The Energy Regulation and Markets Review - Stikeman Elliott

Russia
Decisions on prior approval of transactions involving control by foreign investors
over Russian strategic organisations are made on the basis of applications from the
foreign investors by the government commission for control over foreign investment in
the Russian Federation, are valid for the term established therein, are executed by the
anti-monopoly authority of Russia and forwarded to the investor. A decision may be
taken, in particular, on a condition on agreement with the investor that it fulfil certain
obligations (for example, to render services at a price set in accordance with the Russian
legislation on natural monopolies or to process the minerals extracted within Russia).
It usually takes three months for an application to be considered (with the possibility
of extension for another three months). Transactions entered into by foreign investors
in relation to Russian strategic organisations in violation of the established procedure
for their prior approval are null and void (with application of the consequences of the
invalidity of a void transaction and the possibility of the foreign investor being deprived
judicially of its voting rights attached to shares and stakes exceeding the set limits).
Also envisaged is the obligation of foreign investors to furnish the anti-monopoly
service of Russia with information on acquisition of 5 per cent or more of the shares
(stakes) in Russian strategic organisations. 41
The Russian organisations in the energy sphere that are natural monopoly entities
are covered by the restrictions applicable to such organisations.
The body that regulates natural monopolies (the Federal Monopoly Service)
approves, on the basis of a mandatory application from a natural monopoly entity:
a transactions to acquire title or use rights to fixed assets with a balance sheet value
of over 10 per cent of its equity capital not intended for production (sale) of
regulated goods (services);
b investments in production (sale) of unregulated goods (services) accounting for
over 10 per cent of its equity capital;
c sale, lease or other transaction on acquiring title or use rights to part of its fixed
assets with a balance sheet value of over 10 per cent of its equity capital intended
for production (sale) of regulated goods (services). 42
An entity or group of entities that has acquired, under any transaction, more than 10 per
cent of the votes in a natural monopoly entity must notify the body regulating natural
monopolies (the Federal Anti-monopoly Service) to this effect and of all changes in the
number of votes. The same obligation is borne by a natural monopoly entity acquiring
more than 10 per cent of the votes in another commercial entity. 43
Acquisition of shares (stakes) in organisations in the energy sphere and acquisition
thereby of shares (stakes) in other commercial entities are covered by the general
restrictions of the anti-monopoly legislation in relation to economic concentration
(incorporation, merger, absorption of organisations, transactions with their shares
41 Article 14 of the Federal Law on Foreign Investment in Companies of Strategic Importance for
National Defence and Security.
42 Article 7, Clause 2 of the Federal Law on Natural Monopolies.
43 Article 7, Clause 4 of the Federal Law on Natural Monopolies.
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