Legal and Market Developments in Russia Winter / Spring Issue 2014

Russia Update: Legal and market developments in Russia Winter / Spring Issue 2014 The Russia Update is a periodic publication of Clifford Chance Moscow which aims to summarise significant legal and market news relating to the Russian Federation which have taken place during the relevant period. You can access our key client briefings, alerters and other recent publications from the electronic version of this publication.

Macro Updates ...... 3

Legal and Regulatory Update ...... 4 s General ...... 4 t Corporate ...... 5 Regulatory ...... 5 n Finance ...... 6 Capital Markets and Securities ...... 6

e Litigation and Dispute Resolution ...... 7

t Tax ...... 7

Russian Law Focus: Anti Corruption Regulation . . . 8 n Sector Update ...... 9

Forthcoming Events ...... 14 o CC Moscow Update: News and People ...... 14 c

Russia Update: Legal and market developments in Russia Winter / Spring 2014

Macro Updates Economic sanctions Financial Markets Service of the Central Proud host of the 2014 Winter Following the events in and relating to Bank, its new internal department, Olympic and Paralympic Games Crimea, the US and EU have imposed effective 1 September 2013. The new In February and March 2014, Russia sanctions against various Russian department is led by Sergey Shvetsov, hosted the 2014 Winter Olympic and individuals (including a number of people who has held various positions at the Paralympic Games in its sub-tropical that do not hold governmental or other Central Bank since 2001. The former resort area of Sochi. With numerous official positions) and one Russian bank. FSFM was abolished effective infrastructure projects completed in time Standard & Poor’s and Fitch have reviewed 3 March 2014. for the Games, these were the first ever Russia’s credit rating outlook from stable to Winter Olympic and Paralympic Games negative followed by downgrades of a New head for Russian Accounts on Russian soil. number of Russian banks and corporates. Chamber For a more detailed analysis, please refer to In September 2013, Tatyana Golikova, ‘Deoffshorisation’ remains a hot topic our recent publication . former minister for healthcare and social Governmental authorities remain focused development of the Russian Federation on bringing Russian business on-shore. Financial mega-regulator goes live and advisor to the President for According to a recent statement of the Federal Service for Financial Markets countering corruption, replaced Sergey President, this topic remains one of the has been merged into the Central Bank Stepashin as head of the Accounts key issues for the Russian economy. The of Russia creating the financial Chamber. Mr Stepashin served in this proposed measures mentioned by Mr mega -regulator. The former FSFM position from 2000. Putin include entering into treaties with functions have been transferred to the the popular offshore zones compelling

Legal and Regulatory Update General Update on the Civil Code Further sets of amendments to the Russian Civil Code have been adopted as part of the ongoing overhaul of Russian civil law.

After former President Dmitry Medvedev suggested various amendments to the Russian Civil Code in July 2008, in November 2012 the Russian Parliament decided to split the massive sets of proposed amendments into nine sets which are to be passed as separate laws.

As discussed in our previous issues, the first set of amendments became effective on 1 March 2013 and mainly relate to certain basic principles of civil law, limits on the exercise of civil rights, the disclosure of tax information and Russian Federation and the Japanese restriction on state registration of rights to information about the end beneficiaries of Ministry of Economy, Trade and Industry. certain types of property as well as offshore companies, improvement of recognition of the principle of Russian legislation regarding protection of The 13 agreements and memoranda for compensation for losses incurred as a owners’ interests in their businesses, and future Russian–Japanese collaboration result of unlawful acts of state authorities. improvement of investment climate. signed at the forum included a framework The second set of amendments became Transparency of Russian businesses’ credit agreement between the Japan effective on 1 September 2013 and shareholding structures is another top Bank for International Cooperation (JBIC) affect, inter alia , the general rules on priority, says the President. and VTB Bank and an agreement of intent transactions, the grounds on which a regarding Russian grain exports through transaction may be challenged and the In addition to general announcements the Russian Far East ports between the rules governing agency (including powers made by the President, the Ministry of Marubeni Corporation, the FESCO of attorney). The third set of amendments Finance has published the first draft law Transportation Group and the United relate to security matters (including on the so called ‘deoffshorisation’ relating Grain Company. The event’s exhibition revision of rules on pledge and transfer of to controlled foreign corporations (CFCs). included presentations of agricultural rights and obligations) and came into If adopted, the draft would tax profits of investment opportunities in Russia. force on 1 October 2013. The fourth set qualifying foreign subsidiaries of Russian of amendments related to international companies and individuals. Welcome the United Aerospace private law and conflict of laws norms Corporation and came into force on Tokyo hosts VI Russia Japan In March 2014, open joint stock company 1 November 2013. The fifth set of investment forum United Aerospace Corporation was amendments is scheduled to come into On 19 March 2014, Tokyo hosted the VI registered as a new legal entity. The force on 1 July 2014 and relates to the Russia Japan investment forum. Main corporation was established on the basis pledge and transfer of rights and topics on the agenda included of a presidential decree signed in obligations. A further set of amendments determination of new areas for investment December 2013. In February, the regarding intellectual property matters cooperation between the two countries. Government approved the outline for the was signed into law in March 2014. The event was jointly hosted by the future consolidation of aerospace assets Ministry of Economic Development of the on the basis of the new corporation.

Merger of the two top judicial bodies Regulatory regulator after completion of the in process More important news from the acquisition. Also, unsatisfactory business In November 2013, President Vladimir Central Bank reputation of the acquirer has been added to the list of grounds on which the Putin proposed amendments to the The Russian Central Bank remains active Central Bank can turn down an Constitution of the Russian Federation in improving and tightening regulation of application for acquisition of a stake in a aimed at merging the top judicial banking operations and effecting more Russian bank. instances of commercial (arbitrazh) courts stringent control of the same. Over the and courts of general jurisdiction. The past few months, it has introduced ‘Anti piracy’ law enters into force draft law was adopted and entered into amendments to the system of mandatory The so called anti piracy law aimed at force in February 2014. A number of ratios (among other things, splitting the countering non-licensed distribution of additional implementing laws were signed capital adequacy ratio into three separate movies and TV series became effective into law in March 2014 but the merger ratios) which became effective in on 1 August 2013. The law allows process is yet to be completed. February 2014. The new financial mega- Roskomnadzor, the watchdog in the area regulator was also very active in the area Update on insolvency databases of telecoms, information technologies and of banking supervision which resulted in mass communications, to order internet As at the date of this update, updates on insolvency proceedings and withdrawal of providers to block particular web-sites bankruptcy proceedings of Russian legal banking licences for a number of credit suspected of distribution of non-licensed entities continue to be published in the institutions including Masterbank, a film distribution. The Parliament is Saturday issues of the business daily former top 100 private bank with a retail currently considering amendments to this Kommersant. In November 2013, the deposit base of over 30 billion roubles. court ruled in its favour and confirmed bill that would expand its scope to cover Kommersant’s status as the official Further news include new rules for the photo and audio content. source of insolvency publications for the regulator’s audits of credit institutions Consumer lending bill signed into law time being. which introduce a new form of special purpose audit targeting a particular area In December 2013, the long awaited Corporate of the bank’s operations (such as, for consumer lending law was adopted by the New rules for dividend payments and example, compliance with mandatory Parliament and signed by the President. disclosure of proposed shareholder ratios or compliance with cash settlement The new law establishes regulatory meetings rules). In addition, the Central Bank is framework for granting and servicing loans The Joint Stock Companies Law was working on determining the list of credit to individuals, collection procedures and amended effective 1 January 2014 to institutions of ‘systemic significance’ and related matters and will enter into force on allow publication of statutory disclosure higher requirements that it would apply to 1 July 2014. Its scope expressly excludes regarding convening of shareholder such banks. According to media reports loans secured by mortgages. meetings through the internet. The of February 2014, the list of such banks One of the most important changes amendments also tweaked the rules has been agreed inside the regulator but it allows the Central Bank to determine the regarding determination of persons remains unclear when (and if at all) it maximum interest under consumer loans, entitled to receive dividend payments. would become publicly available. Another which shall not exceed market average From now on, the record date for the list new regulation of the Central Bank (dated interest for particular loan products by of payees is not set by reference to the October 2013) has amended rules for more than a third. To calculate the market date of the relevant decision and instead obtaining prior regulatory clearance for average, the regulator will need to take it is to be determined in the resolution on purchase of shares in a Russian bank. into account respective rates of not less payment of dividends (taking into account The new regulation follows the law than 100 top lending banks and such the recommendations of the board of passed in July 2013. The main change calculations need to be renewed on a directors). Term for actual payment relates to decrease of the threshold quarterly basis. The Central Bank is to should be determined by reference to the requiring approval of the Central Bank start publishing such market average date when payees are determined (rather from 20% to 10% of the bank’s charter rates in November 2014. than by reference to the date when the capital. The new regulation also extends decision on dividend payments was to the acquisition of stakes in persons This new rule and further amendments made by the shareholder meeting as holding over 10% of a credit institution’s considered by the regulator are aimed at used to be the case). shares. Another amendment allows in controlling the heated Russian consumer certain cases to obtain approval of the

lending market and ensuring stability in some of the grounds for challenging a single representative (effectively, a the sector. transactions of an insolvent entity; trustee) to liaise with the issuer and other parties; and n clarified the timeline for challenging FAS applies its powers transactions; and n new listing rules adopted by the extraterritorially Moscow Exchange. Among other n explained the legal consequences of According to an official press release things, the new version of the listing successfully challenged transactions. issued in February 2014, the Russian rules decreases the number of listing antitrust regulator (FAS) has rendered a sections from six to three, reviews Russian LMA developments decision on the basis of an investigation qualification requirements for Upon an initiative of the Association of which involved protection of interests of a respective sections and introduces the Regional Banks of Russia, the market 100% subsidiary of MTS, the top 3 more stringent corporate governance participants have joined forces to Russian mobile network operator, in a rules for the issuers. The new rules produce a draft of so called Russian LMA will become effective in June 2014. foreign jurisdiction, namely Uzbekistan. documentation. Participating lenders New framework for securitisation According to FAS’ resolution, two local include Sberbank, VTB, Gazprombank, transactions mobile network operators violated EBRD, BILLIONP (Russia) and Raiffeisen In December 2013, important Russian law by entering into an (Russia). The main challenges are that amendments were introduced to the agreement that restricted competition (a) a number of proposed changes to the Securities Market Law with respect to and resulted in elimination of presence of Civil Code that would impact the lending securitisation and project finance the third market participant, MTS’ activities are still pending; and regulation. In particular, the amendments subsidiary Uzdunrobita, which adversely (b) difference of concepts used by the introduced a concept of special purpose impacted the market and competition in LMA documentation and Russian law. (‘ specialised ’) financial and project the Russian Federation. Capital Markets and finance entities. In this precedent, FAS has for the first Securities The purpose of activities of a special time applied the extraterritorial powers Important amendments to purpose financial entity include acquisition granted to it as a result of 2012 securities laws of receivables with respect to non-bank amendments to the Russian In the course of 2013, the Parliament, the and bank loans and other obligations antimonopoly legislation. Central Bank and certain other bodies (including future obligations) as well as have introduced a range of important Finance issue of bonds secured by pledge of such amendments to the Russian securities receivables. The law establishes general Changes to insolvency law regulation. The major ones include: rules for set up, corporate governance New amendments to the Insolvency Law n adoption of a new version of the and operation of such entities which are were adopted in 2013. These relate issuance standards, an important broadly similar to those established for so mainly to the liability of the debtor and supplemental normative act setting called mortgage agents, special purpose other persons in insolvency of the debtor. out detailed procedures for vehicles established under Russian law registration and issuance of securities specifically for mortgage backed New guidelines on challenging in Russia. The changes generally securitisations under existing legislation. follow and further develop the recent transactions in insolvency With respect to management companies amendments made to the Securities The Supreme Arbitrazh Court has issued of special purpose financial entities, the Market Law; new guidelines on challenging law provides also that the Central Bank transactions of the debtor in the event of n a new law on bondholders meetings. may establish additional qualification insolvency. In particular, the guidelines: Although inclusion of respective criteria for such entities. provisions into the terms of issuance n provided a list of transactions which documents will become mandatory Further amendments have extended the can be challenged (including payments for selected categories of mass list of assets that can be used as to creditors, set-off, direct debit, securities only in 2016, the law novation, enforcement of pledge); establishes the general rules for set collateral for Russian secured bonds. The list now includes receivables (including n provided a clearer definition of up and operation of bondholder ‘suspicious transactions’ and meetings as well as their competence receivables from future obligations or ‘damage to the creditors’ which are and the bondholders’ right to appoint future receivables from existing

receivables) which is expected to aid further development of securitisation structures in Russia.

New market segment on Moscow Exchange The Moscow Exchange has set up a separate market segment for standardised OTC derivatives. Transactions in this new segment are settled through a central counterparty, the National Clearing Centre. Market participants may also benefit from favourable tax treatment of transactions in the new market.

Litigation and Dispute Resolution New court for intellectual property rights The new judicial body focusing on intellectual property disputes started operations effective 3 July 2013. Tax Eurobond exemption becomes permanent ‘Deoffshorisation’ remains a hot topic Supreme Arbitrazh Court supports As discussed in our previous As discussed in Macro Update above, the deoffshorisation wave publications, the Government reserved the Ministry of Finance has published the In July 2013, the Presidium of the Supreme the right to revisit the terms of the first draft law on the so called Arbitrazh Court published a new decree Eurobond exemption that was introduced ‘deoffshorisation’ relating to controlled which increases the burden of proof on in 2012 (please see our Briefing note of foreign corporations (CFCs). If adopted, offshore companies in order to June 2012 ). The exemption was made the draft would tax profits of qualifying demonstrate good faith. Although the available only for offerings made up to the foreign subsidiaries of Russian companies wording of the decree leaves open a end of 2013. and individuals. Our tax team continues number of questions of both procedural monitoring the developments and further and substantive law, one clear result of its A new law dated 23 July 2013 made the client briefings on this matter are adoption will be an increase in the number exemption permanent and offerings made expected to follow. of legal disputes in which offshore after 31 December 2013 will enjoy the same treatment as those made in 2013. companies will have to disclose information New rules for taxation of certain about their ultimate beneficial owners in financial transaction order to have recourse to the courts. Further amendments to the Tax Code On 28 December 2013, the President The spring 2013 sessions of the State signed into law a wide range of Among other things, the decree also states Duma resulted in quite a few changes to amendments to the Russian Tax Code. that establishing an entity in an offshore Russian tax legislation, most of which Most of them introduce new tax benefits jurisdiction and registering the rights to have already entered into force. The most and clarify provisions regarding formation Russian real estate premises (which were notable of the changes include of the tax base (including booking of the subject matter of the dispute) in its introduction of a mandatory out-of-court losses) with respect to particular types of name “constitute use of a legal entity for the procedure for challenging all decisions of financial transactions. purposes of committing an abuse of rights” . the tax authorities, extension of the period for administrative appeals to up to Please refer to our client briefing for For more details, please refer to our one month (previously it was 10 days), further details. client briefing . broadening the range of cases where parent/subsidiary companies may become liable for the tax obligations of

Russian Law Focus: Anti Corruption regulation

The Russian Law Focus column in this issue of our Russia Update focuses on Russian anti corruption regulation. Countering corruption remains one of the principal topics on Russia’s legislative and law enforcement agenda.

In early 2012, Russia became party to the OECD Anti-Bribery Convention. Over 2011 – 2013 subsequent steps were made to bring the national legislation in line with the OECD standards as well as the most stringent national anti bribery laws in the world. We discuss below the most important features of Russian anti corruption legislation as well as the liability imposed for bribery related acts.

The main legislative act in this area is Federal Law “On Countering Corruption” No. 273-FZ dated 25 December 2008, as amended. It is supplemented by provisions regarding criminal and administrative offences relating to bribery which are imposed by the Administrative Offences Code and the Criminal Code as well as other acts which contain additional rules which (sometimes indirectly) apply to corruption.

A. Principal features of Russian anti bribery rules n definition of a bribe includes money, securities, other property, services, benefits or other consideration provided in exchange for any acts or omissions to act in the interests of another person; n bribery is a crime under Russian law irrespective of whether the aim of bribing a particular person was achieved or consideration from such person was received; n it does not matter whether the purposes of the bribe was to induce a person to perform legal or illegal acts or omissions to act. On this basis, so called facilitation payments are also covered by restrictions imposed by Russian law; n Russian anti bribery legislation covers bribes to foreign officials, including foreign courts and persons performing public functions (this term may be interpreted rather broadly based on the existing international practice) for a foreign jurisdiction, and officers of international organisations (introduced in 2011); n Russian legislation covers giving and receiving bribes in both personal capacity as well as when acting through an intermediary; n there are separate criminal offences for (i) acting as intermediary for the purposes of bribery and (ii) commercial bribery (i.e. bribery between commercial entities); n since 2011, offences envisaged in the Administrative Offences Code (which apply to organisations) include not only an actual bribe but also an offer or promise of a bribe; and

n the maximum amount of a gift to state officials is limited to 3,000 roubles; payment for travel or entertainment expenses of state officials in any form is prohibited.

B. Offences and liability By way of a general observation, under Russian law, criminal liability may only be imposed on individuals. Therefore, liability for legal entities with respect to corruption related activities is envisaged in the Administrative Offences Code.

Administrative liability: a person making, offering or promising a bribe in the interests of a legal entity may be subject to an administrative fine in the amount of up to a 100 multiple of the amount of the bribe in each case supplemented by confiscation. Depending on the size of the bribe, it falls within one of the categories envisaged by the Administrative Offences Code and the amount of the fine is determined on the following basis: n for bribes in the amount up to 1 million roubles: up to three multiples of the bribe but not less than 1 million roubles; n for bribes in the amount from 1 million roubles to 20 million roubles: up to 30 multiples of the bribe but not less than 20 million roubles; n for bribes in the amount exceeding 20 million roubles: up to 100 multiples of the bribe but not less than 100 million roubles.

Criminal liability: bribery related criminal offences include giving and receiving a bribe as well acting as an intermediary on either side. Criminal liability (which, as mentioned above, applies to individuals but not to legal entities) may be imposed in the form of a combination of a criminal fine (in the amount up to a 100 multiple of the amount of the bribe or, with respect to intermediary activities, up to 50 million roubles), disqualification from holding particular positions or activities in a particular business area (up to three years) and imprisonment (for a term up to 15 years). Latest court practice suggests that over the past few years courts tend to impose fines (which were often not paid) less frequently and started using imprisonment sentences slightly more often.

Additional obligations of each Russian legal entity: with effect from 1 January 2013, each Russian legal entity is obliged to comply with certain requirements regarding countering corruption. These include appointment of an internal anti corruption officer or body, cooperation with state law enforcement agencies, introduction of respective internal policies, including code of ethics and business conduct, eliminating conflicts of interests and prohibition of any unofficial book keeping. To date, there is no established practice as to monitoring by the governmental authorities of compliance with these new requirements.

Last but not least, it is also worth noting that bribery related investigations have increasingly become cross-border as prosecutors in different jurisdictions develop information exchange and cooperation mechanisms. In addition, a number of national anti bribery laws have been given a cross border element as a result of which a company may be punished for bribes paid in Russia as part of a corruption investigation in its home jurisdiction (as has been the case with a few major international companies over the past few years).

Russian authorities of all levels regularly declare fighting corruption as one of their top priorities. The number of bribery related investigations and proceedings has notably increased over the past few years and is expected to grow further.

their respective subsidiaries/parents, and financial instruments made through asset Amendments to Property Tax Regime abolition of the requirement that the tax management structures are also prohibited On 2 November 2013, Federal Law No. authorities be notified upon reorganization for the above categories of individuals. 307-FZ On Amendment of Article 12 of (e.g. merger) or liquidation of a company. Part One and Chapter 30 of Part Two of The wording of the new law in terms of the Tax Code of the RF was passed, Furthermore, on 28 December 2013 the the instruments/structures covered may changing the corporate property tax President signed into law a wide range of be interpreted quite broadly, which leaves regime for certain types of property. further amendments to the Russian Tax room for arbitrary application. Code. Most of the amendments introduce new tax benefits and clarify The restrictions may require review of Sector Update provisions regarding formation of the tax KYC / client DD procedures employed by base (including booking of losses) with foreign institutions as well as products Energy, Metals and Mining respect to particular types of financial and services offered to Russian PEPs Announced deals transactions. Please refer to our and their family members. Timchenko exits Gunvor client briefing for more details According to Gunvor’s press release, in Useful changes to leased anticipation of potential economic Restrictions on bank accounts and aircraft treatment sanctions resulting from Russia’s activities foreign securities held by PEPs The Customs Union (which consists of in Crimea and in order to ensure The new law restricts elected Russia, Belarus and Kazakhstan) has uninterrupted operation of Gunvor Group governmental, regional and municipal recently reintroduced exemptions from activities, the shares of the company held officials, civil servants, members of the customs duties and VAT that were by Mr. Gennady Timchenko were on 19 military and other categories of ‘politically available for the most popular types of March 2014 sold to Mr. Torbjorn exposed persons’ (“ PEP ”), as well as their aircraft leased to Russian companies. For Törnqvist, the company’s executive spouses and children under the age of 18, more details on this reintroduction as well director. The deal occurred a day before from opening and holding accounts in as new exemptions and new court economic sanctions were introduced in foreign banks and from owning or ‘using’ practice regarding repossession issues, respect of Mr Timchenko. As a result of foreign financial instruments (including please refer to our client briefing . the deal, Mr. Törnqvist has become the foreign securities). Investments in foreign majority owner of Gunvor, with an 87%

stake, and the remaining 13% of shares Rosneft to partner with Norway’s investors gained from selling a stake in are held by Gunvor’s senior management. Statoil in Arctic the TNK-BP oil venture. Completion of Price or other details of the transaction Statoil of Norway and Rosneft are the deal is subject to approval from have not been disclosed. partnering in a venture after being RWE’s supervisory board and regulators awarded a 20% stake in Norway’s in several countries. Rosneft to control 100% of Russian continental shelf in the Barents Sea. RN gas trading pioneer for USD3 billion Nordic Oil AS, an indirect subsidiary of Russia’s Renova invests USD 400 In July 2013, Rosneft, Russia’s Rosneft, will work with Statoil who will act million in African solar energy state -controlled oil magnate, took over as an operator to develop four blocks In May 2013, Avelar Energy South Africa, Russian independent gas producer Itera near the recently discovered Skrugard part of the Avelar Energy Group for a reported USD3 billion. and Havis areas in the Casberg fields. (established by Renova Group, Russia’s leading private business group) signed its According to an official statement, Evraz to sell Czech plant first long-term power purchase consolidation of Itera is expected to According to chairman of the board of agreement (PPA) with the Dawn Group, a improve business efficiency and forms a directors Alexander Abramov, Evraz Plc JSE listed company, mainly active in stable platform for the consistent plans to complete the sale of Evraz manufacturing, logistics and distribution. implementation of Rosneft’s gas strategy Vitkovice Steel based in the Czech Avelar Energy, expanding its operations in aimed at increasing gas production to Republic in April – May 2014. He also the solar segment in Russia and other 100 bcm per annum and transforming mentioned that Evraz is in the process of EMEA countries, will invest in and Rosneft into the largest independent gas selling its South African asset, Highveld. commission an 180kW solar rooftop producer in the Russian Federation. The system on the warehouses operated by deal is also expected to allow Rosneft to Russian acquisition in RWE’s oil & Dawn Group in Johannesbourg. accelerate the development of the gas unit Kynsko-Chaselsk group of oil and gas L1 Energy, the investment vehicle set up Uralkali occupies headlines: end fields in northern Russia. by Mikhail Fridman and German Khan, of Belorussian trade venture and agreed to buy RWE AG’s Dea oil and gas new shareholders Rosneft partners with Japan’s largest unit, gaining assets in the U.K., Germany In July 2013, Uralkali, the world’s largest energy explorer and the North Sea. RWE is Germany’s supplier of potash, announced the end of In May 2013, Rosneft signed a largest power generator. The sale values its longstanding trade agreement with a cooperation agreement with INPEX, Dea at about EUR 5.1 billion (USD7.1 Belarusian potash company (BCP) to co- Japan’s largest energy explorer, to jointly billion), including debt. The deal is the first operate on sales with Uralkali accusing its explore oil and gas in the Sea of Okhotsk. for LetterOne which was set up in 2013 rival of undercutting their agreement to to invest part of the USD14 billion the two maintain prices by selling more potash on the side.

Just a few weeks after this, Belorussian authorities arrested Uralkali’s CEO Mr Vladislav Baumgartner on charges of abusing his powers. Investigators also publicly promised to look into the activities of Suleiman Kerimov, one of its main shareholders.

Within the next few months, Mr Mikhail Prokhorov’s Onexim Group and Russian fertiliser producer Uralchem acquired stakes in Uralkali exceeding 20% each.

Uralkali’s CEO was extradited back to Russia a few days after Mr Kerimov agreed to sell his stake in Uralkali.

In February 2014, Uralkali inked an 2013. The new list of qualifying exporters the estimated American shale gas agreement for supply of the soil nutrient has been extended to include other resources equal 58 billion barrels, with to China for 24% less than it did before companies with government owned stakes third-place China having 32 billion barrels. pulling out of a joint supply deal with of not less than 50% which extract gas on Belarus. Uralkali will sell 700,000 metric the continental shelf, within territorial or Gazprom forced to end 40 year-old tons of potash to Chinese customers at inner seawaters (and their subsidiaries) as gas pricing regime USD305 a ton under a contract for the well as entities operating subsoil plots of In July 2013, in a landmark case against first half of 2014. federal importance (as defined under the Russian gas monopoly German energy Russian law) whose licences contemplated company RWE won the rights to amend Alrosa completes IPO construction of an LNG plant as at its contracts with Gazprom which has Alrosa, the Russian diamond monopoly 1 January 2013. Rosneft, which may refused to budge on pricing for 40 years. which accounts for 25% of global become Gazprom’s key competitor in this diamond production by value, raised area, announced its plans to enter the LNG Moscow exchange launches first USD1.3 billion in a public offering of its segment earlier in 2013. precious metals trading shares on the Moscow Exchange The stock exchange has started trading completed in October 2013. The Russian Rosneft and Gazprom awarded Arctic gold and silver and announced plans to government sold a 16% stake at 35 Shelf permits start platinum and palladium trading in roubles per share which was close to the In summer 2013, Rosneft and Gazprom the course of 2014. Trading physical bottom of the planned price range. Based were granted extraction licenses for metals is expected to boost liquidity in on this valuation, total capitalisation of around 30 areas accounting for about the market and attract more participants. Alrosa amounted to 258 billion roubles. 80% of Russia’s Arctic shelf According to official statements of hydrocarbons. In December 2013, Financial Services Russia’s Federal Property Management Gazprom announced the launch of oil Announced Deals Agency, which is running the privatisation extraction from the Prirazlomnoye field, Tinkoff Credit Systems hits London programme that the offering was part of, the first Russian project for developing Stock Exchange about four-fifths of demand for the offering the Arctic shelf. The company describes TCS Group Holding, 100% shareholder came from outside Russia. this as commencement of its new project of Tinkoff Credit Systems, a leading aimed at creating a large hydrocarbon Russian credit card bank, raised over Nordgold looks to French tropics production center in the region. USD 1 billion in a GDRs placement on In September 2013, Russian gold miner the London Stock Exchange, making it Nordgold signed a letter of intent to buy a On the back of these developments, in the first IPO of a Russian business in 50.01% interest in exploration licences in February 2014 the Russian Parliament put London since November 2012. The French Guiana from Columbus Gold Corp. forward an initiative to create a national bank was founded by Russian Under the agreement, Nord Gold will pay integrator agency to monitor the entrepreneur Oleg Tinkov and operates Columbus Gold USD4.2 million in cash for exploration and development of Arctic shelf on a branchless model servicing its the Paul Isnard project no later than deposits. A large-scale socio -economic customers online and through other May 2014. The Paul Isnard project contains development program for Russia’s Arctic means of remote communication. inferred gold resources of 4.15 million territories has been launched this year. ounces in the Montagne d’Or deposit. Approved in 2013, it stipulates the NOMOS completes SPO in Moscow modernisation of existing ports along the In October 2013, NOMOS bank completed Rosneft acuiqiring stake in Pirelli Northern Sea Route and the creation of a a secondary public offering of its shares In March 2014, Rosneft agreed a deal uniform transportation, communications raising slightly more than 19 billion roubles. giving it control over a 13% indirect stake and power supply network. The offering involved 21.8 million of the in Pirelli SpA, making the Russian group bank’s shares for a price of 875 roubles Russia ranked world leader in shale the single biggest shareholder in the per share comprising 19.6% of its share oil reserves world’s fifth-largest tyremaker. capital. The offering was done via the Russian shale oil reserves are estimated Moscow Exchange. Media report that the Sector news at 75 billion barrels, which puts the books were visibly oversubscribed. Expected liberalisation of liquefied country on top of the global standings, natural gas operations followed by the US and China. According Gazprom’s monopoly on LNG exports has to a report of the US Energy Information been abolished effective 1 December Administration (EIA) issued in June 2013,

Metrovagonmash and Transholdleasing, each partially owned by Transmashholding. The contract value is 144 billion roubles.

New CEO for Avtovaz A November meeting of the board of directors of Avtovaz, Russia’s historical car producer, appointed Bu Andersson new president of the company. The nomination was made by chairman of the board of directors Karlos Gon and CEO of the state corporation Russian Technologies Sergey Chemezov. After years of work for Saab and General Motors, Mr Andersson joined another Russian carmaker, GAZ, in 2009. In 2011 he was named best CEO in European emerging markets auto industry.

In March 2014, Mr Andersson also became chairman of the board of Otkritie: new shareholder and value rankings. The rankings and the directors of Avtovaz’s joint venture with acquisition of Petrocommerce bank figures are compiled by American market GM, GM-Autovaz. In October 2013, Otkritie Financial research company Millward Brown Aeroflot may create low-cost airline Corporation announced its acquisition of Optimor (MBO). by 2014 Petrocommerce bank from IFD Capital In October 2013, Aeroflot, Russia’s largest group. The latter is in turn expected to China, Russia and the US set up a airline, announced set up of a wholly receive 19.9% in Otkritie as part of an rival to big three ratings firms owned subsidiary that would tap into the additional shares issue scheduled for A new credit agency, the Universal Credit budget airline market. The new company, 2014. The project completion remains Rating Group, has been set up to rival called Dobroljot, is expected to require subject to regulatory approvals. the existing agencies Moody’s, S&P and Fitch. The new institution will be based in USD 100 million investments and the first VTB to Sell Rosbank Stake to Hong Kong. flights are scheduled for 2014. The low- France’s Societe Generale cost airline filed for receipt of necessary regulatory approvals in late December In December 2013 VTB disposed of its Strauss-Kahn rises: Ex -IMF head comes to work for Russian bank 2013. 9.9% stake in Rosbank by selling it to the latter’s main shareholder, Societe Generale. The former head of the IMF has In February 2014, a company In exchange for purchase of Rosbank re -emerged in the supervisory board of spokesperson reported that the first five shares Societe Generale will sell to VTB Russian Regional Development Bank, the destinations have been selected and will some of its Russian assets, including high banking subsidiary of Russia’s state-oil include such busy Russian hubs as liquidity shares, loan receivables and a few company Rosneft. St Petersburg, Samara, Ufa, Perm office real estate assets. Transport & Logistics and Ekaterinburg. Sector news Sector news Aeroflot signs on as Man United’s New carriages supplier for Top 100 brands: Sberbank first Russian sponsor gains prestige Moscow metro Aeroflot, Russia’s largest airline, has Sberbank, Russia’s largest bank, jumped Based on the results of a tender become Manchester United’s official four places from last year to reach spot completed in February 2014, in the next airline carrier for the next five years, 70, closely followed by telecom major 30 years part of the new carriages for the marking the club’s first sponsorship with MTS, which secured spot 82 in brand Moscow tube will be supplied by a Russian company.

Russian Railways applies to take New developments in the private equity firm TPG, VTB and EBRD, over Greek transportation firms VKontakte conflict will sell some of their shares in the offering. The Russian Railways company, RZhD, Pavel Durov, founder and CEO of the top has applied to buy stakes in the Greek Russian social network VKontakte, sold In addition, the GDRs started trading on national railway company TrainOSE, the his remaining 12% stake in the company Moscow Exchange on 6 March 2014. repairing company Rosco and to CEO of Megafon Ivan Tavrin in January Thessaloniki port. In March 2014 RZhD 2014. Weeks after this, Mail.Ru Group Further retail Russian IPOs confirmed its intentions and also co-owned by Alisher Usmanov purchased delayed due to unfavourable market conditions expressed an interest in acquiring the the same stake from Mr Tavrin Greek port Piraeus. consolidating 52% stake in the company. In February 2014, Russian children’s goods retailer Detsky mir, owned by a Eight new warehouses for Sector News major cross-industry Russian Russian Post Skype allowed to operate in Russia conglomerate Sistema, disclosed that it The official development strategy of the without a license has applied to the Central Bank (which Russian Post for the period until 2018 In July 2013, Russia’s telecom watchdog acquired powers of the securities contemplates construction of 6 to 8 gave Skype the green light to continue regulator after it became a mega major logistics centres across Russia. operating in Russia without a license, regulator) for permission to list stock after rejecting an appeal from mobile outside Russia which would allow it to list TM&T operator MTS. depository receipts on the London Stock Exchange. Already in March the company Announced Deals announced, however, that the listing Gazprom media consolidating Consumer Goods and Retail would be delayed due to unfavourable Profmedia Announced Deals market conditions. Gazprommedia has acquired of 100% of Lenta launches IPO Profmedia, a media holding previously On 28 February, Russian hypermarket Similarly, Metro Cash & Carry announced owned by Vladimir Potanin’s Interros. With chain Lenta announced the price for its a delay of offering in respect of its regulatory approvals were received in initial public offering at the London Russian business for an indefinite term. January 2014, the deal was completed Stock Exchange. within the next month. Price or other terms Sector News of the deal have not been disclosed. The total size of the offering is USD 952 7-Eleven considering Russian market million, or USD 1.1 billion if its over- The Moscow authorities are in talks with Yandex buys Israeli startup allotment option is exercised in full the US based 7-Eleven about a Russian search giant Yandex announced (amounting in a total market value of USD contemplated project to open about 200 on 19 March that, it had completed 4.3 billion). The company set the price of local small to medium sized food retail acquisition of a Tel Aviv-based startup USD 10 per global depositary receipt stores. One of the suggested structures is KitLocate. KitLocate is said to possess a (GDR), which is closer to the lower end of to use franchising arrangements to low power consuming mobile geolocation the range of USD 9.5- USD 11.5 that was implement this project. Russian companies technology for smartphones. Terms of the announced earlier. One share is may be invited to join as co-partners. deal have not been disclosed. Yandex is represented by five GDRs. Existing also opening its first research and shareholders of Lenta, including the U.S. development facility in Israel.

market updates on key factors for choice Over 2012 –2013, Marc acted as lead Forthcoming Events of procurement strategy for construction partner on a number of milestone real n St Petersburg International Economic projects, key risks and legal issues in estate projects in Russia, including the Forum (22–24 May 2014, St EPC-contracts (including Russia specific acquisition of Metropolis shopping centre Petersburg, Russia) matters), tax split in construction projects in Moscow (the largest single commercial n Russian Retail Banking Forum - Adam and project finance matters. The latter property transaction undertaken in the Smith Conferences (27 - 29 May 2014, was presented by one of client’s teams Russian corporate history) and the Marriott Grand Hotel, Moscow, Russia) and focused on the bankers’ take on Galeria shopping Centre in St. Petersburg project finance. (The Best Investment Transaction of the n Russian & CIS Coal Summit - Adam Smith Conferences (May 2014, Year at CRE Awards 2012) by MSREF VII Moscow, Russia) Chambers Global 2014 confirms CC Global-GP, L.P., the acquisition of Moscow’s leading status business centres Ducat Place III, Silver n CIS Oil & Gas Summit - The Energy Clifford Chance has been ranked as the City and White Square (The Deal of the Exchange (22 - 24 April 2014, Paris, number one law firm in the 2014 rankings Year at CRE Awards 2013) by O1 France) of Chambers Global Top 30 which were Properties and advised AMMA Group on n Russian Arctic Oil and Gas Adam published in March 2014. The legal the development of Aviapark shopping Smith Conferences (14 - 16 April 2014, directory referred to the geographic centre on Khodynskoye Pole. Marriott Grand Hotel, Moscow, Russia) reach, depth of expertise and client n Wealth Management and Private service of our firm. In terms of Russia New Energy practice counsel Banking: Russia and CIS - Adam Smith specific ratings, our team was ranked in Effective July 2013, Louis Skyner has Conferences (April 2014, tbc, band 1 across a number of practice joined our team as a counsel in the Moscow, Russia) areas including Banking & Finance, Moscow office. Skyner’s practice includes n CIS Private Equity and Venture Capital Dispute Resolution and Restructuring more than ten years of work in the oil & - C5 Conferences (9 - 10 April 2014, /Insolvency with a number of partners gas sector – an area of strength for Moscow, Russia) and counsel getting individual references Clifford Chance Moscow that will be and praise. further bolstered by Skyner’s presence. n Wings of Russia International Aviation Forum - ATO Events (7 April 2014, Marc Bartholomy recognised as Moscow, Russia) Before joining Clifford Chance, Skyner the most influential lawyer by worked as leading legal counsel at Statoil CRE magazine responsible for upstream projects with its CC Moscow Update: Marc Bartholomy, Head of Real Estate Russian partners. Before that he was part Practice at CC Moscow, has headed the of the shipping & offshore practice at the News and People Legal Services section of the Top 100 law firm Wikborg Rein and senior counsel Market Makers 2013 rating. The rating is CC Construction Day 2014 at Petroleum Geo-Services. He, therefore, issued by CRE magazine and represents has experience in advising both from the On 20 March 2014, Clifford Chance real estate market leaders in ‘contractor’ and the ‘client’ perspectives hosted an exclusive Construction Day. A development, investment, property on different stages of the development of team of leading experts from our Real management, leasing as well as legal and oil & gas projects. Estate and Finance practices joined financial advisory. forces to arrange panel discussions and

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