance’s team included Partners Sharis Pozen from Washington D.C., Marc Besen from Dusseldorf, Anastasios Tomtsis from Brussels, Bai Yong from Beijing, and Torsten Syrbe from Moscow.

    Editor’s note: After this article was published, Alrud informed CEE Legal Matters that it had acted as local advisor in Russia to the Danaher Corporation on the deal. The firm’s team included Partner German Zakharov and Senior Associate Ruslana Karimova.

  • Maximum Prices of Medicines and Medical Devices can be set by Government during Epidemics

    On 26 March 2020, a Federal Law came into force allowing the Russian government to set maximum prices for any medicines and medical devices for up to 90 days in case of an emergency or the threat of the spread of dangerous diseases (including COVID-19).

    According to the new Law, if after 30 days of monitoring retail prices for pharmaceuticals and medical devices the government detects price increases of 30% or more, it can then introduce restrictions on the prices of these products.

    In particular, the government will have the right to determine, for a period of up to 90 days, a list of medicines and medical devices for which it can set manufacturers’ maximum selling prices and maximum wholesale and retail mark-ups.

    Maximum prices set by the government will apply to manufacturers, distributors and pharmacies.

    It is important to note that this right is granted to the government for any medicine and medical device without exception.

    In addition, the Russian State Duma is considering a bill* to increase penalties and sanctions for any company violating these rules.

    Issues facing business

    It is not yet clear how the new model of drug price restrictions will be implemented in practice, including:

    • what methodology will be used to monitor prices;

    • how the government will determine the permissible amount of maximum mark-ups; and

    • whether the new rules will apply to products already on the Russian market (imported into Russia or sold by a local manufacturer to a distributor) before the respective government’s decision came into force.

    The introduction of this mechanism creates risks for good-faith market participants since any distributor, retailer or competitor, who unfairly sets inflated prices for a product during a given month, could “activate” the government’s price-reduction mechanism. This, in turn, would lead to a decrease in revenue for a good-faith manufacturer.

    In addition, the application of the new rules will require additional negotiations with counterparties to change previously agreed-upon prices and mechanism for possible disputes. It will also make it more difficult to account for changes in product prices for tax purposes.

    Recommendations

    To minimise these risks (i.e. to be prepared for a sharp price increase), companies should monitor the retail-market prices of the products they manufacture or sell.

    They can also take the preventive measure of setting the maximum resale prices for goods in their contracts with customers, which is permitted by law. This will give them some control over product prices and reduce the risk of becoming the target of a forced price reduction by the government.

    By Vsevolod Tyupa, Counsel, and Alexey Shadrin, Associate, CMS Russia

  • Employees in Russia to be Mandatorily Off Work from 30 March to 3 April

    In accordance with an Executive Order of the Russian President, from 30 March to 3 April 2020 employees in Russia will have fully paid days off as part of measures to keep employees at home and prevent the spread of the coronavirus.

    The Executive Order does not apply to some organisations, including:

    • “continuously operating” organisations;

    • organisations in the medical and pharmaceutical sector;

    • organisations that provide people with food and basic necessities;

    • organisations that perform urgent work in emergency situations, which otherwise may endanger people’s lives or normal living conditions; and

    • organisations that perform urgent repair and loading or unloading operations.

    Thus, all the companies that do not fall under these exceptions have to release their employees from work in their workplaces during the above period, while continuing to pay them their salaries.

    At the same time, we believe that employees working remotely (from home) can continue to work this way since remote work does not lead to additional social interactions. In our opinion, such work should be paid for in the usual amount. This position is indirectly confirmed by the Recommendations that the Ministry of Labour issued on 26 March 2020 and the latest comments of the Russian President’s Spokesperson. We hope that further official clarifications on these issues will appear soon.

    By Valeriy Fedoreev, Christophe Huet, Partners, Ekaterina Elekchyan and Irina Skvortsova, Senior Associates, CMS Russia

  • Russian President Announces Radical Tax Measures

    During an address to the nation on 25 March, Russian President Vladimir Putin announced anti-crisis measures to support Russian businesses and individuals and to find ways to replenish the state budget. The measures applicable to taxation are described below.

    Support of Russian business

    Introduction of tax holidays for small and medium enterprises (SMEs)

    SMEs will be granted six-month payment deferrals for all taxes, excluding VAT.

    The criteria to determine whether a company is an SME are provided in Federal Law No. 209-FZ dated 24 July 2007. Among other stipulations, companies recognised as SMEs cannot be held by a corporate entity (either Russian or foreign) other than another SME at more than 49%.

    In addition to the above tax holiday, micro-enterprises (as defined in Federal Law No. 209-FZ) will also enjoy similar deferrals for social contribution payments.

    Previously, the Russian government announced a tax deferral would be introduced until 1 May 2020 for only the negatively affected sectors of economy.

    Reduction of social contribution rates for SMEs

    The cumulative social contribution rate for SMEs is to be reduced from 30% to 15% for salaries exceeding the minimum monthly wage.

    This measure is being introduced for the long term, and will not be discontinued at the end of the pandemic.

    Moratorium on bankruptcy procedures

    The President announced a six-month moratorium for insolvency claims and claims for debt collection.

    This measure will apply to the most vulnerable sectors of the economy, which the Russian government will list and regularly revise.

    Previously, the Russian government posted a bill for public discussion allowing it to introduce a bankruptcy moratorium in exceptional cases. Hence, the President’s announcement, which immediately introduced the moratorium, goes further than the government initiative.

    Pumping the Russian budget

    Taxation of cross-border payments

    The President proposed introducing a 15% withholding tax on outbound income payments from Russia (including dividends and, in certain cases, interest).

    The Russian government has been instructed to negotiate respective amendments to all applicable double tax treaties (DTTs).

    DTTs with jurisdictions that do not accept these changes will be terminated unilaterally.

    In turn, during a government session that took place on 26 March, the Russian Prime Minister instructed the Ministry of Finance to draft within one month amendments to all applicable DTTs to implement these proposed changes.

    According to an official announcement made on the website of the Russian Ministry of Finance, the new taxation rules will only apply to outbound payments made to so-called “transit jurisdictions”, which primarily concerns Cyprus.

    Moreover, the new rules will not apply to interest payments made on Eurobonds, bonds and loans provided by banks.

    It is expected that these changes will come into force in 2021, and will thus not concern any payments made in 2020.

    These announced measures still leave much to be clarified, most importantly what jurisdictions will ultimately qualify as transit ones, and under which conditions the new rules will apply to them.

    Taxation of individuals

    Interest income received by individuals from bank deposits and investments in debt securities will be subject to personal income tax at a 13% rate, provided that the total amount of investments exceeds RUB 1 million (EUR 11,630).

    Taxation, however, will not concern the principal amounts of such investments or bank deposits.

    Based on the latest clarifications the Russian Minister of Finance gave to the press, taxation will not concern forex gains from investments in foreign currencies. Interest received in a foreign currency is to be recalculated into roubles on a daily basis.

    The new taxation rules will be implemented starting from 2021. So the first tax payments under the new rules will have to be made in 2022.

    Additional funds collected as a result of these tax measures will be used to cover the extraordinary expenses of the Russian budget associated with the implementation of the announced anti-crisis measures in different domains (including the tax measures referred to above).

    Comments

    The measures announced by the President should certainly be rated as more radical than those previously announced at the governmental and regional levels, and will likely have a middle- to long-term effect on the Russian economy.

    Despite the fact that most of the measures are aimed at keeping certain sectors of the Russian economy afloat, it cannot be excluded that changes to international taxation rules will adversely affect the investment climate in Russia for foreign investors.

    It is expected that legislative changes itemising the announced measures will follow shortly.

    CMS Russia’s tax experts are closely monitoring the COVID-19 situation and will continue to provide updates on any further announcements and developments in the field of tax and customs.

    If you have any questions on the above or, more generally, our on-stream summaries on the legal measures adopted in response to the COVID-19 outbreak in Russia, please contact our local CMS experts Dominique Tissot, Maria Kabanova or your regular CMS advisor.

    By Dominique Tissot, Partner, and Maria Kabanova, Senior Associate, CMS Russia

  • Stetom Advises Skoda Transportation on Joint Venture with Sinara Group in Russia

    Stetom, the recently rebranded firm previously doing business as Sterbatomashvaskaya, has advised Skoda Transportation on its entrance into a joint venture with Sinara-Transport Machines. The joint venture company, Sinara-Skoda, will be based in St. Petersburg, and will produce trams, trolleybuses and subway kits for the Russian market.

    Stetom describes Skoda Trandsportation as “a leading European manufacturer of vehicles for city and railway transport with a tradition of production spanning more than 150 years.” For its part, the Sinara Group invests in transport engineering, real estate and financial services. It was founded in 2007 and has over 30,000 employees.

    The Stetom team consisted of Partners Jiri Sterba and Anastasia Tomashevskaya and Senior Associate Sergey Burlakov.

  • COVID-19: Q&A on Russian Employment Law Issues

    COVID-19: Q&A on Russian Employment Law Issues

    As of 19 March 2020.

    1. What prevention obligations arise for employers?
    Based on the Order of the Mayor of the city of Moscow dated 5 March 2020 (which is regularly amended), the employers have to

    • Arrange for temperature measurement of all employees and suspend from work in case of high temperature.
    • Prohibit access to place of work of the employees who (i) arrived to Russia from China, all EU countries, the UK, the USA, Korea, Iran, etc. (the “Infected Areas”). However, based on the Order of the Russian Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing (Rospotrebnadzor) dated 18 March 2020 all persons (Russian or foreign nationals) returning to Russia are subject to self-isolation for 14 days.
    • Assist employees in observing a self-isolation regime.
    • Provide information to state authorities upon request regarding all business contacts of a person having COVID-19 and arrange for disinfection of the premises which were visited by this person.

    2. Do employers have to provide employees with protective masks, disinfectants and similar items?
    No, but employers are recommended to disinfect office furniture daily, arrange for air disinfection in offices, arrange for a stock of antiseptic agents for office cleaning, limit business trips, use audio and video conferences instead of meetings in person.

    3. Do employers have to send an employee home if he or she is suspected of having a corona-related illness? Do the employees who were in contact with the sick employee have to be sent home as well? Does the employer have to report suspected cases or actual cases to the authorities?
    Employers are obliged to send home all employees with symptoms of viral respiratory infections and help them to observe self-isolation for a period of 14 days.

    There is no obligation to send home the employees who were in contact with the sick employee, while the employees who live together with the person who returned from the Infected Areas must observe the self-isolation for a period applied to the person who returned from the Infected Areas.

    The employers must inform state authorities on all employees who have returned from the Infected Areas while all persons who have returned to Russia from any country are subject to self-reporting to the hotline as well.

    4. Are employees entitled to be given garden leave or to work from home if they are afraid that there is a high risk of infection for them?
    The current situation is not regulated by law and thus home office or a garden leave requires consent of an employer except for the cases listed above.

    5. Are there state benefits if business operations have to be restricted due to a risk of infection, such as benefits for short-time working? If so, can employers order short-time work?
    No, there are no state benefits for the employers if business operations have to be restricted due to a risk of infection, such for short-time working.

    6. Do employers have a right to know what illness an employee is suffering from or whether cases of sickness exist in the employee’s family?
    No, since employees are protected by medical privacy. There are so far no exceptions from this rule for COVID-2019.

    7. Is the employer entitled to order or take medical examinations/rapid tests or thermal scans or thermal images?
    The employers are obliged to ensure screening of employees’ temperature only. Other listed measures require consent of the employee.

    8. Do employers have to continue paying wages when the authorities have officially ordered quarantine?
    All employees under quarantine restriction are considered as sick persons. Subject to receiving a sick leave certificate, employees are entitled to a sick leave compensation paid by the employer which is then reimbursed by the State Social Security Fund. Since the amount of the sick leave compensation is not high some employers undertake to compensate to employees the difference between the sick leave compensation and their salary amount. The Russian Government by the Order No. 294 dated 18 March 2020 approved the interim simplified rules for issuance of online sick leave certificates for those persons who have returned to Russia from abroad and who shall observe 14 days quarantine.

    9. Do employers have to continue paying their employees even if the business is temporarily closed by official order? If yes, can employers request a reimbursement from the authorities?
    So far there are no special rules and regulations on payments to employees in connection with a temporary close of business due to pandemic like in case of COVID-19.

    However, one may argue that general Russian labor law provisions on idle time may apply. Idle time due to the reasons, which do not depend on the employer and the employee, is paid in the amount of not less than two-thirds of the base salary. Salary costs in this case are not subject to reimbursement by the authorities.

    10. Is an employee obliged to work if nurseries or schools are closed due to the coronavirus and children have to be cared for?
    Yes, the employees are obliged to work.

    11. Are employers allowed to order employees to use up holiday or overtime/accumulate minus hours if they send them home due to a risk of infection?
    No.

    12. Are employers allowed to still send employees on business trips in risk areas? Can the employees refuse to go on such business trips?
    Generally yes. It is recommended to employers not to send employees on business trips outside of Russia. At the same time legally the employee cannot refuse to go on the business trips if the employer demands it. However, the vast majority of companies (especially state owned) adopt internal regulations which ban all foreign and restrict domestic business trips.

    13. How to deal with private travel by employees: Does an employer have the right to know where an employee is travelling to? Is the employer allowed to dictate/recommend whether the employee travels or not? What are the employment-law consequences for employees if they travel to a risk area and have an infection when they return?
    No, the employers have no right to check or influence private travel.

    However, all persons that returned to Russia from abroad are subject to self-reporting to the hotline organized by the authorities. All employees who travelled outside of Russia – even if they do not have symptoms of the virus – upon return to Russia have to observe self-isolation for a period of 14 days (excluding a contact with relatives). If they have symptoms of viral respiratory infections, they must apply for medical assistance without visiting a hospital.

    By Anna Fufurina, Senior Associate, and Olga Mokhonko, Counsel, Noerr

  • Ilya Rybalkin Appointed to Scientific Advisory Board on International Law

    Ilya Rybalkin, Head of Dispute Resolution at Rybalkin, Gortsunyan & Partners has become a member of the Scientific Advisory Board on International Law under the Ministry of Justice of the Russian Federation.

    The Board is a permanent advisory body established by order of the Ministry of Justice. The key objective of the Board is to create an expert panel to build a dialog with the academic and business communities, including preparation of expert proposals concerning issues of international public and private law and development of practice for their implementation.

    The new board includes representatives of academia, lawyers practicing in international public and private law, and federal civil servants. Board members serve on a pro bono basis. The Board will be chaired by Mikhail Galperin, Russian Federation’s Representative at the European Court of Human Rights and Deputy Minister of Justice of the Russian Federation.

  • Linklaters and Bryan Cave Leighton Paisner Advise on Sovcombank’s Pilot Domestic Green Project Bonds Issuance

    Linklaters has advised Sovcombank as arranger on the RUB 5.7 billion domestic green project bonds issued by an orphan special purpose vehicle, SFO RuSol 1 LLC, for the purpose of financing two solar stations of Solar Systems LLC in the Astrakhan region of Russia. Bryan Cave Leighton Paisner reportedly advised the issuer.

    The bonds, which were placed on February 10, 2020, are secured by a pledge of receivables under the on-loans from SFO RuSol 1 to the project companies, which in turn are secured by DPM power supply contracts, shares, and assets of these stations and related corporate rights agreement. The senior bonds are rated A+(RU) by AKRA, mezzanine bonds are rated AKRA BBB+(RU), and the junior tranche is unrated.

    Solar Systems LLC is owned by Singapore Helios Mech and is one of the largest renewable energy companies in Russia. The portfolio of the company, which was founded in 2014, includes solar power plants in five regions of Russia with a total capacity of 365 MW.

    Linklaters’ team was led by Partner Andrei Murygin and included Managing Associates Yuri Nekrasov and Maxim Kraynov and Associate Aisana Indzhieva.

    Bryan Cave Leighton Paisner’s team included Partners Oleg Khokhlov and Matvey Kaploukhiy, Counsel Igor Zhivotov, and Associates Evgeniya Shirugina and Mikhail Filatov.

     

  • Integrites Advises MUFG, Citi, Credit Agricole, and Societe Generale on Financing for Trafigura Acquisition

    Integrites and Switzerland’s HFW law firm have advised MUFG Bank and a syndicate of lending banks including Citi, Credit Agricole, and Societe Generale on a limited recourse term loan to finance Trafigura’s acquisition of copper cathodes from the Swiss trading arm of the Russian mining group Norilsk Nickel.

    Integrites’s team included Partner Ekaterina Rudova and Senior Associate Maria Antipova.

    Editor’s note: After this article was published CEE Legal Matters learned that Trafigura had been advised by Norton Rose Fulbright and Alrud and that HFW’s team also included its Singapore affiliate, Asia Legal, which advised on Singapore law.