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Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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Doing business in St. Petersburg Guide for exporters, investors and start-ups Current publication was developed by and under supervision of the Enterprise Europe Network Russia, Gate2Rubin Consortium, Module A Regional Center – St. Petersburg operated by St. Petersburg Foundation for SME Development with the assistance of the relevant legal, human resources, certification, research and real estate firms.

© 2012 The Enterprise Europe Network - Russia, Gate2Rubin Consortium, Module A Regional Center – St. Petersburg operated by St. Petersburg Foundation for SME Development. All rights reserved. International copyright. Any use of materials of this publication is possible only after written agreement of St. Petersburg Foundation for SME Development and relevant contributing firms.

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Table of contents Welcome to St. Petersburg ............................................................................................... 7 1.

The city ...................................................................................................................... 8 1.1. 1.2. 1.3. 1.4. 1.5. 1.6. 1.7.

2.

Geography ............................................................................................................................. 8 Public holidays and business hours ....................................................................................... 9 Population ............................................................................................................................. 9 Political system .................................................................................................................... 10 Economy .............................................................................................................................. 13 Foreign trade ....................................................................................................................... 15 Foreign investments ............................................................................................................ 17

Key business sectors................................................................................................. 19 2.1. 2.2. 2.3. 2.4. 2.5. 2.6. 2.7.

3.

Overview of St. Petersburg’s industry ................................................................................. 19 Automotive industry ........................................................................................................... 22 Food and beverage production ........................................................................................... 25 Information and communication technology (ICT) ............................................................. 30 Pharmaceutical industry...................................................................................................... 37 Shipbuilding industry ........................................................................................................... 42 Transport and logistics ........................................................................................................ 46

Business solutions .................................................................................................... 55 3.1. 3.2. 3.3. 3.4. 3.5.

4.

Headquarters....................................................................................................................... 56 Research & Development.................................................................................................... 58 Production сenter................................................................................................................ 61 Distribution сenter .............................................................................................................. 68 Test market ......................................................................................................................... 70

Doing business ......................................................................................................... 72 4.1. 4.2. 4.3. 4.4. 4.5. 4.6. 4.7. 4.8. 4.9. 4.10. 4.11. 4.12.

5.

Establishing a legal presence............................................................................................... 72 Foreign investments ............................................................................................................ 80 Taxation ............................................................................................................................... 85 Contracts ............................................................................................................................. 92 Employment ........................................................................................................................ 95 Product conformity assurance in Russia ........................................................................... 102 Intellectual property rights and franchising ...................................................................... 108 Special economic zones (“SEZ”) in St. Petersburg............................................................. 114 Public private partnerships and infrastructure development........................................... 116 Obtaining rights to state-owned land in St. Petersburg .................................................... 120 Buyout of land plots in St. Petersburg............................................................................... 129 Regulatory issues. Antimonopoly compliance .................................................................. 133

Costs of doing business ...........................................................................................142 5.1. 5.2. 5.3. 5.4. 5.5.

Costs of starting a company .............................................................................................. 142 Human resources .............................................................................................................. 144 Office, retail and warehouse market ................................................................................ 148 Communication ................................................................................................................. 154 Utilities .............................................................................................................................. 155

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6.

SME support ...........................................................................................................157 6.1. 6.2. 6.3. 6.4.

7.

Contacts of the business support infrastructure .......................................................164 7.1. 7.2. 7.3. 7.4. 7.5. 7.6. 7.7. 7.8. 7.9. 7.10. 7.11. 7.12. 7.13. 7.14. 7.15. 7.16. 7.17. 7.18.

8.

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Overview ........................................................................................................................... 157 Definition of SME – EU vs. Russia ...................................................................................... 157 Statistics ............................................................................................................................ 158 SME support and development programs ........................................................................ 160 Overview of the business support infrastructure in St. Petersburg ................................. 164 Authorities ......................................................................................................................... 164 Investment support ........................................................................................................... 166 SME business cooperation support ................................................................................... 167 SME support ...................................................................................................................... 168 Financial support ............................................................................................................... 170 Techno parks and business incubators ............................................................................. 172 Educational programs and internships ............................................................................. 174 Chambers of commerce and industry ............................................................................... 175 Business associations ........................................................................................................ 175 Audit, tax and consulting firms ......................................................................................... 176 Banks ................................................................................................................................. 177 Certification and testing .................................................................................................... 177 Exhibitions ......................................................................................................................... 178 Law firms ........................................................................................................................... 178 Real estate ......................................................................................................................... 179 Recruitment....................................................................................................................... 179 Transport and logistics ...................................................................................................... 180

Authors and contributors ........................................................................................182

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Welcome to St. Petersburg I would like to welcome you to St. Petersburg - the city of enormous business opportunities and development potential. It is the second largest economic, transport, academic, cultural, and tourism center in Russia as well as a growing economy with a thriving private sector and an attractive business environment. Whether you want to start your business or invest in Russia, St. Petersburg is the best place to do it. Favorable economic and geographical location in the European part of Russia, developed infrastructure, extensive scientific, research and educational potential, highly skilled workforce as well as broad market and competitive operating costs facilitate the development of efficient, safe and stable business. St. Petersburg is an attractive location for business and trade which has an established and effectively operating system aimed at supporting investment activity in the city. The Government of St. Petersburg takes every measure to make St. Petersburg a business-friendly environment by reducing administrative barriers and simplifying the procedures required for business and investment activities, including issuance of building permits and registration of property rights. During the recent years many international companies have already implemented investment projects in St. Petersburg, including such leading companies as Coca-Cola, Pepsi, Gillett, Wrigley, British American Tobacco, Bosch Siemens, General Motors, Hyundai and many others. All of them considered St. Petersburg an ideal location for their business needs, whether it is an R&D center, test market, production center or distribution hub. Foreign businesses can benefit from government investment incentives aimed at boosting the local economy. This publication was developed by Enterprise Europe Network (EEN) - St. Petersburg in collaboration of professional legal, human resources, certification, research and real estate firms with the aim of providing start-ups, potential exporters and investors with the relevant information on starting and running business in St. Petersburg. The EEN branch in St. Petersburg focuses on providing business support to Russian companies and provides free services to foreign companies to foster small business cooperation. In 2011 Enterprise Europe Network (EEN) - St. Petersburg processed about 200 foreign requests and provided information on about 1,000 potential partners from St. Petersburg. Exporters, investors and businesses are also encouraged to use a special online tool – portal “Doing business in St. Petersburg” (www.doingbusiness.ru) which contains extensive interactive information in English on advantages and key issues of pursuing business in St. Petersburg as well as a regularly updated database of cooperation profiles and export products from St. Petersburg. Deputy chairman Committee for Economic Development, Industrial Policy and Trade Government of St. Petersburg

Kirill Soloveychik

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1. The city 1.1.

Geography

Coordinates:

Latitude: 59° 57' North Longitude: 30° 19' East

Area:

1,439 sq.km.

Climate:

Maritime, with warm damp summers and moderately cold long winters

Average temperature:

July: + 25 C January: - 2 C

Time:

MSK ( UTC+4)

Dialing codes:

International country code: + 7 (Russia) Area code: 812

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1.2.

Public holidays and business hours

Official holidays:

       

January 1-5 - New Year holidays January 7 – Russian Orthodox Christmas February 23 - Armed Forces Day March 8 - Women’s Day May 1 - International Labor Day May 9 - Victory Day June 12 - Day of Russia November 4 - National Unity Day

Business hours:

Offices: Mondays through Fridays - 9.00-18.00 (9 a.m. till 6 p.m.), lunch break – 13.00-14.00 (1 p.m. till 2 p.m.) Banks: Mondays through Fridays - 9.00-18.00 (9 a.m. till 6 p.m.) Stores: Mondays through Saturdays - 10.00-19.00 (10 a.m. till 7 p.m.), most stores are also open on Sundays Restaurants: Mondays through Sundays – 12.00-23.00 (12 p.m. till 11 p.m.), many restaurants and cafes are open 24 hours

  

1.3.

Population

Population (2011):

4,868,500 people

Labor force (2010):

2,660,500 people

Unemployment rate (2010):

0.6%

Population density (2010):

3,288.3 per sq. km.

Gender ratio (2011): Population age composition: (2010):

male: 44.8% female: 55.2% Male and female (0-15)

12.9% Median age (2010):

Male (16-59); female (16-54)

Male (60 and above); female (55 and above) 61.6%

25.5%

Total: 41.3 years Male: 38.2 years Female: 43.9 years

Birth rate (per 1,000 people, 2010):

12.1

Death rate (per 1,000 people, 2010):

14.2

Ethnic groups (2002 Census):

Russian (84.7%), Ukrainian (1.9%), Belarus (1.17%), unspecified (7.89%)

Official language:

Russian

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1.4.

Political system

City day:

May 27. The city was founded on May 27, 1703

City name:

    

Administrative division:

While the city is divided into 18 districts (rayons), each district is divided into municipal formations. At the moment there are 111 municipal formations (munitsipalnye obrazovaniya).

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Conventional long form: Saint-Petersburg Conventional short form: St. Petersburg Local long form: Sankt-Peterburg | Санкт-Петербург Local short form: С.-Петербург | Петербург Former names: St. -Petersburg (1703-1914), Petrograd (19141924), Leningrad (1924-1991), St.-Petersburg (1991 till present)

1. Admiralteysky District

10. Kurortny District

2. Vasileostrovsky District

11. Moskovsky District

3. Vyborgsky District

12. Nevsky District

4. Kalininsky District

13. Petrogradsky District

5. Kirovsky District

14. Petrodvortsovy District

6. Kolpinsky District

15. Primorsky District

7. Krasnogvardeysky District

16. Pavlovsky and Pushkinsky Districts

8. Krasnoselsky District

17. Frunzensky District

9. Kronshtadsky District

18. Central District

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Political system:

Source: Business Support Structure in St. Petersburg

Executive branch:

The City Administration (www.gov.spb.ru) is the superior executive body of St. Petersburg headed by the Governor. The St. Petersburg Administration is formed of the Governor, the Government, the Governor's Chancellery, the city committees and the subordinate administrative-territorial departments of the Administration.

Legislative branch:

The Legislative Assembly of St. Petersburg (www.assembly.spb.ru) is the standing effective supreme and sole legislative (representative) body of the state authority in St. Petersburg.

Judicial branch:

Charter Court of St. Petersburg (www.spbustavsud.ru), Judges of the Peace of St. Petersburg, City Court of St. Petersburg (www.gs.courts.spb.ru), Arbitration court of St. Petersburg and Leningrad region (www.spb.arbitr.ru) and Leningrad Military Circuit Tribunal (www.lvo.courts.spb.ru).

Suffrage:

18 years of age; universal

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Symbols of St. Petersburg:

Coat of arms Diplomatic representations:

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Flag

55 consular offices, including 34 consulates, 1 embassy office, 3 honorary consuls general, and 19 honorary consuls are accredited in St. Petersburg.

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1.5.

Economy

GRP of St. Petersburg (billion roubles):

1,901.9 1,642.1 1,431.8

1,473.3

2008

2009

1,119.7 666.4

2005

825.1

2006

2007

2010 2011 (estimate) (forecast)

Source: Committee for Economic Development, Industrial Policy and Trade

GRP per capita in St. Petersburg (roubles):

389,595 310,567 320,914

341,683

245,023 145,174

2005

180,315

2006

2007

2008

2009

2010

2011 (estimate)

Source: Federal State Statistics Service; Committee for Economic Development, Industrial Policy and Trade

GRP sectoral composition (2010):

Industrial production Other

19%

24% Real estate

7% 21%

10%

Transport and communications Construction

18% Wholesale and retail trade

Source: Committee for Economic Development, Industrial Policy and Trade

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City budget (billion roubles):

399.5 339.1 278.1

179.9 186.2

347 315.6 358.6 355.8 322.2

404

259.3

120.3 129.9

2005

2006

2007

2008

Revenues

2009

2010

2011

Expenditures

Source: Committee for Economic Development, Industrial Policy and Trade

City debt (01.01.2011):

Total: 6,614.2 million roubles, including Internal: 6,614.2 roubles External: 0 roubles

Credit ratings :

Long-term credit international scale ratings in foreign currency: 

Standard&Poor’s – BBВ (December 2009), forecast – stable

Moody’s Investors Service – Baa1 (May 2011), forecast – stable

FitchRatings – BBВ (September 2011), forecast – positive

Long-term credit national scale ratings:

Leading industries:

Moody's Interfax – Aaa.ru (July 2005)

FitchRatings – AAA(rus) (September 2011), forecast – stable

Machinery, vehicle and equipment manufacturing, electronic and optical equipment, food, including beverages and tobacco; metallurgy and metalworking; chemical production.

Priority sectors/clusters: Automotive, pharmaceutical, shipbuilding, power plant engineering, information technology, radiology, electronic engineering.

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1.6.

Foreign trade

Foreign trade turnover (million USD):

23,643 20,685 17,786 14,177 12,658 10,116

25,734

24,524 17,839

13,437

11,817

4,914

2005

2006

2007 Export

2008 2009 Import

2010

Source: Territorial branch of the Federal State Statistic Service (Petrostat)

Main trade partners (2010):

Czech Republic France South Korea Brazil UK Japan Turkey USA CIS Italy Finland Netherlands Germany China

2.1% 2.3% 2.4% 2.4% 2.5% 3.1% 3.4% 3.7% 4.2% 4.3% 4.7% 8.6% 9.1% 17.5%

Source: Territorial branch of the Federal State Statistic Service (Petrostat)

Currency (code):

Russian rouble (RUB)

Exchange rates:

RUB per EUR – 41.66 (November 2011), 40.3 (2010), 43.4 (2009), 41.40 (2008), 35.90 (2007), 34.70 (2006) RUB per USD – 30.29 (November 2011), 30.48 (2010), 30.24 (2009), 29.38 (2008), 24.55 (2007), 26.33 (2006) Source: Bank of Russia, Ministry of Finance of the Russian Federation

Fiscal period:

calendar year

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1.6.1.

Export

Export volume (2010):

11,817 million USD (12.1% decline in comparison with 2009)

Largest exporters (2010):

JSC Gazprom Neft, JSC Admiralty Shipyards, LLC Novatek Severo-Zapad, CJSC PNT-GSM, Vneshtorgbank

Export structure (2010): 3%

Food products, agricultural raw materials Mineral products

4%

Chemical products, natural rubber Leather and fur products

15%

8%

Timber, pulp and paper products Textile goods and footwear Metal and metal products

0,2% 65%

3% 0,4% 2%

Machinery, equipment, vehicles Other

Source: Territorial branch of the Federal State Statistic Service (Petrostat)

1.6.2.

Import

Import volume (2010):

24,524 million USD (37.8% increase in comparison with 2009)

Largest importers (2010):

LLC Nissan Manufacturing Rus, LLC General Motors Auto , LLC Petro, Northwestern branch of JSC MegaFon, branch of CJSC Russian Fish Company

Import structure (2010): Machinery, equipment, vehicles Metals and metal products

7%

Mineral products 36%

27%

0.4%

Timber, pulp and paper products Chemical products, natural rubber Textiles, textile goods, footwear Leather and fur products

7% 7%

12% 1% 3%

Food products, agricultural raw materials Other

Source: Territorial branch of the Federal State Statistic Service (Petrostat)

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1.7.

Foreign investments

Volume of foreign investments (million USD):

6,284

5,928

5,255

1,160 706

1,171 881

696

985

5,525

5,231

1,417

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Territorial branch of the Federal State Statistic Service (Petrostat)

Structure of foreign investments (million USD, 2010):

538 (10.3%)

4 (0.1%) Foreign direct investment (FDI)

Foreign portfolio investment (FPI) 4,689 (89.6%)

Other foreign investment

Source: Territorial branch of the Federal State Statistic Service (Petrostat)

Foreign investments by sector of the economy (million USD, 2010):

Construction (71)

Wholesale and retail trade (181)

Other (35)

Motor vehicles and equipment (766)

Manufacturing (4,764)

Food, including beverages and tobacco (550)

Real estate (181) Source: Territorial branch of the Federal State Statistic Service (Petrostat)

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Major countries (million USD, 2010):

France Belarus

2.5%

South Korea

18%

Belgium 2.9%

34.3%

Kazakhstan

3.8% Cyprus

4.1%

Sweden

4.4%

11.6%

8.4%

Switzerland

10.2% Germany Other Source: Territorial branch of the Federal State Statistic Service (Petrostat)

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2. Key business sectors 2.1.

Overview of St. Petersburg’s industry

2.1.1.

Structure and main indicators

St. Petersburg’s industrial complex represents the basis of the regional economic growth, accounting for the major source of budget. In the conditions of the global financial crisis, St. Petersburg’s industrial sectors showcased sufficient resilience and fast recovery following the recession. Initially sharp decline in economic growth was relatively quickly followed by renewed economic growth. Today, St. Petersburg’s industry, which employs approximately the fifth of the working population, accounts for 27% of the gross regional product and 36% of the total amount of tax revenues. Efficient operation of the industrial complex significantly affects the development of other sectors of the economy, including transportation, construction, communication, trade and provides real opportunities for the solution of socio-economic goals of the city. Industrial complex of the city is represented by almost all industries. 700 large and medium enterprises, a number of which represent the leading industrial enterprises of the Russian Federation, constitute the basis of the city’s industrial complex. More than 18 thousand small enterprises, including microenterprises, also contribute to the development of the local economy. Large and medium enterprises, 2010 Manufacturing (total)

675

Electronic equipment, electronic and optical equipment

148

Machinery and equipment

91

Food, including beverages and tobacco

86

Metallurgy and metal products

66

Pulp and paper, publishing and polygraphic products

62

Motor vehicles and equipment

48

Non-metallic mineral products

47

Chemical products

39

Rubber and plastics

20

Textiles and clothing

19

Timber processing and timber products

14

Leather, leather and footwear products

7

Petroleum coke and petroleum products

3

Other

25

Electricity, gas and water production and distribution

50

Mineral resources extraction

2

Source: Committee for Economic Development, Industrial Policy and Trade, 2011

In 2010 the volume of industrial production increased by 8.9%. This fact is attributed to the significant increase in the volumes of production of motor vehicles and equipment (2.4 times increase), metallurgy and metal products (26% increase), chemical products (24% increase). Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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In 2010 the industry shipments of St. Petersburg’s enterprises constituted 1,461 billion roubles which represents 124% to the level of 2009. Manufacturing enterprises determine operation of the local industry. Such enterprises account for more than 90% of the total volume of industrial products produced in St. Petersburg (1,343 billion roubles). Machinery (144%), metallurgy and metal products (124%) and chemical products (126%) manufacturing enterprises contributed the most to the growth of production volumes in 2010. Structure of the volume of industry shipments, 2010

Mineral resources extraction 0.4%

Manufacturing 91.9%

Electricity, gas and water production and distribution 7.7% Source: Committee for Economic Development, Industrial Policy and Trade, 2011

2.1.2.

Profitability

In 2010 industrial complex accounted for 251 billion roubles in profit, including 228 billion roubles from manufacturing industries. While the share of profitable enterprises within the total number of manufacturing enterprises constituted 80% (77% in 2009), the volume of profit in the industrial complex increased by 37% in comparison with 2009. The most significant growth in profit in comparison with the previous year is reported in the production of motor vehicles and equipment (1.7 times) as well as metallurgy and metal products (1.6 times). In 2010 a high level of profitability remained in the production of food, beverages and tobacco (26%), chemical products (22%), machinery and equipment (17%). Profitability of manufacturing enterprises, 2010 Russian Federation

14.3%

St. Petersburg

16.7%

Source: Committee for Economic Development, Industrial Policy and Trade, 2011

2.1.3.

Budget receipts

Industrial complex accounts for major budget revenues in comparison with other sectors of the city’s economy. In 2010 the tax revenues from industrial enterprises constituted 125 billion roubles (more than 36% of the total amount), including 116 billion roubles received from manufacturing

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enterprises. Food production, including beverages and tobacco, motor vehicle and other types of equipment production accounted for more than 85% of all budget receipts from the manufacturing sector. Structure of receipts into the budget of the Russian Federation from St. Petersburg's manufacturing enterprises, 2010 2%

2% 5%

7%

Food, including beverages Tobacco

8%

28%

Chemical production

Electronic and optical equipment Machinery and equipment

8%

Metallurgy and metal products Motor vehicles and equipment 3%

37%

Non-metallic mineral products Other

Source: Committee for Economic Development, Industrial Policy and Trade, 2011

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2.2.

Automotive industry

2.2.1.

General overview

Automotive industry and automotive parts manufacturing play an important role in St. Petersburg’s transport machinery complex. The city locates production facilities of the world’s leading car manufacturers, including Nissan, Toyota, General Motors, Hyundai and Scania. Leading car manufacturing plants in St. Petersburg, 2011 Brand name

Opening

Toyota

2007

Production volume, th.units/year 50

General Motors

2008

Nissan

Volume of investment

Employees

133 mln USD

600

60

303 mln USD

1,300

2009

50

200 mln USD

1,500

Hyundai

2010

150

650 mln USD

2,400

Scania

2010

6,5

10 mln Euro

600

Model range

Toyota Camry Chevrolet Cruze, Chevrolet Captiva, Opel Astra, Opel Antara Teana, X-trail, Murano Solaris all types of trucks

Source: Committee for Economic Development, Industrial Policy and Trade

2.2.2.

Industry in numbers

Development of automotive clusters is one of the prerequisites of successful development of automotive industry. St. Petersburg has one of the fastest-growing and promising automotive clusters, which makes the city a leading center of Russian car manufacturing industry. During the first stage of cluster development from 2005 to 2010 Nissan, Toyota, General Motors, Hyundai, Scania built their car assembling facilities in the city. With the total area of allocated land lots of 686.3 hectares and more than 6 thousand workplaces created, the volume of investment into the construction of new car manufacturing facilities constituted 1.3 billion dollars. The total volume of budget spendings directed towards the implementation of investment projects constituted 6.6 billion roubles. Volume of car manufacturing in St. Petersburg, thousand units, 2011 2011F 2010 2009 2008

225 69.4

19.9 47.5

Source: Committee for Economic Development, Industrial Policy and Trade

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2.2.3.

Companies

Light motor vehicles General Motors General Motors opened its automobile factory in St. Petersburg in 2008. Global car making giant became the second foreign carmaker to open a factory in St. Petersburg. Investment in the project totalled 300 million dollars with up to 1,700 jobs created, followed by the opening of a second production line in 2010. Hyundai Motor Company Hyundai officially launched its full-cycle manufacturing plant in St. Petersburg in 2010. St. Petersburg’s plant is Hyundai’s sixth production facility outside its home market of South Korea. The facility is expected to roll out 105,000 vehicles in its first year of operation with the rise to 150,000 in 2012. Hyundai plans to create 5,300 jobs by 2012 in St. Petersburg together with eleven parts suppliers from Korea. Nissan Nissan Manufacturing Rus was established in St. Petersburg in 2009. The plant currently represents approximately a 150 million euro investment with the total volume of 28,500 units since the start of production. The plant currently employs 2,000 employees. Toyota Motor Corporation Toyota became the first Japanese carmaker to start production in Russia with its car assembly plant opened in St. Petersburg in 2007. The plant, with an annual output capacity of about 50,000 vehicles, initially built 20,000 Camry sedans per year while gradually expanding its production since then. Trucks Scania Scania opened its industrial facility for assembling and bodyworking trucks for the Russian market in St. Petersburg in late 2010. This Russian facility is Scania’s sixth delivery center. From the new Delivery Center in St. Petersburg, Scania supplies complete trucks that are adapted to the requirements and operating conditions that apply in Russia. St. Petersburg’s facility has a technical assembly capacity of about 5,000 truck chassis and 1,500 superstructures per year. It employs about 70 employees. Yarovit Motors Yarovit is a Russian manufacturer of cargo trucks, dump trucks, bolster trucks and concrete mixers. Yarovit’s manufacturing facility was set up in St. Petersburg in 2003. In 2012 ë-Auto, a joint venture of Yarovit and the Onexim investment group, will start the production of a hybrid electric car yo-mobile.

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Components suppliers Magna International A global automotive supplier currently operates five production sites in Russia, three of which are located in the St. Petersburg region since 2010. The Cosym stamping and assembly plant in Shushary has 170 employees and produces body, chassis and energy-management systems for OEM customers such as Hyundai, General Motors, Nissan and Volkswagen. The Cosym assembly and sequencing plant in Kamenka is a Hyundaidedicated production site that employs 50 employees. Magna announced the opening of a Magna Exteriors and Interiors facility in Kolpino which has approximately 25 employees producing exterior and interior components for OEM customers, including Ford and Nissan.

2.2.4.

Supporting institutions

2.2.4.1. Associations 

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St. Petersburg Association of Manufactures of Automotive Components (SPbAPAC) St. Petersburg Association of Manufactures of Automotive Components is the largest professional association of automotive components manufacturers in Russia which functions on the principle of a cluster. At present the association unties more than 60 enterprises which manufacture over 1,500 products. Active participation in regional, interregional and international exhibitions and conferences as well as support of the Government of St. Petersburg and the Union of Industrialists and Entrepreneurs makes the association one of the key players at automotive and automotive components market of the Russian Federation.

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2.3.

Food and beverage production

2.3.1.

General overview

Food complex in St. Petersburg is represented by 11 major industries, which include more than 80 large and medium as well as 180 small enterprises. Brewing and tobacco manufacturing are the two most developed sectors of the local food industry. High investment activity of St. Petersburg’s enterprises is one of the major factors accounting for the successful development of food industry in the city. Increased automation and production improvements allowed companies to significantly diversify the assortment of produced food products and improve their consumer appeal. Continuous renewal of assortment is one of the characteristics of the food industry in St. Petersburg. St. Petersburg’s enterprises develop at least 100 new sorts of various bakery and pastry products, including bread and rolls, dried bread and biscuits, pies and cookies. Assortment of the produced bakery products totals more than 400 items which makes it the most diversified assortment present in Russia.

2.3.2.

Industry in numbers

In 2010 the volume of food industry shipments, including beverage and tobacco, constituted 14.6% of the total manufacturing industry in St. Petersburg. The shares of tobacco and confectionery production industries in St. Petersburg represent more than 50% in the total Northwestern Federal District output volume. Structure of industry shipments, 2010

Investment in fixed assets by industry, 2010

21% 15%

77%

49%

11%

8% 7% 12%

Other manufacturing industries

Electric power, gas and water production Motor vehicle and equipment manufacturing

Food manufacturing, including beverages and tobacco Electric power, gas and water production

Food manufacturing, including beverages and tobacco Metallurgy and metal product manufacturing Other industries

Source: Committee for Economic Development, Industrial Policy and Trade, 2011

As of 2010, the food and beverage industry employs more than 11% of the total number of employees occupied in the St. Petersburg industrial complex and pays higher wages than any other industry in St. Petersburg (35.4 thousand roubles).

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As of 2010, food industry, including beverage and tobacco, is the most profitable industrial sector in St. Petersburg (26%), followed by chemical (22%) and machinery and equipment production (17%). These industries account for more than 85% of all revenue receipts from the local manufacturing sector. More than 10% of all investment into industrial sector accounts for the production food, beverages and tobacco.1

2.3.3.

Companies

Bakery Hlebny Dom JSC Hlebny Dom has operating at the Russian market for more than 70 years and is one of the largest baking enterprises in Russia. The company became a part of the Fazer Group in 1997. It is represented by 4 production sites in St. Petersburg as well as one in Moscow. Hlebny Dom produces bakery and confectionery products, long term storage foods as well as frozen and flaky dough products. Karavay JSC Karavay was established in St. Petersburg more than 80 years ago. Today, it is a modern fully-equipped bakery which produces more than 170 items of fancy and bakery products. Karavay is one of the leaders of baking industry in St. Petersburg. It currently possesses 4 baking plants. Beverage production Carlsberg Group Baltic Beverages Holding, a leader at the Russian beer market which manages Baltika, became a part of the Carlsberg Group in 2008. Carlsberg currently owns 89.01% of Baltika stock. Today, Baltika Brewery, founded in 1990, is the largest brewery in Eastern Europe and the second-largest brewery in Europe after Heineken Brewery. Coca-Cola Company Coca-Cola’s plant, opened in St. Petersburg in 1995, produces Coca-Cola products for more than 13 million customers in St. Petersburg and Northwestern Russia. It employs more than 1,000 people, while creating up to 200 additional seasonal workplaces during the peak seasons. Heineken Heineken has been operating in Russia since 2002 when it acquired the Bravo plant in St. Petersburg. St. Petersburg’s Heineken brewery also produces and distributes Budweiser beer, having signed a licensing agreement with Bud’s brand owner Anheuser-Busch. Pepsi Bottling Group, Inc. (PBG) PepsiCo drinks are produced by Pepsi Bottling Group at its four plants in Russia. One of the top global FMCG companies in Russia opened its St. Petersburg’s plant in 1992. PBG produces and distributes all PepsiCo products, including carbonated soft drinks, water, snacks, juices, teas.

1

Committee for Economic Development, Industrial Policy and Trade

26

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Russian Standard Company A leading Russian premium vodka producer opened its distillery in St. Petersburg in 2006. Total investments into the facility amounted to 60 million dollars. The distillery produces 3.6 million dekaliters of vodka annually. A 30,000 square meter facility handles the production of the company's entire vodka portfolio, including Russian Standard Original, Russian Standard Platinum and Imperia. Candy Chupa Chups S.A. The Spanish candy maker launched its St. Petersburg’s production facility in 1991. Neva Chupa Chups produces Chupa Chups caramel lollipop candies of various flavors and colors not only for the Russian market but also for export to CIS countries. St. Petersburg’s factory has the capacity of making up to 200 million 200-gram rolls per year. Confectionery factory named after N.K. Krupskaya The history of the Confectionery factory began in 1938. In 2006 the factory was acquired by the Norwegian Concern Orkla which is one of the leading suppliers of branded consumer goods to Nordic food retailers as well as Central and Eastern Europe and Russia. Today, the factory is a modern industrial complex with capacity to produce more than 20 thousand tons of confectionery products per year. It produces more than 130 confectionery products, including chocolate of different sorts, diabetic products, chocolate semi-finished products for food industry. Chewing gum Wm. Wrigley Jr. Company The world’s largest maker of chewing gum has been operating a 70 million dollar plant in St. Petersburg since 1999. Wrigley is planning to expand its St. Petersburg plant with an investment of 100 million dollars. The company also announced that it might build a second factory in Russia and acquire local producers to tap its growth at the Russian market. Dairy Petmol dairy plant, Unimilk St. Petersburg dairy plant Petmol launched the production of dairy products in 1934. In 2003 LLC Unimilk became the main shareholder of the company. Today, Unimilk is one of the leading manufacturers of dairy products in Russia and CIS. Established in 2002, the company employs more than 14 thousand people and unites 28 enterprises in Russia, Ukraine and Belarus specialized in the production of dairy products and baby food. Baltic Milk, Wimm-Bill-Dann Baltic Milk Dairy Factory was launched in 1987. The factory became a part of the Wimm-Bill-Dann production and trade group in 2000. Will-BillDann is the leader at the Russian market of dairy products and baby food as well as one of the leading producers at the soft drinks market in Russia and CIS. The company operates more than 35 processing plants in Russia, Ukraine and Central Asia and employs more than 18 thousand people.

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Tobacco British American Tobacco (BAT) BAT’s plant in St. Petersburg operates 13 production lines producing five premium brands. It provides about 25% of BAT’s production volume in Russia. The company completed the construction of new production facilities at its plant in St. Petersburg in 2007 with the total investment of 110 million dollars, thus increasing St. Petersburg plant’s production capacity to 40 billion cigarettes a year. Japan Tobacco International (JTI) Petro JTI Petro's cigarette making facility in St. Petersburg is the company’s biggest worldwide plant with the total of 400 million dollars invested. The brand portfolio includes over 30 brand names, both international and local. It supplies the firm's Russian and Ukrainian plants with main tobacco components used for cigarette production. Philip Morris International (PMI) Philip Morris Inc. officially opened its third Russian cigarette factory in St. Petersburg in 2000. The total investment of 335 million dollars made this project the company’s largest cigarette plant in Europe. The plant, which employs 750 workers and operates 15 conveyer belts, produces the Marlboro, Parliament, Virginia Slims, L&M, Chesterfield and Bond Street brands. In 2002 the company began construction of a new processing line and a warehouse with the total investment estimated at 240 million dollars.

2.3.4.

Supporting institutions

2.3.4.1. Universities 

St. Petersburg Institute of Management and Food Technology St. Petersburg Institute of Management and Food Technology is an institute of continuing professional education and professional development, international information, scientific research, analysis, exchange of experience, which has been operating for more than 43 years. Every year more than 3 thousand specialists from bread and baking pasta, yeast, brewery and other food industry enterprises undergo training, career and professional development at the Institute. St. Petersburg State University of Refrigeration and Food Engineering With more than 6 thousand students enrolled, St. Petersburg State University of Refrigeration and Food Engineering is the leading higher educational institution in refrigeration engineering and food processing in Northwest Russia. The University has educated more than 25 thousand engineers who continue to actively contribute to the development of refrigerating and cryogenic engineering, technology and equipment for food processing. The University is actively involved in research, scientific and innovative activities. Technopark has been operating on the basis of the University since 2000. It unites the University engineering departments as well as business structures and small innovative enterprises. During the period of 5 years Technopark carried out more than 300 projects, which have been implemented at the largest food enterprises across Russia.

2.3.4.2. Research Institutions 

28

All-Russia Scientific and Research Institute of Fats All-Russia Scientific and Research Institute of Fats is the largest scientific and research center in Russia specialized in oil and fact industry. The institute carries out fundamental and applied Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru




scientific research and introduces the best research practices aimed at technological, economic and social development of agro-industrial complex. The institute carries out research of vegetable oil production and processing, vegetable food protein as well as margarine and mayonnaise production, etc. State Scientific Research Institute of Baking Industry, St. Petersburg branch State Scientific Research Institute of Baking Industry is the leading scientific center of bread and baking pasta industry in the Russian Federation and CIS. St. Petersburg branch specializes in the field of developing new technologies for baking. The priority research areas are the development and improvement of biotechnological processes and assortment of rye, rye and wheat bread as well as pastry.

2.3.4.3. Professional associations 

St. Petersburg Union of Food Enterprises The Union is a non-profit organization established in 2005 by baking, meat processing, dairy, oil and fat, confectionery, alcohol and other food industry enterprises. The organization aims to coordinate business activities of its members and actively participate in the effective state regulation in the sphere of food industry.

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2.4.

Information and communication technology (ICT)

2.4.1.

General overview

Information and communication technology (ICT) sector is one of the most rapidly growing sectors of the Russian economy. 60% of all Russian IT companies are based in St. Petersburg, including 49 centers of leading international and Russian ICT companies. The development ICT cluster is a priority policy implemented by the Government of St. Petersburg. Availability of a developed IT infrastructure, including a technopark, business incubator, modern research and scientific institutions, as well as highly qualified IT-personnel facilitate the development of St. Petersburg as a Russian leader in information and communication technology.

2.4.2.

Industry in numbers

Today, ICT cluster is one of the youngest and most competitive sectors of innovation policy implemented in St. Petersburg. The cluster represents not only an independent sector but also a trigger facilitating effective development of other sectors of the regional economy. As of 2009, the sector’s annual turnover constituted not less than 3.5 billion dollars. The amount of people employed only in software development constitutes more than 36 thousand employees with almost 100% of them possessing higher education degrees. Most of the companies and institutions comprising ICT cluster have the highest competitiveness rating, including Reksoft, Exigen Services, PROMT, Speech Technology Center, Spb Software, SPEEREO, Solvo and others.2 Russian cities by number of head offices and remote development centers of IT companies, 2010 Ranking 1

City Moscow

2

St. Petersburg

49

3

Moscow region

10

4-5

Novosibirsk

8

4-5

Voronezh

7

6

Rostov-on-Don

7

7

Tomsk

6

8-9

Yekaterunburg

5

8-9

Veliky Novgorod

4

8-9

Kazan

4

10-12

Nizhniy Novgorod

3

Source: Russian software developing industry and software exports, 7 Association (RUSSOFT), 2010

2

Number of offices 67

th

annual review, Russian Software Developers

Russian Software Developers Association (RUSSOFT)

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2.4.3.

Companies

Suppliers of software development services Astrosoft Astrosoft is a premium level IT-services supplier with more than 10-year expertise in implementing projects all over Europe. The company is headquartered in St. Petersburg and provides a wide range of services in software development and integration, consulting and training. The key service areas include business applications development, business solutions development, business in Russia for start-up solutions, embedded systems development, legacy system re-architecture. Arcadia Arcadia is an innovative offshore software development based in St. Petersburg. The company provides a wide range of software development outsourcing services to customers worldwide. Today, Arcadia unites team of more than 170 software professionals with over 18 years of experience in custom development of business applications. AT Software AT Software is a leading software and hardware development company in Russia/CIS with customers in Europe, USA and Russia. AT Software was formed in 2008 as the result of merger of two leading Russian software development companies - Lanit-Tercom (St. Petersburg) and Artezio (Moscow). Today, its primary areas of expertise include telecommunications, industrial electronics, healthcare, banking and finance as well as education. The company offers a wide range of services, including software and/or hardware development outsourcing/offshoring (ODC), managed product development, enterprise services (custom applications development, audit, testing, customization, re-engineering, integration), IT consulting and research, IT staffing and out-staffing. DataArt DataArt is a custom software development company that provides advanced solutions for financial services, healthcare, hospitality and other industries. Founded in 1997, DataArt’s services include application development, quality assurance, team completion, reengineering and R&D. The company has been consistently named one of the top or fastest growing IT outsourcing providers worldwide by BusinessWeek. Headquartered in New York, DataArt runs R&D centers in Russia, including the center in St. Petersburg, Ukraine and maintains offices in London, UK. DevExperts DevExperts is a provider of professional software systems for on-line brokerage, exchange, and financial activities mostly on stock, options, and Forex markets. The company is specialized in the development, implementation, and support of financial systems intended to handle complex business activities, including a full set of advanced tools to meet both a trader's and a broker's requirements. DevExperts is based in St. Petersburg and provides its services operating in the US, Great Britain, Russia, Japan as well as other countries.

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Digital Design Headquartered in St. Petersburg, Digital Design is an IT consultancy which offers a full range of IT services to clients in Russia and all over the world. The company’s services include customs software development, corporate portals, software plus services enabling, application maintenance and legacy migration, enterprise application integration, data warehousing and analysis, nearshore development center, rail fleet management system. Founded in 1992, the company has become one of the largest IT services providers in Russia. Exigen Services Exigen Services is an Inc. 5,000 global IT company that provides application outsourcing services. The company has been delivering its services to clients operating in the field of financial services (banking, brokerage and insurance markets), media and entertainment, healthcare, and industries for 17 years. Today, it employs more than 1,700 highly skilled developers and application outsourcing experts within its global delivery network. Headquartered in San Francisco, USA, the company has one of the largest development centers in St. Petersburg. Reksoft Reksoft is a nearshore software engineering services provider established in 1991. The company is headquartered in St. Petersburg and has delivery offices across Europe. Reksoft specializes in supplying software development services, products and solutions to enterprises, ISVs, and system integrators operating in a variety of industries. Reksoft’s major services include software product engineering, enterprise application services, including consulting, custom application development, enterprise application integration, application management, migration and customization, as well as dedicated centers. Software product developers Doctor Web Doctor Web is a developer of highest-grade anti-virus protection Dr.Web®. The company is headquartered in Moscow with the Department of AVResearch and Development located in St. Petersburg. Doctor Web unites the team of more than 230 specialists with over half of them engaged in R&D. Dr. Web’s security products are distributed through its network of partners. Eureca Eureca has been operating at the Russian market since 1990. Today, the company offers a variety of services, including development of complex information systems, development and supply of integrated network solutions, development, production and supply of high-efficient servers and working stations, organization of automated data entry, storage, access and search systems and many others. The company has offices in St. Petersburg, Moscow and Kursk as well as a training center in St. Petersburg.

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PROMPT PROMT is a leading Russian developer of linguistic IT solutions for business and private users. The company has been successfully operating at the market of innovative linguistic technologies for 20 years and, today, offers translation systems for twelve languages. PROMT has 4 worldwide offices, including the corporate office in St. Petersburg, and provides its services to more than 10 thousand client companies all over the world. SPB Software SPB Software Inc. is a global company which develops mobile solutions for OEM mobile device manufacturers and mobile carriers as well as smartphone and tablet end users. With dozens of industrial awards and millions of customers worldwide, SPB provides a unique line of popular consumer products, ranging from mobile games to usability and productivity applications, business, communication, and multimedia software for mobile phones. Founded in St. Petersburg in 1999, the company retains its development headquarters in the city and has offices in USA, Brazil, Taiwan, and Thailand. Speech Technology Center Speech Technology Center is a leading provider of cutting-edge voicebased solutions in speech recording, processing and analysis. Founded in 1990, Speech Technology Center has over 20 years of experience in speech technology development. STC provides competitive solutions across a range of fast-growing technology sectors, including multi-channel and hand-held digital recording, noise cancellation, speech enhancement and biometric authentication and identification. STC is also a leading developer of speech recognition and synthesis engines for the Russian language. Speereo Speereo Software UK Ltd. was founded in 1998 and has a head office in London, UK as well as a R&D center in St. Petersburg. The company specializes in the development of its own proprietary speech recognition system as well as mobile and PC solutions based on Speereo Speech Recognition (SSE) Technology. Software development centers of international companies Alcatel-Lucent Alcatel has been operating its R&D center in St. Petersburg since 2005. Its main objectives lie in the development and integration of innovative telecommunications software systems, and adaptation of existing company’s products to the specific requirements of the regional market. The center covers three fields of applications, including fixed, mobile and enterprise networks, and employs 150 specialists trained at the specialist R&D centers in Europe and the US.

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EMC Opened in 2007, EMC R&D center in St. Petersburg is an important part of the global EMC R&D investment program. The center focuses on rendering support and continuous development of a wide range of world’s leading software products. St. Petersburg’s center currently employs more than 170 program engineers specialized in data management and data storage systems. HP Labs HP Labs Russia is the newest member of the international HP Labs community, and the third new research lab created by the company in the last five years. Opened in St. Petersburg in 2007, it focuses on information management and development of new technologies linked to the explosion of information access brought about by the World Wide Web. The only Russian HP research lab delivers breakthrough technologies and technology advancements that provide a competitive advantage for HP and create business opportunities that go beyond HP's current strategies. Intel Opened in St. Petersburg in 2004, the Intel R&D center currently employs more than 100 specialists. The center focuses on conducting research and development of innovative software solutions for Internet-related technologies, including Dynamic Runtime Layer (DRL), communication technologies that enhance wireless communication, grid computing to optimize programming environment. St. Petersburg center works in close collaboration with the city universities with the aim of creating a solid academic foundation for information. Oracle Development Following the Sun Microsystems’ acquisition by Oracle in 2009, the Sun Microsystems’ center of high technologies in St. Petersburg has been functioning as Oracle Development LLC. System integrators BCC Group Founded in 1994, today, BCC Group is one of the leading companies providing IT-services and systems integration at the Russian market. The company’s major activities include enterprise management and business consulting, IT-consulting, software integration and installation services, telecom solutions for mobile and fixed communication networks, IT and telecom solutions for production and manufacturing and others. The company has 5 offices in Russia, including the office in St. Petersburg. Nienschanz Nienschanz is one of the largest IT-oriented holdings in Russia and an experienced solution provider. CJSC Nienschanz was founded in St. Petersburg in 1991 and since then has developed into a multi-profile group of companies. The major services include system integration, ITconsulting, fabrication, integrated supplies and service maintenance of computer facilities and peripheral units, integrated supplies of copyingand-duplicating machines, manufacture, integrated supplies, distribution and service maintenance of office furniture.

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SOLVO SOLVO Ltd. is a St. Petersburg based leading vendor of high-end logistics automation and control systems. The company provides solutions for automating the entire complex of business and technology processes within warehouses and container terminals. SOLVO offers its customers a wide range of services, including project customization, training and consulting, system implementation and deployment assistance, and technical support.

2.4.4.

Supporting institutions

2.4.4.1. Universities 

St. Petersburg State Electrotechnical University St. Petersburg State Electrotechnical University is one of the world’s largest education and research centers specializing in radio engineering, electrical engineering, electronics and computer science. The University has a staff of more than 1,000 highly-qualified specialists and scientists, including the Nobel Prize Winner in physics Zhores Alferov. Electrotechnical University is alma mater for over 70 thousand students and over 3 thousand international students. St. Petersburg State Polytechnical University St. Petersburg State Polytechnical University was founded in 1899. It has recently become the National research University, thus recognized as a leading Russian and international center in the field of higher engineering and economics. The University attracts students form 96 countries of the world and provides education programs in the field of engineering, physics, economics, humanities and IT. Today, the University has 20 departments and institutes and 120 R&D labs and offers more than 150 concentrations. St. Petersburg State University Founded in 1724, St. Petersburg State University is the oldest institution of higher education in Russia. The University’s Department of Mathematics and Mechanics together with its comprising scientific institutions is one of the largest mathematical centers in the world. The Department offers 23 concentrations and also includes the Research Institute of Mathematics and Mechanics, a computer center and astronomy observatory. St. Petersburg State University of Information Technologies, Mechanics and Optics The National Research University of Information Technologies, Mechanics and Optics is one of the oldest higher education institutions in Russia. The school has been training specialists in cutting-edge technologies directed to science and technical development for more than 100 years. Today, the University has 10 departments offering 49 concentrations and enrolls more than 9,000 full-time students.

2.4.4.2. Research Institutions 

St. Petersburg Institute for Informatics and Automation, Russian Academy of Sciences (RAS) St. Petersburg Institute for Informatics and Automation of the Russian Academy of Sciences was founded in 1978 and has since then grown into a large scientific research organization which gave rise to a new Center of Ecological Security of the St. Petersburg Scientific Research Center of RAS. Today, the Institute is engaged in fundamental research of informatization of society and information security, information and computer systems and networks, theoretical basics of development of soft- and hardware complexes for information real-time processing, IT for intelligent systems of research automation, control, manufacturing and other fields.

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St. Petersburg Department of Steklov Institute of Mathematics, Russian Academy of Sciences (RAS) The Institute was established in 1940 as a department of the Steklov Institute located in Moscow. Today, it is an independent research institute specializing in fundamental research on theoretical mathematics and mathematical models of theoretical physics, including mathematical logic and theory of algorithms, theory of numbers, geometry and topology, mathematical analysis, theory of probability, mathematical statistics and many other.

2.4.4.3. Associations 

36

RUSSOFT RUSSOFT is a multinational association of software companies from Russia and Belarus. The association was founded in 1999 and is headquartered in St. Petersburg. Today, RUSSOFT unites more than 70 companies which employ more than 20 thousand highly-qualified programmers and software engineers. The association was created to represent Russian software development companies at the global market, enhance marketing and PR activities of its members, and lobby their interests in their countries' governments. RUSSOFT is a part of the Russian Information and Computer Industry Association (APKIT) where it plays a role of Software Development and Export Committee. SPb CIO Club St. Petersburg CIO Club is a professional community uniting IT directors of leading companies of the Northwestern region of the Russian Federation. The organization’s major objectives lie in providing support and strengthening the development of professional community of IT directors. Established in 2004, the Club is at present the largest professional IT community in Russia.

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2.5.

Pharmaceutical industry

2.5.1.

General overview

The development of pharmaceutical cluster is one of the priorities of the Government of St. Petersburg. According to Pharmexpert Market Research Center, St. Petersburg is the most investment-attractive region of the Russian Federation as well as a launch pad for successful implementation of pharma and medical equipment projects.3 The effectiveness of the pursued government policies is revealed in the increased interest of international businesses in St. Petersburg as well as the results achieved. 11 projects on the localization of pharmaceutical facilities and creation of modern research infrastructure are being implemented in the framework of the cluster. The total volume of investments constitutes approximately 30 million roubles. The projects are implemented with the participation of the leading research and education centers, which play a pivotal role in establishment of joint modern research centers and labs.

2.5.2.

Industry in numbers

The volume of pharmaceutical market in St. Petersburg constituted more than 20 billion roubles in 2009. This fact represents a significant trigger for development of competitive industry in the region. The average per capita consumption of pharmaceuticals in St. Petersburg constitutes more than 133.5 dollars, which is significantly higher than the average Russian consumption (82.1 dollars, respectively).4 Nine investment projects with the volume of total investment of 25.12 billion roubles aimed at constructing new pharmaceutical plants were launched in 2010. In addition to production operations, almost each project involves the construction of research labs for development of new pharmaceuticals. Major pharmaceutical investment projects, 2010 Company

Investment

Production site

Samson-Med

1.5 bln RUB

Industrial zone "Pushkin"

Greopharm

2.3 bln RUB

Industrial zone "Pushkin"

Neon

0.9 bln RUB

Industrial zone "Pushkin"

Pharm-Holding

0.7 bln RUB

Industrial zone "Pushkin"

Biokad

1.07 bln RUB

Pharmasintez Vertex Immuno-Gem Novartis

Lab complex SEZ "Noidorf"

SEZ "Noidorf"

SEZ "Noidorf"

1.7 bln RUB

SEZ "Novo-Orlovskoe"

SEZ "Novo-Orlovskoe"

1 bln RUB

SEZ "Novo-Orlovskoe"

SEZ "Noidorf"

0.6 bln RUB

SEZ "Novo-Orlovskoe"

SEZ "Novo-Orlovskoe"

15.35 bln RUB

SEZ "Novo-Orlovskoe"

SEZ "Novo-Orlovskoe"

Source: Committee for Economic Development, Industrial Policy and Trade

3 4

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2.5.3.

Companies

The key pharmaceutical cluster projects in St. Petersburg: Biocad Biotechnological company Biocad is planning to construct a new research and pharmaceutical manufacturing plant on the territory of the Noidorf industrial zone within 2010-2017. The project aims to create an import substituting production of more than 40 essential pharmaceuticals in accordance with the GMP standards as well as scientific and research complex on oncology/hematology, gynecology/urology, neurology, viral infections and diabetes. The project will be implemented on the territory of 5 hectares and will include pilot production lab, 10 production lines for the production of substances, liquid and solid pharmaceuticals with the annual capacity of up to 60 million packages and storage facilities. GalenoPharm The company intends to construct a scientific center for the supply of respiratory pharmaceuticals. The project will be realized within 2010-2014 and will include a complex base for the development of pharmaceutical products to treat bronchial allergy, chronic wheezing illnesses as well as biologically active supplements and beauty products. Gem-standard Gem-standard became the resident of the Novo-Orlovskaya Special Economic Zone (SEZ) in 2011. The company is planning to construct a research and production complex for the development of innovative blood plasma pharmaceuticals. The project with the total budget of 865 million roubles will be implemented in 2011-2015 on the territory of 4 hectares and will use unique complex technology for deep and complete plasma processing. Geropharm Geropharm aims to create a modern high-tech industrial complex in compliance with the GMP standards to produce original Russian as well as generic pharmaceuticals. The project includes the construction of two complexes, including suppository manufacturing on the territory of 1.6 hectares with the total investment of 800 million roubles and injection drug manufacturing on the territory of 2.8 hectares with the total budget of 1.3 billion roubles. Both projects will be implemented on the territory of the Pushkinskaya industrial zone within 2010-2014. Neon Neon aims to launch the production of high quality effective Russian pharmaceuticals to address the demands of the Russian healthcare system. The project will be implemented within 2010-2014 on the territory of 2.9 hectares within the Pushkinskaya industrial zone. It envisages the establishment of a high-tech production in accordance with the GMP standards with the annual capacity of 960 million units.

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Novartis The world’s leading pharmaceutical company operating in more than 140 countries around the world held a ground breaking ceremony to mark the launch of construction of a pharmaceutical manufacturing plant in St. Petersburg on June 16, 2011. The construction of this facility represents the most significant Novartis investment into Russia to date. The new greenfield facility will be located on the territory of the Novo-Orlovskaya Special Economic Zone (SEZ) and will manufacture innovative patented pharmaceuticals and modern high quality generic medicines. The project with the total investment of 15.3 billion roubles will be implemented on the territory of 10 hectares within 2010-2014. It will include the construction of research complex for the development of new medicines, modern production operations organized in accordance with the GMP standards with the annual capacity of 1.5 billion solid peroral pharmaceutical as well as scientific and educational activities, including participation in Russian innovative projects. The plant will manufacture therapeutic pharmaceuticals to counter socially significant diseases, including cardiovascular, oncologic, immunologic diseases and diabetes. Pharmasyntez Pharmasyntez plans to construct a scientific and manufacturing complex for the development and production of oncology pharmaceuticals on the territory of 4.5 hectares located in the Novo-Orlovskaya Special Economic Zone (SEZ) within 2010-2015. The project with the total budget of 2 billion roubles envisages the development and transfer of pharmaceutical manufacturing technologies for the production of antitumor products to combat oncological diseases. The company will localize the production of 5 pharmaceuticals from the list of strategically significant pharmaceuticals. Pharm-Holding Pharma-Holding announced its plans to build a science research and production complex in St. Petersburg within 2010-2014. The project is aimed at increasing the availability of essential pharmaceuticals as well as establishment of effective scientific and production base. The total budget of the project which will be implemented on the site of 2.9 hectares located in the Pushkinskaya industrial zone constitutes 800 million roubles. The plant will manufacture C-peptide, cortagen and prostamax. Polysan Polysan aims to construct a modern pharmaceutical plant in accordance with the GMP standards within 2010-2012. The total investment of the project constitutes 2 billion roubles. The plant will produce high quality infusion pharmaceuticals. Samson-Med Samson-Med intends to construct a bio-substances and pharmaceutical manufacturing facility on the territory of 2.7 hectares in the Pushkinskaya industrial zone within 2010-2014. The project with the total budget of 1.5 billion roubles envisages organization of a complete technological cycle for the production of active pharmaceutical substances and pharmaceuticals in accordance with the GMP standards, including cardiology, neurology, pulmonology, ophthalmology, gastroenterology and genecology products. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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Vertex Vertex aims to construct a new scientific and manufacturing complex for the development and production of innovative pharmaceuticals. The project with the total investment of 1.6 billion roubles will be implemented within 2010-2014 on the territory of the Novo-Orlovskaya Special Economic Zone (SEZ). The complex will include research as well as pilot production labs.

2.5.4.

Supporting institutions

2.5.4.1. Universities 

St. Petersburg State Chemical-Pharmaceutical Academy St. Petersburg State Chemical-Pharmaceutical Academy is a leading Russian center in educating high qualified process engineers occupied in industrial production of pharmaceuticals of various origin. The academy participates in TEMPUS program realized by the EU and Russian Federation in the sphere of training of GMP experts. St. Petersburg State Institute of Technology St. Petersburg State Institute of Technology is an acknowledged world’s center of chemistry, chemical and biotechnologies, nanotechnologies, cybernetics and engineering. The Institute possesses a vast range of methods of active pharmaceutical ingredients synthesis as well as pilot production of substances in accordance with the GMP requirements. It is a major center dedicated to training of personnel for scientific centers and industrial enterprises. St. Petersburg State Pavlov Medical University One of the leading medical schools in Russia carries out preclinical research, including study of new molecules and dosage forms, translational studies, clinical research, pharmacoepidemiological and pharmacoeconomic research as well as training of GLP, GCP, GSP and evidentiary medicine specialists. St. Petersburg State Polytechnical University St. Petersburg State Polytechnical University conducts a world top-level bioanalytical research in accordance with the FDA and GLP requirements. The oldest pharmaceutical institution of higher education in Russia carries out high-tech research projects on the development and study of active pharmaceutical substances of natural and synthetic origin and educates highly qualified specialists in the sphere of molecular biology.

2.5.4.2. Research Institutions 

40

Institute of Cytology of the Russian Academy of Sciences (RAS) Institute of Cytology is the leading institution of the Russian Academy of Sciences within the field of modern cell biology. The institute is tasked with studying the structural organization and expression of nuclear genome, structure and function of cell organelles, investigation of intracellular processes and intercellular contacts. Institute of Toxicology The scientific center focuses on fundamental and applied research in the field of toxicology, pharmaceutical chemistry and pharmacology. The Institute specializes in the study of mechanisms of action of potential dangerous chemical and natural substances as well as development of novel antidotes and therapies. Research Institute of Influenza Research Institute of Influenza is involved in solving fundamental and applied tasks in the field of virology, epidemiology and infectious pathology, thus serving a goal of protecting and augmenting human health, developing healthcare and medical science. The institute is engaged in epidemiologic and etiologic influenza/ARI surveillance improvement, molecular genetic and Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru


phylogenetic analysis of influenza viruses, genetic classification of existing and newly emerging viruses, studies on molecular mechanisms of viral pathogenesis, nanotechnology-based diagnostic reagents generation, exploration of new ways for next-generation vaccine production as well as other relevant research areas. State Research Institute of Highly Pure Biopreparations The Institute is a biotechnological center specialized in novel therapeutics and diagnostics. The main scientific areas include elucidation of mechanisms of therapeutic activity of endogenous mediators for the development of new biopharmaceuticals, development of new drug delivery systems for targeted and sustained release of drugs as well as medicine manufacturing. St. Petersburg State Mechnikov Medical Academy The oldest and one of the most prestigious institutions of higher medical education in Russia represents a scientific and research center which includes morphology, genetics, biochemistry, immunology, physiology, mathematical modeling and epidemiological analysis labs. St. Petersburg Institute of Pharmacy St. Petersburg Institute of Pharmacy functions on the basis Adaptogen Interregional Center and St. Petersburg State Mechnikov Medical Academy. It is occupied in carrying out preclinical studies of new pharmaceuticals, specific food products, biologically active substances and beauty products.

2.5.4.3. Life Sciences Park in St. Petersburg On June 18, 2011 the Government of St. Petersburg signed the memorandum of intent with Life Science Park STP BP stipulating mutual cooperation in the development of Life Sciences Park in St. Petersburg. Life Sciences Park is the largest project in Russia aimed at establishing a complex infrastructure for the development of pharmacy, biotechnology and medical industry. The project aims to create comfortable and competitive environment for the innovative development of life sciences in St. Petersburg, strengthen cooperation between Russian and international businesses and research organizations, provide favorable conditions for the operation of companies engaged in R&D, diagnostic studies, product licensing, private clinic management, etc.

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2.6.

Shipbuilding industry

2.6.1.

General overview

Shipbuilding is one of the leading industrial sectors in St. Petersburg’s economy. For centuries the city served as the sea capital of Russia as well as a recognized center for shipbuilding, naval science and education. Today, shipbuilding industry is undergoing major reorganization. High concentration of industrial and scientific sectors as well as unique port infrastructure stipulates the development of shipbuilding industry and provides new opportunities for pursuing effective forms of cooperation within the city. In September 2010 the Government of St. Petersburg signed an agreement with the United Shipbuilding Corporation on the establishment of a shipbuilding cluster in the city. The priority lies in construction of a new shipbuilding complex on the island of Kotlin. While the development of a modern complex in the Northwestern region of the Russian Federation will benefit not only shipbuilding but also a number of related sectors, it will facilitate the social and economic development of the city. The project envisages the development of a modern high-tech production, as well as facilitation of social and economic development of Kronshtadt. One of the first steps includes establishment of the engineering center on design and production of marine equipment, which will be used for Arctic exploration. As a result of the project’s implementation, St. Petersburg’s shipbuilding cluster will accommodate 200 shipbuilding enterprises engaged in manufacturing of import substituting equipment and components. Basic information on the shipbuilding complex on the Island of Kotlin, St. Petersburg Main products

Annual gross receipts

tankers, LPG tankers, offshore ice-resistant fixed platforms, ice-breakers, floatable nuclear heat and power plants, first rate ships, aircraft carriers, dieselelectric submarine 38 billion roubles

Volume of investment Total number of employees City tax revenue Implementation period

35 billion roubles 6,500 people 3.5 billion roubles a year 8 years

Source: Committee for Economic Development, Industrial Policy and Trade

2.6.2.

Industry in numbers

The Northwestern region is often referred to as a shipbuilding capital of Russia. High concentration of scientific and industrial shipbuilding potential accounts for more than 80% of R&D and over 70% of all domestic industrial production. The region locates about 39% of all Russian shipbuilding enterprises as well as 58% of all personnel occupied in the industry. Today, the region accounts for 72% of the total volume of production within the shipbuilding industry.5 43 shipbuilding organizations which employ more than 50 thousand specialists are located in St. Petersburg. Shipbuilding accounts for more than 50% of all products produced by the defense industry complex in St. Petersburg.6 St. Petersburg and Severodvinsk are the only two Russian cities, which locate shipbuilding facilities for the production of large-capacity ships and vessels.

5

6

Ministry of Industry and Trade of the Russian Federation Committee for Economic Development, Industrial Policy and Trade

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Number of shipbuilding enterprises across the federal districts of the Russian Federation, 2011

Northwestern Federal District

Urals Federal District

18%

2%

Central Federal District 39% Southern Federal District

15%

Far Eastern Federal District Siberian Federal District

10% 14%

Volga Federal District 2%

Note: Total number of shipbuilding enterprises in Russia - 167, including 113 industrial enterprises and 54 scientific and research organizations Source: Modern state and perspectives of development of Russian shipbuilding industry, Department of Shipbuilding Industry and Marine Equipment, Ministry of Industry and Trade of the Russian Federation, 2011

2.6.3.

Companies United Shipbuilding Corporation United Shipbuilding Corporation is a government-owned company, which unites shipbuilding, repair and maintenance subsidiaries located across Russia. Today, the corporation has 3 subsidiaries, including the Western Shipbuilding and Repair Center in St. Petersburg, the Northern Shipbuilding and Repair Center in Severodvinsk and the Far Eastern Shipbuilding and Repair Center in Vladivostok. The shipbuilding enterprises united under the corporation are engaged in both commercial and naval shipbuilding and account for 80% of all shipbuilding projects in Russia. The Western Shipbuilding and Repair Center unites the following St. Petersburg-based shipbuilding enterprises: Admiralty Shipyard Admiralty Shipyard is one of the oldest and largest shipyards located in St. Petersburg. Founded in 1704 by Peter the Great, the shipyard is one of the major Russian enterprises engaged in design, manufacturing and modernization of civil and naval vessels of various types, including such naval warships as nuclear and diesel-powered submarines and large auxiliaries. ALMAZ Almaz Shipbuilding Company has been for many years specializing in manufacturing of high-speed ships and boats. The major products include hovercrafts, patrol boats, multi-purpose crafts as well as high-speed motor boats. Almaz also offers services in production of shipbuilding ways, metal processing, assemble-welding and mechanical engineering.

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Baltiysky Zavod (Baltic Plant) Baltiysky Zavod is one of the leading shipbuilding enterprises in Russia. Founded in St. Petersburg more than 150 years ago, the shipyard specializes in manufacturing of ice-breakers and ice-classed vessels, large commercial vessels intended for various types of cargo, as well as naval ships. The shipyard also develops a wide range of marine propulsion equipment and machinery as well as head exchanges for nuclear power plants, non-ferrous and core-mould castings. Kronstadt Marine Plant Founded in 1858, Kronstadt Marine Plant is one of the oldest shipbuilding plants in the world specialized in manufacturing of marine steel vessels with power systems. Severnaya Verf (Northern Shipyard) Established in St. Petersburg in 1912 originally only for military shipbuilding, today Severnaya Verf is one of the major shipyards manufacturing both naval and civilian ships. It is the only enterprise in Russia which has experience in manufacturing ships and vessels using a three-dimensional mathematical model developed in the specialized shipbuilding system. Sredne-Nevskiy Shipyard Sredne-Nevskiy Shipyard is one of the leading shipbuilding enterprises in Russia. Founded in 1912, the shipyard has since then manufactured more than 500 ships and vessels working for the Russian Navy as well as export contracts.

2.6.4.

Supporting institutions

2.6.4.1. Universities 

St. Petersburg State Marine Technical University St. Petersburg State Marine Technical University is the only institute of higher education in Russia which educates world class marine engineers specialized in design, manufacture and maintenance of marine vessels, surface ships and submarines, technical equipment for exploration and extraction of oil, gas and other undersea mineral resources. Founded in 1902, today the University offers educational programs at 5 departments, including natural and social sciences and humanities, naval architecture and ocean engineering, marine engineering, marine electronics and control systems, business and management.

2.6.4.2. Research Institutions 

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Avrora Avrora is a scientific and production association established in St. Petersburg in 1970. Today, the company is engaged in the development and manufacturing of control systems and devices for commercial and naval vessels, including automated control systems of technical facilities, automated combat information and control systems, complex control systems, training systems and simulators, development and manufacturing of control systems for industrial, technological and power generation objects, transportation and port facilities, automated control systems of technological processes of oil and gas extraction, processing and transportation as well as other industrial, medical and technical products.

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Elektropribor, Central Scientific and Research Institute Elektropribor is the leading Russian research institute located in St. Petersburg. The Institute carries out a full cycle of work, including fundamental research as well as product manufacturing. Main products include integrated satellite/inertial navigation systems, mobile airborne marine gravimeter, periscope complex. The institute supplies its products not only to the Russian Navy but also foreign companies from China, Finland, Germany, India, Japan, Norway and the Republic of Korea. Krylov Shipbuilding Research Institute Krylov Shipbuilding Research Institute is the leading scientific institution of the national shipbuilding industry and has a status of the Russian Federation State Research Centre for naval commercial ships. This status comes due to both high qualifications of the staff researchers and experts who have established their own world-recognized schools of learning and a unique complement of experimental facilities combined with innovative in-house research methods and tools. The Institute is engaged in performing naval ship conceptual design studies, hydrodynamics, commercial ship and offshore engineering conceptual design studies, structural mechanics, marine power plants and power generation as well as other marine-related technologies. Shipbuilding and Ship Repair Technology Center Shipbuilding & Ship Repair Technology Center is one of the major research institutions in St. Petersburg and a leading center of shipbuilding technologies in Russia. The Center carries out fundamental and exploratory research in the field of creation of modern technologies for shipbuilding and engineering sectors and participates in the development and implementation of large-scale investment projects. Today, the Center incorporates research laboratories, design and construction divisions engaged in the development and modernization of shipbuilding yards, water-development facilities and engineering enterprises, on-shore bases for marine objects, design and manufacturing of ship fittings, design of fishing and fish-processing vessels, special-purpose vessels, as well as production facilities for manufacturing of designed equipment.

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2.7.

Transport and logistics

2.7.1.

General overview

St. Petersburg is a major transport hub of Russia, which handles international freight and passenger operations via all means of transportation. All types of transport infrastructure, including car roads, railway network, river and sea transport, airport, oil and gas pipelines, are present on the territory of the city.

2.7.2.

Industry in numbers

2.7.2.1.1 Water Transport Inland water transport plays an important role in the transport complex due to the wide continuation of the Neva – Ladoga Lake system. While the Svir-Onega Lake system provides access to the Republic of Karelia, the Belomor-Baltic canal provides access to the White Sea. Another waterway, Volga-Baltic Waterway, connects St. Petersburg with the European North of the country, Central Russia, Volga-Vyatka region, Cis-Ural region, Volga region as well as ports on the Caspian Sea. The Volga-Don canal connects St. Petersburg with the Caucasus, Cis-Azov region as well as the Baltic Sea ports. 

7 8

Cargo operations In 2010 approximately 8 million tons of cargo was shipped on St. Petersburg’s part of the VolgaBaltic Waterway, including 7.7 million tons in the Volga-Baltic direction and 0.2 million tons in the Baltic-Volga direction. Up to 80% of all inland waterway operations is carried out in cooperation with the Large Port of St. Petersburg. Transit to other ports represents approximately 20% of all shipments.7 Passenger operations Total passenger turnover on St. Petersburg’s inland waterways constituted 2,122.4 thousand people in 2010. Approximately 290 thousand people were transported in 2010 in the framework of the water fixed-route taxi program. High-speed transit operations increased by 15% in 2010.8

Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg

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Structure of cargo turnover on the VolgaBaltic Waterway, Blagoveschensky bridge point, 2010

Structure of passenger traffic flow, 2010

2% 6% 7%

1%

28% 18%

38% 66% 34%

Oil products Metal products Timber Fertilizers Construction materials General cargoes

Operations along rivers and canals Local transit operations by high-speed fleet Operations along the Neva River with the exit to the Gulf of Finland

Source: Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg

2.7.2.2. Rail Transport St. Petersburg’s railway hub includes 423 km of railroads. Railways and stations in St. Petersburg occupy approximately 4 thousand hectares. Annual cargo turnover of St. Petersburg’s railway hub constitutes more than 110 million tons. Today, the city’s railway hub mainly functions as a sorting center for foreign cargo and companies from other regions directed towards Finland, the Baltic and Baltic Sea ports. The node includes 5 stations (Baltic, Vitebsk, Moscow, Ladoga, Finland), 2 yards (St. Petersburg, Moscow Sorting, Shushary), 1 Port Station (New Port), 10 passenger destinations (Oranienbaum, Gatchina, Luga, Pavlovsky, Malovisherskoe, Volhovstroevskoe, Irinovskoe, Priozersk, Vyborg, and Sestroretsk). A new high-speed train Allegro was launched on route St. Petersburg - Helsinki (Finland) - St. Petersburg in December 2010.9 

9

Cargo operations In 2010 the volume of cargo turnover at St. Petersburg’s railway hub constituted 108.6 million tons. Within the structure of cargo operations transit operations prevail over local cargo shipments.10 Passenger operations 60.6 million people departed from railway stations located in St. Petersburg in 2010, including 4.21 million people on long-distance direct connections, 4.31 million people on long-distance local connections and 52,15 million people on local connections. The total number of passengers

St. Petersburg Open City, Committee for Investment and Strategic Projects Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg

10

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departing from St. Petersburg stations decreased by 35% within the period of 5 years (20062010) mainly due to the decrease in the number of passengers travelling on local connections. 11 Dynamics and structure of cargo and passenger turnover of St. Petersburg railway hub, 2010 52.15

Passenger turnover, million people

8.42

59.6

Cargo turnover, million tons

49

Transit Local connections

Local cargo turnover Long-distance connections

Source: Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg

2.7.2.3. Air Transport Air transport has been actively developing in St. Petersburg. The city has adopted a master plan for the development of air transport till 2025. St. Petersburg is served by Pulkovo International Airport, which is the fourth busiest airport in Russia. The airport handled 9,610,767 passengers in 2011 which represents a 14% increase in comparison with 2010. Pulkovo Cargo Terminal is one of the five leading cargo terminals in Russia and is the largest cargo terminal in the Northwest Russia. It has the annual cargo handling capacity of 30 thousand tons. Pulkovo has been undergoing a major 1 billion euro modernization since 2007. The first phase of reconstruction, which includes the construction of a new passenger terminal and other airport infrastructure improvements, is scheduled for completion in 2013.12 

Cargo operations Today, 85% of all cargo shipments is handled by passenger airplanes. In 2010 Pulkovo Airport handled 25.3 thousand tons of cargo operations. The share of foreign air companies and charter flights in the structure of cargo operations has increased. 30-40% of all cargoes shipped by Russian air companies accounts for JSC Rossiya Airlines.13 Passenger operations In 2010 passenger turnover at Pulkovo Airport constituted 8.4 million passengers, which represents a 25% increase in comparison with the previous year. 14 As of 2009, Pulkovo handles regular aircraft operations along 59 international and 46 domestic routes as well as 25 routes to the CIS. 31 international air companies, 29 Russian air companies and 11 companies from the CIS have regular flight operations from Pulkovo Airport.15



Dynamics and structure of cargo and passenger turnover at Pulkovo Airport, 2010 Cargo turnover, thousand tons

2.5

16.2

6.7

7,674

Passenger turnover, thousand people

Regular flights

Charters

770

Russian airlines

Foreign airlines

Source: Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg

11

Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg Pulkovo St. Petersburg Airport official website 13 Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg 14 Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg 15 Pulkovo Airport, 2009 Annual Report 12

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2.7.2.4. Large Port of St. Petersburg The Large Port of St. Petersburg is the largest port in the Northwest Russia and one of the most important components of St. Petersburg’s transport complex. The water area of the port constitutes approximately 164.6 square kilometers. The port has 200 berths with the length of berthing line of 31 kilometers. Most of the berths are capable to process different kinds of cargoes as well as accept vessels with a draft of up 11 meters and length of up to 320 meters. 28 stevedoring companies perform cargo handling operations on the territory of the Large Port of St. Petersburg.16 

Cargo operations Cargo turnover of the Large Port of St. Petersburg constituted 58 million tons which is 15% more than in 2009.17

Structure of cargo turnover in the Large Port of St. Petersburg, 2010

4%

Containers

9%

4%

Oil products

5% 33%

Mineral fertilizers Ferrous metals

8%

Refrigerated cargoes 11%

Coal, coke 28%

General cargoes Other

Source: Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg

Passenger operations Recent years have seen a significant growth in passenger traffic. The number of cruise passengers has increased by 38.5%, while the number of ferry passengers has increased 4 times since 2008. Passenger traffic in 2010 constituted 604 thousand people. The opening of St. Petersburg – Helsinki ferry line in April 2010 as well as introduction of amendments into the Russian legislation, which allows foreign tourists travelling by ferry to be present on the territory of the Russian Federation visa free for 72 hours, played a major role in the growth of ferry traffic in St. Petersburg.18

16

Administration of the Sea Port “Large Port of St. Petersburg” official website Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg 18 Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg 17

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2.7.2.5. Road Transport St. Petersburg has a well-developed road network with major highways and national roads, connecting Northwest Russia with the rest of Russia as well as Nordic and Baltic countries. St. Petersburg and the surrounding Leningrad region have the highest density of roads with a road network covering approximately 1,300 km. Railroad network which is one of the most efficient and dynamic forms of transport in the region is also connected to the Large Port of St. Petersburg and other port complexes in the region. The major highways connect the following routes in Russia (St. Petersburg - Moscow), Kola (St. Petersburg – Murmansk), Scandinavia (St. Petersburg - Vyborg - State border with Finland), Narva (St. Petersburg - Ivangorod - State border with Estonia) as well as other routes, including St. Petersburg – Pskov, St. Petersburg – Vologda and St. Petersburg - New Ladoga. 

Cargo operations In 2010 large and medium-sized organizations registered in St. Petersburg transported 12.5 million tons of cargo, including 80% by non-general purpose transport. 21 million tons of cargo was transported in connection with the Large Port of St. Petersburg. The volume of operations carried out within the city is significantly higher due to the large number of carriers from other regions operating in the city.19

Structure of motor park of trucks registered in St. Petersburg, 2010

Motor park of trucks, thousand units

72.6 Legal entities

56.4 Physical entities

Source: Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg

Passenger operations As of 2010, 506 legal and physical entities possess certificates authorizing passenger operations. Their motor car park constitutes more than 7,500 buses. Inner city passenger operations constituted 430 million people in 2010. 121 regular routes between St. Petersburg and other regions of the Russian Federation as well as 32 regular international routes operate in St. Petersburg.20

2.7.2.6. Terminal and Storage Facilities Development of logistics, terminal, storage and distribution facilities on the territory of St. Petersburg is a major priority in the development of transport and logistics complex of the city. In 2010 the total area of terminal and storage infrastructure constituted 6.4 million square meters, including 1.52 million square meters of A and B class facilities. In 2010 the total of 66.9 thousand square meters of storage space was constructed.21 

Cargo operations The year 2010 marked a gradual revival of the physical volume of cargo turnover since the crisis. Cargo turnover of terminal and storage facilities constituted 105.7 million tons in 2010, which is 23 million tons more than in the previous year.22

19

Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg 21 Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg 22 Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg 20

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Cargo turnover of terminal and storage facilities, million tons, 2010

Logistics terminals A and B+ class storage facilities

B, C and D class storage facilities Port terminals

4.4 15.52

27.72 58.05

Source: Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg

2.7.3.

Companies

Water Transport North Western Shipping Company The company was established 88 years ago and is one of the largest water transport companies present at the Russian market. The North Western Shipping Company is a successor of the North-Western River Shipping Company established in 1923. Today, the company provides a variety of cargo and passenger operations, shipping and ship repair services and incorporates 6 subsidiaries, including a shipping company ”North-Western Fleet”, a passenger port and shipbuilding and ship repairing yards. Rail Transport Russian Railways (RZhD) The Russian Railways is a government-owned national rail carrier headquartered in Moscow. The company has the world’s second largest network with over 86 thousand kilometers of common carrier routes as well as a few hundred kilometers of industrial routes. The company, established in 1992, is responsible for more than 42% of total Russia’s cargo traffic, including pipelines, and more than 32% of passenger traffic. Every year the Russian Railways transports more than 0.95 billion passengers and 1.2 billion tons of cargo across 11 time zones. Sea Transport Large Port of St. Petersburg, Administration of Sea Port The Large Port of St. Petersburg is a state enterprise which provides the organization of trading navigation in the sea port of St. Petersburg as well as behind its limits in established zones of responsibility of the Russian Federation. It is the largest port in the North-Western Russia located on the islands of Neva Delta, in the Neva Bay in the eastern part of the Gulf of Finland of the Baltic Sea. The Large Port of St. Petersburg includes moorings of sea trading, wood, fish and river ports, an oil terminal, shipbuilding, ship-repair and other yards, a sea passenger station, a river passenger port, and also moorings of Kronstadt, Lomonosov, Gorskaya, Bronka.

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Marine Facade The Marine Facade is a project of additional expansion of St. Petersburg on Vasilievsky island at the Neva River’s mouth with the view of creating a new sea passenger port. The project is implemented within the framework of a public-private partnership between the City of St. Petersburg and Marine Façade Company. The Russia’s first and only passenger port was constructed and officially transferred into the ownership of St. Petersburg in May 2011. Since the start of its operations, the Marine Facade has become an important feature of the cruise and ferry industry, thus turning St. Petersburg into one of the most attractive centers for international tourism. Rosmorport, St. Petersburg branch The federal state unitary enterprise Rosmorport aims to contribute to the development of sea transport infrastructure as well as higher competitiveness of Russian seaports. St. Petersburg branch is engaged in maintenance, operations and development of federal property assigned to the branch, providing services in the Large Port of St. Petersburg, Passenger Port of St. Petersburg and the seaport of Primorsk as well as implementation of federal target programs of marine transport development. Sea Port of St. Petersburg, Group of companies Sea Port of St Petersburg is the largest group of stevedoring companies in St. Petersburg port and Northwestern Russia. Today, it provides a full range of stevedoring services to more than 2,000 companies from Russia, CIS and foreign countries accepting all types of cargoes, including heavylifts and out-of-gauge cargoes. In 2010 the companies of the group handled over 12.1 million tons of cargoes. The share of the group in the total turnover of the Large Port of St. Petersburg constitutes approximately 17 %. Road transport Gorelektrotrans Gorelektrotrans is a state enterprise engaged in the organization of passenger operations by electric transport, development of route network, improvement of transportation fleet and facilities efficiency, facilitating sustainable functioning of city electric transport operations. The enterprise includes 5 tram parks, 3 trolleybus parks, a combined tram and trolleybus park, a trolleybus yard and motor transport base and other subsidiary services. Passazhiravtotrans Passazhiravtotrans is a St. Petersburg state enterprise of passenger motor transport and is one of the largest passenger bus carriers in the Northwestern region of Russia. It operates 5 bus parks and carries out regular urban, suburban, intercity and international passenger bus operations along 11 urban, 8 suburban and 32 intercity routes.

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Piteravto Piteravto was founded in 1993 to provide a full range of transportation services to passengers. Founded initially as a small transport company, it gradually grew into the group of companies. Today, the holding includes a managing company, a central transport company with three divisions and three regional transport companies. The company’s bus fleet includes over 2.2 thousand buses of different varieties with over 3 thousand drivers employed. Air Transport Pulkovo Airport Pulkovo Airport is one of the fastest developing air transport hubs in Russia. Infrastructure of the airport includes airfield with two runways, two terminals, cargo terminal, fuel-supply complex, parking complex and other infrastructure objects. The airport handled more than 9.5 million passengers in 2011 which represents a 14% increase in comparison with 2010. Since April 2010 the operation of the Pulkovo airport is managed by the Northern Capital Gateway in the framework of public-private partnership agreement. The priority of consortium lies in reconstruction of the airport building and new international passenger terminal, modernization of the domestic passenger terminal, reconstruction of technical airport facilities as well as development of commercial infrastructure. Rossiya, Russian Airlines Rossiya Airlines is one of the biggest Russian airlines and the leading air carrier in the Northwestern region of the Russian Federation. Rossiya Airlines is headquartered in St. Petersburg and operates up to 40% of its flights from Pulkovo Airport. Formerly known as Pulkovo Airlines, the company changed its form of ownership and was transformed into Rossiya Airlines in 2006. Today, the fleet of Rossiya Airlines includes 29 modern liners. The company is a full member of IATA and is a registered member of the Multilateral Interline Traffic Agreements (MITA). Rossiya works with over 100 Russian and foreign partners which enables the company to take passengers nearly anywhere in the world.

2.7.4.

Supporting institutions

2.7.4.1. Government Institutions 

Committee for St. Petersburg Transport Infrastructure Development, Government of St. Petersburg The Committee is engaged in implementing the state policy and managing the development of road and bridge complex and transport infrastructure of St. Petersburg, including roads, tunnels, elevated road, bridges and other road facilities, hydraulic facilities, airfields, airports and other aviation infrastructure and capital development facilities. Committee on Transport and Transit Policy, Government of St. Petersburg Committee on Transport and Transit Policy is a governmental agency which supervises the development of transport complex in St. Petersburg. It aims to increase freight traffic and passenger traffic within the St. Petersburg transport complex, maximize the city role as an international transport and transit center, increase volume of transport services in export-import operations and improve environment for state and private investments directed towards transport infrastructure development. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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Coordination council on the development of transport system of St.-Petersburg and Leningrad region under the direction of the Minister of transport of the Russian Federation The Coordination council on the development of transport system of St.-Petersburg and Leningrad region is an important mechanism established with the view of facilitating coordinated development of transport infrastructure of St. Petersburg and Leningrad region and abolishing infrastructural restrictions in adjacent territories of the specified subjects of the Russian Federation. External Transport Agency St. Petersburg State Institution External Transport Agency is a subdivision of the Committee on Transport and Transit Policy tasked with the development and implementation for cargo traffic management measures aimed at improvement of road safety and road capacity, organization of public transportation services by water and air transport, detention of vehicles subject to state registration, material and technical support as well as other measures aimed at reducing adverse environmental consequences of water transport. Marine Board under the Government of St. Petersburg Marine Board under the Government of St. Petersburg was established 2004 with the aim of providing concerted actions by the federal executive bodies, executive bodies of the Government of St. Petersburg, companies and organizations in the field of maritime activities. Transport Board under the Government of St. Petersburg Established in 2006, the Board is an advisory body under the Government of St. Petersburg which is tasked with providing proposals and recommendations for the Governor of St. Petersburg and the Government of St. Petersburg on the issues related to state policy in transport and logistics sphere. Transportation Committee, Government of St. Petersburg The Transportation Committee is an executive body of state authority tasked with implementing the governmental policy of St. Petersburg in the sphere of urban and suburban transport as well as intercity passenger motor transport, organization of road traffic and coordination of activities of other executive bodies functioning in this area.

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3. Business solutions St. Petersburg is an ideal location for the following business needs:  Headquarters Favorable economic and geographical position, highly educated, efficient and motived workforce as well as developed infrastructure make St. Petersburg an ideal location for Russian headquarters of any international business.  Research & Development center (R&D) St. Petersburg is an acknowledged scientific and educational center as well as a Russian leader in information technology, which possesses all necessary innovative infrastructure and extensive government support to accommodate your R&D activities.  Production center One of Russia’s most important production centers provides you with developed logistics, innovative and flexible business environment as well as highly efficient and motivated workforce to accommodate your production facilities in the city.  Distribution center St. Petersburg’s westernmost mainland location in Russia and well-developed transport infrastructure makes it an ideal location for your Russian and European distribution center.  Test market St. Petersburg is an ideal test market in the European part of Russia, which will allow you to assess the demand for your new products and improve your technology and business models.

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3.1.

Headquarters

St. Petersburg is the second largest city in the Russian Federation. It is a major European cultural center and an important Russian port on the Baltic Sea. A close proximity to Europe, developed infrastructure and favorable investment climate make St. Petersburg an attractive location for Russian headquarters of numerous international corporations, banks and other businesses. Russian rating agency Expert ranked St. Petersburg among the most attractive regions of the Russian Federation for trade and investment (1A) characterized by high investment potential given minimum risks. St. Petersburg is also ranked as the most business-friendly city in the Russian Federation (A+) characterized by favorable business climate and excellent conditions for pursuing business in the city.23

3.1.1.

Advantages

 Favorable economic and geographical position St. Petersburg is the world’s northernmost city with over one million population. It is the largest westernmost city of the Russian Federation conveniently located along the shores of the Neva Bay of the Gulf of Finland. A complex system of river ports is interconnected with the system of seaports, thus making St. Petersburg the major link between the Baltic Sea and the rest of Russia through the Volga-Baltic Waterway. St. Petersburg is a major trade gateway as well as a financial and industrial center of the Russian Federation specialized in power plant engineering, machine tool technology, shipbuilding and instrument engineering. The city boasts a highly developed iron steel and nonferrous metal industry, chemical industry as well as consumer goods, food and printing industries.  Highly educated, efficient and motived workforce Flexible and highly educated labor market provides excellent conditions for establishing your headquarters in St. Petersburg. St. Petersburg is the fourth most populated city in Europe with more than 40% of residents having higher education degrees. Destined by the European location and close proximity to the European markets, residents of the city possess foreign language skills which makes them an ideal workforce for any headquarter located in the city.  Developed infrastructure St. Petersburg has a well-developed infrastructure which connects European part of Russia with the Nordic and Baltic regions, thus conveniently suiting the business needs of your headquarter. Moreover, the ongoing development of a major strategic investment transportation project will determine further development of the city as a major world transport hub. The Western HighSpeed Diameter (WHSD) envisages construction of a motorway which will link passenger and freight transport along the busiest traffic lines and St. Petersburg transport hub, including the Large Port, to the national road network. By 2013 the totally new Pulkovo Airport will provide fast and efficient connections to major destinations around the world.

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Investment rating of Russian regions 2010-2011, Expert RA Rating Agency

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3.1.2.

Cases

The following national and international companies have already registered, located or announced their plans to relocate headquarters to St. Petersburg: Gazprom Neft One of the largest oil producing and refining companies in Russia, which is an oil arm of Gazprom, has a fully operational head office in St. Petersburg since December 2011. Rostelecom Russia’s national telecommunications operator with the largest domestic backbone network has its de jure headquarters in St. Petersburg. Russian Standard One of the leading banking and alcohol beverage groups which holds the stock of Russian Standard Company, a producer and distributor of Russian Standard Vodka, as well as Russian Standard Bank, announced its plans to register to St. Petersburg in 2007. Sovcomflot Russian state-owned maritime shipping company specialized in petroleum and LNG shipping relocated its headquarters to St. Petersburg in 2006. Transaero The first private company and one of the largest airline companies in Russia operating since 1991 registered to St. Petersburg in 2006. Transneft Russian state-owned company which transports about 93% of all oil produced in Russia and owns the largest oil pipeline system in the world, announced its plans to register to St. Petersburg in 2005.

VTB Bank VTB Bank is one of the largest banks in Russia, a backbone financial institution with over 85% of the lender’s securities held by the state. VTB Bank moved its headquartered to St. Petersburg in 2005. X5 Retail Group The largest retail chain in Russia announced its plans to relocate to St. Petersburg in 2007.

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3.2.

Research & Development

Due to its unique scientific and educational base, St. Petersburg plays a major role in the development of nanotechnology industries in Russia, thus making it an ideal location for your R&D activities. The majority of Russian R&D centers and facilities of international companies are based in St. Petersburg. As a result of innovation activity in 2011 St. Petersburg was included in the list of the most innovative regions of the Russian Federation.24

3.2.1.

Advantages

 Largest scientific and educational center St. Petersburg is a leading scientific and educational center of the Russian Federation which possesses 10% of all intellectual potential of the country. The city is home to 252 scientific institutes and organizations with more than 170 thousand scientific workers employed. 8% of all Russian students and 15% of all Russian post graduate students pursue their studies in St. Petersburg. St. Petersburg is home to more than 100 higher education institutions, including St. Petersburg State Electrotechnical University (ETU) which along with the National Research Nuclear University functions as the coordinator of educational activities within the National Nanotechnology Network.  Extensive government support The Government of St. Petersburg applies systematic approach to the development of innovation and technology. The city adopted a complex program aimed at developing and supporting a modern competitive regional innovation system. The government views the development of the following industrial clusters as a priority in sustaining innovative climate in the city: automotive industry, pharma and biotechnology, shipbuilding, information and communication technologies, radiology and power plant engineering. In addition, every year the city hosts the St. Petersburg International Economic Forum (SPIEF), a flagship event which serves a major platform for economic talks between Russian and CIS leaders as well as the world’s business elite.  Innovative special economic zone A special economic zone of technical-implementation type has been functioning in St. Petersburg since 2010. The zone focuses on rendering tax, customs and other type of concessions to the companies engaged in the development of high-tech solutions. Simplified customs regime facilitates the development of export/import activities, thus creating favorable conditions for promoting foreign economic activities.25  A leader in information technology 60% of all Russian IT companies are based in St. Petersburg, including 49 centers of leading international and Russian ICT companies. Availability of developed IT infrastructure, including a technopark, business incubator, modern research and scientific institutions, as well as highly qualified IT-personnel facilitate the development of St. Petersburg as a Russian leader in information technology.

24

Rating of innovation activity in the Russian Federation in 2011, St. Petersburg Policy Fund, Russian Presidential Academy of National Economy and Public Administration, RBC daily 25 For more information, please see Section 4.8 Special economic zones (“SEZ”) in St. Petersburg

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3.2.2.

Cases

The following national and international companies have already located their R&D facilities in St. Petersburg: Alcatel-Lucent Alcatel has been operating its R&D center in St. Petersburg since 2005. Its main objective lies in the development and integration of innovative telecommunications software systems and adaptation of existing Alcatel products to the specific requirements of the regional market. The center covers three fields of applications, including fixed, mobile and enterprise networks, and employs 150 specialists trained at the specialist Alcatel R&D centers in Europe and the US. AstraZeneca AstraZeneca is planning to establish a Predictive Science Center in St. Petersburg within 2012. It is the company’s first Predictive Science Center in Russia which will focus on the development of bioinformatics, data analysis methods, software and systems to better predict the safety and efficacy of potential new medicines. The center will employ around 30 specialists who will work in close collaboration with local companies and organizations as part of a related agreement with the St. Petersburg government. Corning Corning scientific center was founded in 1996 in St. Petersburg and is specializing on mathematic and computer modelling of materials, products and technological processes. EMC Opened in 2007, EMC R&D center in St. Petersburg is an important part of the global EMC R&D investment program. The center focuses on rendering support and continuous development of a wide range of world’s leading software products. St. Petersburg’s center currently employs more than 170 program engineers specialized in data management and data storage systems. Google Google opened its second R&D center in Russia in 2006. Today, Russia is only the second country outside the US in which Google has two R&D centers, including Moscow and St. Petersburg. St. Petersburg division focuses on the development of security software and its adaptation to the needs of Russian users. It employs around 10 software engineers engaged in the development of Chrome Developer Tools as well as improvement of V8 virtual machine.

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HP Labs HP Labs Russia is the newest member of the international HP Labs community, and the third new research lab created by the company in the last five years. Opened in St. Petersburg in 2007, HP Labs Russia focus on information management and development of new technologies linked to the explosion of information access brought about by the World Wide Web. The only Russian HP research lab delivers breakthrough technologies and technology advancements that provide a competitive advantage for HP and create business opportunities that go beyond HP's current strategies. Intel Opened in St. Petersburg in 2004, Intel R&D center currently employs more than 100 specialists. The center focuses on conducting research and development of innovative software solutions for Internet-related technologies, including Dynamic Runtime Layer (DRL), communication technologies that enhance wireless communication, grid computing to optimize programming environment. St. Petersburg center works in close collaboration with the city universities with the aim of creating a solid academic foundation for information. LG MC Russia R&D Lab LG MC Russia R&D Lab (LGERP), opened in St. Petersburg in 1997, is a central LG division in CIS. The Lab plays a key role in the development of innovative high tech solutions for LG Electronics. LG MC Russia R&D Lab focuses on three major directions, including mobile communications, digital television and household appliances. Microsoft In June 17, 2011 the Government of St. Petersburg and Microsoft signed the cooperation agreement stipulating the development of education and training system for IT specialists and introduction of modern technologies into the public management system. Microsoft has already been working and launching a number of educational programs in St. Petersburg. The new agreement involves the establishment of Microsoft Information Center within Ingria Technopark located in St. Petersburg as well as the company’s participation in the development of St. Petersburg IT cluster. Sitronics Sitroninics opened its 5th international R&D center in St. Petersburg in June 2011. Investment into the R&D center operating in telecommunications sector constituted 177,000 dollars. The center which is to employ 120 specialists will specialize in the development and testing of convergent billing decisions, including highly-productive rating systems for tariffs in real-time mode. In the future the center plans to carry out research in the field of self-service systems, including webportals, terminals, pad-computers and communicator applications, CRMdecisions.

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3.3.

Production сenter

Today, St. Petersburg is Russia’s second most important production center, specializing in the production of complex machinery and equipment. Leading industries in this sector include shipbuilding, instrument manufacture as well as production of electrical generators and turbines, machine tools and machines for printing, textile, paper, food, automotive and leather industries. During the recent years St. Petersburg turned into the Russia’s automobile manufacturing center, which already hosts the production facilities of the world’s largest automakers and automobile parts manufacturers, including Hyundai Motor Company, Toyota Motor Corporation, General Motors Company, Nissan Motor Company and Scania.

3.3.1.

Advantages

 Highly qualified and motivated workforce St. Petersburg is a major scientific and educational center of the Russian Federation, which possesses 10% of all intellectual potential of the country. The city is home to a number of leading technical universities, including St. Petersburg State Electrotechnical University (ETU) which along with the National Research Nuclear University functions as the coordinator of educational activities within the National Nanotechnology Network. St. Petersburg boasts a diverse pool of technical specialists given the city’s reputation as a Russian IT center.  Innovative and flexible business environment The city’s innovative business environment provides production companies with access to a diverse pool of talented specialists who can help you innovate and improve your production processes. The fact that 20% of all Russia’s advanced technologies are created in St. Petersburg indicates a high degree of production process development and automatization, which significantly enhances the value of your production processes as well as end product. Moreover, the flexibility of existing labor market provides an ideal environment for flexible production, which can be easily scaled up and down.  Acknowledged R&D center and test market St. Petersburg is one of the most innovative regions in Russia and an acknowledged R&D center and test market on the territory of the Russian Federation. Excellent framework conditions, open and fast-adopting market as well as high purchasing power of the population will help you assess the demand and improve your new products as well as research and development efforts, technology implementations and business models.  Developed logistics Due to the ideal geographical location and scarcity of Russian ports on the Baltic Sea, St. Petersburg is Russia’s foremost logistics hub. The city’s transport infrastructure with highly developed motor transport network, railway, air, river and sea transport, including Russia’s main port of foreign trade and sea gate to Europe, might serve as a key asset in your decision to locate your production center in the city. In addition, the city has a number of modern multifunctional logistics complexes and parks (Pulkovo, Kolpino, Yanino) suitably located to address storing, processing and customs clearance needs of your business.

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3.3.2.

Cases

The following international and leading Russian companies have already located their production facilities in St. Petersburg: Bakery Fazer Group Fazer Group started operating on the food catering and services market in Russia in 2006, and has invested 204.78 million dollars in its operations in Russia during the last ten years. Beverage production Carlsberg Group Baltic Beverages Holding, a leader at the Russian beer market which manages Baltika, became part of the Carlsberg Group in 2008. Carlsberg currently owns 89.01% of Baltika stock. Today, Baltika Brewery, founded in 1990, is the largest brewery in Eastern Europe and the second-largest brewery in Europe after Heineken Brewery. Coca-Cola Company Coca-Cola opened its plant in St. Petersburg in 1995. The facility produces Coca-Cola products for more than 13 million customers in St. Petersburg and Northwestern Russia. It employs more than 1,000 people, while creating up to 200 additional seasonal workplaces during the peak seasons. Heineken Heineken has been operating in Russia since 2002 when it acquired the Bravo plant in St. Petersburg. St. Petersburg’s Heineken brewery also produces and distributes Budweiser beer, having signed a licensing agreement with Bud’s brand owner Anheuser-Busch. Pepsi Bottling Group, Inc. (PBG) PepsiCo drinks are produced by Pepsi Bottling Group, Inc. (PBG) at its four plants in Russia. One of the top global FMCG companies in Russia opened its St. Petersburg’s plant in 1992. PBG produces and distributes all PepsiCo products, including carbonated soft drinks, water, snacks, juices, teas, and sports and energy drinks. Russian Standard Company A leading Russian premium vodka producer opened its distillery in St. Petersburg in 2006. Total investments into the facility amounted to 60 million dollars. The distillery produces 3.6 million dekaliters of vodka annually. A 30,000 square meter facility handles the production of the company's entire vodka portfolio, including Russian Standard Original, Russian Standard Platinum and Imperia.

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Candy Chupa Chups S.A. The Spanish candy maker launched its St. Petersburg’s production facility in 1991. Neva Chupa Chups produces Chupa Chups caramel lollipop candies of various flavors and colors not only for the Russian market but also for export to CIS countries. St. Petersburg’s factory has the capacity of making up to 200 million 200-gram rolls per year. Car assembly General Motors General Motors opened its automobile factory in St. Petersburg in 2008. Global car making giant became the second foreign carmaker to open a factory in St. Petersburg. Investment in the project totalled 300 million dollars with up to 1,700 jobs created, followed by the opening of a second production line in 2010. Hyundai Motor Company Hyundai officially launched its full-cycle manufacturing plant in St Petersburg in 2010. St. Petersburg’s plant is Hyundai’s sixth production facility outside its home market of South Korea. The facility is expected to roll out 105,000 vehicles in its first year of operation with the rise to 150,000 in 2012. Hyundai plans to create 5,300 jobs by 2012 in St. Petersburg together with eleven parts suppliers from Korea. Nissan Nissan Manufacturing Rus was established in St. Petersburg in 2009. The plant currently represents approximately a 150 million euro investment with the total volume of 28,500 units since the start of production. The plant currently employs 2,000 employees. Scania Scania opened its industrial facility for assembling and bodyworking trucks for the Russian market in St. Petersburg in 2010. This facility is Scania’s sixth delivery center. From this new delivery center, Scania supplies complete trucks that are adapted to the requirements and operating conditions that apply in Russia. St. Petersburg’s facility which employs about 70 employees has a technical assembly capacity of about 5,000 truck chassis and 1,500 superstructures per year. Toyota Motor Corporation Toyota became the first Japanese carmaker to start production in Russia with its car assembly plant opened in St. Petersburg in 2007. The plant, with an annual output capacity of about 50,000 vehicles, initially built 20,000 Camry sedans per year while gradually expanding its production since then.

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Chewing gum Wm. Wrigley Jr. Company The world’s largest maker of chewing gum has been operating a 70 million dollar plant in St. Petersburg since 1999. Wrigley is planning to expand its St. Petersburg plant with an investment of 100 million dollars. The company also announced that it might build a second factory in Russia and acquire local producers to tap its growth at the Russian market. Components suppliers Magna International A global automotive supplier currently operates five production sites in Russia, three of which are located in the St. Petersburg region since 2010. The Cosym stamping and assembly plant in Shushary has 170 employees and produces body, chassis and energy-management systems for OEM customers such as Hyundai, General Motors, Nissan and Volkswagen. The Cosym assembly and sequencing plant in Kamenka is a Hyundaidedicated production site that employs 50 employees. Magna announced the opening of a Magna Exteriors and Interiors facility in Kolpino, which has approximately 25 employees producing exterior and interior components for OEM customers, including Ford and Nissan. Electronics HP – Foxconn Hewlett-Packard and component maker Foxconn opened a pilot assembly line to make computers in St. Petersburg in 2010. A pilot production line on a rented 10,000-square-meter facility in Shushary produces HP, HP Pro and Compaq models. It currently employs 100 workers, although the staff is expected to grow as production increases. A 32,000-square-meter main facility is expected to cost 50 million dollars and have an annual capacity of 500,000 personal computers. Elevators Otis Elevator Company The world's largest manufacturer of vertical transportation systems has three manufacturing plants in Russia, including the one operating in St. Petersburg since 1994. Otis St. Petersburg was established in 1991 to meet the elevator need for new construction as well as for the replacement market. With 470 employees, Otis St. Petersburg is the only company that manufactures European standard elevators in Russia. Since the opening of the production line, St. Petersburg’s plant has shipped more than 3,000 elevator units to CIS countries and other Russian regions. FMCG P&G P&G opened its Gillette razor manufacturing plant in St. Petersburg in 2000 with an investment of 40 million dollars and 500 people employed. It has soon become one of the major razor manufacturing plants in the world with a capacity of 860 million blades a year. In 2004 the facility was expanded with an investment of 502 million roubles and several Gillette factories’ productions moved to St. Petersburg.

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Unilever Unilever has been operating in Russia since 1992 and has 7 manufacturing and production sites, including the one located in St. Petersburg. The plant was opened in 1994 and currently focuses on the production of home care, personal care and tea products. In 2009, the company acquired the sauces business of Baltimor Holding, a leading ketchup business in Russia. The acquisition included ketchup, mayonnaise and tomato paste business, accounting for annual turnover of around 70 million euros, as well as a production facility at Kolpino, near St. Petersburg. Home Appliances Bosch and Siemens The largest manufacturer of home appliances in Europe and one of the leading home appliances companies in the world opened its manufacturing plant in St. Petersburg in 2007. St. Petersburg’s plant manufactures Bosch and Siemens cooling appliances. In 2007 the company laid the foundations for a washing machine factory with the capacity of 300,000 machines per year, which is due to be built by 2012. In 2010 the company launched a new line of washing machines and a second line of refrigerators at its existing plant in Strelna. It has also announced about the expansion of its logistics center. The Strelna factory currently employs 420 people and is to create 100 additional workplaces with the expansion of the production line. IT NEC Corporation One of the world's leading providers of Internet, broadband network and enterprise business solutions established NEC Neva Communications System, a public switching system manufacturing facility, in 1997. It was the first high-tech alliance between a Japanese and Russian company. NEC delivers tailored solutions in the key fields of computer, networking and electron devices, by integrating its technical strengths in IT and networks, and by providing advanced semiconductor solutions through NEC Electronics Corporation. LED manufacturing OptoGan Group A vertically integrated European LED & luminaire manufacturer acquired the Russian subsidiary of Elcoteq together with its industrial facility and infrastructure in St. Petersburg in 2010. Elcoteq started the production of electronic devices and telecom equipment in St. Petersburg in 2006. OptoGaN has already invested over 9.5 million euros in new production lines. The first line with the capacity of 30 million LEDs per month was launched in fall 2010.

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Packaging Amcor Tobacco Packaging Originally built by Alcan Packaging in the Krasnoselskaya industrial zone of St. Petersburg in 2005, a tobacco packaging plant started operating under Amcor Tobacco Packaging brand after Amcor acquired Alcan Packaging from Rio Tinto in 2010. With the original investment of 40 million euros, the plant’s current capacity constitutes 3 billion units per year. Pharmaceuticals Novartis In 2010 Novartis started a construction of a new greenfield pharmaceutical manufacturing plant in St. Petersburg, as part of 500 million dollar five-year investment into the Russian healthcare infrastructure. The facility will be constructed in the Novoorlovskaya Special Economic Zone (SEZ) located to the north of the St. Petersburg city center. Once completed and approved for commercial production, which is expected in 2014, the facility will produce approximately 1.5 billion units of both innovative pharmaceuticals and generics per year. Pipe products Severstal One of the Russia’s largest steel and mining industry companies opened its Izhora Pipe Mill at Kolpino outside St. Petersburg in 2006. The plant with the capacity of 600 thousand tons per year specializes in manufacture of large diameter pipes from strip made by Cherepovets Steel Mill. The plant produces unique products for Russian domestic pipe industry which allow to expedite the process of pipeline construction as well as lower the costs and enhance reliability. Telecommunication Alcatel-Lucent Alcatel has been operating its R&D center in St. Petersburg since 2005. Its main objective lies in the development and integration of innovative telecommunications software systems, and adaptation of existing Alcatel products to the specific requirements of the regional market. The center covers three fields of applications, including fixed, mobile and enterprise networks, and employs 150 specialists trained at the specialist Alcatel R&D centers in Europe and the US. Tobacco British American Tobacco (BAT) BAT’s plant in St. Petersburg operates 13 production lines producing five premium brands. It provides about 25% of BAT’s production volume in Russia. The company completed the construction of new production facilities at its plant in St. Petersburg in 2007 with the total investment of 110 million dollars, thus increasing St. Petersburg plant’s production capacity to 40 billion cigarettes a year.

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Japan Tobacco International (JTI) JTI's cigarette making facility in St Petersburg is the company’s biggest worldwide plant with the total of 400 million dollars invested. The brand portfolio includes over 30 brand names, both international and local. It supplies the firm's Russian and Ukrainian plants with main tobacco components used for cigarette production. Philip Morris International (PMI) Philip Morris Inc. officially opened its third Russian cigarette factory in St. Petersburg in 2000. The total investment of 335 million dollars made this project the company’s largest cigarette plant in Europe. The plant, which employs 750 workers and operates 15 conveyer belts, produces the Marlboro, Parliament, Virginia Slims, L&M, Chesterfield and Bond Street brands. In 2002 the company began construction of a new processing line and a warehouse with the total investment estimated at 240 million dollars.

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3.4.

Distribution сenter

St. Petersburg’s westernmost mainland location in Russia as well as well-developed infrastructure and logistics makes it an ideal location for your Russian and European distribution center. St. Petersburg is an administrative center of the fourth largest federal district in Russia. With a distribution center located in St. Petersburg your business will be able to directly cover 1.7 million square kilometers of the northern part of European Russia and reach more than 13 million consumers within short-term delivery.

3.4.1.

Advantages

Existing transport infrastructure supported by extensive rail and road network, one of the busiest Russian airports, developed port infrastructure and efficient inland water transportation system make St. Petersburg an ideal location for your Russian and European distribution center.  By air St. Petersburg is served by the Pulkovo International Airport, which is the fourth busiest airport in Russia. The airport handled 9,610,767 passengers in 2011 which represents a 14% increase in comparison with 2010. Pulkovo Cargo Terminal is one of the five leading cargo terminals in Russia and the largest cargo terminal in the Northwest Russia. It has the annual cargo handling capacity of 30 thousand tons. Pulkovo has been undergoing a major 1 billion euro modernization since 2007. The first phase of reconstruction, which includes the construction of a new passenger terminal and other airport infrastructure improvements, is scheduled for completion in 2013.26  By land St. Petersburg has a well-developed rail and road network with major highways and national roads, connecting northwest Russia with the rest of Russia as well as Nordic and Baltic countries. St. Petersburg and the surrounding Leningrad region have the highest density of roads with a road network covering approximately 1,300 km. Railroad network which is one of the most efficient and dynamic forms of transport in the region is also connected to the Large Port of St. Petersburg and other port complexes in the region.  By river Inland water transportation is one of the largest and most unique logistical competitive advantages of St. Petersburg and northwest Russia. St. Petersburg and the Neva River serve a major terminal point for the Volga-Baltic Waterway, which is a part of the Unified Deep Water System (UDWS) of European Russia, providing inland water connection from the Baltic Sea to the Caspian Sea, the Black Sea and onwards to the world oceans.  By sea Sea transport is one of the most important transport modes in St. Petersburg. Today’s northwest Russian port infrastructure is concentrated on the eastern end of the Gulf of Finland, mainly in St. Petersburg. The Large Port of St. Petersburg connected to the Baltic Sea through a channel is Russia’s main port of foreign trade and the country’s main sea gate to Europe.

26

Pulkovo St. Petersburg Airport official website

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3.4.2.

Cases

The following international and leading Russian companies have already located their distribution centers in St. Petersburg: LaserPLY American company’s product line includes flat dieboards, rotary dieboards and platforms. The company’s platforms are used in birch core/maple face and back flat dieboards, flat dieboards with a wood and polymer veneer combination, as well as core material for rotary dieboard production. Today, the company operates two international distribution centers, including the one strategically located in St. Petersburg. Lenta One of the Russia’s largest hypermarket chains operating on the market since 1999 opened its 20 thousand square meters distribution center in St. Petersburg in 2007. Total investments into the project constituted 20 million dollars. Distribution warehouse utilizes the latest processing technologies, thus allowing to reduce costs in shelf storage, cross-docking as well as packaging arrangement and dispatching. Onninen The Finnish company provides comprehensive materials’ services, including complex electrical, lighting, heating and plumbing as well as other engineering products and services for contractors, industry, public organizations and technical retailers in nine countries. Onninen officially opened its Russian headquarters and distribution center in St. Petersburg in 2007. The company’s distribution center serves all northwest Russia and has the capacity of 9,000 pallets, including 18,000 products from 200 suppliers. Static Control Components The world's largest manufacturer and global distributor of parts and supplies supporting the laser toner remanufacturing industry is headquartered in Sanford, USA. Static Control operates 20 separate manufacturing plants and operates through the network of global distribution partners. The company’s distribution partner in Russia operates several distribution centers, including the one strategically located in St. Petersburg to ensure fast product delivery all across Russia.

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3.5.

Test market

St. Petersburg’s market is a perfect test market for new products and technologies. It is an ideal test market in the European part of Russia for high-tech companies longing to assess the demand and improve their new products as well as research and development (R&D) efforts, technology implementations and business models.

3.5.1.

Advantages

Excellent framework conditions, open and fast adopting market as well as high purchasing power make St. Petersburg an ideal test market located in the European part of Russia. It will allow you to assess the demand for your new products and improve your technology and business models.  Excellent framework conditions St. Petersburg is conveniently located in the northern part of European Russia, which can be reached from the capital city of Moscow within an hour by plane. It is the second largest city in Russia as well a major European cultural center. Destined by its geopolitical location as well as historical development, St. Petersburg is often described as the most western city of the Russian Federation. It is characterized by homogeneous population, which is highly receptive to new ideas and products.  Open and fast-adopting market St. Petersburg has one of the most advanced information societies in Russia with the most innovative, motivated and critical consumers. Given St. Petersburg’s open, receptive and fastadopting market, the decision to test your business models, technologies or products in St. Petersburg will allow you to effectively improve and adjust your solutions before entering allRussian or European markets.  High purchasing power Given the existing variations in population’s income and buying power across different regions of the Russian Federation, the most well-to-do population is concentrated in Moscow, St. Petersburg and large regional centers. St. Petersburg’s population is characterized by high income and purchasing power, thus facilitating the growth of demand for high quality and innovative products, technologies and solutions.

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3.5.2.

Cases

The following international companies chose St. Petersburg as a test market for their products as well as technology and information sharing: AstraZeneca AstraZeneca is planning to establish a Predictive Science Center in St. Petersburg within 2012. It is the company’s first Predictive Science Center in Russia, which will focus on the development of bioinformatics, data analysis methods, software and systems to better predict the safety and efficacy of potential new medicines. The center will employ around 30 specialists who will work in close collaboration with local companies and organizations as part of a related agreement with the St. Petersburg government. Google Google opened its second R&D center in Russian in 2006. Today, Russia is only the second country outside the US in which Google has two R&D centers, including Moscow and St. Petersburg. St. Petersburg division focuses on the development of security software and its adaptation to the needs of Russian users. It employs around 10 software engineers engaged in the development of Chrome Developer Tools as well as improvement of V8 virtual machine. Microsoft On June 17, 2011 the Government of St. Petersburg and Microsoft signed the cooperation agreement stipulating the development of education and training system for IT specialists and introduction of modern technologies into the public management system. Microsoft has already been working and launching a number of educational programs in St. Petersburg. The new agreement involves the establishment of Microsoft Information Center within Ingria Technopark located in St. Petersburg as well as the company’s participation in the development of St. Petersburg’s IT cluster.

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4. Doing business 4.1.

Establishing a legal presence Information for the current chapter was developed and kindly provided by DLA Piper

Establishing a legal presence in Russia and choosing the appropriate corporate form to register is one of the most important stages before undertaking business activity in Russia. The corporate form chosen will influence all activities, including financial and tax reporting, customs and currency control. Therefore, any foreign investor should give careful consideration as to which type of corporate form will best fit its investment goals, whilst at the same time meeting all the legal requirements. In Russia, a foreign investor may either establish a representative office or branch of a foreign legal entity, or establish a Russian registered legal entity.

4.1.1.

Establishing a representative office and/or a branch of a foreign legal entity

A representative office is an officially recognized extension of a foreign legal entity, which represents that foreign legal entity’s interests in Russia. According to the effective legislation of the Russian Federation (hereinafter - RF), representative offices are officially not allowed to undertake commercial activity under the Civil Code of the Russian Federation (hereinafter - Civil Code). Instead, their main purpose is generally to promote commercial relations between the foreign legal entity, which they represent, and Russian enterprises, and to gather information about the Russian market. Given that a representative office does not, in theory, undertake commercial activity, it will not be subject to profits tax, unless its activities give rise to a "permanent establishment" for tax purposes (for example, if a foreign legal entity engages in regular commercial activity (such as selling goods or providing services) through a representative office). The advantages of operating through a representative office, compared to a Russian registered legal entity are as follows:    

it has fewer administrative, tax and accounting obligations; foreign employees may obtain personal accreditation, which confers some practical benefits; it is considered to be a non-resident for currency control purposes; and it is possible to benefit from a relevant double tax treaty (if applicable).

A branch is a subdivision of a foreign legal entity, which may undertake commercial activity and fulfill all or part of the functions of its founding foreign legal entity. This may inter alia include the employment of a sales force and conduct of sales activity. The representative office or branch must have a manager or head of the office/branch, who acts on the basis of a power of attorney that is granted by an officer of the founding foreign legal entity. Since a representative office or branch does not have a separate legal identity, the founding foreign legal entity will bear full liability for the actions and obligations of the representative office or branch.

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4.1.2.

Establishing a Russian legal entity (subsidiary)

There is no special legal form of legal entity for foreign investment in Russia. Typically subsidiaries of foreign companies are established in Russia either in the form of a Limited Liability Company ("LLC") or in the form of a Joint Stock Company ("JSC"). Joint stock companies may be either of a closed type (i.e. Closed Joint Stock Companies) or of an open (public) type (i.e. Open Joint Stock Companies). The latter (OJSC) are designated mainly for large number of shareholders and generally are intended to be utilized for the public placement of shares. LLCs and JSCs are able to engage in all types of commercial activities not prohibited by the laws of the Russian Federation. Certain types of activities may be conducted only upon the receipt of a special permission (license). LLCs and JSCs are liable for their obligations with all of the assets and property belonging to them. Generally, the founders, participants or shareholders of LLCs or JSCs are not liable for the obligations of the companies and bear the risk of losses related to company activities only to the extent of the value of their contributions (share value). The founders, participants or shareholders may however be held liable for the obligations of an LLC or JSC if they had the right to give mandatory instructions to such companies, and caused the insolvency of, or losses to, the latter. All Russian legal entities are subject to state registration and are considered as created from the date of the relevant entry in the Unified State Register of Legal Entities. The Federal Tax Service of the Russian Federation has authority for the state registration of legal entities and for their registration as tax payers in Russia. In St. Petersburg this is an Interdistrict Inspectorate of the Federal Tax Services of the RF No. 15. Generally, the submission of the following documents is necessary for registration purposes:     

a standard form application (the signature of the person signing the application has to be notarized); the protocol of the founders' meeting or, if the LLC or JSC has only one founder, the resolution of the sole founder on the establishment of the company the charter of the LLC or JSC; confirmation of the legal status of the founder(s) (e.g. an extract from the state register, trade register and/or certificate of good standing); and confirmation of payment of the state registration fee.

All documents from a foreign legal entity must be notarized and apostilled/legalized in the country of execution and any documents supplied in a language other than Russian must be accompanied by a translation which has notarized certification. In the process of preparation to the registration of a legal entity the founders shall decide upon:     

what will be the name of a new company; what will be the registered (legal) address of the company; determine the amount of charter capital and how the shares will be split between the founders; decide on the management structure of a new company; decide on the bank in which the temporary account for the payment of charter capital shall be opened.

The following issues have to be taken into account when preparing for the registration of a legal entity: 

Russian corporate law does not have national limits on who can be the general director of a company or the member of the board of directors. That said, though, there are work permit and visa requirements for a foreign national. This process takes a few months and cannot begin until Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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the company is already registered. In this context, if it is planned to have a foreign executive in the role of general director, it is probably best to appoint a local employee as the initial general director while the work permit and visa applications are processed for the permanent general director. Alternatively, in case it is decided to have the local employee to take this role on a permanent basis, there will be no need to deal with the work permit or visa at all. Despite the fact that this is not directly provided by the law, the board of directors cannot consist of one person. Moreover, in order to prevent deadlocks the quantity of the board of directors should be odd. Under the Russian law, the sole founder of a Russian legal entity cannot be a one-shareholder company itself, i.e. the sole founder as such must consist of at least two shareholders. It is not necessary that these shareholders should be independent. It may be the companies of the same group.

Upon gathering and preparation of all the documents required for registration, the package of documents shall be filed with the registration authorities. In practice, the process of state registration usually takes about 5-10 business days. The legal entity must also be registered with the Russian non-budgetary funds (Social Insurance, Medical and Pension). Currently, registration with these funds is performed automatically: the registration body sends the necessary details to the respective funds and, based on this information, the funds allocate registration numbers and issue registration certificates. The registration certificates thereafter shall be sent to the legal address of the company. However, in practice it is advisable to visit the non-budgetary funds and obtain the certificates in person (generally it is done by an accountant of a company, if any).

4.1.3.

Limited Liability Companies

The establishment and operation of LLCs is governed by the Civil Code and the Federal Law On Limited Liability Companies dated 8 February 1998 (as amended) ("LLC Law"). Key features of LLCs:       

May be established by one or more persons (the "participants"), but not more than 50. The charter capital is divided into "participation interests". Information about the participants and their participation interests is recorded in a list of participants maintained by the LLC and in the Unified State Register of Legal Entities. All transactions in connection with the transfer or pledge of participation interests in LLCs have to be notarized. Participants have certain rights (e.g. to participate in the management, to share distributed profits, to sell their interest, etc.) which are set out in the LLC Law and the company charter. Participants have certain obligations (e.g. to contribute to the charter capital, to maintain confidentiality, etc.), which are set out in the LLC Law and the company charter. The minimum charter capital is RUB 10,000. At least 50 per cent of the charter capital must be paid in by the date of the LLC's registration and the balance must be paid in full within the first year of its operation.

4.1.3.1. Management structure The typical management structure of an LLC includes either three levels, as described below, or two levels when no board of directors is created in the company:   

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General Participants' Meeting - the highest body of an LLC. Board of Directors (optional) - matters delegated from the General Participants' Meeting. Executive Body - day-to-day management of the LLC.

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The General Participants' Meeting has the right to amend the charter; define the basic goals and directions of the LLC; to delegate to a commercial organization or to an individual entrepreneur the authority reserved to the LLC's Executive Body and approve the conditions of any agreements with such organizations or persons (this is commonly referred to as appointing an "external" management company or manager); assign supplemental rights and duties to the participants in the LLC; approve the annual financial report and distribution of profits; alter the amount of the charter capital; approve regulations governing the internal activities of the LLC; and reorganize or liquidate the LLC, appoint a liquidation commission and approve the liquidation balance sheet of the LLC. An LLC charter may provide for the establishment of a Board of Directors. The competence of the Board of Directors should be set out in the charter and can include such issues as the determination of the basic goals and directions of the LLC, the appointment of the executive bodies and early termination of their powers, decisions on major and interested party transactions, the establishment of representative offices and branches, the approval of internal regulations and other issues. The Executive Body is responsible for all matters which do not fall within the competence of the General Participants' Meeting (or the Board of Directors if there is one). Generally this comprises the day-to-day management of the LLC. Usually, the day-to-day management of the LLC is carried out by a general director, but sometimes this may be in conjunction with a collective executive management board (in Russian "правление", or "pravlenye"), in which case the general director becomes the chairman of the management board. Alternatively day-to-day management may be delegated to an external commercial organization (management company) or to an external individual manager, in both cases on a contractual basis. An LLC charter may also provide for the establishment of an Auditing Commission (or Internal Auditor). The creation of the Auditing Commission is mandatory if the LLC has more than 15 (fifteen) participants.

4.1.3.2. Rights of participants The participants in an LLC have the right, amongst other rights granted by the LLC Law and any additional rights set forth in the company charter, to:       

participate in the management of the LLC in accordance with the procedures established by the LLC Law and the company charter; obtain information concerning the activities of the LLC and have access to its accounting and other documents in accordance with the procedures established by the company charter; participate in the distribution of profits; sell or transfer their participation interests in the LLC charter capital, or a part thereof, in accordance with the procedure established by the LLC Law and the company charter; receive a portion of the assets left after settlement with creditors in the event of the liquidation of the company; demand the expulsion of any participant who grossly violates his obligations as a participant, or whose actions (or lack thereof) substantially hinder the LLC or make its activity impossible27; withdraw from the LLC by selling its participation interest back to the company (if this right is expressly stipulated in the charter), or to require the company to buy-out their participation interests where such right is set out in the LLC Law; and

27

Available to participants who either individually or collectively hold at least a 10 per cent interest in the LLC's charter capital. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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enter into binding shareholders' agreements in which they are able to agree on the exercise of voting rights, the sales of participatory interests and other matters that may be regulated in such agreements.

4.1.3.3. Obligations of participants The LLC participants also have various obligations, which include, amongst other obligations contained within the LLC Law and any additional rights set forth in the company charter, the following:  

to make contributions to the charter capital as specified in the LLC Law and the foundation agreement (or in the decision on the establishment of the LLC, if there is only one participant in the LLC) and within the time period specified in the LLC Law; and to keep confidential all information concerning the activities of the LLC.

4.1.3.4. Charter capital The charter capital of an LLC consists of the nominal value of the participation interests of the participants and should be denominated in Russian Roubles. The initial charter capital may not be less than RUB 10,000. At least 50 per cent of the charter capital must be paid by the date of the LLC's registration and the balance must be paid in full within the first year of its operation. Contributions may be in cash or in kind and certain customs benefits may be available for in-kind contributions made by foreign investors. The charter capital may be increased only after the original charter capital has been paid in full.

4.1.3.5. Participation interests A participation interest in an LLC is not considered a security under current Russian legislation and therefore, unlike shares in a JSC, no registration with the securities regulator is required. Transactions in connection with the transfer or pledge of participation interest in LLCs have to be notarized. The Federal Tax Service of the Russian Federation has to be informed of any transfer of the participation interest. Information on the participants and their participation interests is recorded in the list of participants maintained by the LLC and in the Unified State Register of Legal Entities. Participation interests may be sold to third parties, but are subject to the right of pre-emption of the existing participants on the same terms upon which the participation interests are offered to third parties.

4.1.4.

Joint Stock Companies

The establishment and operation of a JSC is governed by the Civil Code, the Federal Law 'On Joint Stock Companies' dated 26 December 1995 (as amended) ("JSC Law") and the Federal Law 'On the Securities Market' dated 22 April 1996 (as amended). Key features of JSCs:  

Issues shares to raise capital for its activities. The founders of the JSC must pay in 50 per cent of the JSC charter capital within three months following its state registration, with the balance payable in full within the first year.

4.1.4.1. Management structure 

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General Shareholders' Meeting - almost exclusive competence for all matters set out in the JSC Law. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru


  

Board of Directors (optional for CJSCs and OJSCs with less than 50 shareholders, but compulsory for OJSCs with 50 or more shareholders) - the authority defined in the charter. Executive Body (general director, sometimes in conjunction with a collective executive management board, - "правление" or "pravlenye") - for day-to-day management. Internal Auditing Commission or an Internal Auditor - oversees the JSC's financial and economic activities, members of which must be elected by the shareholders.

The General Shareholders' Meeting is the highest governing body of the JSC, whose authority is outlined in the JSC Law and cannot be substantially altered. Each common share carries one vote at the General Shareholders' Meeting (except for cases of cumulative voting where provided for in the JSC Law). Most decisions are made by a simple majority vote, although for certain key decisions a super-majority of 75 per cent is required. The daily management of the JSC is the responsibility of the Executive Body. The most standard Executive Body is a general director, however sometimes this will be in conjunction with a collective executive management board (in Russian "правление", or "pravlenye"), in which case the general director becomes the chairman of the management board. Alternatively the General Shareholders' Meeting may (by majority vote) choose to delegate the powers of the Executive Body to an external commercial organization (management company) or to an external individual manager, in both cases on a contractual basis (however, this decision may be taken only pursuant to a proposal from the Board of Directors if the company has a Board of Directors).

4.1.4.2. Two types of JSC OJSCs (open joint stock companies):      

May have an unlimited number of shareholders. Shareholders are freely entitled to dispose of their shares. Shareholders have pre-emptive rights to acquire newly issued shares that are to be privately placed in proportion to their existing shareholding. Shareholders have pre-emptive rights to acquire newly issued shares that are to be publicly placed in proportion to their existing shareholding. Shareholders have no pre-emptive rights to acquire shares offered by other shareholders for sale to third parties. The initial charter capital at the date of this publication is RUB 100,000.

CJSCs (closed joint stock companies):    

The number of shareholders may not exceed 50 (a CJSC must be transformed into an OJSC within one year should the number exceed 50). Shareholders have pre-emptive rights to acquire shares offered for sale by other shareholders to third parties. Shareholders have pre-emptive rights to acquire newly issued shares that are to be privately placed, in proportion to their existing shareholding. The initial charter capital at the date of this publication is RUB 10,000.

4.1.4.3. Incorporation of a JSC Individuals or legal entities may be founders of a JSC. A JSC's foundation document, the charter, must include the following information:    

the name, legal address and type of JSC (i.e. OJSC or CJSC); the amount of the charter capital; the quantity, nominal value, categories (common or preferred) of shares and classes of preferred shares issued and distributed by the JSC; the rights of the holders of shares of each category; Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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    

the structure and competence of the governing bodies of the JSC and their decision making procedures; the procedure for preparing and holding the General Shareholders' Meeting, including a list of issues requiring either unanimous consent or a resolution adopted by a qualified majority of votes; information on branches and representative offices; information on the existence of any special right of participation in the management of the company (a "golden share") vested in the Russian Federation, a constituent entity of the Russian Federation or a municipality of the Russian Federation; and other provisions required by law.

The charter may include other provisions, provided that they comply with the applicable Russian legislation. The rules on the incorporation of JSCs are generally similar to those described above in connection to LLCs. The only additional requirement in respect of JSCs is the registration of the issuance of the JSC shares with the Federal Service for the Financial Markets of the Russian Federation, which is obligatory upon the establishment of the JSC.

4.1.4.4. Shares and other types of securities A JSC can issue securities in the form of shares, bonds and issuer's options. Generally, the issuance of securities must be registered with the competent regulatory body, which is the Federal Service for the Financial Markets of the Russian Federation. A JSC can issue common shares and/or several classes of preferred shares, however the total value of the preferred shares must not exceed 25 per cent of its charter capital. A fractional share can come into existence when it is not possible to acquire the whole share during the consolidation of shares, when a shareholder exercises its pre-emptive right or in the course of acquiring additional shares. A fractional share grants its owner the same rights that are granted by the whole share of the corresponding category or class, on a pro rata basis.

4.1.5.

Choosing between LLC and JSC

Historically, the LLC has been the preferred form of legal entity for foreign investors looking for the establishment of a wholly owned subsidiary in Russia. This is because the procedure for establishing, operating and transferring participation interests in an LLC were simpler than for a JSC. However, the 2009 amendments to the LLC Law have imposed greater administrative regulation of LLCs, for example LLCs are now obliged to maintain and update a register of participants, and share purchase agreements and pledge agreements connected with participation interests in LLCs must now be notarized in Russia. Both the shareholders of a JSC and the participants of an LLC can enter into binding shareholders' agreements in which they are able to agree on the exercise of voting rights, sales of shares (participatory interests) and other matters. Other aspects of the LLC, which may be a benefit or a hindrance depending on the aims of the foreign investor, are that: 

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Participants (members) of an LLC who either individually or collectively hold at least a 10 per cent interest in the LLC's charter capital may apply to a court seeking the expulsion of another participant. To succeed the participant(s) seeking the expulsion must prove that the other

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 

participant substantially hindered the company's operations or materially breached its obligations; If this right is expressly stipulated in the charter, participants may withdraw from the LLC by selling their participation interest back to the company; and The LLC Law sets forth a significant number of matters which require a unanimous voting decision of all of the LLC participants. This could be a disadvantage for a joint venture partner with a majority participation in the LLC.

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4.2.

Foreign investments Information for the current chapter was developed and kindly provided by BEITEN BURKHARDT

4.2.1.

Legislative basis

The document regulating foreign investments in the Russian Federation is Federal Law No.160-FZ dated July 9, 1999 “On Foreign Investments in the Russian Federation” (hereinafter the “Law on Foreign Investments”). In accordance with this law, which determines and guarantees the fundamental rights of foreign investors, there are other documents that are also both directly and indirectly aimed at regulating investment-connected relations, such as, for instance, Federal Law No.225-FZ dated December 30, 1995 “On Production Sharing Agreements”, and Federal Law No. 57FZ dated April 29, 2008 "On Procedure of Making Investments in Economic Entities of Strategic Importance for National Defense and State Security". Investors may be granted certain extra guarantees under bilateral international agreements concluded by the Russian Federation. In particular, assistance agreements on the encouragement and mutual protection of capital investments have been concluded with the governments of such states as Switzerland, Norway, Italy, USA, Japan, and China. Besides, the Russian Federation is the legal successor to the former USSR under similar agreements concluded with the governments of Germany, France, Great Britain, Austria, and Finland.

4.2.2.

Main provisions

Foreign investments in the Russian Federation may be carried out in any form not expressly prohibited by legislation of the Russian Federation. The legal structure provided for foreign investors in the Russian Federation is identical to the one provided for Russian organizations. Any restrictions on rights of foreign investors may be imposed only by federal laws and only to the extent necessary to protect the fundamentals of the constitutional regime, morals, health, rights and lawful interests of other persons, and ensure national defense and state security. Any property belonging to foreign investors or commercial organizations, in which foreign investors participate, may not be seized. Exceptions to this rule may only be established by a legislative procedure and must provide for compensation for losses. Upon payment of taxes and charges stipulated by the Russian Federation legislation, foreign investors are entitled to freely use revenues and profits in the Russian Federation and to transfer the same outside Russia. Foreign investors may transfer their rights and obligations to another party on the basis of an agreement. Additionally, foreign investors are indemnified against losses inflicted by unlawful actions (or omissions) of state or local authorities or officials of such authorities.

4.2.3.

Priority investment projects

When foreign investors make direct investments or implement priority investment projects they may be granted certain concessions and additional guarantees. Direct investments carried out by a foreign investor are construed as: 

80

a foreign investor’s acquisition of no less than 10% of the shares in the charter capital of an already existing or newly established commercial organization in the Russian Federation in the

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 

form of an economic partnership or a company in accordance with the Russian Federation civil legislation; contribution of funds to the fixed assets of a foreign legal entity’s branch to be established in the Russian Federation; acting as a lessor in the Russian Federation with respect to particular types of equipment, whose customs value amounts to no less than 1 million rubles.

A priority investment project is an investment project that meets all of the following conditions: 

The total amount of investments in the project equals no less than 1 billion rubles (or its equivalent in a foreign currency at the exchange rate of the Central Bank of the Russian Federation quoted on the date when the Law on Foreign Investments came into force – approximately EUR 40,000,000), or the share of foreign investments in the charter capital of the commercial organization implementing the project equals no less than 100 million rubles (or its equivalent in a foreign currency at the exchange rate of the Central Bank of the Russian Federation quoted on the date when the Law on Foreign Investments came into force – approximately EUR 4,000,000); The investment project is included in the list of priority investment projects to be approved by the Government of the Russian Federation. However, it should be noted that at the time of drafting this brochure, the list of priority investment projects was not approved.

The Law on Foreign Investments provides foreign investors with a guarantee, widely used in international practice, of protection from negative changes in legislation of the host country (“grandfather clause”). In accordance with Article 9 of the Law on Foreign Investments, new federal laws and other legal regulatory acts of the Russian Federation that increase the total tax burden on the activities of an investor and commercial organization with foreign investments or establish a less advantageous regime with respect to foreign investments shall not be applied during the payback period of the project, but for no longer than seven years as of the date of commencement of the financing of this project by means of foreign investments. The guarantee of protection from negative changes in the Russian Federation legislation is applied to investors and commercial organizations with foreign investments that implement priority investment projects (regardless of the amount of the share of foreign investments in the charter capital) as well as to commercial organizations with the share of foreign investments in charter capital exceeding 25%. The guarantee is valid with respect to the following taxes:   

import customs duties (with the exception of customs duties that were imposed as a result of measures aimed at protecting the economic interests of the Russian Federation in terms of foreign trade according to the Russian Federation legislation); federal taxes (with the exception of excise taxes and VAT on commodities produced in the Russian Federation); payments to state extra-budgetary funds (with the exception of payments to the Pension Fund of the Russian Federation).

Currently, Russian tax legislation does not provide protection for investors from negative changes in legislation, which makes this guarantee difficult to implement in practice.

4.2.4.

Investments in St. Petersburg. Strategic investment projects

In St. Petersburg investment activities are governed by Law of St. Petersburg No. 185-36 dated July 08, 1998 "On State Support of Investment Activities on the Territory of St. Petersburg" which establishes the legal framework for state support for investors (including foreign investors) carrying out their activities on the territory of St. Petersburg. The respective support measures may include, inter alia, granting the city's sureties, tax benefits, deferred rent rates for lease of the city's property, etc. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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An investment project to be implemented on the territory of St. Petersburg may be recognized as strategic in cases stipulated by the Law of St. Petersburg No. 742-136 dated December 03, 2008"On Strategic Investment Projects, Strategic Investors and Strategic Partners of St. Petersburg". In particular, the investment project can be recognized as strategic if the following criteria are met:    

improvement of socioeconomic and cultural living conditions of citizens of St. Petersburg; increase of investment attractiveness of St. Petersburg; development of an important sector of the national economy in St. Petersburg; promotion of development of certain territories of St. Petersburg.

A strategic investment project shall also conform to the following requirements:   

economic efficiency of the investment project in terms of its payback period and profitability; the aggregate amount of investments in development of the production sector or transport and logistics hub of no less than 3 billion roubles, in other investment projects – 15 billion roubles; use of high-tech, energy-conservative, resource-saving and other high-efficiency technologies (if the investment project is connected with industrial production).

Decision on recognition of a strategic investment project is adopted by the Government of St. Petersburg. Strategic investment projects are implemented on the basis of an agreement entered into between St. Petersburg and respective investor.

4.2.5.

Restriction on foreign investors' activities

Normally, foreign and local investors in the Russian Federation have equal status subject to certain exceptions. For instance, there are restrictions on investments made by foreign parties in the banking and insurance sectors as well as businesses that are strategically important.

4.2.5.1. Banking sector Federal Law No. 395-I dated December 2, 1990 “On Banks and Banking Activities” sets forth additional requirements for the foundation and commercial activities of credit institutions with foreign investments and branches of foreign banks in the Russian Federation. Pursuant to Article 18 of the mentioned Federal Law, the admissible share of foreign capital in the banking system of the Russian Federation shall be established in accordance with a legislative procedure. The admissible share of foreign capital in the banking system of the Russian Federation is calculated as a ratio of the total amount of stakes belonging to foreign investors in the charter capitals of credit institutions and the amount of stakes belonging to foreign banks to the total amount of capital of all credit institutions registered on the territory of the Russian Federation. The Central Bank of the Russian Federation is entitled to prohibit an increase in the charter capital or alienation of shares in the charter capital of credit institutions if as a result of such actions the admissible share of foreign capital in the banking system of the Russian Federation is exceeded. However, to date the federal law that sets forth the share of foreign capital in the banking system of the Russian Federation has not been adopted.

4.2.5.2. Insurance services sector The basic legal act regulating the insurance services sector is Federal Law No. 4015-1 dated November 27, 1992 "On Organization of Insurance Business in the Russian Federation", which establishes certain restrictions on foreign insurance organizations’ activities through their subsidiaries and associated companies on the territory of Russia. According to Article 6 of the mentioned law, subsidiaries of foreign investors (foreign insurance companies) and insurance organizations, in which foreign investors’ share exceeds 49%, may not provide obligatory insurance or life insurance. They also may not provide obligatory state insurance

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or issue property insurance related to making deliveries or performing works for state needs or insure property interests of state and municipal organizations. An insurance organization, being a subsidiary of a foreign investor, has the right to carry out insurance activities in Russia provided that the foreign investor has been an insurance company for at least 15 years, is performing its activities in accordance with legislation of the state of incorporation, and has been participating in activities of insurance companies established on the territory of Russia for at least 2 years. It should be noted that these restrictions do not apply to cases where foreign investors are companies from EU countries. The share (quota) of foreign capital in the charter capitals of all insurance companies registered in Russia may not exceed 25%. When the indicated maximum allowable shareholding is either reached or exceeded, the controlling authority supervising the insurance sector stops issuing permits for the performance of insurance activities to subsidiaries of foreign insurance companies and insurance organizations, in which foreign investors’ share exceeds 49%. Permission (prior consent) of the insurance supervisory authority is required for transferring shares in the charter capitals of Russian insurance companies to foreign investors and their subsidiaries. Increase in the capital of an insurance company with funds from foreign investors and their subsidiaries also requires prior permission from the insurance supervisory authority.

4.2.5.3. Ownership rights to certain categories of land plots In Russia, foreign investors are not allowed to own certain categories of land plots. Article 3 of the Federal Law “On Turnover of Land for Agricultural Purposes” provides for that foreign citizens, foreign legal entities, stateless persons as well as Russian legal entities, in which more than 50 percent of the share capital belongs to foreign citizens, foreign legal entities or stateless persons may not hold ownership rights to agricultural land. Pursuant to Clause 3 of Article 15 of the Russian Land Code, foreign citizens, stateless persons and foreign legal entities may not hold ownership rights to land plots located in border territories (the list of respective territories is approved by the Decree of the President of the Russian Federation No. 26 dated January 09, 2011) and other special territories mentioned in federal laws. Such entities may only lease land plots of the said categories.

4.2.5.4. Investments in economic entities of strategic importance Federal Law No. 57-FZ dated 29 April, 2008 "On Procedure of Making Investments in Economic Entities of Strategic Importance for National Defense and State Security" (hereinafter the "Law On Foreign Investments in Economic Entities of Strategic Importance") establishes the restrictions on foreign investors when purchasing shares in businesses, which are strategically important for national defense and state security, as well as when making other deals with foreign investors entailing establishment of control over such businesses. A business that is strategically important for national defense and state security (hereinafter a "business of strategical importance") is a company established in the Russian Federation in the form of a limited liability company or an additional liability company or a joint stock company, which carries out at least one type of activity, which is strategically important. The Law on Foreign Investments in Economic Entities of Strategic Importance outlines forty two types of such activities, which can be consolidated into several groups:  

activity connected with nuclear materials or radioactive substances; development, production, distribution, renovation, or usage of military technology, weapons, ammunition and explosive materials; Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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      

space activity, activity related to aviation security, development, production, testing and overhaul of aviation technology; mass information activity; development, production, distribution or technical service of encoded (cryptographic) assets; development, production, distribution and identification of electronic machinery intended for secret collection of information; surveying and extracting useful substances from subsoil of land plots of federal importance and catching of biological water resources; activity connected with the use of infectious disease agents; executing work influencing hydrometeorological and geophysical processes and phenomena.

The issue of establishing control over an acquisition target is a decisive criterion that determines whether such acquisition shall be subject to the Law on Foreign Investments in Economic Entities of Strategic Importance. The table below shows the cases when approval of acquisition is required: Investor

Company – acquisition target

Private foreign investor

State foreign investor

General enterprise of strategic importance

Approval is required if over 50% is acquired (also in certain circumstances if a lesser interest is acquired)

Approval is required if over 25% is acquired, while acquisition of over 50% is prohibited

Enterprise, which develops subsoil plots of federal importance

Approval is required if 10% or more is acquired (other than in cases when the Russian Federation owns over 50%)

Approval is required if 5% or more is acquired, while acquisition of over 50% is prohibited

It is important to note that other transactions resulting in control of foreign investor over a business of strategical importance (such as agreements on a foreign investor carrying out the functions of a manager of a company, transactions resulting in the possibility to elect more than 50% of the composition of the board of directors (or supervisory board) or to appoint the sole executive authority or more than 50% of the composition of the collective executive body of such a business, etc.) also require prior approval for their execution. A foreign investor intending to conduct any of the said transactions or establish control over a business of strategical importance must submit to the authorized state body a respective petition for prior consent to such transaction or a petition for consent to establishment of control. The consideration of a petition takes approximately three months.

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4.3.

Taxation Information for the current chapter was developed and kindly provided by DLA Piper

The following table summarizes Russian taxes in general and in St. Petersburg. Tax

To be paid to the federal budget (standard rates)

Profits tax

To be paid to the budget of St. Petersburg

Total tax rate

2%

18%

20%

VAT

18%

-

18%

General personal income tax Mineral extraction tax

13%

-

13%

0-17.5%

-

0-17.5% (depending on the type of mineral) RUB 4-1,700 (depending on the type of waters) 2.2%

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Water tax

RUB 4-1,700

-

Property tax

-

2.2%

Transport tax

-

RUR 24-1,000

Land tax

-

0.004-1.5%

RUB 2.5-200 (depending on the engine power of vehicle) 0.3-1.5% (depending on the type of land)

At a regional level, the authorities are authorized to grant a reduction in the profits tax rate (in the part payable to the regional budget) by 4.5 per cent (i.e. down to 13.5 per cent from 18 per cent of a regular rate) for any period they consider necessary. As far as property tax, transport tax and land tax is concerned, the regional authorities also have a right to reduce the tax rates.

4.3.1.

Special tax regimes in Russia

Under the Tax Code of the Russian Federation, there are two different tax regimes: a common one and a special one. If a taxpayer applies the common tax regime, he/she is obliged to pay such taxes as corporate profit tax, VAT, personal income tax, social insurance contributions, excise duties, property tax, land tax, transport tax, mineral extraction tax and water tax. In addition, the Tax Code of the Russian Federation envisages special tax regimes pursuant to which a taxpayer is obliged to pay only one specific tax instead of a number of taxes. Such special tax regimes include a simplified tax system, a tax on imputed income, a unified agricultural tax and a tax on production sharing agreements. The simplified tax, the unified agricultural tax and the tax on imputed income replace profits tax for organizations, income tax for individual entrepreneurs, VAT (except for imports) and property tax. A taxpayer can apply a particular special tax regime if certain requirements are met.

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4.3.1.1. Tax on imputed income Tax on imputed income is a federal tax established by the Tax Code and which is in force by the local tax authorities. In St. Petersburg the tax on imputed income is constituted by the Law of St. Petersburg N299-35 dated 17 June, 2003. Specific types of business activities mainly performed by small or medium sized legal entities are subject to tax on imputed income. Such types of business activities include consumer domestic services, veterinary services, vehicle maintenance, repair and washing, catering, retail trade, transport advertising and passenger and cargo transportation. A taxpayer can apply a tax on imputed income if he/she satisfies the following requirements:  

less than 25 per cent of company’s capital is owned by other organizations; the average annual staff headcount is less than 100 people.

The tax on imputed income has a rate of 15 per cent and is imposed on the amount of the "imputed revenue" established for each specific type of activity per month adjusted by special coefficients. Usually it involves a very immaterial tax base and is advantageous to taxpayers operating on the basis of the imputed income tax system. Payable imputed income tax could be reduced by deducting insurance contributions for mandatory pension insurance, medical insurance and social insurance for temporary disability or maternity leave.

4.3.1.2. The simplified tax system A company and individual entrepreneurs can apply the simplified tax system if the following conditions are met, inter alia:  

the company's annual turnover does not exceed a certain threshold (RUB 60 million from 1 January 2010 until 2013), and the company employs less than 100 people.

Some entities may not apply the simplified tax system. Such companies are:    

foreign legal entities; Russian legal entities with branches; Russian legal entities with more than 25 per cent of the capital owned by other organizations; insurance agencies, banks and investment funds, parties of production sharing agreements, taxpayers of unified agricultural tax, etc.

The simplified tax rate is:  

6 per cent if a taxpayer selects revenue as a tax base; or 15 per cent if a taxpayer selects "income less deductible expenses" as the tax base.

Taxpayers are subject to quarterly advance payments, whereas the annual final payment is due by 31 March of the following calendar year. Advance tax estimates and annual tax returns are due during the same terms as the corresponding payments.

4.3.1.3. The unified agricultural tax Under article 346.1 of the Tax Code, agricultural producers are allowed to apply the unified agricultural tax. As mentioned, this tax replaces profits tax for organizations, income tax for individual entrepreneurs, VAT (except for import) and property tax. For the purposes of the unified agricultural tax the term "agricultural producers" denotes organizations, (individual) farms and individual entrepreneurs producing agricultural products on agricultural lands and selling these products, in particular, products resulting from the processing

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thereof, if the portion of proceeds from the sale of the products make up at least 70 per cent of the total proceeds from the sale of the goods (works, services) of these organizations, (individual) farms and individual entrepreneurs. The unified agricultural tax is levied on income minus deductible expenses. Income and expenses are calculated in accordance with general profits tax rules. The unified agricultural tax rate is 6 per cent.

4.3.2.

Tax concessions in St. Petersburg

Under the Russian tax legislation, profits and property tax incentives and exemptions can be inter alia provided through regional legislation. At a regional level, the authorities have limited powers to grant profits tax incentives and are only authorized to grant a reduction in the profits tax rate (in the part payable to the regional budget) by 4.5 per cent (i.e. down to 13.5 per cent from 18 per cent of a regular rate) for any period they consider necessary. As far as the property tax is concerned, the regional authorities also have a right to reduce the maximum 2.2 per cent property tax rate or to provide a full exemption from the property tax at their discretion. Thus, when a foreign investor is considering investing in a particular Russian region, it is important to examine not only the relevant federal laws, but also the relevant regional laws. As the various regions of Russia compete to attract foreign investors, each have passed numerous laws, regulations and other legal measures aimed at improving the particular social and economic conditions in their region, including favorable tax conditions. Such incentives are generally granted to major investors or entities operating in a particular industry. However, given that the criteria for the application of such incentives can be discretionally set by the regional authorities, the reduction in profits tax can be potentially available to any group of investors (taxpayers). In St. Petersburg, a number of additional tax concessions (the "Concessions") have been introduced by the St. Petersburg Law On Tax Concessions No. 81-11 dated 14 July, 1995 (the "Law").

4.3.2.1. General rules for the application of the Concessions Scope of the Concessions: Under the Law, a legal entity paying profits tax and property tax to the budget of St. Petersburg and making capital investments (the "Investment") on the territory of St. Petersburg may be entitled to the following Concessions: 1. a full exemption from property tax (from the maximum tax rate of 2.2% to 0%) in relation to respective fixed assets, and 2. a reduction in the regional part of the profits tax rate from 18% to 13.5% if the sum of the qualifying Investment equals RUB 800 million or more. The Concessions are granted for a period of 5 tax periods in a row starting from the date when the right for the Concessions arose in accordance to the provisions of the Law. Types of qualifying investment activities: The Law limits the scope of the Concessions only to manufacturing companies engaged in specific economic sectors to be determined in accordance with the All-Russia Classifier of Economic Activities. In particular, the following main types of activities qualify for the Concessions29:

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The full list of qualifying activities is listed under section D "Production and services of the manufacturing industry", E "Electricity, gas and water production" and I "Transportation and connection" of the All-Russia Classifier of Economic Activities (although there are some exemptions). Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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Production and services of the manufacturing industry

Electricity, gas and water production

Transportation and communications

                     

Food and beverages; Tobacco and tobacco products; Clothing and textiles; Wood pulp; Chemical products (rubber, non-mineral products etc.); Metal products; Machinery and equipment; Equipment for the media; Medical equipment; Transportation vehicles; Furniture; Scrap metal; Cars and auto components; Ships and other transportation vehicles; Others. Electrical energy produced by thermoelectric plants, gas / diesel / nuclear / turbines; Electrical energy, gas, steam and hot water; Water and ice. Land transport; Water transport; Air transport; Additional transportation services: o Terminals (airport etc.) activity, management of airports; o Management of air traffic; o Operation of takeoffs and landings, runways etc.; o Activities on the overland services of air transport.

At the same time, some particular economic activities are excluded from the qualifying list. Please find a list of such activities below:  Lease of cargo automobiles / sea / internal waters / air transport with crew;  Additional transport activity (including forwarding, storage services etc.);  Communications.

However, according to the Law, the application of the Concessions by companies engaged in retail trade, real estate lease (even if they have met other criteria) is directly restricted. Definition of qualifying investment: The Law provides that when determining the required sum of the Investment (i.e. RUB 800 million the "Threshold") only the net investment shall be taken into account, i.e. the sum of the investment made in the respective year must be reduced by the net book value of fixed assets which were used by the taxpayer in St. Petersburg but were alienated (written off) during the same year.

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For the purposes of the Law, the Investment means (a) the acquisition30 of fixed assets and (b) placing those fixed assets into operation. In order to qualify for the Concessions, the Investment must be made: 1. to the fixed assets which were not previously used on the territory of St. Petersburg and which are intended for production purposes (i.e. for the production of goods (work, services) and/or for management purposes), 2. in the required Threshold, 3. on the territory of St. Petersburg, and 4. within a period of no longer than three consecutive calendar years starting from 2010. Investment in the form of land is clearly excluded from the qualifying investment. Additional requirements for the application of the Concessions: The Law provides certain additional requirements for the application of the Concessions which include: 

A "claw back" rule which stipulates that if the fixed assets subject to the Concessions are alienated (or relocated from St. Petersburg) by the taxpayer before the expiration of a 5 year period (after the right for the Concessions appeared), the taxpayer automatically forfeits his right to the Concessions claimed in relation to the alienated assets and must restore and pay to the budget the respective profits tax and property tax. "Actual payment of the investment" requirement The Law also leaves open the question as to whether the investments should be actually paid during the investment period or not. In this respect, a conservative position would be to make sure that the required sum of the investment has actually been paid during the period of putting the fixed assets into operation. Reorganization issues The question of whether the successor has a right for the Concession or not, remains unregulated directly by the Law. However, according to the Tax Code the obligations and the rights of the reorganized company (including a right for the concessions) are transferred to the legal successor.

4.3.2.2. Concessions for the companies engaged in the innovative sector A legal entity that is involved in the manufacturing and selling certain innovative products (that are listed in the Law), may be entitled to a reduction of the regional part of the profits tax from 18% to 13.5% under the following conditions:   

it fulfills the above-mentioned conditions for the qualifying investor; it makes the Investment in the amount of RUB 50 million or more; 80% of the total taxable profit must be derived from selling of the said innovation products.

4.3.2.3. The Concessions for the strategic investors (until 2013) The Law also provides that a qualifying legal entity paying profits tax and property tax to the budget of St. Petersburg and making the Investment to the amount of RUB 3 billion or more on the territory of St. Petersburg may be entitled to the following Concessions: 1. a full exemption from property tax (from the maximum tax rate of 2.2% to 0%) in relation to the respective fixed assets, and

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2. a reduction in the regional part of the profits tax from 18% to 13.5%. The conditions for the application of the Concessions described in this section slightly differ from the general conditions which were described above. In particular, the Investment of RUB 3 billion or more must be made starting from 2007 within three calendar years. Acquisition of the qualifying fixed assets under the lease agreement is directly restricted. Furthermore, the Law contains the so-called minimum "tax test" rule. This means that the qualifying investor forfeits his/her right to apply the Concession if the total amount of taxes due to the budget of St. Petersburg for one calendar year is less that the said amount of taxes for the year preceding the first year when the Concessions were applied. The Concession may be granted only to the investors performing qualifying types of activities (please see Section "Types of qualifying investment activities": Production and services of the manufacturing industry) above. The Concessions may be provided for a period of 5 years starting from the first month of the calendar year following the year when the qualifying investment was made. The above Concession is available for the qualifying investors that meet the above-mentioned criteria until 2013 for a period of 5 years as indicated in the previous paragraph.

4.3.3.

Tax administration in Russia

One of the main purposes of the tax administration reform which has been implemented in the Russian Federation lies in the creation of a more transparent and predictable tax control mechanisms. On the one hand, this mechanism must protect taxpayers from official pressure; on the other hand, it must ensure an effective control over the observation of tax legislation by the state.

4.3.3.1. Tax audits Russian law provides for two types of tax audits that may be conducted by the tax authorities:  

In-house tax audits (the review of tax returns filed by taxpayers). These audits are carried out solely on the basis of such tax returns and other documents submitted by a company, and On-site tax audits (the review of the three calendar years preceding the period in which the tax audit is being performed). Generally, an on-site tax audit covers all taxes. The duration of an onsite tax audit is limited by law to a maximum of two months.

As a result of both in-house tax audits and on-site tax audits the tax authorities are obliged to issue an act reflecting the results of the respective audit. According to the Russian law, the audited company is entitled to object to the act in writing and to defend its position at the proceedings held by the tax authorities. Based on the act and on the proceedings, the tax authorities then issue a decision, which, in practice, generally repeats the wording of the act issued by the tax authorities. According to the Russian law, a company may challenge the decision of the tax authorities through an appellate procedure by filing a petition with the higher tax authority. From 2009, such administrative proceedings have been obligatory before the company may go to court. The higher tax authority has to issue its decision within one month from the date of receiving the petition, this period may be prolonged for 15 business days. Only as of this moment will the decision of the higher tax authority come into force. If the decision is endorsed by the higher tax authority, the company may challenge the decision by filing a court claim with the relevant State Arbitration Court. The claim may be accompanied by an application requesting an injunction from the court which, if granted, shall disallow the tax authorities from unilaterally withdrawing the amounts equal to the sum of the charges from the bank accounts of the company.

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4.3.3.2. Reclassification of transactions for tax purposes The tax authorities have recently changed their focus from reviewing mainly defects in accounting business operations for tax purposes to disregarding the legal form of a contract when making a tax re-assessment. In its Ruling No. 53 of 12 October, 2006, the Plenum of the High Arbitrazh Court specifically stated that the courts should take into account that transactions not compliant with the law or other legal acts, as well as sham and fictitious transactions, are to be deemed void with tax implications arising therefrom regardless of their recognition by courts. The same ruling has also formulated a different concept that if the court has decided, on the basis of evidence submitted by the tax authorities and the taxpayer itself, that the taxpayer has accounted for business operations not in accordance with its actual economic meaning, then the court "shall define the scope of the rights and obligations of the taxpayer based on the true economic content of the business transaction". In such a case, the court can find a tax benefit unjustified and disallow such a benefit received by the taxpayer if the transaction concerned:  is lacking economic substance and legitimate business reasons other than obtaining a tax benefit ("business purpose principle"); or  was recorded for tax purposes not in accordance with its actual economic substance ("form over substance principle").

4.3.3.3. Tax penalties The carrying out of business activities without registration with the tax authorities is subject to a fine to the amount of 10 per cent of the respective income, but not less than RUB 40,000. Late submission of a tax return is subject to a fine equal to 5 per cent of the tax due under such a tax return per calendar month (full or partial). Non-payment of a tax as a result of a reduction in the tax base is subject to a fine to the amount of 20 per cent of the unpaid tax. The fine may be increased by up to 40 per cent if the violation is intentional. Late payment of tax is subject to an interest equal to 1/300 of the effective rate per day of the Central Bank of the Russian Federation.

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4.4.

Contracts Information for the current chapter was developed and kindly provided by BEITEN BURKHARDT

Reasonable actions on the part of foreign companies in the Russian market can lead them to extremely impressive financial results. However, thorough preparation and maximum awareness are a prerequisite for such results. Several principal aspects that should be kept in mind when establishing contractual relations with counterparties in Russia are briefly covered below.

4.4.1.

Analyzing counterparties prior to signing contracts

When taking a decision on whether to enter into a partnership with a Russian company, it is necessary to verify its solvency and reliability. Thus, it is possible to distinguish between reputable and solvent partners and doubtful or newly established fly-by-night companies, which reduces counterparty default risks under agreements. The most simple and fast way to obtain information about a potential partner is to review open official data sources, in particular the Unified State Register of Legal Entities, the Unified State Register of Rights to Immovable Property and Transactions Therewith, the Land Cadastre, Registers of Intellectual Property (Rospatent), and the websites of federal courts, services and agencies. Furthermore, information on various organizations can be requested from special information agencies.

4.4.2.

Recommendations for entering into contracts

The main criteria for the "reliability" of a signed agreement are its validity and enforceability. Moreover, it should be noted that subordination of an agreement to any foreign law cannot preclude possible problems related to subsequent performance of the agreement. 

Form of contract According to the Russian Civil Code, foreign trade transactions shall be executed in a written form under pain of invalidity. This means that dispatch of goods (rendering of services, performance of works) to or by foreign entities without entering into a written contract (e.g., on the basis of invoices) is not allowed.

Choice of governing law Normally, foreign counterparties would like the provisions of an agreement to be executed thereby to be governed by the national law. However, such choice of law may adversely affect the validity of the agreement as any terms and conditions contradicting imperative provisions of the Russian law are deemed null and void and cannot be judicially protected or enforced in Russia. Like in many countries, a number of issues in Russia are subject to exclusive regulation by the Russian law, in particular transfer of rights to real estate, shares and interests in Russian companies, protection of consumer rights as well as matters related to establishment and operations of Russian companies.

Jurisdiction As a general rule, the parties to a contract may select a competent court for considering disputes that may arise in connection with the contract. Like the choice of the governing law, in certain cases the choice of jurisdiction is limited. For example, disputes over rights to immovable property located (registered) in Russia may be settled by a Russian state court only. It should also be mentioned that only court decisions of the countries, with which Russia has treaties on mutual recognition and enforcement of court judgments, are enforceable in Russia. In particular, there are such treaties with Italy, Spain, the Baltic States, and certain countries of

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the Central and Eastern Europe. In the absence of such treaty, a judicial act may prove to be useless. A common method of avoiding such risks is to enter into an arbitration agreement providing that all disputes fall within the jurisdiction of Russian or foreign international arbitration. Aside from the confidentiality, an undeniable advantage of international arbitration is the enforceability of its awards in more than 140 countries, including Russia. At the same time, it is important to remember that to be enforceable in Russia foreign international arbitration awards shall be recognized by a Russian state court at the place of location of a debtor (in St. Petersburg – the Arbitration Court of St. Petersburg and Leningrad Oblast). 

Liability of parties Generally, the grounds for and limits of liability for improper performance of contractual obligations are stipulated by the parties to the contract. However, certain restrictions of "free will" should be born in mind: Russian law does not permit limiting liability given premeditation of the breaching party. For harm caused by a defective product within its established lifespan, liability of the seller (producer) ensues regardless of fault of the seller or the presence of contractual links. At their option, victims may file a lawsuit for damages against either the seller (importer) or the manufacturer of the product. The only basis for a release from liability is a proven fact of improper product use.

4.4.3.

Securing contract performance

For the purposes of protecting business interests it is necessary to consider in advance effective means of securing a counterparty's performance of its obligations. The most common means of security under the Russian law include pledge/mortgage, surety and a bank guarantee. 1. Pledge/mortgage: A pledge is one of the most reliable means of security and, in the event the debtor does not fulfill its contractual obligations, it entitles the creditor to satisfaction of his/her claims out of the debtor's property being the subject of pledge. Moreover, a pledge lender has the preferential right to satisfaction of its claims in priority over all other creditors of the debtor. One type of pledge is mortgage – pledge of land, buildings (including buildings under construction) and other real estate. The law establishes considerably strict requirements for mortgage agreements as well as the obligation of state registration. 2. Surety: Oftentimes Russian companies have quite modest charter capitals and assets, which are not enough for satisfying claims which could arise in the future. Consequently, a popular form of securing obligations is a personal surety of company founders – individuals or companies affiliated with the debtor and owning assets. The surety and the debtor bear joint liability for performance of the secured obligation. 3. Bank guarantee: A distinct feature of a bank guarantee is its independence from the main (secured) obligation. This means that within the period established by the bank guarantee agreement the creditor is entitled to satisfaction of its claims from the guarantor bank even if the secured obligation is invalid (unenforceable). A bank guarantee is one of the most reliable means of securing obligations. When executing one it is necessary to very precisely formulate, which documents the creditor must present to the bank along with a claim for payment, as well as to consider the requirements of current court practice on the execution of guarantees (including validity periods).

4.4.4.

Currency control

In accordance with the Federal Law “On Currency Regulation and Currency Control”, when implementing cross border transactions, residents (Russian citizens and companies incorporated pursuant to the Russian laws) shall comply with special requirements stipulated by the law and normative acts of currency regulation authorities. The most important regulatory acts related to Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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making payments to foreign recipients are issued by the Bank of Russia. Pursuant to the general rule, residents shall provide authorized Russian banks with special documents when making payments within the framework of foreign trade activities. Responsibility for violating the currency legislation of the Russian Federation and the acts of the currency regulation authorities is specified in the Administrative Offences Code (KoAP). In accordance with currency control regulations, some operations (e.g., an offset of mutual claims) may be prohibited.

4.4.5.

Specific features of supply agreements containing conditions on equipment installation

If within the framework of a supply agreement a foreign supplier also undertakes to provide services associated with installation or supervision of installation of the equipment supplied, it is necessary to take into consideration a number of aspects of Russian tax and migration legislation as well as provisions on regulation of construction activities. Should a foreign company render services associated with supply, it is recommended that the respective relations in regard to supply and services be formalized by separate agreements. First of all, this is due to tax consequences – on the one hand, when determining the contract price including the cost of goods and services without dividing it into respective parts, customs payments shall be charged on the entire contract price; on the other hand, in some cases services rendered by a foreign company in Russia may be subject to VAT (depending on the type of services) and corporate profits tax (if a permanent establishment is formed in accordance with the criteria set forth by legislation). In the above cases if a foreign company does not have its own divisions, through which activities in Russia are performed, a Russian company being a party to the respective agreement and acting as a tax agent of the foreign company shall calculate and withhold VAT and corporate profit tax on the amount payable to the foreign counterparty as remuneration for its services. Any issues related to formation of permanent establishments of foreign companies are regulated by bilateral international double taxation treaties and the Tax Code of the Russian Federation. As a general rule, a permanent establishment of a foreign company is deemed to have formed if representatives of the foreign company perform regular commercial activities in Russia. Moreover, a foreign company shall be mandatorily registered with Russian tax authorities if such activities are performed for more than 30 days during one calendar year. However, some double taxation treaties establish special rules with respect to construction (building areas) and installation works (installation objects). Pursuant to general rules, the activity of a foreign company that performs construction or installation works on the territory of the Russian Federation is not taxable in Russia if such activity is performed for no longer than 12 months. For example, such provisions are set forth in Subclause 3 of Clause 5 of the Double Taxation Treaties with Germany dated 29.05.1996, the Netherlands dated 16.12.1996 and Great Britain dated 15.02.1994. Also, it should be taken into consideration that in certain cases in order to perform installation works a company may have to obtain a permit to perform construction works and join a self-regulating organization (SRO) registered in Russia. It is necessary to check whether a permit is required with respect to each particular type of works to be performed. In accordance with the current rules, performance of installation supervision works usually does not require a permit of a member of SRO. As a work permit is not required foreign citizens performing installation (supervision) works, service and warranty maintenance as well as post-warranty repairs in Russia, they usually stay in Russia on the basis of a multi-entry business visa. However, it should be noted that the aggregate period for a foreign citizen to stay in Russia on the basis of such visa may not exceed 90 days during each period of 180 days. If the above works are performed for more than 90 days, the foreign company must review other options – e.g. replace the personnel each 90 days, obtain new business visas or respective work permits.

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4.5.

Employment Information for the current chapter was developed and kindly provided by BEITEN BURKHARDT

Labor relations and other relations directly connected therewith are regulated by labor legislation which consists of the Labor Code of the Russian Federation (hereinafter the "Labor Code"), other federal laws and laws of the constituent territories of the Russian Federation, as well as by other regulatory legal acts containing labor law regulations. Requirements of the Russian labor legislation are also applicable to foreign citizens and foreign company employers participating in relations involving the performance of labor activities in Russia.

4.5.1.

Employment agreement

An employment agreement is the basic document regulating the relations between the employer and the employee. It is mandatory that an employment agreement be concluded between the employer and the employee in writing prior to the commencement of work. Given actual admittance of the employee to work, the employer must execute an employment agreement with him/her in writing within 3 business days after the employee was actually admitted to work. The following conditions must be included into an employment agreement:        

information on the employer and the employee; place of employment; date of commencement of work; position (labor function); conditions determining the nature of the work (mobile, connected with travel, in transit, etc.); compensation, and benefits to the employee for working in severe, detrimental, and dangerous conditions; work and holiday time; terms of remuneration of labor (salary, possible premiums, bonuses, etc.); provision on mandatory social insurance in accordance with legislation.

An employment agreement may also include other conditions not contradicting the effective legislation. The conditions of an employment agreement may be amended by an agreement of the parties executed in writing. In certain exceptional cases the labor legislation allows the employer to unilaterally change the conditions of an employment agreement (without the employee's consent).

4.5.2.

Term of an employment agreement

Employment agreements may be concluded for an indefinite term (unlimited agreements) or for a fixed term not exceeding 5 years (fixed-term agreements). Generally, employment agreements are concluded for an indefinite term. A fixed-term employment agreement may be entered into only in cases stipulated by the Labor Code and other federal laws, for instance: for the time of performing the obligations of an absent employee, for whom the workplace is preserved; for the time of performing temporary (up to 2 months) or seasonal work; for the time of carrying out work beyond the employer's usual activities; etc. By agreement of the parties, a fixed-term employment agreement may also be concluded with executives, deputy executives and chief accountants of an organization; persons combining jobs; persons studying full time and other persons specified by the Labor Code. Entering into a fixed-term employment agreement in cases not stipulated by the Labor Code or other federal laws is not allowed.

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It must be noted that if neither party has requested termination of a fixed-term employment agreement upon expiration of its term and the employee continues to work after expiration of the employment agreement, the agreement is deemed concluded for an indefinite term.

4.5.3.

Probation period

Russian labor legislation provides for the possibility of establishing probation for an employee in order to verify his/her suitability for the job entrusted. Probation may be established for a period of up to 3 months. For executives and their deputies, chief accountants and their deputies, executives of separate structural subdivisions (branches, representative offices) the maximum probation period is 6 months. Probation may not be established for certain categories of employees specified by the Labor Code (pregnant women; women with children up to 1.5 years of age; persons under 18 years of age; young specialists; etc.). During the probation period the employer has the right to terminate the employment agreement with the employee who failed to pass probation, under a simplified procedure. In such case, the employer must notify the employee of the termination of the employment agreement in writing at least 3 days in advance. Moreover, the employer must state the reasons, for which the employee is deemed to have failed to pass probation.

4.5.4.

Salary

The amount of the salary shall be specified in the employment agreement and may not be less than the federal minimum wage established for the entire territory of the Russian Federation (4,611 rubles on the date of preparation of the brochure) and the regional minimum wage established by regional laws annually. In St. Petersburg the regional minimum wage is established in the amount of 7,781 rubles for the year 2012. Salaries must be paid at least every half-month in the currency of the Russian Federation, i.e. Roubles.

4.5.5.

Working hours

In the Russian Federation the normal duration of working hours may not exceed 40 hours per week. By agreement between the employee and the employer, part-time work may be established. The employer must establish a part-time working day for certain categories of employees upon their request. Such employees include: pregnant women; one of the parents having a child aged up to 14 years or a disabled child up to 18 years; persons caring for a family member who is ill. In case of parttime work the employee's labor is paid pro rata to the time worked by him/her or the amount of work performed. Russian labor legislation provides for the possibility to establish various working schedules by the employing company, i.e. various means of distributing work within a certain period (week, month, quarter, etc.), including: standard working day, non-standard working day, flexible working hours, record of cumulative hours worked. The Labor Code also allows engaging an employee in overtime work subject to the employee's written consent. The maximum duration of overtime work is 4 hours within 2 consecutive days and 120 hours per year. Overtime work shall be compensated for by granting the employee additional days-off or paying the employee at least one and a half times the regular hourly rate for the first 2 hours and at least twice the regular hourly rate for any subsequent hours.

4.5.6.

Leave

Each employee shall be granted at least 28 calendar days of paid leave per annum (basic paid leave). An employment agreement, collective agreement, or internal documents of the employer may also

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provide for granting the employee an additional paid leave, the duration of which is not limited by law. As a general rule, leaves are granted to employees in calendar days .Upon agreement between the employee and the employer the annual leave may be divided into parts. At least one part of the leave shall not be less than 14 calendar days. The employee may be granted a short-term unpaid leave, the duration of which shall be agreed by the employee and the employer. Such leave shall be granted due to family circumstances or other valid reasons upon the employee’s written application.

4.5.7.

Statutory holidays

Russian labor legislation establishes 12 statutory holidays per year, which are: January 1, 2, 3, 4, and 5; January 7; February 23; March 8; May 1 and 9; June 12; and November 4. If a holiday falls on a dayoff, the following business day becomes a day-off. The statutory holidays coming for the paid leave period are not included in the number of calendar days of the leave and are not paid. Work on holidays and days-off is prohibited, except for the cases provided by law, and, as a rule, requires the employee’s written consent. Such work shall be paid at least twice the regular rate.

4.5.8.

Secondary employment. Prohibited competition

During the time free from the main work an employee is entitled to perform another regularly paid work for the same employer (internal secondary employment) or for another employer (external secondary employment). Working hours at a secondary job may not exceed 4 hours per day. It is permissible to conclude secondary employment agreements with an unlimited number of employers. In accordance with the Russian legislation, an employment agreement may not stipulate that the employee is prohibited for the term of the employment agreement from performing work or business activities that compete with the employer’s activities. No employee may also be prohibited from competing with his/her employer following the expiration of the employment agreement.

4.5.9.

Termination of employment agreements

An employment agreement may be terminated only on the grounds stipulated by the Labor Code or other federal laws. Dismissing an employee on other grounds is not allowed. The Labor Code provides for the following grounds for termination of employment agreements: 1. Termination of an employment agreement by agreement of the parties Any employment agreement – whether concluded for an indefinite term or fixed term – may at any time be terminated by agreement of the parties. This procedure for terminating labor relations is widely used in practice as it is connected with minimal potential risks for the employer. The labor legislation does not obligate an employer to pay any compensation to an employee; however, it is possible if provided for by the conditions of the agreement between the employee and the employer. The amount of and procedure for paying compensation are determined by mutual consent of the parties. 2. Resignation of an employee An employee is entitled to terminate the employment agreement at any time upon his/her own initiative. Such employee must notify the employer of the resignation in writing at least 2 weeks in advance. Prior to expiration of the resignation notification period the employee is entitled to withdraw the letter of resignation at any time. In such case dismissal does not occur.

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If upon expiration of the resignation notification period the employment agreement is not terminated and the employee does not insist upon resignation, the employment agreement remains valid. 3. Termination of a fixed-term employment agreement A fixed-term employment agreement terminates upon expiration of the term stated therein. If upon expiration of the term of the employment agreement neither the employee nor the employer has requested termination of the labor relations, the provision regarding the term of the agreement loses effect and the agreement becomes indefinite. In case of termination of a fixed-term employment agreement due to expiration of its term the employer is obligated to notify the employee thereof in writing three calendar days prior to dismissal, otherwise the agreement will also be deemed prolonged for an indefinite term. 4. Termination of labor relations due to circumstances beyond the parties control In some cases an employment agreement is subject to termination due to circumstances beyond control of the employer and the employee. The list of such circumstances is stipulated by the Labor Code and, in particular, includes the employee being called to military service; reinstatement of the employee that previously performed the respective job duties; recognition of the employee as completely incapable of working; disqualification of the employee; the employee being sentenced to punishment under a court verdict, and other circumstances. 5. Termination of an employment agreement on the initiative of the employer Dismissal upon the employer's initiative always requires certain substantiation directly stated in the Labor Code, as well as compliance with the mandatory procedure and careful execution of all required documents. The Labor Code contains a relatively broad list of the grounds for dismissal of an employee upon the employer’s initiative. The most important of them are: 

 

Dismissal for reasons connected with the employee's conduct, including: repeated nonperformance of employment duties resulting in disciplinary sanctions; single gross breach of employment duties; presentation by the employee of falsified documents when being hired, and other grounds. Dismissal for reasons associated with the employee's insufficient professional qualifications. Dismissal for production reasons: liquidation of the organization or a separate subdivision thereof; staff reduction. In these cases the employees must be notified at least two months prior to dismissal and paid a severance pay in the amount established by the Labor Code.

It is prohibited in all cases to dismiss an employee on the employer's initiative during the employee's temporary incapacity to work or leave, as well as pregnant women, other than in case of liquidation of the organization. Should any legislative requirements be breached, the dismissal of an employee may be deemed unlawful. In such case the employee may be reinstated at work and the employer may be obligated to compensate for the emotional distress caused to the employee by the unlawful dismissal.

4.5.10. Specific features of employment of company executives Company executives are individuals vested by virtue of law, other regulatory legal acts and/or the company foundation documents with the right to manage the company, in particular, to perform the functions of its single-member executive body. The term "executive" used in Russian legislation is of general character and when applied to a company of a particular type may be replaced with other terms, for example "director", "general director", "president", "chairman of the board", etc.

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An executive is considered to be a company employee. Due to this, an employment agreement shall be entered into by the executive and the company, and relations between them are regulated not only by civil legislation and the company corporate documents but also by labor legislation. Employment of company executives has the following specific features:     

An executive is employed on the basis of either an indefinite employment agreement or a fixedterm employment agreement, which is established by the foundation documents or the employment agreement. The employment agreement with an executive may stipulate a longer probation period: up to 6 months. An executive may occupy paid positions in other companies (i.e. have secondary employment) only subject to permission of the employer's authorized body (general meeting of participants / shareholders, board of directors, etc.). An executive bears full material liability for direct actual damage caused to the employer and is obligated to compensate for losses, including lost profit, caused to the company by his/her wrongful acts, in cases established by Russian legislation. Along with the general grounds for terminating an employment agreement with a company executive, legislation also provides for additional grounds, for example: o The authorized body of the employing company taking a decision to prematurely terminate the employment agreement with the executive. In the absence of wrongful acts (omissions) by the executive, he/she is paid a compensation in the amount determined by the employment agreement, but not less than three times the executive's average monthly salary. o Bankruptcy of the employing company. o Other grounds agreed upon by the parties in the employment agreement. Federal laws and company foundation documents may extend the above specific features of employment to the members of the company's collective executive body, who entered into an employment agreement with the company.

4.5.11. Financial liability of employees and employers Financial liability of an employee is limited to the amount of direct actual damages incurred as a result of a wrongful act or omission by the employee. Pursuant to the law, the employer may not claim lost profits from the employee. Russian labor legislation distinguishes between limited and full financial liability of an employee. As a general rule, an employee who has caused losses to an employer shall be held liable within the limits of his/her average monthly salary (limited liability). Full financial liability means that an employee is obligated to compensate for all losses that he/she has caused to the employer, even if such losses significantly exceed his/her average monthly salary. The employee shall bear full financial liability only in the cases directly stipulated by the Labor Code, in particular, malicious damage; damage caused while inebriated; damage caused as a result of the employee's criminal offence; damage caused while not fulfilling employment duties; damage caused as a result of disclosure of a legally protected secret, including a trade secret; and other cases. Labor Code provides for 4 main cases of financial liability of the employer: 

Compensation for damages caused to the employee due to illegal deprivation of the possibility to work, including unfair dismissal, illegal transfer to another job, delays in obeying a court ruling to reinstate employment and other cases. The compensation shall be paid in the amount equal to the employee's average salary for the entire period of deprivation of the possibility to work. Compensation for damages to the employee’s property. The damage shall be compensated for in full at the current local market prices. Compensation (interest) for delaying payment of salary, Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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 

leave allowances or other sums due to an employee are calculated at the rate of at least 1/300th of the current Central Bank refinancing rate for each day of delay. Compensation for the emotional distress caused to the employee by the employer's unjust actions in the amount determined by the agreement between the employee and the employer or by court. The employment agreement or written agreements attached thereto may provide for the liability of the parties to such agreement(s). However, such contractual liability of the employer may not be lower, and employee’s liability may not be higher than that stipulated by the Labor Code or other federal laws.

4.5.12. Employment of foreign citizens Employers have the right to engage foreign employees provided that respective permitting documents and a special Russian visa are obtained by the employer and the foreign employee. Depending on the status of the foreign citizen, the following documents shall be obtained: 

Employment of highly qualified foreign specialists, i.e. foreign employees who have work experience, skills or achievements in a particular area of activities and are paid salaries of at least 2 million rubles per year, requires obtaining a work permit and a work visa for the said specialist. Both documents are issued for up to 3 years. Employment of other foreign citizens is possible provided that the employer obtained a permit to engage and use foreign employees and the employee obtained a work permit and a work visa. These permits and the work visa are issued for the period of up to 1 year.

The said procedure does not apply to foreign citizens holding residence permits; foreign citizens employed by diplomatic missions and consular establishments of foreign countries in the Russian Federation, international organizations; journalists accredited in Russia; employees of foreign legal entities performing assembly works, service and guarantee maintenance as well as follow-up service for technical equipment installed in Russia, and other categories of foreign citizens specified by the Russian legislation.

4.5.13. Taxation of employees' income Employees' income (salary and other payments under employment agreements) is subject to the personal income tax at the following rate:  

13% – for Russian tax residents (i.e. persons staying on the territory of the Russian Federation for more than 183 days per year irrespective of their citizenship) and highly qualified foreign specialists (irrespective of their tax residency); 30% – for other employees not considered Russian tax residents.

Although employees are taxpayers of the personal income tax, in accordance with tax legislation it is employers acting as tax agents that are obligated to calculate, deduct from the remuneration amount, and pay to the budget the personal income tax.

4.5.14. Social insurance of employees Pursuant to the Labor Code, employers are obligated to ensure mandatory social insurance for their employees. Russian legislation establishes the following types of mandatory social insurance:   

medical insurance; pension insurance; social security insurance, which provides for insurance against such cases as temporary incapacity to work, industrial accidents, occupational diseases, maternity and other cases.

Insurance contributions are made on the basis of remuneration of and other payments to employees under employment agreements. Remuneration of and other payments to foreign employees, who

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entered Russia on the basis of a visa and are not granted a temporary or permanent residence permit, are not subject to insurance contributions, except for contributions towards insurance against industrial accidents and occupational diseases. Contributions towards mandatory social insurance are paid by employers to the state insurance funds (the Pension Fund of the Russian Federation, the Social Security Fund of the Russian Federation, the Federal Mandatory Medical Insurance Fund) at the rates established by the federal legislation.

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4.6.

Product conformity assurance in Russia Information for the current chapter was developed and kindly provided by SGS Vostok Limited, Russian subsidiary of the SGS Group

4.6.1.

What is the acting legal framework for product conformity assurance in Russia?

Back in 1993, the Russian Government enacted legislation obliging to certify a number of consumer and industrial products and introduced the GOST R system of mandatory certification with the intention of protecting health and safety of Russia’s population. GOST R certification implies assessment of product conformity against applicable GOST R standards with regard to safety and quality characteristics by an independent properly accredited certification body. The GOST R system has been complemented by other conformity assurance systems relating to sanitary regulations, phitosanitary and veterinary aspects, industrial safety etc. The Russian Federal Law No.184 on Technical Regulating dated on 27.12.2002 introduced dramatic changes to the former conformity assurance system with the objective to harmonize Russian technical barriers to trade with international practices. It established new rules of state regulatory requirements for industrial and consumer goods, buildings, related business processes, as well as for consumer services. According to this Law, a Technical Regulation (in Russian: Tekhnicheskiy Reglament) has been the primary document, which stipulates the obligatory requirements for various goods to be sold and/or consumed in Russia, whereas standards and norms should be used as a supportive base only. Apart from mandatory certification another form of conformity assurance has been introduced called “declaration of conformity”. However, until new Technical Regulations are adopted, the GOST R conformity assurance system has been still valid. In view of the Agreement signed on October 6, 2007 Belarus, Kazakhstan and Russia have established the Customs Union in the framework of the Eurasian Economic Community (EAEC or EurAsEC). In December 2009, the Agreement on the circulation of products liable to mandatory conformity assurance within the Customs Union was signed, followed by a number of more specific regulatory documents. As a result, the national legal framework in the area of conformity assurance and supervision over product safety has to be gradually replaced by the Customs Union legal framework. By January 2012, the first 24 Technical Regulations out of the 47 top-priority Technical Regulations of the Customs Union have been passed. The first 10 Technical Regulations should come into force in July 2012. In 2012, the remaining top-priority Technical Regulations of the Customs Union should pass according to the agreed schedule. Those 47 Technical Regulations would cover over 60% of the goods circulating within the Customs Union. During the period from 2013 to 2015, unified requirements should be adopted towards all significant product categories marketed in the Customs Union. As soon as a Technical Regulation of the Customs Union comes into force, the relevant national requirements are abolished. A Technical Regulation can be either generic or specific. Example of a generic document can be the Technical Regulation on Electromagnetic Compatibility, which concerns a number of industries. Specific Technical Regulations relate to specific product categories like, for example, the Technical Regulation on Safety of Toys or the Technical Regulation on Juice Products from Fruits and Vegetables. To summarize, by early 2012, three major co-existing conformity assurance regulatory frameworks in Russia are as follows:

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  

Technical Regulations of the Customs Union; Technical Regulations of the Russian Federation – applied only when there is no relevant Technical Regulation of the Customs Union; GOST R system – applied only when there are no relevant Russian or Customs Union Technical Regulations.

In addition, there are special requirements from Russian and Customs Union authorities with regard to conformity assurance against veterinary, phitosanitary, sanitary and industrial safety norms.

4.6.2.

How to find out whether the product is liable to mandatory conformity assurance in Russia?

Starting from July 1, 2010 the Single list of products liable to mandatory conformity assessment (verification) in the framework of the Customs Union resulting in unified document issuance has been enacted. The unified document implies either the Certificate of Conformity or the Declaration of Conformity drafted according with the same unified template in Russia, Belarus and Kazakhstan. This list has been updated on a regular basis. The other documents to refer to are:   

the Single list of products liable to sanitary-epidemiological supervision on the customs border and in the customs territory of the Customs Union approved by the Decision of the Customs Union Commission No.299 dated on 28.05.2010; the Single list of products liable to veterinary supervision in the Customs Union approved by the Decision of the Customs Union Commission No.317 dated on 18.06.2010; the List of products liable to quarantine phitosanitary supervision on the customs border and in the customs territory of the Customs Union approved by the Decision of the Customs Union Commission No.318 dated on 18.06.2010.

If the product is not included in the Single product lists of the Customs Union, then one should consult two national regulatory documents: the Single list of products liable to mandatory certification and the Single list of products whose conformity verification is to be made in the form of a declaration of conformity (both approved by the Decree of the Russian Government No. 982 dated on December 1, 2009 and since then regularly updated). Besides, one should consult the acting Technical Regulations of the Customs Union and the Russian Federation, and if there are any relevant regulations pertaining to the product category in question, then one should check the scope of the Technical Regulation to find out whether the specific product is liable to mandatory verification of conformity. If the product is not mentioned in any of the product lists and any of the acting Technical Regulations either of the Customs Union or the Russian Federation, then the product is not subject to mandatory verification of conformity in Russia.

4.6.3.

What kinds of permissive documents are there in Russia?

There are two forms of conformity assurance in Russia: declaration of conformity (by the manufacturer) and certification of conformity (by a properly accredited certification body being independent from the manufacturer). Declaration of Conformity and Certificate of Conformity have equal legal status and are valid throughout the whole territory of the Russian Federation. The appropriate form of conformity assurance is stipulated by regulatory documents applicable to the product in question. Sometimes, both forms are possible. The following types of approvals are usually required to prove product compliance in Russia: 

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GOST R Declaration of Conformity or GOST R Certificate of Conformity.

For some measuring instruments the so-called Pattern Approval Certificates need to be obtained. These are issued by a state authority called Rosstandart based on results of tests performed by accredited State Scientific Metrological Centers. When the product is liable to sanitary and epidemiological regulations of the Customs Union, Certificate of State Registration may be required. For products subject to veterinary and phitosanitary supervision there may be a requirement to obtain Veterinary Certificate, Phitosanitary Ceritificate and/or Import Quarantine Permit. Some other documents may be required at the stage of commissioning for industrial equipment, such as Technical Passports or Permits to Use.

4.6.4.

When are Russian permissive documents required?

Mandatory verification of conformity is conducted before the product has been launched to the Russian market. This concerns both locally produced and imported goods. Approving documents are required at different stages of doing business in Russia, such as:     

Concluding a sales deal; Customs clearance at the Russian border; Advertising and PR activities; Placing a product in retail; Commissioning of equipment.

4.6.5.

What labelling/marking requirements are there in Russia?

According to the Russian Law No.2300-I “About Consumer Rights protection” dated 07.02.1992, all consumer goods, both food and non-food, exported to and distributed in Russia require Russian language labelling and the sale of imported products without consumer information in Russian language is illegal. Russian labelling has to cover the following items:         

Name of a product; Country of origin; Name and address of manufacturer or any other contact information for consumers; How and where the product is to be used; The main characteristics and description of the product; Safety requirements; Conformity assurance and licensing information (relevant Mark of Conformity); Expiration date, if applicable ; Other information required by the applicable Technical Regulations.

This information can be contained on a box, label, or any other appropriate material concerning the product such as technical brochures or manuals.

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The following marks demonstrate to the consumer the product’s compliance to the applicable mandatory requirements: Mark

Symbol

Definition

GOST R Mark of Conformity

The product is compliant with GOST R standards

TR Mark of Conformity

The product is compliant with Russian Technical Regulations (TR)

CU TR Mark of Conformity

The product is compliant with Customs Union (CU) Technical Regulations (TR)

4.6.6.

How long does it take to get certified?

The conformity verification process in Russia can take from a few hours up to several months. Its duration depends on the following factors:      

The type of certificate you opt for (e.g. verification process for a 3-year validity Certificate of Conformity for serial production normally takes longer than a certificate valid for just one shipment); The need to make tests, number and complexity of the tests; Number of certificates you have to obtain prior to the targeted permissive document; Your ability to quickly collect the internal documents needed for verification; Time spent upon translation of required documents into Russian language; Your previous experience with Russian certification (i.e. obtaining a permissive document for the very first time commonly lasts longer than subsequent similar applications).

As a result, you are able to speed up the process by means of manipulating the above-mentioned factors.

4.6.7.

Which international certificates are accepted in Russia?

Many procedures in the conformity assurance system of Russia and the Customs Union were copied from the West (especially the EU), and foreign manufacturers face similar requirements for operation in their local market. Still, there are some discrepancies. The reason for that partly lies in the Russian specific climate conditions, partly in the historical background (many of the Russian standards have not been re-viewed since the Soviet times). Quite often, verification methods considerably differ from those applied in the Western Europe or the US. To cite some examples: in Russia, testing of toys includes verification of formaldehyde and phenol content, although not checked in the EU; transformers have to be tested at -40°C temperature, i.e. in twice as cold conditions as in Europe; steel pipes might be subject to 100% testing as opposed to 10-20% sampling in Europe. Therefore, even if your products are well-known throughout the world and recognized as safe in the EU or any other country, you still have to prove that they comply with Russian/Customs Union Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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requirements in accordance with locally accepted methodology. However, availability of an international certificate might facilitate the procedure of obtaining the appropriate Russian approvals.

4.6.8.

Does it matter whether exporter or importer handles product conformity assurance?

When negotiating sales contracts with Russian partners, exporters need to raise issues related to conformity assurance expenses, namely which party bears the costs, procedures and responsibilities. In some cases, exporter and importer alike are able to carry out certification and obtain proper permissive documents. However, a declaration of conformity can be signed only by a Russian legal entity. For an international company it means that the declaration of conformity can be signed either by their Russian distributor representing the foreign manufacturer on the basis of a formal contract for conformity assurance purposes, or by their Russian agent, or by their subsidiary located in Russia. Exporters should bear in mind that in case the certificate or declaration is issued under the name of their importer, the latter will become their exclusive distributor in the Russian market during the whole validity term of the certificate. Therefore, those exporters who wish to keep control over their Russian marketing strategy and preserve their independence from any local partner are recommended to take care of their products’ conformity assurance on their own.

4.6.9.

How much would it cost to get certified?

The cost for conformity verification services is very much dependable on such factors as complexity of a product, complexity of manufacturing process and type of required permissive document. Relevant expenses would usually consist of the following elements:       

Cost of samples selected for destructive tests; Expenses for packing, storage, freight handling and transportation of samples to the testing laboratory; Cost of product tests in accredited laboratory; Audit expenses, including travel costs; Translation services; Labor expenses of the certification body (man-days * daily rate) over processing of your inquiry, verification of documents, issuance of certificate; Overheads.

You may be offered discounts in case you wish to obtain a relatively large number of certificates or if you are applying for the same service repeatedly. Such cost reduction is due to decreasing overheads, number of required samples and number of tests.

4.6.10. How to make the certification cost-effective? To make the certification process cost-effective, we recommend correlating the type of certificate with anticipated volume of exports and range of exported goods. Thus, if you are planning to regularly ship your goods to Russia, and their range is quite wide, it might be wiser to opt for a serial certificate valid for a few years. Although it will require higher single payment versus shipment certification, in the long-term such scheme can save both your time and money. In fact, whole product line will have to be sampled and tested in the framework of a shipment certification, whereas only a limited number of samples will be tested for serial certification since production audit will certify conformity of the rest. Be prepared that the certification cost might appear not proportional versus cost of the product to be certified. Therefore, if your company intends to take part in a tender for a project in Russia, the

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advice is to plan ahead and ask preliminary quotation for certification from a professional body so as to include the cost to your bidding. Otherwise, there is the risk that once the project wins the bid not taking into account real certification cost, your anticipated profit will not be sufficient to cover actual expenses. In some cases, your certification body might suggest slight modifications of initial design for a machine or industrial unit in order to lower your certification expenses.

4.6.11. Whom to address for Russian conformity assurance? Any approving document is to be issued by an accredited body. There are about 1500 certification bodies and 3550 testing facilities accredited within GOST R system, not counting other certification systems. In July 2010, the Single Register of Certification Bodies and Testing Laboratories of the Eurasian Economic Community (EurAsEC) Customs Union was established. Only organizations included in this Register (1010 certification bodies and 2114 test laboratories by the end of 2011) are allowed to issue Certificates of Conformity and Declarations of Conformity recognized in three member countries of EurAsEC, namely Russia, Belarus and Kazakhstan. Often, certification bodies focus on a specific type of approvals or on a specific industry (e.g. textile or telecom). It is reflected in their accreditation scope. Only the largest ones provide integrated services assisting in getting a range of approvals in one place. While selecting a certification body, request for the accreditation certificate and for the reference list, consider whether the future partner is experienced in the kinds of approvals you need and able to guide you in the Russian regulatory environment. Unprofessional or fraudulent service might cause headache in the future such as arrest of the shipment at the customs border or costly delays in delivery schedule.

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4.7.

Intellectual property rights and franchising Information for the current chapter was developed and kindly provided by BEITEN BURKHARDT

4.7.1.

General information on the legal regulation of intellectual property

4.7.1.1. Regulation of intellectual property in Russia The institution of intellectual property in Russia is governed by Part 4 of the Civil Code of the Russian Federation (hereinafter the “Civil Code”), which entered into force on January 1, 2008, replacing a multitude of specialized laws and subordinate legislation. A foreign legal entity or individual may exercise and seek protection for IP rights in Russia, provided that the relevant legal requirements are satisfied. Russia is a party to numerous international treaties on IP rights, including:        

the Patent Cooperation Treaty; the Paris Convention for the Protection of Industrial Property; the Madrid Agreement on the International Registration of Trademarks; the Protocol to the Madrid Agreement; the Universal Copyright Convention (UCC); the Berne Convention for Protection of Literary and Artistic Works (Berne Convention); the Convention for the Protection of Producers of Phonograms against Unauthorized Duplication of their Phonograms (Geneva Convention); the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations (Rome Convention).

4.7.1.2. Types of protected objects Part 4 of the Civil Code uses the following classification of intellectual properties and equivalent means of individualization:        

copyright (literary, scientific, and artistic works, including computer programs and databases); rights related to copyright (performance right, recording right, on-air and cable broadcast right, right of a database producer, publisher’s right to a scientific, literary, or artistic work); patent right (patents for inventions, industrial designs, and utility models); right to the results of selective breeding; right to semiconductor topographies; right to a production secret (know-how); rights to means of individualization of participants of legal entities, goods, works, services, and enterprises (corporate name, trademark, denomination of origin of goods, brand); right to use intellectual properties as part of an integrated process.

4.7.1.3. Transactions with intellectual property A system of agreements for administration of IP rights is unified for all types of protected objects and includes the following types of agreements:  

agreement on alienation of the exclusive right; license agreement (exclusive or non-exclusive license).

Under an agreement on alienation of the exclusive right to intellectual property, the right holder transfers to the acquirer its exclusive right to the respective object. That being said, the original right holder loses the right to independently use the object.

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Agreement on alienation of the exclusive right shall be executed in a written form. If intellectual property is subject to state registration, respective agreement shall also be registered with the Federal Service for Intellectual Property, Patents, and Trademarks (hereinafter, “Rospatent”) under pain of invalidity. Pursuant to a license agreement, the owner of the exclusive right to IP (licensor) grants the licensee the right to use such IP within the limits established by the agreement, with or without indication of the territory, in which use is permitted. The licensee under a license agreement may use respective IP only within those scope of rights and means of use that are stipulated by agreement. The right to use IP, which is not directly specified in the license agreement, is not deemed to be granted to the licensee. A license agreement shall be executed in a written form and, if intellectual property is subject to compulsory state registration, be registered with Rospatent under pain of invalidity. License agreements are divided into two types:  

ordinary (non-exclusive) license: the licensee is granted the right to use IP, and the licensor reserves the right to issue licenses to other parties; exclusive license: the licensee is granted the right to use the trademark, and the licensor does not reserve the right to issue licenses to other parties.

The licensee may grant a third party the right to use IP (a sublicense agreement) only with the licensor’s written consent. Under a sublicense agreement, the sublicensee may be granted rights to use IP only to the extent of such rights and means of use that are contemplated by the license agreement for the licensee. In all other respects, a sublicense agreement is subject to the same rules as a license agreement.

4.7.2.

Trademarks and service marks

Part 4 of the Civil Code defines a trademark as “a symbol serving to individualize the goods of legal entities or individual entrepreneurs” and a service mark as “a symbol serving to individualize the works performed by legal entities or individual entrepreneurs or the services rendered by them”. Trademarks may be represented by words, pictures, three-dimensional signs and other designations (or combinations thereof). The Civil Code does not provide for the exhaustive list of types of trademarks and allows for the existence of other types of trademarks, provided they meet the criteria for registration stipulated by law. The criteria for registration of a symbol as a trademark are: distinctiveness (possibility to identify products (services) among similar ones) and novelty (trademark shall not be identical or confusingly similar to existing means of individualization). Legal protection of a trademark in the Russian Federation is provided on the basis of its state registration in accordance with the procedure established by law or under international treaties of the Russian Federation. The registration of symbols as trademarks in Russia is performed by Rospatent. The owner of a trademark acquires the exclusive right to use the trademark only for those goods and services, for which the trademark has been registered. Trademarks are registered with the use of the International Classification of Goods and Services, in accordance with which the applicant may select the desired classes of goods and services. The initial term of the trademark registration is equal to 10 years, at the end of which the trademark owner may renew the registration an unlimited number of times. The owner of a registered trademark is granted the exclusive right to use it within the Russian Federation. Without the owner’s consent, no one is entitled to use in civil turnover the trademark Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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itself or an identical or confusingly similar trademark. The rightholder is able to use the symbol ® notifying of that respective trademark is protected on the territory of Russia.

4.7.3.

Copyright and related rights

Scientific, literary, and artistic works that are the result of creative activity and exist in some objective form are protected in Russia as copyright objects. The key criteria for granting legal protection are as follows:  

presence of a creative component in the work; objective form of expression of the work, e.g., written or oral form (in the form of a public utterance, public performance and other similar form), in the form of an image, audio or video recording, in three-dimensional form.

At the same time, a work is protected by copyright irrespective of its artistic value, purpose, and means of expression. Part 4 of the Civil Code contains an open-ended list of the types of works that are protected by copyright (literary works, musical works, audiovisual works, etc.). Copyright objects also include computer programs (protected as literary works), derivative works (translations, staging's, etc.) and composite works (including databases, anthologies, encyclopedias, etc.). Official documents and their official translations, state symbols and marks, folklore works and informative reports on events and facts are not protected as copyright objects. Unlike trademarks and properties protected by a patent, copyright protection is granted by virtue of the very fact of creation of the work as of the moment when the work takes on an objective form. No additional formalities must be observed to obtain the right to protection. Use of the symbol of copyright protection – “©” – in conjunction with the name of the author and the year of creation of the work is not a condition for granting legal protection, but it may serve as a notice that the work is protected. Programs and databases can be registered with Rospatent. Such registration procedure is voluntary and does not give rise to rights to the computer programs or databases, but rather it is intended to facilitate proving authorship and time of creation. At the same time, agreements on alienation of the exclusive right to registered programs and databases must also be registered with Rospatent. In accordance with the traditions of the countries of continental Europe, it is customary in Russian copyright law to divide copyrights into personal non-property and exclusive (property) rights. Personal non-property rights (e.g., right of authorship, right of integrity in a work, right of withdrawal) are closely related to the author’s identity and, therefore, cannot be transferred to third parties. An exclusive (property) right (e.g., distribution of a work, public performance of a work, onair broadcasting), on the contrary, can be alienated by the author in favor of third parties. As a general rule, copyright protection lasts for the author’s lifetime plus 70 years after his/her death. Upon the expiration of a copyright, the copyright object is considered to be in the public domain and may be freely used by all interested parties. The exclusive right of a database producer originates as of the completion of its creation and is effective for 15 years. With every update of the database, the effective term of the producer's exclusive right is renewed.

4.7.4.

Industrial property

Another institution in Russian intellectual property law is patent law, in the context of which protection is granted to technical achievements and new industrial developments. In contrast to copyright law, which protects the form of an author's works, including scientific and artistic works,

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patent law aims to protect the essence and content of technical industrial solutions. Part 4 of the Civil Code identifies inventions, utility models, and industrial designs as patentable objects. A technical solution in any area relating to a product or method is protected as an invention. The following may be patented as inventions relating to a product:    

a device; a substance; a microorganism strain; a plant or animal cell culture.

Processes acting on a tangible object with material resources are protected as method-related inventions. Exclusive rights to a method are complemented by rights to the product directly manufactured by the patented method (indirect protection), with the new product being deemed manufactured by the patented method, unless proven otherwise. An invention is granted legal protection if it meets the criteria of novelty, level of invention, and industrial applicability. A utility model is a technical solution relating to a device. In essence, a utility model is similar to an invention, but differs in that the level of invention requirement does not apply to it. The criteria for registration of a utility model are only novelty and industrial applicability. An artistic design solution for an industrial or artisanal product that defines its outward appearance is protected as an industrial design. This category is largely similar to shape trademarks, which means that the author of the intellectual property is able to choose between these two types of protection. Industrial designs may be either three-dimensional or flat, as well as being a combination of twoand three-dimensional elements. An industrial design must meet the criteria of novelty and originality. The following may not be covered by patent rights:    

methods of cloning a human being; methods of modifying the genetic continuity of cells of human embryos; use of human embryos for industrial and commercial purposes; other solutions contradicting public interests or humane and moral principles.

Legal protection of inventions, utility models, and industrial designs is provided on the basis of patents issued by Rospatent. A decision to register an invention, industrial design, or utility model is taken based on an examination of the application. Number of stages of examination and content thereof depends of type of industrial property being registered. A patent certifies the exclusive right of the party, to which the patent has been issued, to use the patented object. The exclusive right of a patent holder means that third parties are not entitled to use the patented object without the patent holder’s consent. The effect of a patent is limited in time and space. The terms of patents are as follows:   

a patent for an invention – 20 years from the date of submission of the application; a patent for a utility model – 10 years, with right of renewal for 3 years; a patent for an industrial design – 15 years, with right of renewal for 5 years.

The exclusive right from a patent issued by Rospatent is valid only within the Russian Federation. Each year, the patent holder must pay the state fee to maintain the patent in force. If the fee has not been paid on time, the patent is canceled, although it may be reinstated within three years after the Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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expiration of the deadline for paying the fee. At the same time, a party that has started using the patented object during the period between the cancelation of the patent and its reinstatement retains the right to continue using it free of charge.

4.7.5.

Right to a production secret (know-how)

Relationships arising in connection with the creation and use of production secrets are governed by Part 4 of the Civil Code (Chapter 75). In addition, the articles of Federal Law No.98-FZ of July 29, 2004 “On Trade Secrets” governing the procedure for establishing trade secret protection remain in force. Production secrets are understood as information of any kind, including information about intellectual properties in the scientific and technical sphere and information on methods of performing professional activities, that has current or potential commercial value by virtue of being unknown to third parties, that is not freely accessible to third parties by legal means, and for which the owner of such information has established trade secret protection. Relationships relating to the establishment, alteration, and cancelation of trade secret protection are governed by the Federal Law “On Trade Secrets”. Trade secret protection is deemed established after the following measures have been taken by the owner of the information:     

compiling a list of the information that constitutes a trade secret; limiting access to the information that constitutes a trade secret by implementing procedures for handling the information and monitoring the compliance with such procedures; listing the individuals receiving access to information that constitutes a trade secret and/or the parties to which such information has been disclosed or transferred; regulating relationships with regard to the use of information that constitutes a trade secret by employees on the basis of employment contracts and by contracting parties on the basis of civil law contracts; marking tangible media (documents) containing information that constitutes a trade secret with the words “Trade Secret” and the name of the owner of this information.

The law rules out the necessity of registering a production secret with state authorities. Therefore, the exclusive right to a production secret arises for the right holder as of the establishment of trade secret protection. The exclusive right to a production secret may also arise directly at the time of obtaining the information, if the obtained information qualifies as information for which trade secret protection has already been implemented. The law allows for the possibility of several right holders possessing the exclusive right to one and the same production secret, if each of the right holders has obtained the information constituting such production secret independently of the others. Honesty and independence in obtaining a production secret means that the party that has become a new owner of the production secret obtained the respective information as a result of entirely independent intellectual activities without the knowledge and use of information belonging to other owners of the production secret. The exclusive right to a production secret remains valid as long as the confidentiality of the information constituting such secret is maintained. As soon as the respective information is no longer confidential, the exclusive right of all right holders to the production secret shall lapse.

4.7.6.

Franchising

According to the Civil Code, under a franchise agreement (Russian name "commercial concession agreement" [договор коммерческой концессии]) the franchisor (rightholder) grants to the franchisee, for a consideration, a set of territorially exclusive rights, including the right to conduct

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business using the franchisor's trademark or service mark. A franchise agreement may also apply to other IP rights, such as the right to use a trade name or the right of access to trade secrets. As every franchise in Russia involves a trademark, the respective trademark must be valid in Russia when the franchise agreement is submitted for registration. Such validity can be based either on Russian trademark registration or on World Intellectual Property Organization trademark registration with Russia as a designated registrant country. A franchise agreement shall be registered with Rospatent. Equally, no amendment to or early termination of a franchise agreement shall be valid until registration has been performed. A franchise agreement may be concluded for the term agreed by the parties thereto or for an indefinite term. In the latter case, each party is able to unilaterally terminate the agreement by sending a written notice at least six months prior to termination. Provided that the franchisee duly performed its obligations while the franchise agreement was in effect, once the franchise agreement expires, the franchisee has the statutory right of first refusal to renew the agreement for a new term. However, in this case the franchisor may change the terms, on which the agreement is renewed, in accordance with current market demands. A franchisor and franchisee are jointly and severally liable for defects in goods and services produced under the franchise agreement. The franchisor is secondarily liable for defects in goods provided to the franchisee pursuant to the franchise agreement, even if the franchisor has no direct control over the franchisee's actions. The parties to a franchise agreement may agree upon restrictions of their rights thereunder. In particular, such agreement may provide for:      

obligation of the franchisor not to grant to third parties the same exclusive rights for their use on the franchisee's territory or to refrain from own similar activities in such territory; obligation of the franchisee not to compete with the franchisor on the territory covered by the franchise agreement; refusal of the franchisee from entering into franchise agreements with regard to similar exclusive rights with the franchisor's competitors; obligation of the franchisee to distribute goods (perform works, render services) at prices set by the franchisor as well as obligation of the franchisee not to distribute similar goods (works, services) with the use of trademarks or trade names of other holders; obligation of the franchisee to distribute goods (perform works, render services) only within the agreed territory; obligation of the franchisee to negotiate places of location of commercial premises used in the course of exercising of exclusive rights as well as their external and internal design.

It should be noted that franchise agreements in terms of the Federal Law "On Protection of Competition" are deemed to be so-called vertical agreements, which are not subject to the most of restrictions relating to concerted practices established by the said Federal Law.

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4.8.

Special economic zones (“SEZ”) in St. Petersburg Information for the current chapter was developed and kindly provided by DLA Piper

The SEZ Law31 states that an SEZ is a Russian territory, which benefits from a preferential regime for conducting business on that territory, thereby encouraging investment in the territory. SEZs are selected by the Russian Government on a tender basis from proposals submitted by the regional authorities. The term for which a territory will benefit from a SEZ status depends upon the type of business activity for which the SEZ status was granted; this may be for up to 20 years for the hightech industry and health and recreation industry or up to 49 years in respect of investment in transport infrastructure. There are various types of SEZ in Russia:    

High Technology Incubation Zones ("TIZs"); Industrial Production Zones ("IPZs"); Zone of Tourism and Recreation ("ZTR"); Port Zones ("PZs").

In addition to the SEZs considered above, other legislation has been enacted with respect to specific free economic zones. An example of such legislation is the Federal Law On the Special Economic Zone in the Kaliningrad Region of 10 January 2006 and the Federal Law On the Special Economic Zone in the Magadan Region of 31 May, 199932.

4.8.1.

TIZ in St. Petersburg

In general, existing TIZs in Russia are located in the Moscow region (Dubna (nuclear technology, energy saving, aerospace and civil engineering) and Zelenograd (microelectronics, nanotechnologies and medical studies), Tomsk (new materials, micro- and nanoelectronics) and St. Petersburg (computer programs, databases, complex equipment, medicine). The territory of the TIZ "St. Petersburg" will benefit from SEZ status until 2025. According to the SEZ Law, this term cannot be extended. The TIZ "St. Petersburg" consists of two platforms which are “Noidorf” and “Novo-Orlovsky”.

4.8.1.1. General requirements for the resident of the TIZ in St. Petersburg The benefits of the TIZ only apply to foreign investors upon the creation of a Russian subsidiary registered on the territory of the TIZ "St. Petersburg", as only Russian legal entities may make an application to become a TIZ resident. Russian legal entities interested in participating in the TIZ should make an application to obtain the status of a TIZ resident. The application should be supported by a business plan. A special SEZ Council decides on whether the applicant qualifies as a TIZ resident based on a scoring system that takes into account, amongst other things, the prior expertise of the applicant or its founder in the relevant industry, the investment recoupment period envisaged, competition in the relevant market, etc. The qualifying applicant enters into an investment agreement with the Russian ministry. The TIZ resident is entitled to perform innovation activities inside the TIZ only under the conditions envisaged in such agreement.

31 32

Federal Law On Special Economic Zones in the Russian Federation dated 22 July 2005. More information on SEZ development can be found at www.rosez.ru.

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4.8.1.2. Tax incentives for the TIZ residents in St. Petersburg TIZ residents in St. Petersburg benefit from a number of tax concessions with regard to property tax, land tax, corporate profits tax and other taxes. Profits tax rate paid to the budget of St. Petersburg is reduced from 18% to 13.5% for the TIZ residents in St. Petersburg. The reduced tax rate is applicable during the period when the TIZ "St. Petersburg" exists (i.e. till 2025). The TIZ residents in St. Petersburg enjoy full exemption from property tax in respect to the property located inside the TIZ which is used inside of the TIZ and accounted for on the balance of the TIZ resident. The TIZ residents are exempt from the transport tax for a period of 5 years starting from the date of the transport vehicle registration in St. Petersburg. The said exemption does not apply in relation to water and air transport vehicles. The TIZ residents in St. Petersburg also benefit from an exemption from the land tax for the period of 5 years starting from the registration of the property rights for that land plot. Unlike other SEZ residents, the TIZ residents also benefit from a low rate of social insurance contribution rates (14% (till 2017) and 28% (starting from 2019) compared to the general rate of 34%).

4.8.1.3. Other tax and customs incentives for the TIZ residents in St. Petersburg In addition to the above tax benefits, the customs regime of the free economic zone functions on the territory of TIZ "St. Petersburg". The said customs regime envisages an exemption from customs VAT, customs duties and non-tariff regulation in respect to foreign goods (equipment, raw materials, components, construction materials) imported to the territory of the TIZ. Goods produced within the Customs Union (Russia, Kazakhstan and Belarus) that are imported into TIZ are also exempt from export duties, any exclusions and limitations. Until the 1st of January, 2017 TIZ residents (registered before 2012) are allowed to import their products, which were manufactured within the TIZ using imported raw materials, into the territory of the Customs Union free from duties and taxes conditional upon the sufficient processing of the goods. The TIZ residents have a right to apply accelerated depreciation in relation to their own fixed assets by setting a multiplier (maximum of 2). R&D costs (including those that were not successful) may be deducted in the tax (accounting) period when they were actually incurred without any limitation in size. The tax position of TIZ residents cannot be worsened by any Russian tax laws, including regional tax laws or any tax laws of the municipal districts during the term of the investment agreement.

4.8.1.4. Other benefits for TIZ residents in St. Petersburg Apart from tax incentives St. Petersburg is highly attractive for the investors because of the other benefits it may offer to investors. Specifically, the Government of St. Petersburg supports investors by providing the state guarantees of St. Petersburg, providing tax deferrals and low land rent rates. The TIZ territory in St. Petersburg contains all the necessary infrastructure. The TIZ residents who have built any real estate on the rented land plot have a right to buy the land plot lying under the real estate at discounted rates.

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4.9.

Public private partnerships and infrastructure development Information for the current chapter was developed and kindly provided by DLA Piper

A public private partnership (hereinafter - "PPP") is a cooperation of a public authority and private investor through a long-term agreement in areas of services traditionally provided by the public sector. PPPs are aimed at increasing the quality of the public services/infrastructure and efficiency of private gains through the combination of public and private financial and management instruments. As the need for the improvement of public infrastructure and services in Russia is enormous, public authorities show a constant growth of interest in PPPs. Unlike many European countries where PPP legislation is well established and numerous PPP projects have been successfully implemented, the Russian PPP legislation is still evolving. In practice, the lack of experience implies the intention of the public authorities to have a greater control over the PPP projects, than is usually expected in Europe. To reap the full benefits of PPP (particularly, through increasing foreign investment) the authorities need to be prepared to relinquish greater control of the procured public services/infrastructure to the private sector. A series of high-profile PPPs have already been launched in Moscow, St. Petersburg and other regions of Russia. The largest number of projects carried out relate to transport infrastructure (e.g. the Western High Speed Diameter Motorway and Pulkovo Airport in St. Petersburg, the Road interchange between Moscow ring road and High speed motorway "M-1: Belarus" in Moscow). Within the last few years more and more PPP projects have been launched in the following sectors: water treatment (e.g. the Northern Water Treatment Plant in St. Petersburg, the Water Treatment Station in Rostov-on-Don), waste treatment (the Waste treatment facility in St. Petersburg), education (the construction and operation of buildings for educational purposes in the Pushkinskiy district of St. Petersburg).

4.9.1.

Legal Framework

PPP projects that involve the federal authorities are implemented on the basis of the Federal Law No FZ-115 'On Concession Agreements' of 21 July 2005 as amended ("Concession Law"), together with a series of model concession agreements for different types of infrastructure. Regional and local PPP projects may also be carried out on the grounds of the Concession Law or special regional laws on PPPs that usually provide more flexibility and comfort to investors. Regional laws on PPPs are adopted in the majority of the regions of Russia. In particular, the Law of St. Petersburg No 627-100 'On the Participation of St. Petersburg in Public Private Partnerships' of 25 December 2006 ("St. Petersburg PPP Law") was among the first regional laws on PPP, and is considered to be the most effective one.

4.9.2.

Concession Law

The Concession Law applies to thirteen types of infrastructure including, amongst others, motorways, roads, railways, the underground, pipelines, sea ports, airports, communal services, and various cultural, sporting and tourism facilities. The Concession Law includes provisions on:    

entities involved in the concession granting process; concession facilities; tender and selection procedure; concession agreements; and

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certain guarantees for the private entities and public bodies.

Generally, the Concession Law is flexible and does not impose rules on how relations between the public and private bodies will be conducted during the concession period, these relations are to be governed by the detail of the concession agreement itself once concluded. However, the Concession Law contains numerous shortcomings, the main ones are summarized below: 

Ownership of the Facility The Concession Law only relates to the PPP projects constructed as Build-Operate-Transfer ("BOT") and Rehabilitate-Operate-Transfer ("ROT") models. Under these models, the private entity builds/rehabilitates the facility and upon completion transfers the ownership of the facility to the public body. Thereafter, the private entity takes over the operation and maintenance of the facility under a lease back from the public body for the contract period. Other PPP models that incorporate the ownership of the real estate object by the private entity (for example, BOOT33) are not provided for under the Concession Law.

Security As a general rule the Concession Law provides against the possibility of a concessionaire to pledge rights under the concession agreement or to assign the rights during the construction stage of a concession. Based on the practical needs of the investors and financing institutions an exception to this rule was introduced with regard to the concessions on social facilities and amenities (such as water and waste treatment plants, energy supply facilities, street lightning and others). The concessionaire is entitled to pledge his/her rights under the concession agreement to a lender, who provides financing for the fulfillment of the concessionaire's obligations under the concession agreement. In compliance with the Concession Law the rights under the concession agreement may be pledged only to a single lender (independent of the existence of any other financing parties). The lender, concessionaire, and the grantor of the concession enter into a direct agreement stipulating the rights of each party in case the concessionaire does not meet his/her obligations under the financial or concession agreement.

Alternative security instruments are available in Russia, but the aforementioned restrictions are a significant hindrance when it comes to structuring the security package and finding lenders.

4.9.3.

Negotiation of the contract

Concession agreements are granted through the tender procedure which is defined in the tender documentation. Usually the tender documentation contains a draft of the concession contract that is supposed to be executed with the winner of the tender. According to the Law on Concessions within 5 days from the date of announcement of the winner of the tender the organizer of the tender provides the winner of the tender with the concession contract that shall be signed by the winner of the tender within a certain time specified in the tender documentation. The Law on Concessions does not provide for the possibility for the winner of the tender to negotiate changes in the concession agreement. With reference to the above, even if bidders are requested to present as a part of their bids a mark-up of a concession agreement, the winner of the tender may be still bound to the published version of the concession contract and exposed to potential liability if unwilling to sign it in its published form with very limited carve-outs.

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4.9.4.

St. Petersburg PPP Law

The St. Petersburg PPP Law was enacted in response to the shortcomings of the Concession Law and is aimed at better facilitating the St. Petersburg administration's pipeline of PPP projects, which is regarded as one of the most advanced in Russia. The principal features of the St. Petersburg PPP Law, which improve on the Concession Law, are as follows. 

There is no restriction on the use of PPP models under which the private entity retains ownership of the facility. The St. Petersburg PPP Law directly establishes 8 forms of PPP, among which are Build-OwnOperate-Transfer ("BOOT"), Build-Own-Operate ("BOO"), Rehabilitate-Own-Operate-Transfer ("ROOT") and others. In addition to the greater variety of forms of PPP directly stipulated, the St. Petersburg PPP Law entitles the Government of St. Petersburg to establish other forms of PPP if required.

There is no legal prohibition to pledge the project's assets, or to pledge or assign the rights under the PPP agreement as part of the security package. Usually the conditions under which the private partner is entitled to pledge/assign its rights under the PPP agreement, as well as the rights to the project assets, are stipulated in the project agreement and lenders direct agreement. These conditions underlie negotiations between the public authority, the private partner, and the financing organizations.

There is greater flexibility for the private entity to negotiate and mark-up the PPP agreement, provided as a part of the tender documentation. The St. Petersburg PPP Law directly provides for negotiations between the city and the winner of the tender to discuss possible amendments to the draft of the PPP agreement. Limitation of possible amendments shall be established in the tender documentation, and in any case shall not change the provisions of the bid of the winner of the tender. The law states that in the case where the tender documentation does not provide for a larger period of time, negotiations shall be commenced and the PPP agreement signed within 20 days. In practice the period for negotiations and the execution of the PPP agreement, as usually established in the tender documentation, is 6 months.

4.9.5.

Other Issues/Risks in PPP field

Notwithstanding the notable limitations of the Concession Law, there are additional issues that differ from project to project. The most common ones that shall be considered by an investor are listed below:      

Market volatility and currency risk; The risk is usually taken by the investor. Political risk and state intervention; According to the legislation and general practice, the authorities usually undertake the obligation to indemnify the investor in case such a risk arises. Provisions of laws governing budget, tax, licensing and antimonopoly regulation; These provisions usually imply additional obligations on the investor in the course of the implementation of the PPP project. Geographical concentration of major projects; The potentially negative attitude of consumers being charged for services that used to be free, for example through the introduction of toll roads; Dispute resolution procedure. Russian policy favors the jurisdiction of the Russian courts for the resolution of contractual disputes. However, for various reasons, most international PPP participants would prefer dispute resolution to be conducted through recognized international arbitration institutions.

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Also, it may be noted that in a number of current projects the public body did opt for internationally recognized arbitration.

4.9.6.

PPP Finance Institutions

In November 2005 the regulations on the State Investment Fund ("SIF") were adopted by the Russian government, signalling another move towards PPP. The SIF is intended to be one of the federal primary PPP funding sources and to act as a catalyst in attracting private investment. The planned volume of the SIF in 2012 exceeds RUB 65 billion (which is approx. USD 2.1 billion). The maximum amount of investment to be made from the SIF is limited with the amount established in the federal budget for the corresponding year and shall not exceed 75 per cent of the project capital costs for federal projects, and 50 per cent of the project capital costs for regional projects. To qualify for SIF support, an investment project must:     

be performed through concessions, or in the sectors of transport, energy, or engineering infrastructure; have a value in excess of RUB 5 billion (which is approx. USD 166 million) for federal projects, and RUB 500 million (which is approx. USD 16.6 million) for regional and local projects; comply with public sector priorities; generate social benefits, and breakeven.

In addition to the above, regional investment project must also be financed from the regional budget to an amount not less than that estimated for the regional/municipal co-financing of investment projects by the Ministry of Regional Development. The investor, qualifying for SIF support, shall prove that the implementation of the project is impossible without SIF investments. In May 2007, the Federal Law No FZ-82 'On the Russian Bank of Development' of 17 May 2007 set rules and principles of the activities of Vnesheconombank ("VEB"). VEB is a state owned banking institution tasked with promoting Russian infrastructure and in particular, with supporting and developing PPP projects. VEB is currently considered as one of the institutions that will play a key role in the further development of Russian PPPs. In this regard a PPP task force has recently been created within VEB to study, standardize and promote PPP practices in Russia. The European Bank for Reconstruction and Development and VEB have agreed to explore the possibility of co-financing the projects in certain areas and in February 2008 a memorandum of understanding in this regard was signed. The priority sectors under the agreed arrangements include transport infrastructure, energy and municipal services and those with significant environmental and energy efficiency potential. With the help of other interested organizations, the two institutions will also consider setting up a unit to help manage the project preparation process for PPPs in infrastructure, a move that could be extremely beneficial in attracting investors. In August 2009, VEB signed a formal agreement with a private infrastructure fund to become the fund's joint manager and cornerstone investor with a commitment of USD 200 million. Other investors in the fund include the IFC (USD 100 million), the EBRD (USD 100 million) and the Kazakh development institution Kazyna Capital Management (USD 30 million) as well as private sector investors. The fund expects to invest in PPP projects such as Pulkovo Airport, and the Moscow to St. Petersburg toll road.

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4.10. Obtaining rights to state-owned land in St. Petersburg Information for the current chapter was developed and kindly provided by DLA Piper An entity interested in receiving rights to state-owned land in St. Petersburg (hereinafter - the Entity) may acquire the rights to the land (a) owned by the Russian Federation (hereinafter - the Federal land) and (b) owned by St. Petersburg or the land not delimited between St. Petersburg and the Russian Federation (hereinafter - the City land). The rights to the land plots from the state-owned land can be granted:  

at a tender, and without a tender.

The choice of the procedure depends on the following principal issues: 

Type of rights o Subsequent to the results of a tender, the person can be granted either ownership or lease rights to the land depending on what has been put up to tender. o If the land plot is allocated without a tender then only the lease rights to the land plot can be acquired unless otherwise stipulated by an international agreement ratified by the Russian Federation. In both the cases when the land plot is granted for lease, after the commissioning of the building and the state registration of the title of ownership to it, the Entity may acquire the long-term lease rights or the title of ownership to the land plot under the building erected.

Initiative o The tender is initiated by the authority. The choice of the land plot, its formation, and the preparation of the documentation is done by the competent authorities and no action is required from the Entity before applying for the participation in a tender. o If the land plot is granted without a tender, the procedure is initiated by the Entity and the land plot is chosen during the prior approval of the allocation of the object as a part of the procedure for the allocation of the land plot.

Determination of the price or the amount of the lease payment o The price or amount of the lease payment in the contracts is concluded as a result of a tender and is the highest price which has been proposed during the conduct of the tender but not less than the initial price.34 o The amount of the lease payment, if the land plot is allocated without a tender, is determined on the basis of the valuation report prepared during the procedure of the allocation. We would like to draw your attention to the fact that the lease payment in the contracts concluded as a result of the allocation of the land plot without a tender is regarded also as an investment condition. In practice this means that the lease payment for the whole period of time indicated in the lease agreement should be paid as a full sum even if the construction has been realized earlier than was stated in the contract and therefore the lease period was shorter.

34

The price or the amount of the lease payment is determined either by choice of the highest bid proposed in closed envelopes or by increasing the initial price or lease payment by announcing the new price (which is not more that 1 to 5 per cent from the previous price) during a tender until only one participant is left who is ready to buy or lease the land plot at the newly announced price.

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

Establishment of the boundaries and cadastral registration of the land plot o The land plot that is put up to tender is already formed, meaning that the land plot has fixed boundaries, has undergone State Cadastral Registration in the Real Estate State Cadastre and has been assigned a cadastral number. The preparation of the land plot for tender is carried out by the appropriate state authorities. o Establishment of the boundaries of the land plot, if the land plot is allocated without a tender, and the State Cadastral Registration in the Real Estate State Cadastre are undertaken by the Entity which is a time-consuming procedure.



The existence of town-building documentation and other limitations The land plot is granted only at a tender if the drafts of the territory planning and the drafts of the territory survey have been elaborated in regard to the territory where the requested land plot is located.35 Besides, the land plot is granted only at a tender in the event there is more than one application (i.e. at least two or more) from investors regarding a specific land plot.

4.10.1.

Acquisition of ownership or lease rights to the land at a tender

The acquisition of the rights to state-owned land at a tender is regulated mainly by the Land Code of the Russian Federation and the Rules on the Organization and Conducting of the Tender on Sales of the Land Owned by the State or Municipals and on the Rights for the Conclusion of the Lease Agreement in Regard to the Same Land approved by the Decree of the Government of the Russian Federation dated 11 November 2002 No.808, as well as by the Regulation on the Order of Cooperation of the Executive Authorities of St. Petersburg when Making Decisions on the Allocation of the Immovable Property for the Construction, Reconstruction and Adaptation for Modern Use, approved by the Decree of the Government of St. Petersburg dated 30 December 2010 (last amended 2 August 2011) No. 1813. The tender may be held in the form of an auction or a competition. A distinctive feature of the competition is the fact that the state sets certain conditions (obligations) on the use of the land plot. Unlike at auction, the winner of the competition should not only make the highest bid, but should also undertake the obligations to meet the conditions of the competition. An auction is a more widespread form of tender. The major steps for the acquisition of a land plot at a tender are the following: 1. Address plan For the purposes of the preparation of documents required for the allocation of the land plot for construction at a tender (without preliminary approval of the place of the property allocation), each year the Investment Department of St. Petersburg (during the last month of each calendar year) prepares and provides to the Committee on Construction the Address Plan for the preparation of documents for the tender procedures. This Address Plan must be approved by the Chair of the Construction Committee and the Vice-Governor of St. Petersburg responsible for such matters. The Address Plan contains a list of land plots (sites) which shall be put for tender. 2. Procedure for adopting a decision on the allocation of the land plot for construction at a tender The land plots available for tender procedures may, among others, include both the land plots located within the territories for which the drafts of territory planning and drafts of territory survey have already been developed and approved, and the land plots located within the

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territories for which the drafts of the territory planning and territory survey have not been approved yet. 

For the purpose of the preparation of documents regarding the land plots, for which the drafts of territory planning and territory survey have not been approved, the Investment Department of St. Petersburg directs a request to the Committee on Town-Planning and Architecture. The latter issues a report which shall include information on the permitted use of the land plot and functional purpose of the property to be constructed on such a land plot, taking into account the applicable town-planning limitations, as well as the time terms for the issuance of a town-planning map of the land plot.

The Investment Department of St. Petersburg directs inquiries to a number of government authorities in order to obtain their reports. For instance, such inquiries are sent to: o the Committee on Land Resources and Land Development (which reviews factual information about the land plot, its address, total area, data on any real estate objects located on the land plot, allocation of zones with special regime of treatment on the land plot, etc.), o the Committee on City Property Management (which reviews encumbrances of the land plot and the properties located on it, if any, as well as information on the registration of ownership title of St. Petersburg to the land plot and real estate located on it, etc.), o the Committee on State Control, Use and Protection of Cultural Properties (which reviews whether the land plot or real estate on it, if any, are regarded as cultural heritage properties or whether such properties are located within the borders of the protection zone of properties of cultural heritage, as well as a review of the applicable limitations to construction and other works on such properties), o the Committee on Energy (which reviews the technical conditions for connection to utilities, etc.), o and several other committees of the St. Petersburg Government.

The Investment Department of St. Petersburg also directs a notification to the Construction Committee of St. Petersburg on the necessity to obtain information from the Department of Rospotrebnadzor for St. Petersburg. Upon the receipt of such a notification, the Construction Committee shall direct an inquiry to the Department of Rospotrebnadzor for St. Petersburg on the compliance of the planned use of the targeted land plot with the sanitary rules established by the Federal Law "On sanitary-epidemiological wellbeing of the population", and submit the received response to such an inquiry to the Investment Department of St. Petersburg.

Upon the obtainment by the Investment Department of St. Petersburg of the reports of all the government authorities mentioned above (which shall be prepared by the relevant government authorities within 10-14 business days in accordance with applicable legislation), the Investment Department procures the performance of cadastral works and state cadastral registration of the land plot, and the evaluation of the market value of the real estate or complex of rights to the real estate, as well as requests from the Committee on Town-planning and Architecture issuance of the town-planning map of the land plot.

All of the documents gathered by the Investment Department of St. Petersburg regarding the land plot and reports are then transferred to the Construction Committee for the purpose of the preparation of the draft Decree of the Government of St. Petersburg on the allocation of the real estate for construction purposes at tender proceedings.

Upon the adoption by the Government of St. Petersburg of the Decree on the sale of the land plot at tender or sale at tender of the right to execute the lease agreement of the land

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plot for construction purposes, the Construction Committee directs a package of documents required for the organization and performance of the tender to the organizer of the tender. 3. Results of the tender The results of the tender (auction or competition) are formalized in the minutes on the results of the tender which shall be signed by the tender organizer, the auctioneer (when the tender is held in the form of an open auction) and the winner on the date of the tender. 4. Conclusion of a land sale-and-purchase contract or a land-lease contract The signed and effective minutes on the results of the tender serves as the grounds for the conclusion of the land sale-and-purchase contract or the land-lease contract between the winner and the appropriate authority.36 5. State registration of the lease or ownership rights in the Unified State Register of Rights to Immovable Property and Transactions Thereof by the Department of Federal Services on state registration, cadastre and cartography in St. Petersburg.

4.10.2. Acquisition of lease rights to the land without a tender The procedure for the acquisition of City Land37 is regulated in detailed form under the following major acts:  

the Law of St. Petersburg dated 26 May 2004 (last amended 04 July 2011) No. 282-43 “On the procedure of the allocation of immovable properties owned by St. Petersburg for construction and reconstruction” (hereinafter - the St. Petersburg law); the Regulation on the Order of cooperation of the Executive authorities of St. Petersburg when making decisions on the Allocation of Immovable Properties for the Construction, Reconstruction and adaptation for modern use, approved by the Decree of the Government of St. Petersburg dated 30 December 2010 (last amended 2 August 2011) No. 1813 (hereinafter the Decree).

The principal stages for providing land plots from the City land for construction without a tender in accordance with current legislation are the following: 1. The Investor applies to the Construction Committee of St. Petersburg with an application for the allocation of a land plot. 2. If there are no grounds for denial of the application, the Construction Committee of St. Petersburg forwards the application to the Investment Department of St. Petersburg within 5 (five) business days. 3. The Investment Department of St. Petersburg directs inquiries to a number of government authorities in order to obtain their reports on the possibility of the allocation of a land plot. For instance, such inquiries are sent to:  

the Committee of Town-Planning and Architecture (which reviews various town-planning limitations, the permitted use of the land plot, functional purpose of the object of planned construction, etc.), the Committee of Land Resources and Land Development (which reviews factual information about the land plot, its address, total area, data on any real estate located on the land plot, allocation of zones with special regime of treatment on the land plot, etc.),

36

In regard to City land it is the local agency of the Committee on City Property Management; and in regard to the Federal land - the appropriate Territorial department of the Federal Agency for State Property Management of St. Petersburg. 37 Although the possibility of allocation of the land plot without tender is established in the Land Code, the procedure can be factually realized only in regard to the City land as soon as there is no competent authority for Federal land. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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 

 

the Committee of City Property Management (which reviews encumbrances of the land plot and the real estate located on it, if any, as well as information on the registration of ownership title of St. Petersburg to the land plot and real estate located on it, etc.), the Committee on State Control, Use and Protection of Cultural Properties (which reviews whether the land plot or the real estate located on it, if any, are regarded as cultural heritage properties or whether such properties are located within the borders of the protection zone of cultural heritage properties, as well as a review of applicable limitations to construction and other works on such properties), the Committee on Energy (which reviews technical conditions for connection to utilities, etc.), and several other committees of St. Petersburg Government.

Upon the obtainment of reports from the abovementioned committees (which shall be prepared by relevant government authorities within 10-14 business days in accordance with applicable legislation), the Investment Department of St. Petersburg directs such reports to the Construction Committee. 4. The Construction Committee, within five business days from the receipt of the abovementioned reports, adopts a decision on the denial of the allocation of the land plot or on preparation of the memorandum to the attention of the Vice-Governor of St. Petersburg on the possibility of the preparation of the draft Decree of St. Petersburg on the allocation of the land plot for construction under investment conditions. 5. The Vice-Governor solicits the approval of the Governor of St. Petersburg. 6. The Governor of St. Petersburg may issue an approval and give orders regarding further action to be implemented by authorized government authorities. In pursuance of such orders the Investment Department of St. Petersburg:  

directs an inquiry to the Committee on Land Resources and Land Development for the issuance of the plan of allocation of the land plot on the cadastral map of the territory; sends to the competent authorities of St. Petersburg a notification on the necessity to inform the population on the possible provision of the land plot for construction (this is done in accordance with the requirements of the law of St. Petersburg No. 400-61 dated 5 July 2006 “On the order of organization and conduct of public hearings and informing the population of construction/town-planning activities in St. Petersburg”); directs to the Construction Committee the plan of allocation of the land plot on the cadastral map and notifies about the necessity to obtain information from the Department of Rospotrebnadzor for St. Petersburg. Upon the receipt of such notification the Construction Committee shall direct an inquiry on the ecological conditions of the use of the land plot to the Department of Rospotrebnadzor for St. Petersburg in accordance with the Federal Law “On the sanitary-epidemiological wellbeing of the population”.

7. Upon receipt of the replies to the abovementioned inquiries, the Construction Committee provides for the signing of the Act on the allocation of the land plot by representatives of the Committee on Land Resources and Land Development, the Committee on State Control, the Use and Protection of Cultural Properties and the Committee on Town-planning and Architecture and approves the Act on allocation of the land plot itself. The Act on allocation of the land plot is subject to official publication. The Act is regarded as a decision on the preliminary approval of the place of allocation of the property and serves as the basis for the further adoption of the decision on the provision of the land plot for construction and stays in effect for 3 years. 8. On the basis of the issued Act on the allocation of the land plot, the Investor shall perform the requirements of effective legislation, including cadastral works and state cadastral registration

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of the land plot, the evaluation of the market value of the real estate or complex of rights to the real estate and obtainment of reports from a number of Committees of St. Petersburg Government (including the Committee of Land Resources and Land Development, the Committee of City Property Management, the Committee of State Control, the Use and Protection of Cultural Properties, and several others as listed in the Decree of St. Petersburg Government No.1813 dated 30 December 2010). 9. Having fulfilled all the requirements listed in item 7 above, the Investor applies to the Construction Committee for the issuance of a Decree of St. Petersburg on the allocation of the land plot for the construction under investment conditions. 10. Unless there are grounds for denial of the Investor's application, the Construction Committee prepares a draft Decree of St. Petersburg on the allocation of the land plot for construction under investment conditions and refers it to the St. Petersburg Government for enactment. 11. Upon adoption of the Decree on the allocation of the land plot for construction under investment conditions by the St. Petersburg Government, the Construction Committee submits the necessary documents to the Committee of City Property Management for execution with the Investor of the lease agreement under investment conditions. The contract on the land plot lease is concluded for the period of construction. 12. Upon the signing of the lease agreement, the lease rights to the land shall be registered in the Unified State Register of Rights to Immovable Properties and Transactions Thereof by the Department of Federal Service on state registration, cadastre and cartography in St. Petersburg.

4.10.3. Requirements on the location (zoning) When investor considers to obtain rights to a land plot for the purpose of construction, it is necessary to take into account the applicable zoning requirements which are contained in the following documents: 

The Master Plan of St. Petersburg approved by the St. Petersburg Law dated 22 December 2005 No. 728-99 (hereinafter referred to as "the Master Plan"). This determines the directions for the town-planning development of St. Petersburg and bases the arrangement and distribution of the functional zones.

The Rules on Land Use and Territory Development in St. Petersburg approved by St. Petersburg Law dated 16 February 2009 No. 29-10 (hereinafter referred to as "the Rules"). These clarify the function of a territory determined by the Master Plan and establish the types of permitted use and the ultimate parameters of the permitted construction/reconstruction for land plots that are located within the boundaries of territorial zones.

The drafts of territory planning (hereinafter referred to as "the DTP") and the drafts of territory survey (hereinafter referred to as "the DTS") to be elaborated with regard to the parts of a territory of St. Petersburg and to be approved by the Decree of the St. Petersburg Government. The DTPs determine the density and the parameters of development of territories of quarters, the total area of the sites for capital construction for specified designated purposes, and the characteristics of development of social, transport maintenance and technical-engineering systems required for the development of the territory. The DTSs are elaborated to establish the sizes and boundaries of the built-on and vacant land plots and clarify the design solutions valid in DTPs for specific land plots.

As of today, only a part of the territory of St. Petersburg is covered by the elaborated DTPs and DTSs. When there is no elaborated DTP and DTS in regard to the territory in the frames of which the considered land plot is situated, the DTP separately or together with the DTS is elaborated by the

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Entity. The DTP (together with DTS) is developed on the basis of the statement of work received from the Committee of Town-Planning and Architecture.38 The development of the DTP (together with DTS) is carried out by a specialized organization under a contract within the time periods agreed on in the contract. In actual practice, on average, the overall period for the DTP (and DTS) development, coordination and approval by the Decree of St. Petersburg Government, takes from half a year to 8 months. In certain cases, construction plans shall meet and comply with the requirements stipulated in the effective legislation on the protection of items of cultural heritage.39 Such requirements are regarded for items of cultural heritage (newly founded cultural heritage properties), their territories and zones for the protection of items of cultural heritage, and provide the following peculiarities to be taken into account while locating the construction on the territory of the historically formed districts of St. Petersburg: 1.

The zones for the protection of items of cultural heritage (the protective zone and the zone of regulated development of the central regions of St. Petersburg) represent the territories adjacent to the land plots on which the items of cultural heritage are located. For the purpose of the safety for the items of cultural heritage a special order of use for land plots located within the boundaries of such zones has been established (the regime of the zone). The boundaries of the protective zone and the zone of regulated development of central regions of St. Petersburg and their regimes are described in the St. Petersburg Law dated 19 January 2009 No. 820-7 “On the boundaries of zones for the protection of items of cultural heritage on the territory of St. Petersburg and the regimes of land use within the boundaries of such zones and on amending the St. Petersburg Law “On the Master Plan of St. Petersburg”. The above law specifies the following material conditions for land plot use and the limitations within the zones for protecting items of cultural heritage:  

 2.

new construction is prohibited in the protective zone and limited in the zone of regulated development in the central regions of St. Petersburg; reconstruction and refurbishment in both zones is limited by the height of the buildings, façade configuration, color and other parameters and requires special approval from the Committee on State Control, the Use and Protection of Cultural Properties and the St. Petersburg Committee on Town-Planning and Architecture; all town planning, construction and ground work shall be approved by the Committee on State Control, Use and Protection of Cultural Properties.

The information on items of cultural heritage (including the subject of the protection) is contained in the state register: in the federal register with regard to items of cultural heritage of federal meaning, in the regional register with regard to items of cultural heritage of regional meaning and in the register of newly founded items of cultural heritage with regard to such properties. The demolition of items of cultural heritage is prohibited. Only the following work may be performed with regard to items of cultural heritage (all of these are intended for the safety of

38

Item 4 of the Instruction on the order of elaboration, structure and content of the documentation of territory planning approved by the Order of the Committee of Town-Planning and Architecture of St. Petersburg Government dated 22 May 2006 No. 515. 39 St. Petersburg Law No.29-10 “On the Rules on Land Use and Territory Development in Saint-Petersburg” dated 16 February 2009; St. Petersburg Law No.820-7 “On the boundaries of zones of protection of items of cultural heritage on the territory of St. Petersburg and regimes of use of lands within the boundaries of such zones and on amending the St. Petersburg Law “On the Master Plan of St. Petersburg” dated 19 January 2009; St. Petersburg Law N.333-64 “On the defense of items of cultural heritage” dated 12 July 2007; Federal Law No. 73-FZ “On items of cultural heritage for the people of the Russian Federation” dated 25 June 2002.

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the items of cultural heritage and cannot lead to changing the features that constitute the subject of the protection of the properties):    

repairs; restoration; conservation; adaptation to modern use. Please note that only in the course of adaptation to modern use reconstruction of the item of cultural heritage is deemed possible.

4.10.4. Construction permit documentation Performance of the construction work on the land plot requires the receipt of certain permit documentation under the town-building legislation so that the safety and the legitimacy of the process is controlled. Fulfilling construction work does not require the obtainment of a license any more as it was required in 2005. At the same time the state system of licensing was replaced with a system of admissions that are issued by the self-regulated organizations. Under the town-building legislation a selfregulated organization is a non-commercial partnership that unites a particular number of legal entities and entrepreneurs fulfilling the survey or design or construction works and has the compensation fund to cover the harm (damages) caused in the result of the defaults of the survey, design and construction work done by the united members of such a self-regulated organization. A precise list of the work that requires admissions of the self-regulated organizations is approved by the order of the Ministry of Regional Development of the Russian Federation dated 30 December 2009 No. 624. Each self-regulated organization may issue only the admissions to those works that have been approved as the sphere of activities of the relevant self-regulated organization at the general meeting of the members of the self-regulated organization.40 The admissions are issued only to the legal entities and entrepreneurs who answer the requirements established by the relevant self-regulated organization and the minimum requirements of the Town-Building Code of the Russian Federation. We would like to draw your attention to the fact that the work that requires admission of the selfregulated organization includes such works as organization of design documentation preparation (function of a general designer), organization of construction works (function of a general contractor), control over the construction process implementation of which is imperative under the town-building legislation. Before starting the construction of a building on a land plot the subject also requires that the following major documents are received: (a) a town-planning map; (b) a positive conclusion of the state expertise on the results of survey work and on the design documentation and (c) a construction permit. 1. A town-planning map41 is the document, which contains significant town-building information such as boundaries of a land plot, permitted use etc. The town-planning map is prepared by the Committee of Town-Planning and Architecture based on the application of the subject filed with the necessary documents (e.g. materials of topographic mapping, cadastral passports of the land plot).42 The normative term for the preparation of the town-planning map is 30 days from the date of application. 2. The positive conclusion of the state expertise on the results of the survey work and on the design documentation is given if the elaborated design documentation answers the requirements of 40

Item 5 of article 55.8 of the Town-Building Code of the Russian Federation. Item 1 of article 44 of the Town-Building Code of the Russian Federation. 42 The order of the Committee on the Town-Planning and Architecture of St. Petersburg dated 11 June 2009 N 96. 41

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the technical regulations and the requirements to the content of the design documentation. The state expertise is conducted by the St. Petersburg state autonomous agency "Center of State expertise"43 subject to the Service of State Construction Supervision and Expertise of St. Petersburg. In regard to a technically complicated or unique property the state expertise will be conducted by the Federal State Agency Glavgosexpetisa of the Russian Federation.44 The term of the state expertise depends on the complexity of the building but should not exceed three months. 45 3. After the receipt of the positive conclusion from the state expertise on the results of the survey work and on the design documentation, the subject applies for the obtainment of the construction permit attaching all the required documentation in accordance with the TownBuilding code of the Russian Federation. The construction permit is given in the name of the person who enjoys the rights (lease or ownership) to the land plot. The construction permit is issued if the design documentation is in conformity with the townplanning map. Currently, the construction permit is granted by the Service of State Construction Supervision and Expertise of St. Petersburg. In regard to the technically complicated or unique property - the permit will be issued by the Ministry of the Regional Development.46 The normative term for issuing of the construction permit is 10 days from the date of application.47

43

The Decree of the Government of St. Petersburg dated 23 October 2009 N.1177 On creation of St. Petersburg state autonomous agency "Center of State expertise"; item 4.2, 6.1 of article 49 of the Town-Building Code of the Russian Federation. 44 The order of the Federal agency on construction and housing and communal services dated 16 March 2007 N 64; item 4.1 of the Town-Building Code of the Russian Federation. 45 Item 7 article 49 of the Town-Building Code of the Russian Federation. 46 Decree of the Government of the Russian Federation dated 23 May 2009 N 441. 47 Item 11 article 55 of the Town-Building Code of the Russian Federation.

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4.11. Buyout of land plots in St. Petersburg Information for the current chapter was developed and kindly provided by DLA Piper According to Article 36 of the Land Code of the Russian Federation, citizens and legal entities which own real estate (buildings and constructions) located on state land have an exclusive right to the privatization or lease of the land plots on which such real estate is located. Therefore, if a citizen or a legal entity owns real estate located on a state land, such citizen or legal entity may choose to: 1. acquire the land plot on which the real estate is located under ownership, or 2. execute a long-term lease agreement of the land plot for 49 years. In order to obtain either of the above-mentioned rights to the land plot, the citizen or the legal entity (hereinafter – the Investor) shall apply to an authorized government authority with an application. In St. Petersburg such authority is vested in the Committee for City Property Management.

4.11.1. Procedure for the buyout of land plots The list of documents, which shall be submitted to the Committee for City Property Management with an application on the buyout, has been recently revised and is currently established by the Order of the Ministry of Economic Development of the Russian Federation dated 13 September 2011 No. 475 “On the adoption of the list of documents required for the acquisition of rights to the land plot”. Such documents include the following: 1. Copy of the document, confirming the identity of an applicant. 2. Copy of the certificate of state registration of the individual as an entrepreneur or a copy of the certificate of state registration of a legal entity or an extract from the state register regarding the legal entity or the individual entrepreneur applying for the buyout of land. 3. Copy of the document confirming the authority of the representative of an individual or a legal entity, in the event the applicant appoints a representative. 4. Extract from the Unified State Register of Rights to Real Estate Property and Transactions Therewith regarding the rights to real estate (buildings and constructions) located on the targeted land plot, or notification on the absence of such data in the Unified State Register of Rights to Real Estate Property and Transactions Therewith (or copies of documents confirming rights to such real estate if such rights are considered as existing irrespective their registration at the Unified State Register of Rights mentioned above). 5. Extract from the Unified State Register of Rights to Real Estate Property and Transactions Therewith regarding the rights to the targeted land plot, or notification on the absence of such data in the Unified State Register of Rights to Real Estate Property and Transactions Therewith (or copies of documents confirming rights to the land plot if such rights are considered as existing irrespective their registration at the Unified State Register of Rights mentioned above). 6. Cadastral passport of the land plot. 7. Copies of documents entitling the Investor to acquire the land plot, unless the grounds for the right to acquisition of the land plot are evident from the above-mentioned documents. 8. Reference from the applicant, containing the list of all buildings and other constructions located on the targeted land plot, with an indication of the cadastral numbers and addresses of such real estate. According to clause 2 of the Order of the Ministry of Economic Development of the Russian Federation dated 13 September 2011 No.475, the documents listed in items 2, 4, 5 and 6 above Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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cannot be requested (demanded) from the applicant by the authorities, however, the applicant has the right to submit these documents together with an application. This provision comes into force within the following timeline:  

from 1 October 2011 (but not earlier than upon expiration of 10 days from the date of the official publication of the Order) – for documents required for the acquisition of rights on federal land (land plots which are currently under federal ownership); from 1 July 2012 – for documents required for the acquisition of rights on other land plots of state or municipal property.

According to item 5 of Article 36 of the Land Code of the Russian Federation, the government authorities (i.e. the Committee for City Property Management in St. Petersburg) cannot demand from the applicant to submit any additional documents other than those indicated in the Order No.475. Upon the submission of documents by the applicant, the Committee for City Property Management has one month for the adoption of the decision on provision of the land plot into ownership as per the buyout request of the applicant. Within one month from making a decision on provision of the land plot into ownership, the competent government authorities shall prepare a draft of the sale and purchase agreement regarding the targeted land plot and provide it to the applicant for review and signing. Please note that in the event that the cadastral registration of the targeted land plot has not been performed before the submission of an application by the applicant for obtainment of rights to such land plot, the respective cadastral works shall be performed by the applicant at its own cost, and the rights to the land plot will be granted only subject to the completion of such cadastral works and the cadastral registration of the land plot. Please note that the total area of the targeted (for buy-out) land plot shall be balanced with the total area of the real estate located on it. The law provides for the possibility of buy-out of the land plot which is necessary for operation of the real estate located on it. Therefore, in the event small real estate located on a very large land plot, the Investor will be able to buy-out not the whole land plot, that, for example, was provided for construction purposes, but only a part of the land plot which is required for the operation of the real estate (unless the Investor proves that there are sufficient reasons for a buyout of the whole land plot for further operation of the real estate located on it). According to Article 8 of the Civil Code of the Russian Federation the rights to the land plot have to be registered in the Unified State Register of Rights to Real Estate and Transactions Therewith. Therefore, upon signing the sale and purchase agreement regarding the targeted land plot, the respective documents shall be filed for registration. The Investor will formally obtain his/her ownership title to the land plot only after registration of the transfer of rights at the Unified State Register of Rights to Real Estate and Transactions Therewith.

4.11.2. Local legislation influencing the procedure of land plots buyout On 31 August 2006 the Decree of the Committee for City Property Management of St. Petersburg No.262-р “On the order of cooperation of the structural subdivisions of the Committee for City Property Management and Open joint stock company “The Property Fund of St. Petersburg" in the process of the sale of state-owned land plots to the owners of real estate located on such land plots” was adopted. The decree remains effective (as amended) as of the present time. According to the Decree, the application and package of documents submitted by the Investor for buyout of a targeted land plot are accepted by the Department on the disposal of state property of the Committee for City Property Management (hereinafter - the Department of the Committee). The Department of the Committee registers submitted applications on the date of their submission and no later than within two business days from the date of registration of the application sends the

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inquiries regarding the targeted land plot and the real estate located on it to a number of other government authorities, including the following:    

Committee of State Control, Use and Protection of Cultural Properties; Committee of Land Resources and Land Development; Department (agency) of real estate property of St. Petersburg District, on the territory of which the targeted land plot is located (hereinafter - the Agency); Department of the Federal Service for State Registration, Cadastre, and Cartography for St. Petersburg; etc.

Upon gathering of the information from various government authorities, confirmation that a targeted land plot can be disposed of to Investor's ownership, the Department of the Committee prepares a Transfer Order on the transfer of the targeted land plot into the Investor's ownership. The Transfer Order serves as an assignment to the Property Fund of St. Petersburg to conclude the Sale and Purchase agreement of the targeted land plot with the Investor. Upon the execution of the Sale and Purchase agreement of the targeted land plot, the documents are filed for the registration of the transfer of rights to the land plot with the Unified State Register of Rights to Real Estate and Transactions Therewith, upon completion of which the Investor formally obtains its ownership title to the land plot.

4.11.3. Buyout price of the targeted land plot According to Article 36 of the Land Code of the Russian Federation, the buyout price for stateowned land shall be determined by the government authorities as follows:   

with respect to federal land – by the federal government authorities; with respect to the land owned by the subjects of the Russian Federation – by government authorities of the subject of the Russian Federation; with respect to municipal land – by municipal authorities.

In any case, the buyout price shall not exceed the cadastral price of the land plot. In the event that the mechanism for the calculation of the buyout price is not determined, the buyout price shall equal the cadastral price of the land plot. According to the Federal Law dated 25 October, 2001 No. 137-FZ “On entering into force of the Land Code of the Russian Federation”, there are two categories of potential acquirers of land plots, for which different rules for the calculation of the buyout price are established. The first category of potential acquirers of land plots includes the following: 1. legal entities which own real estate located on targeted land plots and are acquiring the land plots in the course of re-registration of their right of permanent perpetual use; 2. citizens and non-commercial organizations, which acquired ownership title to real estate located on the targeted land plots before the Land Code of the RF came into force and for which no special procedure for acquisition of ownership title to the land plots was established by the federal law; 3. legal entities and entrepreneurs which own real estate located on targeted land plots, if such real estate was privatized (disposed of from state or municipal property), including when real estate was constructed or reconstructed on the land plots; 4. legal entities and entrepreneurs which own real estate located on targeted land plots, if such real estate was constructed on targeted land plots instead of destroyed or earlier privatized and currently demolished real estate. The second category of potential acquirers of land plots includes persons, which own real estate located on targeted land plots and are not included in the first category.

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In St. Petersburg the calculation of the buyout price is regulated by the St. Petersburg law dated 15 February 2010 No. 59-19 “On the establishment of the price of the land plots in St. Petersburg”, taking into account the rules for the determination of the buyout price established by the Federal Law dated 25 October 2001 No. 137-FZ “On entering into force of the Land Code of the Russian Federation”. According to the St. Petersburg law dated 15 February 2010 No. 59-19 “On the establishment of the price of the land plots in St. Petersburg”, the buyout price for the first category of potential acquirers as described above shall be calculated as follows: 

15% of the cadastral value of the land plots – when the land plots are being bought-out by the owners of real estate constructed on such land plots and when such land plots were provided for performance of investment activity in accordance with the laws of St. Petersburg, or when such land plots are used for the purposes of allocation of industrial property and at least 70% of the land plot is occupied by such industrial property; 19.5% of the cadastral value of the land plots – when the land plots are sold to other owners of real estate located on the land plots.

The buyout price for the second category of potential buyers shall be calculated as follows: 

10-fold rate of the effective land tax –- when the land plots are being bought-out by the owners of real estate constructed on such land plots and when such land plots were provided for performance of investment activity in accordance with the laws of St. Petersburg, or when such land plots are used for the purposes of allocation of industrial property and at least 70% of the land plot is occupied by such industrial property; 13-fold rate of the effective land tax – when the land plots are sold to other owners of real estate located on the land plots.

The St. Petersburg Law No. 59-19 also provides for a 9-fold rate of effective land tax for calculation of the buyout price for the land plots which were provided to strategic investors of St. Petersburg or investors implementing strategic projects on the territory of St. Petersburg for the purposes of construction on such land plots of the plants producing cars and/or automobile components. However, this provision of the St. Petersburg law loses its effect (becomes inoperative) from 1 January 2012. Please note that, theoretically, starting from 1 January 2012 the buyout price for the land plots may change in the event that the local authorities adopt any amendments to the St. Petersburg Law No.59-19. No such amendments were adopted as of November 2011. However, it is recommended that Investors monitor this issue further.

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4.12. Regulatory issues. Antimonopoly compliance Information for the current chapter was developed and kindly provided by DLA Piper The basic law for antimonopoly regulation in the Russian Federation is the Federal Law “On Protection of Competition” dated 26 July 2006, as amended ("Competition Law"). Under the auspices of the Federal Antimonopoly Service ("FAS") the Competition Law regulates competition in both the commodities market and the financial services market and includes seven areas of particular interest to foreign investors:       

establishment of companies; mergers and acquisitions; agreements limiting competition; abuse of a dominant position; unfair competition; state aid; and selection of a financial organization by subjects of natural monopolies and various states and municipal bodies.

Certain activities in each of the abovementioned areas require a prior approval or notification of the antimonopoly authorities in order to comply with antimonopoly laws and such requirements have to be taken into account when planning investment activities.

4.12.1. Establishment of companies According to the currently effective legislation, the founders of a new company must obtain a prior approval of the FAS for the establishment of a new company only if the charter capital of the new company is paid by the contribution of shares, participation interests and/or property assets (excluding cash assets) of another legal entity ("Target") (unless such a legal entity is a "financial organization"48), if the newly established company acquires:   

more than 25 per cent of the shares of the Target (if the Target is a JSC and the charter capital of the newly established company is paid by contribution of shares in the Target); or more than one-third of the participation interests of the Target (if the Target is an LLC and the charter capital of the newly established company is paid by contribution of a participation interest in the Target); or more than 20 per cent of the book value of the main production (fixed) assets and intangible assets of any of its founders,

and if: 

the balance sheet value of the total aggregate assets of the founders (including their respective "groups of persons"49) and the Target (including its groups of persons) exceeds RUB 7 billion; or

48

Meaning an individual or legal entity rendering financial services, including credit organizations, insurers, stock/currency exchange organizations, pension funds, investment funds, etc. 49 In determining the threshold for asset values and aggregate revenues in the context of mergers and acquisitions, the FAS takes into consideration not only the purchaser and the target, but also the persons (individuals and legal entities) in their respective "groups of persons". The broad term "group of persons" means all persons and/or entities that directly or indirectly control the company, are directly or indirectly controlled by the company or are under common control with this company and/or entities directly or indirectly controlled by it. For the purpose of the definition of the group of persons, "control" means holding of any of the following: (i) over 50% of votes (including combined participation), (ii) CEO position; (iii) rights to give to a company binding instructions; (iv) right to appoint CEO; (v) right to appoint over 50% of the management board and/or the board of directors. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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 

the aggregate revenue earned by the founders (including their respective groups of persons) and the Target (including its groups of persons) from the sale of goods in the past calendar year exceeds RUB 10 billion; or the Target is included in the FAS Register of dominant entities or legal entities with a Russian market share exceeding 35 per cent.

The establishment of a new company whose charter capital is paid by the contribution of shares, participation interests and/or property assets of a financial organization, will require prior approval of the FAS if the balance sheet value of the total aggregate shares, participation interests and/or property assets of such a financial organization exceeds an amount that is established by the Russian Government.50

4.12.2. Mergers Entities (except financial organizations) involved in a consolidation, affiliation or merger must obtain a prior approval of the FAS51 if:   

the balance sheet value of the total aggregate assets of the merging entities (including those of their respective groups of persons) exceeds RUB 3 billion; or the aggregate revenue earned by the merging entities (including those of their respective groups of persons) from the sale of goods during the last calendar year exceeds RUB 6 billion; or either of the merging entities (including their respective groups of persons) is included in the FAS Register of dominant entities or legal entities with a Russian market share exceeding 35 per cent.

Consolidations, affiliations or mergers of financial organizations will require a prior approval of the FAS if the total value of the entities' assets exceeds the amount established by the Russian Government.52

4.12.3. Acquisitions 4.12.3.1. Acquisition of participation interests in a Russian company (LLC) Preliminary approval of the FAS is required where a purchaser, be it an individual or legal entity and its group of persons, acquires:    

more than one-third (on a first acquisition); or more than a half (on a first or any further acquisition); or more than two-thirds (on a first or any further acquisition) of the target LLC's total participatory interests, and if (unless the purchaser is a financial organization):53 the balance sheet value of the total aggregate assets of the purchaser and the target LLC (including their respective groups of persons) exceeds RUB 7 billion and the balance sheet value of the total aggregate assets of the target LLC (including its group of persons) exceeds RUB 250 million; or

50

This amount differs depending on the type of financial organization. Preliminary FAS approval is not necessary if: (i) the consolidation, affiliation or merger is going to be performed between the parent company and its subsidiary; (ii) entities, participating in the consolidation, affiliation or merger belong to the same group of persons, information on which was disclosed within a special procedure, provided by the Competition Law; (iii) the consolidation, affiliation or merger is stipulated by the acts of the President or the Government of the Russian Federation. 52 This amount differs depending on the type of the financial organization. 53 For financial organizations the thresholds in this regard are: the balance sheet value of the total aggregate assets of the financial organization exceeds the amount established by the Government of the Russian Federation. This amount differs depending on the type of the financial organization. 51

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the aggregate revenue earned by the purchaser and the target (including their respective groups of persons) from the sale of goods in the past calendar year exceeds RUB 10 billion and the balance sheet value of the total aggregate assets of the target LLC (including its group of persons) exceeds RUB 250 million; or either the purchaser or the target LLC (including their respective groups of persons) is included in the FAS Register of dominant entities or legal entities with a Russian market share exceeding 35 per cent.

4.12.3.2. Acquisition of shares in a Russian Company (JSC) Preliminary approval from the FAS is required where a purchaser, be it an individual or legal entity and its group of persons, acquires:     

more than 25 per cent (on a first acquisition); or more than 50 per cent (on a first or any further acquisition); or more than 75 per cent (on a first or any further acquisition), of the target JSC's total share interests, and if (unless the purchaser is a financial organization): the balance sheet value of the total aggregate assets of the purchaser and the target JSC (including their respective groups of persons) exceeds RUB 7 billion and the balance sheet value of the total assets of the target JSC (including its group of persons) exceeds RUB 250 million; or the aggregate revenue earned by the purchaser and the target (including their respective groups of persons) from the sale of goods in the past calendar year exceeds RUB 10 billion and the balance sheet value of the total assets of the target JSC (including its group of persons) exceeds RUB 250 million; or either the purchaser or the target JSC (including their respective groups of persons) is included in the FAS Register of dominant entities or legal entities with a Russian market share exceeding 35 per cent.

4.12.3.3. Acquisition of assets in a Russian company The preliminary approval from the FAS is required where a purchaser, be it an individual or legal entity and its group of persons, acquires the right of ownership or the right to use the main production (fixed) assets (except for land plots or non-industrial buildings, unfinished buildings, structures, constructions, premises and parts of premises) or intangible assets of an entity, if the acquired assets account for more than 20 per cent of the book value of the main production (fixed) assets and intangible assets of another legal entity (the Owner), and if (unless the Owner is a financial organization):  

the aggregate book value of the assets of the purchaser and the Owner (including their respective groups of persons) exceeds RUB 7 billion and the balance sheet value of the total assets of the Owner (together with those of its group of persons) exceeds RUB 250 million; or the aggregate revenue earned by the purchaser and the Owner (including their respective groups of persons) from the sale of goods in the past calendar year exceeds RUB 10 billion and the balance sheet value of the total assets of the Owner (together with its group of persons) exceeds RUB 250 million; or either the purchaser or the Owner (including their respective groups of persons) is included in the FAS Register of dominant entities or legal entities with a Russian market share exceeding 35 per cent.

4.12.3.4. Acquisition of rights in a Russian company Preliminary approval from the FAS is required where a purchaser, be it an individual or legal entity and its group of persons, acquires rights conferring the ability to determine the commercial behavior of the target company (including as a result of change of indirect control over a Russian target company) or of the right to perform the functions of its executive bodies. Such persons, entities or

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group of entities involved in the acquisition must receive prior approval from the FAS if (unless the purchaser is a financial organization):  

the aggregate book value of the assets of the purchaser and the target (including their respective groups of persons) exceeds RUB 7 billion and the balance sheet value of the total assets of the target (together with those of its group of persons) exceeds RUB 250 million; or the aggregate revenue earned by the purchaser and the target (including their respective groups of persons) from the sale of goods in the past calendar year exceeds RUB 10 billion and the balance sheet value of the total assets of the target (together with its group of persons) exceeds RUB 250 million; or either the purchaser or the target (including their respective groups of persons) is included in the FAS Register of dominant entities or legal entities with a Russian market share exceeding 35 per cent.

In practice, the FAS supervises those offshore mergers or other transactions involving the acquisition of shares, as a result of which indirect control over a Russian entity changes. It is presumed by the FAS that as a result of an indirect change of control of a Russian legal entity, the foreign entity acquiring the shares would obtain rights over the Russian entity which would allow it to determine the conditions of the Russian entity's own business activity.

4.12.3.5. Exemptions from rules on the application for prior approval The Competition Law provides several exemptions from the obligatory rules on obtaining preliminary FAS approval:   

the acquisition will be performed between a parent company and its subsidiary; or the entities, participating in the acquisition belong to the same group of persons, information on which has been disclosed within a special procedure, provided by Article 31 of the Competition Law; or the acquisition is stipulated by the acts of the President or the Government of the Russian Federation.

4.12.3.6. Post-completion notification procedure Any proposed transaction that meets the relevant conditions and thresholds (as described in the preceding paragraphs of this section on "Acquisitions") will generally require a preliminary FAS approval. However, in exceptional cases it may be permissible to notify the FAS post-completion of such transactions provided that:  

the parties to the transaction belong to the same group of persons and information on such group was disclosed under the special procedure, provided by the Competition Law; and the parties to the transaction are a parent company and its subsidiary.

Please, also note that post-completion notification is also required with respect to those transactions in which the aggregate assets and the aggregate revenue of the purchaser and the target company (including their respective groups of persons) is over RUB 400 million and, in addition, the aggregate value of assets of the target company and the companies of its group exceeds RUB 60 million.54

4.12.3.7. Procedures and timing After all the required documents have been submitted, the FAS has 30 days to review the application or notification. If the FAS believes that the transaction may lead to a restriction of

54

Provided that the prior approval thresholds (as described in the preceding paragraphs of this section on "Acquisitions") are not met.

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competition, the review period may be extended for additional two months, during which the FAS places information about the transaction on its official website and invites all interested parties to send their opinions on the transaction. Any company established, either as a new company or as a result of a merger, consolidation or affiliation, without the requisite prior approval of the FAS can be liquidated or reorganized if it is determined that its establishment has led or may lead to the reduction of competition, in particular as a result of emergence or strengthening of a dominant position. Any acquisition made without the requisite prior approval of the FAS shall be declared invalid if it is determined that its establishment has led or may lead to the reduction of competition, in particular as a result of emergence or strengthening of a dominant position. As for post-completion notification, the deadline for its submission is 45 days from the completion date of the respective transaction.

4.12.3.8. Agreements and concerted actions limiting competition Competition Law prohibits agreements, concerted actions or other business activities that lead or may lead to the following:        

control or fixing of prices, discounts, bonus payments or surcharges; an increase or reduction of prices or the manipulation of prices at tenders; the division of the market by reference to territories or according to the volume of sales/purchases, the range of marketable goods or the range of sellers or purchasers; refusal to enter into a contract with particular sellers or customers without an economic or technological justification; imposition of contractual terms that are disadvantageous to the other party or do not relate to the subject matter of the contract; setting different prices on the same goods without economic or technological justification; discontinuance or the reduction of production of goods for which there is a consumer demand if it is possible to produce them on a profitable basis; restriction of access to the market or the removal from the market of other entities that sell or purchase particular products, etc.

Competition Law further prohibits other agreements if such agreements lead or may lead to the limitation of competition. These bans are not applicable to agreements if they qualify as "vertical agreements". Vertical agreements are agreements between economic entities not competing with each other, one of which acquires goods or is the potential acquirer, while the other supplies goods or is the potential seller. Competition Law enacts only two per se bans applicable to vertical agreements: setting resale prices and exclusivity (i.e. contractual ban on selling competing goods). However, these bans do not apply to vertical agreements which are either vertical agreements between economic entities where the market share of each one is less than 20 per cent or vertical agreements in a written form which are commercial concession agreements. This means that vertical agreements between two parties, none of which has a market share in excess of 20 per cent, are exempt from all bans under Competition Law applicable to the agreements. In certain cases activities which would prima facie seem to limit competition may be permitted if it can be proved that the positive effects of the action, including any positive socio-economic effects, outweigh its negative consequences, or if the relevant Government Regulation permits such agreements or business activities. Such Government Regulations exist for vertical agreements55 and

55

Government Decree “On Cases of Permissibility of Agreements between Business Undertakings” dated 16 July 2009. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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for agreements between credit and insurance companies.56 In this context it is worth mentioning that if the parties intended to enter into an agreement have certain doubts as to its compliance with or permissibility under Competition Law they have the right to file the draft of such agreement with the FAS and ask the FAS to give its opinion on whether or not the agreement complies with the Competition Law requirements (Article 35 of the Competition law). This filing procedure is possible with respect to specific agreements between specific parties only (i.e. no blanket clearances). In addition, in approving agreements, the FAS may issue binding prescriptions designed to ensure competition in the market. Anti-competitive agreements are deemed by Competition Law as the severest violation. Each company being a party to an anti-competitive agreement can be subject to turnover-based fines varying from 1 per cent to 15 per cent of the party's turnover in the market to which the agreement in question relates. At the same time the maximum fine to be imposed on the violator cannot exceed 4 per cent of the violator's total turnover on a worldwide basis. Please, also note that company's officers can be also penalized or even subjected to criminal liability. In addition, Competition Law also prohibits so-called "coordination of economic activities"57 amongst economic entities, if such coordination may lead to restriction of competition.

4.12.3.9. Abuse of dominant position Determining whether a particular entity, group of entities and/or their respective groups of persons enjoy a dominant position involves a complex evaluation of various factors, most notably the relevant entity's market share:   

For entities with a market share of more than 50 per cent there is a presumption of market dominance. Entities with a market share of between 35 per cent and 50 per cent (inclusive) may be deemed dominant by the FAS on the basis of an investigation into the relevant market. For entities with a market share less than 35 per cent, there is a conclusive presumption of nondominance, with several exceptions provided by the Competition Law for entities and financial organizations and oligopoly markets.

For those in a dominant position, the Competition Law prohibits any of the following activities:      

setting and/or support of a monopoly for high or low prices; withdrawal of goods from circulation if the result of such a withdrawal is a rise in the price of the goods; creation of conditions that place one or more business entities in an unequal position as compared to other entities in their ability to access the market for particular goods (i.e. discriminatory conditions); the imposition of contractual terms by one contracting party on another that are either disadvantageous to the other contracting party or do not relate to the subject matter of the contract; discontinuance or reduction of the production of goods for which there is a consumer demand if it is possible to produce them on a profitable basis;58 unjustified refusal to enter into a contract with particular customers if it is possible to produce or deliver the relevant goods to such customers;

56

Government Decree “On Cases of Permissibility of Agreements between Credit and Insurance Organizations” dated April 30, 2009. 57 "Coordination of economic activities" is understood to be the coordination of actions between economic entities who are not a "group of persons" (i.e. one economic entity coordinating its activities with one or more third party economic entities). 58 Activity may be allowed if the dominant entity can prove that the positive effects of a particular activity outweigh its negative consequences.

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   

setting different prices for the same goods where it is not economically or technologically necessary to do so; creation of discriminatory conditions;58 creation of barriers to market entry or market exit for other business entities;58 and violation of pricing rules.

4.12.3.10. Unfair competition The Competition Law prohibits unfair competition in Russia. That is, any actions of commercial entities aimed at acquiring competitive advantages in commercial activity, which contradict Competition Law, business customs, the requirements of good-faith, reasonableness and fairness, which have caused or may cause losses to other competing legal entities, or damage their business reputation. Typical activities that would constitute unfair competition for the purposes of Competition Law would include:     

the distribution of false, inaccurate or distorted information by a commercial entity, which may cause losses to or otherwise damage the business reputation of another commercial entity; the misleading of consumers about the nature, method and place of production and quality of a commercial entity's goods; the incorrect comparison by a commercial entity of goods produced or sold by it against those of another commercial entity; the sale of goods by a commercial entity in contravention of certain intellectual property rights (e.g. abuse of trademarks); and the abuse by a commercial entity of certain commercial secrets (i.e. the receipt, use or disclosure of such information without relevant consent).

4.12.3.11. State preferences State preferences are new to Russian competition legislation and were introduced by the Competition Law. In accordance with the Competition Law, state (or municipal) preferences consist of granting economic entities certain privileges ensuring that such economic entities have more favorable conditions for their activity by transferring state (or municipal) property and/or civil rights or by granting a material privilege. The Competition Law regulates the procedure of providing state (or municipal) preferences for the following purposes:             

ensuring the livelihoods of the population in the Arctic regions and equivalent areas; development of education and science; conduct of scientific research; environmental protection; conservation, usage, popularization and state protection of the cultural heritage (historical and cultural monuments) of peoples of the Russian Federation; development of culture, arts and conservation of cultural values; development of physical fitness and sports; ensuring defense powers and the security of the state; agricultural production; social protection of the population; labor protection; health care of citizens; support of small and medium businesses; and socially oriented non-commercial organizations in accordance with the Federal Law No. 7-FZ dated 12.01.1996 (as amended); and Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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other purposes, defined by the legislation of the Russian Federation.

State (or municipal) preferences shall be granted with the preliminary written approval from the FAS, unless such preferences are directly granted by federal law, a law of a constituent entity of the Russian Federation or a regulatory act of the local government on the budget, or are granted from the reserve funds for financial security of extraordinary expenses in compliance with budgetary legislation of the Russian Federation or in the amount which does not exceed limits established by the Central Bank of the Russian Federation for settlements in cash in the Russian Federation between legal entities, if such preferences are granted no more frequently than once a year for a certain entity. In order to provide state (or municipal) preferences, the authority intending to grant the preferences must submit an application to the FAS in order to obtain the FAS approval to the granting of such preferences together with:   

a draft act which provides for the granting of the state preferences with an indication of the goals and the amount of the preferences; a list of the beneficiary entity's activities over the two years preceding the date of the FAS application; and other information as provided for by the Competition Law.

The FAS shall make a decision on the application within one month from the date it is submitted together with all necessary documents. The FAS may extend the period for its review of the application for a term of up to two months.

4.12.3.12. Recent development of antimonopoly legislation On December 6, 2011 the President of the Russian Federation signed Federal Law No. 401-FZ “On Amendment of the Federal Law “On Protection of Competition” and Other Laws of the Russian Federation” – a so-called “Third Antimonopoly Package”. The Third Antimonopoly Package was officially published and most of the new rules will come into force from January 6, 2012. The main purposes of such debated amendments are as follows:   

the development of competition on goods markets; the perfection of principles of control over activities of monopolies; the minimization of legal risks for business.

The representatives of antimonopoly authorities are sure that the Third Antimonopoly Package will significantly liberalize current antimonopoly legislation, soften the liability of entities for the violation of antimonopoly laws and reduce a number of bans (prohibitions) established by the current antimonopoly legislation. The amendments to the currently effective Competition Law, suggested by the Third Antimonopoly Package, among other things include the following:    

The Third Antimonopoly Package excludes criminal liability for concerted actions. The new amendments also distinguish the terms "agreement" and "concerted action" and limit the number of agreements currently prohibited by antimonopoly legislation. Agreements within the group of entities shall not fall under the bans established by antimonopoly legislation (ex. Article 11 of the current Competition Law) in the event of the control of one entity within the group over another. Concerted action shall mean only such actions where each participant has initially been aware of the said action due to public declaration on performance of such actions (however, the amendments remain unclear as to who shall make such public declaration and in what form).

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 

 

 

The bans established by the Competition Law in regard to agreements limiting competition and/or concerted actions shall cover only such agreements and actions which are performed by entities working on the same market (i.e. between competitors). The amendments also limit the applicability of the bans for concerted actions in connection to such entities, the joint share of which on the goods market does not exceed 20% and the share of each of which does not exceed 8%. However, in any case there is still a risk that the actions by the said entities may be qualified as coordination. The amendments establish fixed administrative fines for abuse of a dominant position, which did not lead to limitation/elimination of competition (however, this rule shall not apply to activities of monopolies to which turn-over fines shall still be applicable). The Third Antimonopoly Package also limits the possibility of qualification as coordination of economic activity only to such coordination of entities' activity by a third party, where such third party does not perform any activity on the same goods market as the market on which coordination is being performed. The new amendments increase thresholds currently established for preliminary approval of reorganization (merger, etc.) of legal entities: the balance sheet value of the total aggregate assets of the merging entities (including those of their respective groups of persons) shall exceed RUB 7 billion and the aggregate revenue earned by the merging entities (including those of their respective groups of persons) from the sale of goods during the last calendar year shall exceed RUB 10 billion. The Third Antimonopoly Package also clarifies the situation related to acquisition of a foreign company which has no legal presence in Russia, but supplies goods (renders services, performs works in) to Russia. Thus, if such sales exceed RUB 1 billion within one year preceding the transaction and the acquirer obtains more than 50% of voting shares (participatory interest) in a foreign company or obtains other rights conferring the ability to determine business conduct of a foreign company, or the right to perform the functions of its executive bodies, the preliminary FAS approval may be required. The new law introduces mitigating circumstances and aggravating circumstances when considering administrative cases in the field of competition/antimonopoly issues. A number of amendments are devoted to auctions. The new amendments suggest establishing a procedure for the consideration of complaints regarding the violation of the auction procedure and procedure for the execution of agreements as a result of an auction. It is also provided to establish the order of the calculation of administrative fines for the said violations on the basis of the value of the item put to auction. Besides, the Third Antimonopoly Package provides for a number of sanctions for agreements and concerted actions at auction. It is provided to establish administrative liability not only for non-submission of information to antimonopoly authorities as currently provided by the law, but also for untimely submission of such information to antimonopoly authorities;

Undoubtedly, the above-mentioned examples refer only to the amendments introduced by the Third Antimonopoly Package. It will bring important changes to the currently effective Competition Law of the Russian Federation and influence business activity on the Russian market.

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5. Costs of doing business 5.1.

Costs of starting a company

5.1.1.

Overview

Starting a business in St. Petersburg involves completing a series of legal activities. Russian companies, as well as branches and representative offices of foreign companies in Russia, must be registered with several authorities. Companies must be registered with the State Registration Authority (currently, tax authorities), which takes care of state registration and registration for tax purposes, as well as with the State Statistical Committee and three social funds. Branches and representative offices must be registered with the tax authorities and accredited as well as registered with the State Statistical Committee and three separate social funds. In St. Petersburg registration is carried out through the Unified Registration Center, which registers companies with all required establishments and authorities.59 In the preliminary phase, it is required to gather and draft all documents, which are to be filed with competent authorities (notarized and apostilled corporate documents of a foreign company, constitution documents of the newly established Russian company or business, etc.). Additional steps are necessary for Russian companies, branches, and representative offices to be fully operational, e.g. opening of bank accounts, development of a corporate seal, registration of the issuance of shares (for JSCs only) with the securities authorities, etc. You can establish a company with your own financial and human resources, however it is highly recommended to refer to the services provided by consulting, law or special registration companies to expedite the whole process.

5.1.2.

Costs and duties

The following state duties are applied while registering a company through the Unified Registration Center in St. Petersburg:60  

Individual entrepreneur / sole proprietorship State duty: 800 RUB Registration time: no more than 5 business days Legal entity (all types) State duty: 4,000 RUB Registration time: no more than 5 business days

The following costs may be incurred while registering and starting a company in Russia: 

59 60

Notary services Some documents submitted for registration have to be approved by notary Cost: starting at 200 RUB

For more information, please see Section 4.1 Establishing a legal presence Effective January 30, 2010

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 

Stamp In order to run a business all legal entities in Russia are required to have a company stamp Cost: starting at 400 RUB Bank account In order to run a business it is necessary to have a bank account Cost: varies depending on the bank Certification and other issues Certification might be required depending on the nature of your business and products Cost: starting at 2,000 RUB

5.1.3.

Contacts

Administration of the Federal Tax Service in St. Petersburg Unified Registration Center at Interdistrict Tax Inspection #15 10-12 Krasnogo Tekstilschika Street 191124 St. Petersburg, Russia Tel.: +7 812 335 14 03, 335 14 00 | Fax: +7 812 335 14 02 i784700@r78.nalog.ru www.r78.nalog.ru

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5.2.

Human resources

According to the Territorial branch of the Federal State Statistic Service (www.petrostat.gks.ru), average nominal salary in St. Petersburg constitutes 29,642 roubles (as of September 2011). In September 2011 real accrued salary calculated with consideration of consumer price index constituted 102.7% to the level of August 2011 and 103.5% to the level of September 2010.

5.2.1.

Average salaries by industry

Industry

September 2011, RUB

In % to August 2011

September 2010

Average level

Agriculture

27,770

101.5

112.5

93.7

Mining

41,810

116.3

100.4

141.0

Manufacturing

29,810

100.5

110.9

100.6

Electricity, gas and water production and distribution

36,389

97.9

109.0

122.8

Construction

26,499

99.1

107.7

89.4

Wholesale and retail trade; repair of motor vehicles, motorcycles and personal and household goods

23,624

98.9

109.2

79.7

Hotels and restaurants

16,751

108.2

109.1

56.5

Transport and communication

33,185

97.1

113.5

112.0

Financial activity

51,989

100.1

113.5

1.8 times

Real estate operations, rent and services

35,064

104.4

111.5

118.3

Public administration, military security, social insurance

29,727

108.2

103.1

100.3

Education

21,775

111.9

110.6

73.5

Health care and social services

24,881

105.6

110.1

83.9

Other community, social and personal services

28,998

117.5

125.9

97.8

Source: Territorial branch of the Federal State Statistic Service

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5.2.2.

Salary, benefits and compensation survey Information for the current chapter was developed and kindly provided by CASE

CASE conducts cross-industry and industry-specific surveys of salaries, benefits and compensations in St. Petersburg and other cities in Russia twice a year in spring and fall.

5.2.2.1. Sample characteristics 90 Russian and foreign companies engaged in different business sectors took part in a survey conducted in October-November 2011. Employers provided information on 154 positions of various levels in various professional fields. CASE analyzed salaries of more than 21 thousand employees. Type of company

Business area

6%

Russian

44%

Foreign

Production

34%

Industry / B2B

33%

FMCG, DCG

49%

Services

28%

IT – Telecom

17%

Retail

12%

50%

Joint

Size of company less than 100 employees in St.Petersburg

14%

100-500 employees 40%

46%

more than 500 employees

5.2.2.2. Salary raise In 2011 64% of the analyzed companies raised salaries for their employees. The average raise constituted 9-10%. Only 44% of the companies reported their intent to raise salaries in 2012. The planned average raise constitutes 8-10%. 60% of the companies reported their intent to re-examine salaries once a year, 9% - twice a year, 30% - without specific periodicity. Most of the companies reexamine their salaries in January, April or July. Pay raise percentage (from September 2010 to October 2011) Salary Total income

8.6% 6.8%

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5.2.2.3.

Bonuses

More than 70% of the companies pay periodic bonuses (monthly, quarterly) based on performance. Approximately 70% of the companies pay yearly bonuses. Share of bonuses and commissions in employees’ annual income

19%

14%

81%

86%

Production

Office

36%

64%

Sales Salary

19%

24%

81%

76%

Middle Top management management

Other income

5.2.2.4. Average salaries (as of October 2011) and personnel characteristics Position

Average salary, RUB (prior to individual income tax withholding)

Average monthly income (salary + bonuses), RUB (prior to individual income tax withholding)

Secretary

25,083

26,851

HR specialist

32,148

35,200

Accountant

35,359

38,615

System administrator

42,174

45,806

Advertising & marketing specialist

38,040

41,772

Customer representative

25,192

41,168

Sales assistant

15,942

24,016

Manufacturing line operator

23,924

28,624

Mechanic

32,493

37,374

Warehouse attendant

24,559

28,642

    

Average personnel turnover coefficient – 23% Average age of employees (operational personnel) – 35 years Training and development opportunities – 93% Availability of programs for attracting young specialists – 41% Cooperation with Universities – 84%

While 49% of the companies are not planning to change the number of employees in 2012, 43% intend to increase and 8% - to decrease the number of employees.

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5.2.2.5. Benefits, compensations and working conditions 84%

Financial assistance

54%

Meals Sport benefits

33%

Add. sick leave payments

46%

Add. vacation days

46%

Add. insurance

62% 79%

VHI

97%

Mobile phone* Company car*

70%

* for specific group of employees

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5.3.

Office, retail and warehouse market Information for the current chapter was developed and kindly provided by Jones Lang LaSalle

5.3.1.

Office market overview

5.3.1.1.

Supply

In 2011 modern office stock (Classes A and B) in St. Petersburg exceeded 2 million sq.m, 2400 including 523,500 sq.m of Class A and 1,502,200 sq.m. of Class B premises. Completions volume 2200 returned to average pre-crisis level, although it 2000 was lower than in 2008-2009, when over 1800 300,000 sq.m. were delivered annually. In 2011 1600 the total volume of completions reached nearly 1400 170,080 sq.m. Future office projects currently 1200 under construction are not numerous. Around 1000 320,000 sq.m of office space will be delivered to 800 the market by the end of 2013 not considering 600 delays. The volume of completions announced 400 for 2012, however, is only around 200,000 sq.m, 200 mainly due to a number of projects announced 0 for delivery in 2011 being delayed. The 2004 2005 2006 2007 2008 2009 2010 2011 2012F geographical distribution of new supply in the Class A Class B next two years is split between the central part of the city and Moskovsky district of St. Petersburg, where over 30% of future supply is announced for delivery. Class A&B stock dynamics

th.sq.m

5.3.1.2.

Demand

After the first quarter of 2011, when significant amount of office space was absorbed via purchases, owner-occupied construction and 140 lease, the city witnessed subdued activity from tenants. Even at the year-end normal spike in 120 tenants’ activity was not observed. In 2011 net 100 absorption figures for Classes A and B reached 80 about 236,800 sq.m, whereas in 2010 the annual volume of net absorption was 173,000 60 sq.m. 40 Sector wise, the most active companies in the market were those from Wholesale & Retail 20 industry with 24% share, Construction and 0 Mining & Exploration industries with 16% and -20 13% respectively. Recent activity of Construction sector confirms its recovery after the crisis. At the same time Banking & Finance Completions Net absorption sector remains subdued, operating mainly in the B2C segment and leasing street-retail premises. IT companies were also active on the market in 2011. th.sq.m.

148

Q3 2011

Q1 2011

Q3 2010

Q1 2010

Q3 2009

Q1 2009

Q3 2008

Q1 2008

Q3 2007

Q1 2007

Completions and net absorption

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5.3.1.3. USD/sq.m/ year

Market balance and rents Rent and vacancy rate dynamics

800

30%

700

25%

600 20%

500 400

15%

300

10%

200 5%

100 0

0% 2004 2005 2006 2007 2008 2009 2010 2011

Base rent, Class A Base rent, Class B Vacancy rate (R axis)

Since the beginning of the year the average vacancy rate has decreased from 19.7% to 13.5%. At the end of 2011, the volume of available space was around 270,000 sq.m. Potential tenants remain price-sensitive, which limits rental growth. In 2011 rental rates remained stable with only minor changes explained mainly by currency rate at USD 320400 for Class A and USD 240-320 for Class B office buildings. Slight growth within 5% for rouble-denominated rents was observed throughout the year. Prime office rents rose from USD 500 to USD 550 per sq.m/year (excluding VAT and OpEx). Further growth is expected to be uneven due to high volumes of remaining available space.

5.3.1.4. Outlook Further market development will be highly dependent on the general economic conditions in the country, which in turn influence demand for office space. The expected higher level of completions will result in sustained vacancy rates. The current elevated level of available space will also limit potential rental growth. Real rental increase is expected to be at 5-7% with the most popular office properties demonstrating even greater increases.

Stock at the end of year (thousand sq.m) Completions (thousand sq.m) Vacancy rate (%)

2004

2005

2006

2007

2008

2009

2010

2011

506.7

634.8

821.3

997.2

1,402.7

1,713.6

1,825.6

2,025.7

192.3

128.1

186.5

175.9

405.6

310.9

111.9

170.08

5.0

5.0

6.1

5.8

15.0

25.9

19.7

13.5

500

600

800

900

1,000

600

500

550

Prime base rent (USD/sq.m/year) Source: Jones Lang LaSalle, 2011

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5.3.2.

Retail market overview

5.3.2.1.

Supply Shopping center stock

th. sq.m.

2000

14% 12%

1600

10% 1200

8%

800

6% 4%

400

2% 2013F

2012F

2011

2010

2009

2008

2007

2006

2005

0% 2004

0

Annual completions Stock at the beginning of the year Vacancy rate (R axis)

In 2011 the quality shopping center stock reached almost 1.6 million sq.m. The level of completions in 2011 exceeded average retail volumes delivered in 2009-2010 (i.e. 100,000 sq.m.) and reached 200,000 sq.m. Seven new quality shopping centers were delivered to the market in 2011, with the largest projects being Leto SEC (79,000 sq.m.) and City Mall 2nd phase (30,400 sq.m.). Around 200,000 sq.m. of new quality retail space is planned for delivery in 2012 not considering possible delays. The year 2011 was characterized by a number of market trends, including redevelopment of existing outdated retail schemes and concentration of new shopping centers of average size (from 20,000 to 40,000 sq.m. of leasable space) near new metro stations, whereas larger formats have been focused on actively developed residential zones.

Both projects that were frozen in crisis period, and new retail schemes are once again being actively developed. Approximately 460,000 sq.m. of retail space will be delivered to the market in 20122013, although previously the estimations of future pipeline were more moderate.

5.3.2.2. Demand Real turnover growth in January-October 2011 showed low but positive values, increasing 2.6% YoY in real terms. Real income growth dynamic was quite moderate as well, at 3.6% YoY based on the first nine months in 2011, whereas precrisis indicators rarely showed annual growth values below 10%.

Retail turnover and income dynamics 80% 60%

40% 20%

-40%

Real income growth, % YoY

Jun 11 Sep 11

Mar 11

Dec 10

Sep 10

Jun 10

Mar 10

Dec 09

Jun 09

Sep 09

Mar 09

Dec 08

Jun 08

Sep 08

Mar 08

-20%

Dec 07

0%

Lower indicators such as these may limit the interest of international newcomers to the market, although a number of retailers, who have already started their activity in Moscow, are considering St. Petersburg market for further development as well. Those brands, that have not entered the Russian market yet, are opting to wait for the economic situation to become clearer.

At the same time, both local and international retailers which are already present in the city, are expanding their presence. Their expansion is restrained, however, by the lack of quality retail space in popular shopping centers. In 2011 the average vacancy rate declined from 7% to 6%. Retail turnover real growth, % YoY

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5.3.2.3.

Rents Prime rental rates in high quality shopping centers remained at USD 2,000 per sq.m. throughout the year, whereas rents for some types of tenants, such as cafes and restaurants, entertainment, supermarkets and hypermarkets, showed growth between 1020% depending on segment.

Prime base rents, USD/sq.m/year Budapest Hamburg Warsaw Berlin Prague St. Petersburg

Paris London Moscow 0

500 1000 1500 2000 2500 3000 3500 4000 4500

Turnover rent, as an alternative for fixed rents, remains as an option in leasing contracts. However, the target turnover rent is rarely achieved, so fixed rate is applied more widely than that based on turnover. Rents denominated in USD or EUR often specify a fixed lower limit of the exchange rate. Roubledenominated rental contracts usually include an annual increase of 5-10%. Foreign developers are using LIBOR and HICP indices for rental indexation.

5.3.2.4. Outlook The lack of retail turnover growth and instability of the world economy might force retailers to slow down their expansion plans. There will be a limited number of new brands entering market in 2012. Competition between brands already operating on the market will continue to strengthen as long as the developers will be considering them as potential occupiers in the situation of lack of new international retailers. As a result, prime rents are expected to show a raise during next year. The rental increase is expected to reach about 5-10% in 2012. 2004

2005

2006

2007

2008

2009

2010

2011

Stock at the end of year (thousand sq.m) Completions (thousand sq.m) Vacancy rate (%)

117.6

186.2

809.5

101.5

1,194.8

1,234.8

1,380.5

1,581.1

61.7

68.6

623.3

201.0

184.4

40.0

145.7

200.6

0.5

0.5

0.7

1.0

3.0

13.0

7.0

6.0

Prime base rent (USD/sq.m/year)

2,000

2,100

2,400

3,000

3,000

1,800

2,000

2,000

Source: Jones Lang LaSalle, 2011

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5.3.3.

Warehouse market overview

5.3.3.1.

Supply Stock and vacancy rate dynamics

th.sq.m.

1800

25%

1500

20%

1200 15% 900 10%

By the end of 2011, quality warehouse stock in St. Petersburg reached 1.76 million sq.m. Four Class B warehouse projects were delivered to the market with the total leasable area of 43,800 sq.m, including the owner-occupied complex of 19,800 sq.m. Annual supply was very low, as there were no speculative warehouse complexes delivered to the market in the previous three quarters of 2011.

600

5.3.3.2.

2012F

2011

2010

2009

2008

2007

2006

2005

2004

After the construction boom of 2007-2008, when half of the existing supply was delivered, 5% 300 developers are not eager to return to active expansion. Currently, there is a small number of 0 0% projects under construction. However, some developers resumed work under previously stalled projects or announced new projects for Existing stock Vacancy rate (R axis) 2012-2013. At the same time, key market players prefer to work on ‘built-to-suit’ projects. This trend is expected to grow in the nearest two years as a number of such projects is in negotiation stage now.

Demand Demand for new warehouse space in 2011 was comparable with 2010. Net absorption reached around 152,000 sq.m. from the beginning of 2011, with the share of H2 deals constituting more than half of the total volume. The total volume of deals was even higher. The most popular size of a single deal was still 5,00010,000 sq.m. Larger spaces were also in demand. One third of all deals closed in 2011 were in a range of 15,000-20,000 sq. m.

Prime rental rates

USD/sq.m/y ear

160 140 120 100 80 60 40 20

152

2011

2010

2009

2008

2007

2006

2005

2004

2003

0

In January-September 2011 the most active occupiers on the St. Petersburg warehouse market were manufacturing, and retail and distribution companies. Logistic companies became more active in the end of the year, and as a result the volume of deals in this segment reached more than 30% (62,000 sq. m) of all space leased in quality warehouse complexes from the beginning of 2011.

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5.3.3.3.

Market balance and rents The vacancy rate has been declining since the beginning of 2010. In 2011 it went down from 16% in the beginning of the year to 4% in the end of the year. This was a result of supply/demand misbalance, when very low completion level was accompanied by high absorption level throughout 2011. Currently, the volume of available space in quality warehouse projects is well below 100,000 sq.m.

Warehouse demand breakdown by company name 2011 2010 2009 2008 2007 2006 0%

20%

40%

60%

80%

100%

Logistic Manufacturing Retail and distribution Other

Stable growth of demand resulted in rental increase. In 2011 rental rates increased from USD 95-105 to USD 110-120 per sq.m/year showing annual growth of 5-10% on average and up to 15% for the most demanded properties. As the volume of available space remains limited, rent is expected to grow throughout the next year as long as economic situation remains stable.

5.3.3.4. Outlook Trends observed during the last year will continue in 2012. Vacancy rate will continue to decline due to the limited number of projects planned for delivery to the market. Rental rates will increase with the same speed as in 2011 showing 5-10% growth per year. A tangible lack of class A premises is expected as only two warehouse projects with the total leasable area of 50,000 sq.m. are planned to enter the market. Occupancy rate in these projects is already close to 50%.

Stock at the end of year (thousand sq.m) Completions (thousand sq.m) Vacancy rate (%)

2004

2005

2006

2007

2008

2009

2010

2011

118.3

460.8

595.8

1,081.7

1,511.9

1,644.1

1,717.9

1,756.7

110.3

342.5

135.0

485.9

430.2

132.1

73.8

43.8

0.1

0.3

0.5

1

19.7

22.3

16.2

4.4

110

115

125

150

110

90

105

120

Prime base rent (USD/sq.m/year) Source: Jones Lang LaSalle, 2011

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5.4.

Communication

You can easily find all communication channels to suit your business needs in St. Petersburg. Providers offer various telephone, mobile and internet services, depending on your location (technical availability) and needs. 

Stationary and mobile telephone networks are well developed in St. Petersburg. Quality phone coverage is available at affordable prices.61 Landline communications are available from a number of operators.

Most mobile operators in St. Petersburg run on GSM and CDMA 2000 networks. GSM networks are mostly widely used and cover all parts of the city. CDMA offers quality communication as well as high-speed Internet access. The largest GSM operators are Beeline, Megafon, MTS, Tele2; CDMA 2000 – Skylink.

IP calling cards are intended for international, national and local calls. You can use the following cards to optimize you international communication costs – Apollo Phone, Arctel, Master, Metrocom, Peterstar, Phoneclub, Web plus, West call.

Virtually all forms of technology for Internet connections are available in the city. Depending on your location, it is possible to obtain a necessary connection type, including dial-up connection, ADSL, dedicated channels, Wi-Max. Free or paid Wi-Fi hotspots can be accessed at the airport, major hotels, shopping and office centers & restaurants.

61

Detailed information on tariff plans and services can be found on company’s websites.

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5.5.

Utilities

Utility prices (electricity, water, heating and gas) for business as well as consumer purposes in Russia are regulated by the state. In St. Petersburg the regulating bodies are the Regional Energetics Commission of St. Petersburg Government and the Tariff Committee of St. Petersburg Administration.

5.5.1.

Electricity

The following electricity tariffs are effective beginning January 1, 2012 and ending June 30, 2012: Grades and zones

Units

Tariffs*

1 grade tariff

RUB/kW per hour

2.80

Night zone

RUB/kW per hour

1.71

Day zone

RUB/kW per hour

2.81

Tariffs varied per day/night zones

*Inclusive of VAT. Tariffs provided for residential customers. Source: Tariff Committee of St. Petersburg Administration.

5.5.2.

Water supply and water discharge

The following water tariffs by the State Unitary Enterprise “Vodokanal of St. Petersburg” are effective beginning January 1, 2012 and ending December 31, 2012: Type of customers Population

Units RUB per cubic meter RUB per cubic meter

Other

Tariffs* Drinking water 15.78

Technical water

18.70

Water discharge 15.78

3.38

21.74

* Tariffs (with the exclusion of residential customers tariffs) are indicated exclusive of VAT. Tariffs provided for residential customers are valid till June 30, 2012. Source: Tariff Committee of St. Petersburg Administration.

5.5.3.

Heating

The following heating tariffs are effective beginning January 1, 2012 and ending June 30, 2012: Type of customers

Units

Tariffs* Hot water

Customers (that pay for heat generation and transfer) Population

Steam

RUB per hectocalory

1,207.34

1,207.34

RUB per hectocalory

1,424.66

* Tariffs (with the exclusion of residential customers tariffs) are indicated exclusive of VAT. Source: Tariff Committee of St. Petersburg Administration.

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5.5.4.

Natural gas

Natural gas tariffs may vary depending on location, season, volume of consumption and other issues. The following natural gas tariffs are effective beginning January 1, 2012: Units Natural gas

RUB per 100 cubic meters

Tariffs* 01.01.2012 – 30.06.2012 3,805.78

01.07.2012 – 31.12.2012 4,375.07

* Inclusive of VAT. Tariffs provided for residential customers. Source: Tariff Committee of St. Petersburg Administration.

5.5.5.

Gasoline and diesel fuel

Fuel prices are not regulated by the state. Numerous local and international supplies, including BP, Shell and Statoil, operate in St. Petersburg. The average retail prices of gasoline and diesel fuel in St. Petersburg are provided in the following table. Fuel

Units

Average retail price*

Gasoline A76 Ai 92 Ai 95 Diesel

RUB per liter RUB per liter RUB per liter RUB per liter

25.79 26.48 28.60 28.13

* Retail prices (inclusive of VAT) as of December 2011. Source: Committee for Economic Development, Industrial Policy and Trade.

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6. SME support 6.1.

Overview

St. Petersburg has been and still remains the leader in the development of small businesses among other regions of the Russian Federation. During the recent years small business has been gaining more weight in the local economy. According to the National institute for system studies of entrepreneurship, St. Petersburg is ranked as the leader along the number of key indicators:   

#1 region in the number of small businesses (368.7) per 100 thousand residents #1 region in the volume of small business turnover (312%) per capita in percentage of the average in the Russian Federation #2 region in the number of residents employed in small businesses (345.3 thousand).62

As for world rankings, St. Petersburg is ranked 18th in the number of small businesses per 100 thousand residents and 33d in the share of residents employed in small businesses. These indicators are three times and 1.3 times higher than the respective average Russian indicators.63

6.2.

Definition of SME – EU vs. Russia

Small and medium-sized enterprises (SMEs) are non-subsidiary, independent firms, which employ less than a given number of employees. This number, however, varies across countries. In the words of the Organization for Economic Co-operation and Development (OECD) Glossary of Statistical Terms "the most frequent upper limit designating an SME is 250 employees, as in the European Union". Some countries set the limit at 200 employees, while the United States considers SMEs to include firms with less than 500 employees. In most OECD countries small enterprises are those with less than 50 employees, while micro-enterprises have at most 10 or, in some cases, 5 employees. In addition to this, financial assets are also used to define SMEs.64 The federal law #209-FZ “On small and medium business development in the Russian Federation” which defines small, medium-sized and micro enterprises was adopted in 2007. The following table summarizes the differences in definitions of medium-sized, small and micro enterprises in Russian and the European Union.

Indicators

Medium-sized

Small

EU

EU

Russia

Micro Russia

EU

Russia

Headcount, and

250

101-250

50

15-100

10

1-15

either: Turnover

€ 50 mln

€ 10 mln

€ 43 mln

RUB 400 mln ≈ € 9.6 mln -

€ 2 mln

Or: Balance sheet total

RUB 1 bln ≈ € 24 mln -

RUB 60 mln. ≈ € 1.4 mln -

€ 10 mln

€ 2 mln

Source: European Commission. Enterprise and Industry. Small and medium-sized enterprises (SMEs): SME Definition; Federal law #209-FZ “On small and medium business development in Russian Federation”.

62

As of the beginning of 2011 Committee for Economic Development, Industrial Policy and Trade 64 OECD Glossary of Statistical Terms (www. stats.oecd.org/glossary). 63

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6.3.

Statistics

Number of small businesses (thousand units): 261.5

301.4

276.3

227.8 180.8

01.01.2007

01.01.2008

01.01.2009

01.01.2010

01.01.2011

Source: Committee for Economic Development, Industrial Policy and Trade

Type of small businesses (thousand units):

207

189.7

185.1 162.4 126.9 53.9

01.01.2007

76.4

65.4

01.01.2008

01.01.2009

86.6

94.4

01.01.2010

01.01.2011

Individual entrepreneurs Companies Source: Committee for Economic Development, Industrial Policy and Trade

Small businesses by sector of economy (2010):

4%

Wholesale and retail trade, repair of motor vehicles and household goods Manufacturing Construction

20% 4%

45%

Hotels and restaurants Transportation and communication Other communal, social & personal services

9% 8% 3%

8%

Real estate, rental & leasing and other services Other

Source: Committee for Economic Development, Industrial Policy and Trade

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Turnover of small businesses (billion roubles):

1,266

1,086.4 981.3

927.8 608.7

2006

2007

2008

2009

2010

Source: Committee for Economic Development, Industrial Policy and Trade

Investment in fixed capital of small businesses (million roubles):

01.01.2011

542

01.01.2010

406 257

01.01.2009 01.01.2008

749

1,098 407

2,401 2,280 857

1,731

991 Manufactruring

2,253 Trade

Other

Source: Committee for Economic Development, Industrial Policy and Trade

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6.4.

SME support and development programs

Small business development program has been functioning in St. Petersburg since 2008. A number of special programs have been implemented since the launch of the program, including the establishment of the Venture Fund, City Business Incubator, Fund for Small Business Credit Assistance, and Enterprise Europe Network - St. Petersburg branch. The city has managed to significantly reduce the problems of limited financial resources for startups, high rental costs, unfavorable credit conditions and complexities of new market entry. During the program implementation period the number of small businesses has increased by almost 70% (from 181 thousand in 2007 to 301 thousand in 2011).65

6.4.1.

Implementation of the Action Plan aimed at development and support of small business in St. Petersburg (2008-2011)

The priorities of the Action Plan implemented during the period of 2008-2011 included:       

Development of human resources potential; Financial support; Strengthening of market positions; Development of social partnership; Information support; Increasing public significance; Improving information management of authorities.

The total financing of the program amounted to 4,078.4 thousand roubles. In 2010 the Action Plan stipulated the implementation of 30 activities, which included both direct and indirect support of small businesses. 879.7 million roubles were allocated for the implementation of the activities in 2010. The following 9 special programs of the Action Plan envisaged direct and indirect subsidizing of parts of expenditures incurred by small businesses:       

Business loans from commercial banks for small businesses; Rental subsidies for separate groups of businesses; Participation in exhibitions and fairs; Leasing of fixed assets; Grid connection subsidies; Small business start-up grants; Export subsidies for small businesses manufacturing export products or/and works, services.

Manufacturing enterprises represent a priority target group of the subsidy program. In 2010 manufacturing enterprises were granted 22,7445.9 thousand roubles in subsidies, thus accounting for 62.6% of the total volume of all subsidies for small businesses.66

65 66

Committee for Economic Development, Industrial Policy and Trade Committee for Economic Development, Industrial Policy and Trade

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The results of the implementation of the Action Plan aimed at development and support of small businesses in St. Petersburg (2008-2011) are presented in the following table. Major problems

Program solution

Results

Limited financial resources

Special programs

1 bln roubles in subsidies granted to 3,787 small businesses 1,151 subsidies granted to the amount of 240 mln roubles 859 contracts of guarantee to the amount of 2.7 bln roubles which allowed to secure 6.2 bln roubles in credits More than 100 small companies have undergone business incubation period 1,361 purchase and sale agreements concluded More than 2,500 specialists educated and trained Services provided to 800 small businesses

Special credit assistance program Establishment of the Fund for Small Business Credit Assistance High rental costs

Establishment of the First City Business Incubator Buy-back of rental premises

Shortage of qualified human resources Complexities linked to new market entry Administrative control issues

Special program - Regional University of Small Business Establishment of Enterprise Europe Network - St. Petersburg Establishment of the Public Council on Small Business Development under the auspices of the Governor of St. Petersburg

Effective dialogue pursued between businesses and authorities

Source: Committee for Economic Development, Industrial Policy and Trade

6.4.2.

Program for small and medium business development in St. Petersburg for 2012-2015

A new Program for small and medium business development in St. Petersburg envisages the implementation of the following major goals till 2015:   

Increasing the comfort of living Promoting affordability and diversified assortment of products and services provided to the residents of St. Petersburg Increasing self-employment among population Increasing the number of work places, growth in the number of population employed in small business Changing the sectoral structure of small business Increasing the share of manufacturing and innovative sectors, growing small businesses into medium-sized businesses, thus increasing budget tax receipts.

The Program’s budget constitutes around 3.4 billion roubles for the period from 2012 till 2015 with the largest share allocated for the financing of special subsidy programs as well as placement of government contracts with small and medium-sized business. The Program envisages a 1.5% increase in the share of products (works, services) produced by small and medium-sized businesses in the total GRP volume as well as a 5% increase in tax receipts from small and medium-sized businesses, and a 10% increase in the share of innovative and manufacturing enterprises. Small and medium-sized business is to increase the number of work places by 7%, which will allow to increase the share of population employed in this sector by 2.5%. The growth in the average salary paid by small and medium-sized businesses is to constitute 10%.67

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The major activities implemented in the framework of the Program are presented in the following table: Focus of the Program 1. Improved access to financial resources

2. Strengthening of SMEs positions at intraregional, interregional and international markets

3. Development of social partnership 4. Development of human resources potential

5. Increasing public significance of SMEs 6. Improved information support

Types of support Special programs: Leasing of fixed assets Business incubator Business loans from commercial banks for small manufacturing businesses Subsidies for small arts & crafts businesses Grid connection subsidies Small business start-up grants Franchising costs subsidies Increasing the assets of the Fund for Small Business Credit Assistance Increasing the assets of the Fund for Venture Investments Development into Small Scientific and Technology Businesses Special programs: Enter the regional markets Exhibitions and trade fair activities Certification Intellectual rights protection Enterprise Europe Network – St. Petersburg Export subsidies for small businesses manufacturing export products or/and works, services Improvement of energy efficiency of SMEs production Subsidies: Support of SMEs pursuing innovative activities within a cluster through acquisition of manufacturing and technological equipment Development of the localization, import substitution and subcontracting system Establishment of the regional center for the coordination of export-oriented SMEs Functioning of the Public Council on Small Business Development under the auspices of the Governor of St. Petersburg and specialized commissions Special programs: Regional University for Small Business Basics of entrepreneurship for school students Women entrepreneurship support Technological internships Promoting youth entrepreneurship Popularization of entrepreneurship; Support of business initiatives of socially unprotected groups of population -

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Complex monitoring of SMEs Collection, analysis, systematization and distribution of legal, economic, marketing and other business information for SMEs via Internet Development and management of the state information system of St. Petersburg “St. Petersburg’s Register of SMEs and business support infrastructure”

Source: Committee for Economic Development, Industrial Policy and Trade

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6.4.3.

Further information

Further details are available at the official website of the Program for Small Business Development in St. Petersburg at www.spb-mb.ru.

6.4.4.

Contacts

Committee for Economic Development, Industrial Policy and Trade 16 Voznesensky prospect 190000 St. Petersburg, Russia Tel.: +7 812 576 00 01 | Fax: +7 812 570 35 54 info@cedipt.spb.ru | www.cedipt.spb.ru | www.spb-mb.ru

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7. Contacts of the business support infrastructure 7.1.

Overview of the business support infrastructure in St. Petersburg

Business support infrastructure provides extensive opportunities for business development during the economic downturn and support for securing future economic prosperity and growth. This section of the guide summarizes the existing support from government to help your business succeed, including financial support, advice, consulting, information, skills training, etc.

7.2.

Authorities

7.2.1.

Committee for Economic Development, Industrial Policy and Trade

The Committee for Economic Development, Industrial Policy and Trade is tasked with long-term objectives of development of growing economy with high level of competitiveness and share of human capital. The Committee is comprised of the following 6 blocks each formed of specialized departments and units: Economic Planning; Development of Industry, Agri-Industrial Complex and Economic Security; Support of Industry, Small and Medium-Sized Entrepreneurship; Development of Innovations and Investment Attraction; Consumer Market and Licensing; Improvement of Public Contracting, External Economic Activity, Development of Medical and Pharmaceutical Projects.

Tasks        

Implementation of socio-economic development program of St. Petersburg; Development and implementation of programs aimed at supporting industry, small and medium-sized businesses in St. Petersburg; Support of implementation of investment projects in St. Petersburg; Implementation of innovation policy in St. Petersburg; Implementation of cluster policy; Regulation of trading activities; Licensing of certain activities; Organization and implementation of citywide celebrations, forums and trade fairs.

The Committee is also entrusted with evaluation and coordination of other committees of the Government of St. Petersburg as well as district administrations in the above-mentioned areas. Together with the Finance Committee, Tariff Committee and Labor and Employment Committee, Committee for Economic Development, Industrial Policy and Trade forms the financial and economic sector of the Government.

Contacts Committee for Economic Development, Industrial Policy and Trade 16 Voznesensky prospect 190000 St. Petersburg, Russia Tel.: +7 812 576 00 01 | Fax: +7 812 570 35 54 info@cedipt.spb.ru | www.cedipt.spb.ru

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7.2.2.

Committee for External Relations

The Committee for External Relations of the Government of St Petersburg is tasked with implementation of the government policy of St. Petersburg in the sphere of development of external relations and interregional cooperation. The Committee includes the following specialized divisions and departments: State Protocol Division; Department for Europe, North America and Australia; Asian, African and Latin American Countries Department; Department for Coordination of State Programs for Interethnic Relations, Cooperation with Compatriots Abroad and Regions of the Russian Federation.

Tasks      

Implementation of the government policy of St. Petersburg in the sphere of the development of external relations of St. Petersburg, interregional cooperation of St. Petersburg Coordination of activities in the development and implementation of international technical assistance and business cooperation programs, including those related to the development of the city economy, social sphere, education, culture and health care in St. Petersburg Coordination of activities in the organization of participation of citizens and organizations in interregional and international conferences and other interregional and international events held by the executive agencies of the St. Petersburg government Implementation of the government policy aimed at supporting and developing ethnic cultures, languages, traditions and customs of the communities residing in St. Petersburg Organization of work aimed at supporting compatriots residing abroad and using their potential for the development of relations with foreign countries Other issues of foreign relations of St. Petersburg in compliance with the legislation in force.

Contacts Committee for External Relations of St. Petersburg Smolny 191060 St. Petersburg, Russia Tel.: +7 812 576 71 13 | Fax: +7 812 576 76 33 kvs@gov.spb.ru | www.kvs.spb.ru

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7.3.

Investment support

7.3.1.

St. Petersburg Investment Promotion Agency (St. Petersburg State Institution “City Agency for Industrial Investments”)

St. Petersburg Investment Promotion Agency (St. Petersburg state institution “City Agency for Industrial Investments”) has been working on implementation of St. Petersburg investment policy and providing integrated support of investment projects for 7 years. The Agency has the status of a duly authorized organization of the St. Petersburg Government for attraction of investments into the City. The mission of the Agency is to increase the investment potential of St. Petersburg and improve its competitiveness both on domestic and external markets. The Agency liases closely and personally with every customer and renders full spectrum of investor support services free of charge.

Services The Agency renders the following services: 

Information and consulting support at all stages of investment projects;

Providing information necessary to make decisions on investment, e.g. conditions for doing business in St. Petersburg, availability of sites and condition of infrastructure facilities, applicable legislation and forms of state support, possible partners and project financing sources;

Selection of land plots most suitable for project implementation;

Arrangement and carrying out of meetings with participation of stakeholders and project implementation organizations, resolution of current and extraordinary matters;

Support of investment projects at all stages of design, construction and commissioning of facilities;

Coordination of investor interaction with executive agencies of the State Government in St. Petersburg, subordinate institutions and other entities participating in projects;

Assistance in obtaining necessary approvals (statements, permitting documents) from authorized agencies and organizations;

Preparation of documents for obtaining initial permits and town-planning documents for designing and construction, commissioning of construction/ reconstruction facilities, execution of property rights for land plots and real property facilities.

Contacts St. Petersburg Investment Promotion Agency St. Petersburg State Institution “City Agency for Industrial Investments” 88-90 A Griboedov Canal Embankment 190068 St. Petersburg, Russia Tel.: +7 812 320 50 16 | Fax: +7 812 320 50 15 gapi@spbgapi.ru | www.spbgapi.ru

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7.4.

SME business cooperation support

7.4.1.

Enterprise Europe Network – Module A Branch – St. Petersburg The Enterprise Europe Network (EEN) is a key instrument in the EU's strategy to boost growth and jobs. Bringing together 570 business support organizations from 49 countries, we help small companies seize the unparalleled business opportunities in the EU Single Market. ENN’s mission lies in helping small businesses make the most of the business opportunities in Russia and the European Union.

Enterprise Europe Network - Russia, Gate2Rubin Consortium, Module A Regional Center – St. Petersburg is co-financed by the Government of the Russian Federation and the Government of St. Petersburg and is operated by St. Petersburg Foundation for SME Development since 2008.

Services The EEN branch in St. Petersburg focuses on providing business support to Russian companies. Our services to foreign companies are provided free of charge and are aimed at fostering business cooperation: 

Events Together with our partners we implement a number of international and national events aimed at developing and promoting international business cooperation.

Basic partner search In order to find business partners, suppliers or subcontractors in St. Petersburg, please contact your local EEN branch and our colleagues will guide you through the partner search process.

Partners, business offers and products from St. Petersburg You can find business offers and products from companies located in St. Petersburg on our portal at www.doingbusiness.ru .

Information support Our internet portal “Doing business in St. Petersburg” is an entry point for international SMEs, investors and other parties interested in pursuing trade, outsourcing, investment activities and starting business in St. Petersburg.

Extensive information on our services as well as key business and investment issues is available in English at www.doingbusiness.ru.

Contacts Enterprise Europe Network – Russia Gate2Rubin Consortium, Module A Regional Center – St. Petersburg 14 Izmaylovsky prospect 190005 St. Petersburg, Russia Tel.: +7 812 325 84 16, 325 8351, 575 04 80 | Fax: +7 812 712 66 07 info@enterprise-europe-network.ru | www.doingbusiness.ru

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7.5.

SME support

7.5.1.

St. Petersburg State Institution “Center for Business Development and Support” The Center of Business Development and Support (CBDS) aims to improve the quality and accessibility of state services for juridical entities and individual entrepreneurs. CBDS was established in 2010 and is managed by the Committee for Economic Development, Industrial Policy and Trade.

Services 

Do you need to get permit, license, agreement to develop your business? Make use of the services provided at the Multi-Services Center. The Multi-Services Center started to provide various state services for entrepreneurs on the basis of one-stop shop in cooperation with 11 executive authorities of St. Petersburg from January 2012.

Would you like your company to participate in state support programs? CBDS advises SMEs on state support programs, such as crediting by commercial banks, backing the costs caused by product exports, protection of intellectual property, certification, acquisition of fixed assets on leasing, energy efficiency. CBDS contributes to involvement of St.Petersburg’s SMEs in the process of creating high-tech products on subcontract basis paving the way for localization of the leading foreign companies. Further, the Center implements the mechanism of import substitution in cooperation with large -scale enterprises of St. Petersburg.

Do you have any ideas? Do you want to create or have you already been creating new products and technologies? CBDS facilitates the implementation of measures aimed at stimulating R&D activities and contributes to the development of Technological platforms. The Center provides support to St. Petersburg companies participating in competitions for funding of innovative projects by the programs of innovative development of companies with state participation, government corporations, federal state unitary enterprises, as well as in federal programs. The Center cooperates with development institutions and St. Petersburg organizations tasked with ensuring continuous financial and non-financial support for innovative projects. CBDS promotes the creation of R&D-centers in St. Petersburg.

The Center conducts educational seminars, panel discussions, meetings and consultations as well as assists in the organization of fairs and exhibitions. Extensive information on services and activities is available at www.crpp.ru.

Contacts St. Petersburg state institution “Center of Business Development and Support” 16 Voznesenski prospect 190000 St.-Petersburg, Russia Tel.: +7 (812)576-25-89 | Fax: +7 (812)576-25-89 info@crpp.ru | www.crpp.ru Multi-Services Center let. O 10-12 Krasnogo tekstilschika street Tel.: +7 (812) 417-31-31, 417-31-30 Business hours: M-Th 9:30 am to 5.30 pm; Fri 9.30 am to 4.30 pm, Sa-Sun closed.

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7.5.2.

Public Council on Small Business Development under the auspices of the Governor of St. Petersburg

Consulting and advisory body under the auspices of the Governor of St. Petersburg on the issues pertaining to the realization of government policy in the sphere of small business development and support. Public Council unites representatives of the most important public business organizations, including the Union of Industrialists and Entrepreneurs of St. Petersburg, St. Petersburg Chamber of Commerce and Industry, OPORA RUSSIA, St. Petersburg Union of Entrepreneurs, St. Petersburg branch of «Business Russia», Merchant club of St. Petersburg and many others.

Services 

Rendering assistance to executive authorities in the implementation of government policy in the sphere of small business development and support;

Aligning interests of executive authorities and small business associations regarding the issues of implementation of socio-economic development policy of St. Petersburg;

Developing recommendations on protection of rights and interests of small businesses in the course of development and implementation of economic, proprietary, city planning and social policy;

Informing the Governor of St. Petersburg, Government and other executive authorities on the most acute problems of small business development;

Developing positive image of small business, raising public confidence in businesses, developing business culture and business ethics.

Public Council actively carries out analyses of legislative acts regulating business activities. A lot of attention is also paid to information support. Public Council publishes periodical «Public Council Newsletter», presents TV program «Small business of a big city», organizes 4 city competitions – «Best entrepreneur of St. Petersburg», «Young, bold, ambitious», «Business lady Petersburger», «Mass media about small business». Public Council regularly holds seminars, conferences, round tables on acute issues for businesses.

Contacts Public Council on Small Business Development under the auspices of the Governor of St. Petersburg 46/5 Mayakovskogo Street 191014 St. Petersburg, Russia Tel.: +7 812 576 25 66, 576 26 59, 576 26 58 | Fax: +7 812 273 58 45 sovet@osspb.ru | www.osspb.ru

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7.6.

Financial support

7.6.1.

Nonprofit organization “Fund for Small Business Credit Assistance” Nonprofit organization “Fund for Small Business Credit Assistance” was established by the Government of St. Petersburg in 2007. The Fund carries out two programs aimed at supporting small and medium businesses in St. Petersburg:

Services 

Credit guarantee for businesses to the amount of 50% of the total credit amount and up to 12 million roubles Conditions of the credit guarantee program: - Credit agreements concluded for at least 3 months - Fund’s commission: 1.75% per annum - 37 participating banks Eligibility requirements: - Small and medium-sized businesses - At least 3 months of business activity prior to the date of application - No breaches of previously concluded credit agreements, loan agreements, leasing, etc. 6 months prior to the Fund’s guarantee application

Loans to individual entrepreneurs and legal entities to the amount of 50,000-1,000,000 roubles at 10% interest per annum Conditions of the micro finance program: - Application review period: 3 to 5 days - Percentage accrues on the actual amount outstanding - Overpayment for 12 months: 5.5% - Maturity: 3 to 12 months - Repayment any time, commission free - Individual approach to every customer - Standard package of documents Means of loan guarantee: - Business owner guarantee - Loans up to 100,000 roubles: business owner guarantee - Loans over 100,000 roubles: guarantee and collateral (motor vehicles, property, bank guarantees, etc.)

Contacts Fund for Small Business Credit Assistance let. A, 46 Mayakovskogo Street 191014 St. Petersburg, Russia Tel.: +7 812 576 25 75 | Fax: +7 812 273 49 55 credit-fond@bk.ru | www.credit-fond.ru

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7.6.2.

Nonprofit organization “Fund for Venture Investment Development Assistance for Small Science and Technology Enterprises of St. Petersburg”

The Fund for Venture Investment Development Assistance for Small Science and Technology Enterprises of St. Petersburg was established by the Government of St. Petersburg with the participation of the Committee on Economic Development, Industrial Policy and Trade. The Fund aims to create and develop venture (risk) financing infrastructure for small science and technology businesses in St. Petersburg.

Services 

Selection of innovative investment projects for small science and technology enterprises engaged in priority areas of science, technology and engineering in Russia The Fund carries out the selection of innovative projects for investment from two sources – (1) Closed-End Mutual Fund for High-Risk (Venture) Investments “Regional Venture Fund for Investment in Small Science and Technology Enterprises of St. Petersburg” and (2) “Fund for Seed Investments of the Russian Venture Company”. Selection criteria (1): - Volume of investment requested – from 10 to 90 million roubles - Transmission of more than 25% of shares to the Fund - Strong business team capable of developing a company in conditions of fast growth and limited resources - Availability of intellectual property rights (patents, copyrights, certificates) - Project aimed at development of a new type of knowledge intensive products (works, services) or increase of its technical level, introduction of new and improvement of applied technologies - High level of project development, potential for mid-term business development (4-7 years) at the regional, Russian and international markets, clear company development strategy and plan for application of investment resources - Business development plan, including description of risks linked to financing Selection criteria (2): - Volume of investment requested – up to 33.3 million roubles - Qualified team - Availability of intellectual property rights (patents, copyrights, certificates) - Attraction of investments with the aim of acquiring, development, manufacturing and promotion of commercial version of innovative product/service - Withdrawal from Investment company in 1-5 years is carried out though transmission of shares to strategic partner or venture fund or through buy-out of company’s management

Expert support and consulting of project authors and innovation companies on investment support and preparation of investment projects The Fund advises entrepreneurs on venture infrastructure in St. Petersburg and provides information on government measures aimed at small business support.

Contacts Fund for Venture Investment Development Assistance for Small Science and Technology Enterprises of St. Petersburg 37 Sedova Street, office 802, 192148 St. Petersburg, Russia Tel.: +7 812 640 96 45, 910 34 33 | Fax: +7 812 640 96 45 venture-spb@bk.ru | www.vf-spb.ru Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru

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7.7.

Techno parks and business incubators

7.7.1.

Ingria Technopark and Business Incubator

Ingria Technopark will be created on the principles of public-private partnership with the support of the Government of the Russian Federation and the Government of St. Petersburg. The project is a part of the federal program aimed at creating techno parks in the sphere of high technologies. The total volume of investment equals 30 billion, including 64% of private investment. The construction of the first stage will start in 2012 with the opening planned for 2013. Microsoft and DataArt have already announced their plans to locate their R&D centers in Technopark. Ingria Technopark is a member of the Association of technoparks in the sphere of high technologies of Russia since 2011. Business Incubator Ingria began operating as a pilot project of Technopark in December 2008. It is a subdivision of the managing company OJSC Technopark tasked with rendering assistance in accelerated development of innovative companies. Information technologies is the key specialization of the residents. During the first 3 years of its operation the Incubator's residents attracted more than 500 million roubles in investments from international IT companies, private and state funds, business angels. Ingria is actively developing its cooperation with Russian and St. Petersburg Universities, thus sharing its experience with other regions. Nowadays, Business Incubator Ingria has about 70 residents. Ingria residents are winners and finalists of many contests, including Web Ready, Start-11, the best project in the cluster in St. Petersburg, BIT-Online, the International Young Interactive Entrepreneur Award 2010, IBTEC-2010, Product/Solution of the year-2011 and many others.

Services 

Programs offered to the residents Pre-Incubation and Incubation: Pre-Incubation lies in formation of a business model, while Incubation is aimed at progressing the business and entering the market. Regardless of incubation program, companies can reside in the office during their cooperation with Ingria.

Organization of events Every year Business Incubator Ingria organizes more than 100 events, including Open Days Ingria (featuring lectures of famous speakers), Lead The Way (discussions of technology trends), StartupLynch, Train&Develop Program (specialized trainings), VC Corner, seminars, round tables, conferences as well as partners’ and residents’ events. During these events start-ups have an opportunity to receive expert feedback, investment estimation of their projects and improve their presentation skills.

Experts and mentors Ingria cooperates with major IT and technological companies and venture funds. As a part of joint programs Ingria engages leading experts as mentors of business incubator’s residents.

Contacts Ingria Technopark Business Incubator 70 Obukhovskoy Oborony prospekt, building 2 192029 St. Petersburg, Russia Tel.: +7 812 313 10 85, 313 10 86 | Fax: +7 812 313 10 87 startup@ingria-park.ru | www.ingria-park.ru | www.ingria-startup.ru

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7.7.2.

The First St. Petersburg Business Incubator The First St. Petersburg business incubator supports and facilitates the development of small innovation companies. It is a unique business, information and creative environment for successful development of innovative business of residents.

The First St. Petersburg business incubator was founded in 2006 by the Administration of St. Petersburg in cooperation with the Ministry for Economic Development of the Russian Federation. It is managed by Managing Company «REO «Service». The First St. Petersburg business incubator is located in «Crystal» Business Center.

Services The St. Petersburg business incubator provides following services: 

Offices Renting comfortable offices equipped with furniture, computers and conditioning system at a reduced rental rate

Consulting Consulting on legal issues, economy, taxation, marketing, business planning, promotion, PR, accounting, financing, loan services, HR, internationalization

External accounting services

Promotion of the companies Advertising, exhibitions, media, PR-support, events

Education programs Seminars, trainings, master classes

Internationalization Business trips, seminars, joint projects, internships, consulting

Access to business incubator’s partnership network

To find more information about the First St. Petersburg business incubator, its services and resident companies visit www.start-business.ru.

Contacts The First St. Petersburg Business Incubator 37 Sedova St. 192148 St. Petersburg, Russia Tel.: +7 812 448 56 65 | Fax: +7 812 560 97 49 info@start-business.ru | www. start-business.ru

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7.8.

Educational programs and internships

7.8.1.

St. Petersburg State Institution “St. Petersburg Interregional Resource Center” (SPIRC) The President Management Training Program is a leading program in professional business education for managers since 1997. Nearly 3,500 managers graduated from the Program during these years. In 2005 St. Petersburg Interregional Resource Centre (SPIRC) was registered as State Institution. SPIRC represents a new format of the President Management Training Program in St. Petersburg – a state training program for managers of national economic enterprises of the Russian Federation.

Services 

President Management Training Program State Plan for training managers of national economic organizations of the Russian Federation

Postgraduate work with President Program’s alumni Supporting President Program graduates in career development, assistance in promotion graduate’s business and projects

Regional University of small business Governmental support programs, educational programs, seminars

Development and maintenance of international and interregional educational projects

Special educational projects Trainings, Consulting, Coaching, Special Internships

Wide range of partnership all over Russia Signed collaboration agreements with 18 regions of Russia, Northwest Russia consortium coordination center

Event management International conferences, meetings, seminars, business meetings in St. Petersburg, exhibitions

Database of business contacts Business match-making for Russian and potential foreign partners

Business exchange program Russian-foreign exchange management training program for top-managers in Russia and abroad

Contacts St. Petersburg State institution “St. Petersburg Interregional Resource Center" 88/90 Griboedova embankment 190068 St. Petersburg Russia Tel. + 7 812 326 42 75 | Fax: +7 812 326 42 74 int@spbmrc.ru | www.spbmrc.ru

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7.9.

Chambers of commerce and industry

St. Petersburg Chamber of Commerce and Industry 46-48 Chaikovskogo Street 191123 St. Petersburg, Russia Tel.: +7 812 719 66 44 | Fax: +7 812 272 97 13 spbcci@spbcci.ru | www.spbcci.ru American Chamber of Commerce in Russia, St. Petersburg Chapter 24 Yakubovicha Street 190000 St. Petersburg, Russia Tel.: +7 812 448 16 46 | Fax: +7 812 448 16 45 all@spb.amcham.ru | www.amcham.ru/spb Finnish-Russian Chamber of Commerce 4-6-8 B Bolshaya Konjushennaya Street, office B301 191186 St. Petersburg, Russia Tel.: +7 812 322 21 21 | Fax: +7 812 322 21 21 info@spb.svkk.ru | www.svkk.ru Russian-German Chamber of Foreign Trade 4A Finlyandsky prospect 194044 St. Petersburg, Russia Tel.: +7 812 332 14 15 | Fax: +7 812 332 14 16 info@petersburg-ahk.ru | www.petersburg.russland.ahk.de Russo-British Chamber of Commerce 23A Vladimirsky prospect, office 705 191002 St. Petersburg, Russia Tel.: +7 812 346 50 51 | Fax: +7 812 346 50 52 infospb@rbcc.com | www.rbcc.com

7.10. Business associations Union of Industrialists and Entrepreneurs of St. Petersburg 1 Smolny proezd, Letter B 191060 St. Petersburg, Russia Tel.: +7 812 576 76 81 | Fax: +7 812 576 77 92 spp@spp.spb.ru | www.spp.spb.ru St. Petersburg Union of Entrepreneurs 16 Stachek prospect 198095 St. Petersburg, Russia Tel.: +7 812 252 39 50, 252 43 50, 252 38 10 www.spbsp.ru St. Petersburg International Business Association (SPIBA) 21 Nevsky prospekt, office 506 191186 St. Petersburg, Russia Tel.: +7 812 325 90 91, 312 53 07 | Fax: +7 812 325 90 92 office@spiba.ru | www.spiba.ru

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7.11. Audit, tax and consulting firms BANKO Audit & Consulting Tel./Fax: +7 812 702 07 03 www.bankoaudit.ru BDO Tel.: +7 495 797 56 65 Fax: + 7 495 797 56 60 www.bankoaudit.ru Deloitte Tel.: +7 812 703 71 06 Fax: + 7 812 703 71 07 www.deloitte.com Eccona Tel./Fax: +7 812 622 12 13 www.eccona.ru Energy Consulting Tel.: +7 812 327 55 22 Fax: + 7 812 327 55 39 www.ec-group.ru Ernst & Young Tel.: +7 812 703 78 00 Fax: + 7 812 703 78 10 www.ey.com G.C.E. Group Tel.: +7 812 334 55 61, 334 55 62, 334 55 63 www.gce.ru Hannes Snellman Tel.: +7 812 363 33 77 Fax: +7 812 363 33 88 www.hannessnellman.com IBS Tel.: +7 812 333 15 44 www.ibs.ru Impex Consult Tel.: +7 812 309 39 85 www.impexconsult.ru Intalev Tel./Fax: +7 812 677 90 67, 600 99 24 www.intalev.spb.ru Institute for Enterprise Issues Tel.: +7 812 703 40 41 Fax: + 7 812 703 30 08 www.ipp.spb.ru Institute of Independent Social & Economic Research (INSEI) Tel.: +7 812 232 84 54 www.insei.ru InterComp Tel.: +7 812 740 18 60 www.intercomp.ru

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Juralink Tel.: +7 812 606 66 24 Fax: + 7 812 606 66 23 www.juralink.ru Jurconsult International Tel.: +7 812 324 73 24 Fax: + 7 812 274 68 09 www.jurconsult.spb.ru Konsu SP Tel.: +7 812 325 82 94, 327 38 92 Fax: + 7 812 325 82 93, 321 29 96 www.konsu.com KPMG Tel.: +7 812 313 73 00 Fax: + 7 812 313 73 01 www.kpmg.com PKF Tel.: +7 812 600 91 00 Fax: + 7 812 600 90 50 www.mcd-pkf.com Moore Stephens Tel.: +7 812 332 28 51 Fax: + 7 812 332 14 88 www.mscis.moorestephens.com PricewaterhouseCoopers Tel.: +7 812 326 69 69 Fax: + 7 812 363 66 99 www.pwc.ru Prime Advice Tel.: +7 812 449 50 00 Fax: + 7 812 449 50 01 www.hlbprime.com PROUD Tel.: +7 812 329 40 04 www.pra.ru RBS Tel.: +7 812 332 13 55 www.rbsys.ru Russia Consulting Tel.: +7 812 458 58 00 Fax: + 7 812 458 57 00 www.russia-consulting.eu St. Petersburg Foundation for SME Development Tel.: +7 812 325 84 16 Fax: + 7 812 712 66 07 www.fbd.spb.ru

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7.12. Banks Cetelem Tel.: 8 800 500 89 98 www.cetelem.ru Citibank Tel.: +7 812 336 75 75 www.citibank.ru Banca Intesa Tel.: +7 812 275 41 54 www.bancaintesa.ru Bank of Moscow Tel.: 8 800 200 23 26 www.bm.ru Bank Uralsib Tel.: +7 812 334 44 33 www.bankuralsib.ru Barclays Tel.: +7 812 747 34 30 www.barclays.ru/ Gazprombank Tel.: +7 812 301 99 99 www.gazprombank.ru GE Money Bank Tel.: +7 812 320 87 56 www.gemoney.ru Nordea Bank Tel.: +7 812 747 34 30 www.nordea.ru

Promsvyazbank Tel.: +7 812 321 20 20 www.psbank.ru Raiffeisen Bank Tel.: +7 812 334 43 43 www.raiffeisen.ru Rosbank Tel.: +7 812 332 12 29 www.rosbank.ru Russian Agricultural Bank Tel.: +7 812 335 06 30 Fax: + 7 812 335 06 30 www.rshb.ru Sberbank Tel.: 8 800 555 55 50 www.sbrf.ru Swedbank Tel.: +7 812 313 63 63 www.swedbank.ru TransCreditBank Tel.: +7 812 703 44 30 www.tcb.ru UniCredit Bank Tel.: 8 800 700 73 00 www.unicreditbank.ru VTB 24 Tel.: 8 800 100 24 24 www.vtb24.ru

7.13. Certification and testing Center for Certification and Marketing Tel.: +7 906 239 58 30 www.gost-spb.ru Center of Quality Control Tel.: +7 812 274 14 30 Fax: + 7 812 274 14 32 www.quality.spb.ru Center for Testing and Certification St. Petersburg Tel.: +7 812 251 39 50 Fax: + 7 812 251 41 08 www.rustest.spb.ru Center –Test Tel.: + 7 812 328 62 62, 328 62 02 www.okp.ru Certification Tel.: +7 812 337 16 02, 388 12 16 www.sertis.ru

Kvatro – Certification Center Tel.: +7 812 712 66 05, 972 66 30, 712 67 01 www.kvatro-spb.ru Mezhregiontest Tel.: +7 812 600 06 07 www.megregiontest.ru Reglamentsert – Northwestern Scientific and Technical Center for Testing and Certification Tel.: +7 812 777 05 15, 766 19 40 Fax: + 7 812 766 1940 www.reglamentsert.ru Rostest Tel.: +7 812 927 94 11 Fax: + 7 812 633 05 16 www.i-trade.spb.ru

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Russian Register Tel.: +7 812 600 11 67, 600 11 68 Fax: + 7 812 600 11 69 www.rusregister.ru SGS Vostok Limited Tel.: +7 812 449 04 66 Fax: + 7 812 449 04 67 www.sgs.ru

Test St. Petersburg Tel./Fax: +7 812 334 02 62, 327 55 51, 327 5552, 575 0093 www.en.test-spb.ru

7.14. Exhibitions ExpoForum Tel.: + 7 812 240 40 40 www.expoforum.ru FarExpo Tel.: +7 812 718 36 37 Fax: +7 812 777 04 07 www.farexpo.ru Imperia Tel.: +7 812 327 49 18 Fax: + 7 812 327 49 18 www.imperiaforum.ru Monomax Tel.: +7 812 335 20 55, 335 20 39 www.monomax.ru PrimExpo Tel.: +7 812 380 60 00 Fax: +7 812 320 80 90 www.primexpo.ru Severnaya Palmira Tel.: +7 812 975 12 40, 448 36 55 Fax: +7 812 449 52 44 www.congresscity.ru

Sivel Tel.: +7 812 324 64 16 Fax: +7 812 596 38 14 www.sivel.spb.ru Sovencon Tel.: +7 812 369 01 34, 369 00 16, 369 08 45 www.sovencon.ru Stachek 47 Tel.: +7 812 702 04 38 Fax: + 7 812 784 65 30 www.stachek47.ru Restec Tel.: +7 812 320 63 63 Fax: + 7 812 320 80 90 www.restec.ru Vystavka, LLC Tel.: +7 812 320 24 57, 320 24 55, 766 47 17 www.y-expo.ru

7.15. Law firms Baker & McKenzie Tel.: +7 812 303 90 00 Fax: + 7 812 325 60 13 www.bakermckenzie.com Beiten Burkhardt Tel.: +7 812 449 60 00 Fax: + 7 812 449 60 01 www.bblaw.com Capital Legal Services International Tel.: +7 812 346 79 90 Fax: + 7 812 346 79 91 www.cls.ru

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Castren & Snellman Tel: +7 812 325 80 85 Fax: +7 812 325 80 86 www.castren.fi Clyde&Co Tel.: +7 812 232 22 97 Fax: +7 812 233 81 09 www.clydeco.com DLA Piper Tel.: +7 812 448 72 00 Fax: + 7 812 448 72 01 www.dlapiper.com

Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru


Duvernoix Legal Tel.: +7 812 702 62 00 Fax: + 7 812 702 62 55 www.duvernoixlegal.ru Egorov Puginsky Afanasiev & Partners Tel.: +7 812 322 96 81 Fax: + 7 812 322 96 82 www.epam.ru Hellevig Klein & Usov Tel.: +7 812 244 75 49 Fax: + 7 812 244 75 48 www.hkupartners.com Mannheimer Swartling Tel.: +7 812 335 23 00 Fax: + 7 812 335 23 01 www.mannheimerswartling.se

Pepeliaev, Goltsblat & Partners Tel.: +7 812 640 60 10 Fax: + 7 812 640 60 20 www.pgplaw.ru Salans Tel.: +7 812 325 84 44 Fax: + 7 812 325 84 54 www.salans.com Unicomlegal Russia Tel.: +7 812 380 16 61 Fax: + 7 812 380 16 61 www.unicomlegal.ru

7.16. Real estate Advecs Tel.: +7 812 322 52 00 www.advecs.com ARIN – Agency for Development and Real Estate Research Tel./Fax: +7 812 600 03 94 www.arin.spb.ru Colliers International Tel.: +7 812 718 36 18 Fax: + 7 812 718 36 16 www.colliers.spb.ru

Jones Lang LaSalle Tel.: +7 812 363 32 31 Fax: + 7 812 363 32 30 www.joneslanglasalle.ru Knight Frank Tel.: +7 812 363 22 22 Fax: + 7 812 363 22 23 www.spb.knightfrank.ru

7.17. Recruitment ANCOR Tel.: +7 812 448 88 35 Fax: + 7 812 448 88 36 www.ancor.ru AVANTA Personnel – Adecco Group Russia Tel./Fax: +7 812 329 57 70, 329 00 11, 329 2211 www.avantapersonnel.ru Avenir Group Tel./Fax: +7 812 718 81 57 www.avenir.ru BARONA Tel.: +7 812 640 90 33, Fax: + 7 812 640 90 34 www.barona.ru Business Kernel Tel.: +7 812 315 55 88, 222 52 51, 222 37 58 www.business-kernel.ru

BusinessLink Personnel Tel.: +7 812 327 89 96 Fax: + 7 812 327 89 93 www.blp.ru CASE HR solutions Tel.: +7 812 334 24 25 Fax: + 7 812 334 24 25 www.case-hr.com HR Solutions Tel./Fax: +7 812 702 70 99 www.hrsolutions.ru Kelly Services Tel.: +7 812 332 22 44 Fax: + 7 812 332 23 35 www.kellyservices.ru

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Manpower Tel.: +7 812 324 46 46 Fax: + 7 812 324 46 47 www.manpower.ru Morgan Hunt Group Tel.: +7 812 336 38 28 Fax: + 7 812 336 38 27 www.morganhunt.ru Staffwell Tel.: +7 812 640 20 01 www.staffwell.com

1000 kadrov Tel.: +7 812 313 93 80 www.1000kadrov.ru Ventra Employment Tel.: +7 812 635 86 16 www.ventra.ru

7.18. Transport and logistics Ahlers Tel.: +7 812 332 67 00 Fax: + 7 812 332 67 01 www.ahlers.com DHL Tel.: +7 812 326 64 00 www.dhl.ru FedEx Tel.: +7 812 325 88 25 Fax: + 7 812 571 59 30 www.fedex.com/ru

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IWM Tel.: +7 812 393 70 54 Fax: + 7 812 309 12 12 www.iwm.ru TNT Tel.: +7 812 718 33 30 Fax: + 7 812 718 34 95 www.tnt.com UPS Tel.: +7 812 703 39 39 Fax: + 7 812 703 16 50 www.ups.com

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8. Authors and contributors Guide “Doing business in St. Petersburg” was developed by and under supervision of the Enterprise Europe Network, Gate2Rubin Consortium – Russia, Module A Branch – St. Petersburg operated by St. Petersburg Foundation for SME Development with the kind contribution of the following legal, human resources, certification, research and real estate firms. Enterprise Europe Network - Russia, Gate2Rubin Consortium, Module A Regional Center – St. Petersburg The Enterprise Europe Network (EEN) is a key instrument to boost growth and jobs. Bringing together 570 business support organizations from 49 countries, we help small companies seize the unparalleled business opportunities on the world Market. ENN’s mission lies in helping small businesses make the most of the business opportunities in Russia and the European Union. Regional Center in St. Petersburg is co-financed by the Government of the Russian Federation and the Government of St. Petersburg and is operated by St. Petersburg Foundation for SME Development since 2008. Tel.: +7 812 325 84 16, 325 8351, 575 04 80 | Fax: +7 812 712 66 07 www.doingbusiness.ru BEITEN BURKHARDT BEITEN BURKHARDT is an international law firm, represented by 12 offices in 6 countries, with a staff of over 300 specialists providing legal and tax consulting in Western and Eastern Europe, Russia, Ukraine and China. BEITEN BURKHARDT's Russian Practice comprises offices in Moscow (since 1992) and St. Petersburg (since 1996). The firm's specialists provide comprehensive legal support for investment projects in the areas of manufacturing, infrastructure, health care and real estate, render services for establishing subsidiaries, joint ventures and branches, conduct legal and tax due diligence on companies and property being acquired in Russia, consult on tax, customs, financial and other issues of activities in the Russian Federation. The working languages are English, German and Russian. T: +7 812 449 60 00 | F: +7 812 449 60 01 www.bblaw.com CASE CASE was established in April 5, 2010 on the basis of the ANCOR Survey Services with the aim of implementation of consulting projects in the field of personnel management. The major services include salary, benefits and compensation surveys, labor market research, reward system development, personnel assessment, personnel training and development, HR Projecting, outplacement, labor law consulting. CASE successfully implements projects on the territory of Russia, Ukraine and Kazakhstan. Today, CASE is represented in 5 cities in Russia, including Moscow (head office), St. Petersburg, Rostov-on-Don, Perm and Novosibirsk. T: +7 812 334 24 25 | F: + 7 812 334 24 25 www.case-hr.com

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DLA Piper DLA Piper is one of the most highly rated global law firms, with branch offices in 30 countries of Europe, the Middle East, Asia and also the USA. With 39 lawyers and 4 partners, our St. Petersburg practice constitutes the largest legal and full-fledged tax services provider in Russia's northwest. The firm advises on corporate law, mergers and acquisitions, taxation, real estate and infrastructure, project finance, customs and regulatory, employment, IP and IT protection, and possesses significant litigation capabilities and experience. In 2007-2011, DLA Piper was recognized as the leading legal practice in St. Petersburg according to Chambers Europe and the leading corporate practice in the North West region in the view of the Legal500 directory. T: +7 812 448 72 00 | F: +7 812 448 72 01 www.dlapiper.com Jones Lang LaSalle Jones Lang LaSalle is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 167 million square meters worldwide. In Russia and CIS Jones Lang LaSalle has offices in Moscow, St. Petersburg, Kiev and Almaty. Jones Lang LaSalle, Russia was voted Consultant of the Year in 2004, 2006, 2007, 2008, 2009, 2010 and 2011 at the Commercial Real Estate Awards, Moscow and Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg. T: +7 812 363 32 31 | F: + 7 812 363 32 30 www.joneslanglasalle.ru SGS The SGS Group is the global leader and innovator in inspection, verification, testing and certification services. Founded in 1878, SGS is recognized as the global benchmark in quality and integrity. With 70,000 employees, SGS operates a network of over 1,350 offices and laboratories around the world. Operating in Russia since January 1981, today SGS Vostok Limited, the Russian subsidiary of the SGS Group, employs a staff of 3,300 people at the Moscow headquarters and the various offices and laboratories all over the Russian Federation, including Northwest Russia. T: +7 812 449 04 66 | F: + 7 812 449 04 67 www.sgs.ru

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Legal disclaimer All of the information included in this document is for informational purposes only, and may not reflect the most current legal developments, judgments, or settlements. This information is not offered as legal or any other advice on any particular matter. The Enterprise Europe Network, Gate2Rubin Consortium – Russia, Module A Branch – St. Petersburg and the contributing authors expressly disclaim all liability to any person in respect of anything, and in respect of the consequences of anything, done or not done wholly or partly in reliance upon the whole or any part of the contents of current brochure. No client or other reader should act or refrain from acting on the basis of any matter contained in this document without first seeking the appropriate legal or other professional advice on the particular facts and circumstances. If you have finished with this document, please pass it on to other interested parties or recycle it. Thank you

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Doing business in St. Petersburg 2012  

Doing business in St. Petersburg 2012

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