Foreign investment is of considerable importance in the economy of any country. Russia is no exception. So, we will consider what the national legal regulation of foreign investment in the Russian Federation is, as well as what features this concept has in the country.
What is an investment?
Studying the elements of national and legislative regulation of this concept, you should first understand what is called investment.
In simple terms, foreign investments are all property investments made by investors from abroad to enterprises located on the territory of Russia, that is, to a specific business entity. The legislator also notes that this object can relate to any form of ownership.
As for the form of investments made, they can be presented not only in the form of real material values. They also recognize securities, property rights, services, as well as other intangible benefits. Some lawyers also classify the information required for the maintenance and development of an object located in Russia as an investment. The main feature of all these benefits is that in the process of their exploitation they continue to remain in the ownership of the investor and cannot be withdrawn from civil circulation, actually being in the territory of the Russian Federation.
Practice shows that investment activity is significantly affected by both the political situation in the state and its economic situation.
Investor
The legal regulation of foreign investment in the Russian Federation is inextricably linked with the concept of investor. Who is recognized as such, and what kind of person can it be?
The concept of investor brings to the attention the content of the law "On Foreign Investments", which states that a person conducting investment activity in Russia is recognized as such. Moreover, the legislator also notes that this person can act both on behalf of the organization and as a private citizen. What are the requirements of Russian legislation for investors? The legal regulation of foreign investment provides for certain requirements both for individuals and legal entities-investors.
So, if a legal entity wishes to make its contribution to the development of a certain object located in Russia, then it must be recognized as a legal entity. It can be either an institution or enterprise legally operating in the territory of another country, or an international organization. In addition, an entire state can act as an investor.
If we are talking about private investors, then in this case the main requirements of the law are put forward in relation to its legal capacity and legal capacity. The system of legal regulation of foreign investments also provides that the stateless investor may also be an investor - a person who does not have the citizenship of any state.
As for the legal basis for investment activity in Russia, they provide for a number of benefits for foreigners who want to make a valuable contribution to the development of the Russian economy.
Legal regulation
The main regulatory document that enshrines the concept, types and legal regulation of foreign investment in Russia is the Law on Foreign Investment in the Russian Federation, which was adopted in 1997 and is still in force today with a number of amendments. Specialists in the field of jurisprudence note that this normative act assigns to all investments that are on the territory of Russia and are recognized as foreign, a special national legal regime. According to the majority, this regime provides for some conditions that, in practice, are not as favorable as those that Russian citizens can use. However, in return for this, certain exceptions follow from this rule, as well as from many others, having both a restrictive and a stimulating character.
The legislative framework
The legislative framework of the Russian Federation contains a whole list of regulatory acts, the content of which regulates the activities of investors. In addition to the aforementioned Law "On Investments", the activities of investors are directly regulated by the provisions presented in the State Tax Code. It clearly spells out all issues related to the taxation and duties of all investments made, as well as the activities conducted by investors.
The law "On state regulation of foreign trade" also addresses some provisions regarding the conduct of investment activities. In particular, its provisions directly relate to the correctness of the actions related to the import and export of goods into Russia, as well as beyond its borders, the use of services, labor results, as well as the fruits of intellectual activity. This law was adopted in 2003, and its provisions are actively used in many economic areas of the country, including the legal regulation of foreign investment in the Russian Federation.
As for the activities of investors from abroad who make their investments in the form of capital, this concept is regulated by a separate law, which was adopted in 1999. Its name is fully consistent with what the content of the normative act prescribes - this is the law "On investment activity made in the form of capital investments".
Lawyers who specialize in issues of international legal regulation of foreign investments pay special attention to such a law as “On the Procedure for Making Investments in Business Companies of Strategic Importance”. This normative act deals exclusively with investments made for the development of special facilities, which include military bases, as well as other legal entities and entities whose main purpose is to facilitate work in improving the defense capability of the entire state. This act provides for a wide range of restrictions for making investments, which is due to the purpose of ensuring the preservation of state secrets.
Special attention should also be paid to what national legal regulation of foreign investment in the Russian Federation is provided by the Law "On Joint-Stock Companies". This normative act provides universal legal support for this activity carried out in Russia.
Along with all of the above laws and by-laws, lawyers do not recommend that such sources of law as international treaties, of which the Russian Federation is one of the parties, as well as various codes (especially civil), be ignored.
Forms of carrying out activities
In addition to the concept, the legal regulation of foreign investment in Russia also provides a list of certain forms in the form of which this activity can be carried out in the territory of the state.
The main law "On Foreign Investments" states that it can be carried out in any way, but only if it is not prohibited by the current legislation of the country. However, practice shows that among the options for making investments, the most effective and widespread are forms such as contracts, the creation of companies, as well as branches. Let's consider each of them in more detail.
If he speaks of companies that are created by foreign investors, then, being in Russia, they are traditional for this country business companies and partnerships. Despite the fact that these persons are based on foreign capital, they still register in the manner that is common to all, in accordance with the provisions of current legislation. However, despite this, from the moment a legal entity was created, its legal status begins to be determined on the basis of the Law on Foreign Investments with all the ensuing circumstances. The legal regulation of foreign investment also provides the opportunity not only to make investments in new legal entities, but also to redeem parts of previously created enterprises or organizations. Based on the law, such legal entities will be called organizations with foreign deposits.
Practicing lawyers who constantly face issues related to the legal regulation of foreign investment, note that such activities of companies need to be clearly distinguished from ordinary business. The difference between them is that in the second case, foreign companies carry out their activities not by making valuable investments, but by creating branches of their companies on the territory of the Russian Federation.
When it comes to representative offices and branches, it should be understood that they are separate structural units that have the right to act on their own behalf and conduct activities within Russia - this is what the content of the Civil Code says. As for the peculiarities of the legal regulation of foreign investments, presented in the form of organization of branches of companies, they consist in conducting state accreditation of such enterprises, by the positive results of which such legal entities acquire the right to conduct the activities for which the branch was organized.
Another common form of investment in Russia is contracts. This phenomenon is very often present in international private law (MPE). However, according to practicing lawyers, far from all contracts can be of the nature of cooperation on the basis of investment. According to experts, such agreements must strictly comply with clear signs. One of them is long-term. All investments made by investors should be commercial in nature, that is, in other words, the introduction of tangible and intangible assets should be carried out solely for the purpose of making profit in the future. All investments made must necessarily have a targeted use.
If we talk about the disadvantages of this form of investment, it has a great risk of the return on investment. This factor should also be provided for in the content of the investment contract.
If we compare all the above features of the legal regulation of foreign investment, we can conclude that a very large list of agreements may fall under a number of such signs. In particular, lawyers note that under the described requirements, contracts for financial leases, simple partnerships on attracting investments, commercial concessions, loans for investing in the number of fixed assets of an enterprise, as well as a production sharing agreement, are ideally suited.
Principles
There are a number of principles for the legal regulation of foreign investment in private equity. In the normative legal acts (normative legal acts) operating in the territory of Russia that regulate the provisions related to the contribution of capital to the development of the economy, they are all indicated. But, unfortunately, this is done in abbreviated form. So, let us consider in more detail what each of the presented principles of national legal regulation of foreign investment means.
The basic principle of all actions related to the investment of foreign capital in the development of the country's economy is the principle of local legislation. It means that all relations regarding investments made in Russian enterprises and organizations of various forms of ownership should be regulated solely on the basis of the legislation in force in the Russian Federation for the current period. As for the regulation of invested funds, it is carried out only at the federal level.
With regard to the concept of an investment law in force within the Russian state, it represents a whole set of a number of regulatory acts, the content of which regulates issues related to the conduct of this type of action. As a rule, such sources regulate not only this type of activity, but also foreign exchange, labor and other aspects.
Another important principle is the equal rights of Russian investors. It provides for the equal protection of all subjects of investment activity, as well as monitoring the observance of their rights and legitimate interests. The law calls for the proper protection of the interests of each investor, regardless of the size of his contribution, the form of his contribution, and regardless of the nationality of the investor himself. It also does not matter at all how much the person receives the benefits from the investments made. In case of violation of the legitimate rights and interests of the investor, the state is obliged to provide their protection in the proper form and manner.
And, finally, the third principle on which the legal regulation of foreign investment in the Russian Federation is based is the need to comply with all provisions of Russian legislation with the provisions presented in the international regulatory framework on investments. In fact, this only means that this activity on the territory of Russia should be carried out in a manner that complies with what is prescribed in local legislation and does not contradict international law, which includes treaties concluded between different countries. Such a system of legal regulation of foreign investment in private equity practice is called by multilateral practitioners. According to most experts, it is she who helps ensure the safety of invested capital at the international level.
What contracts are considered the main ones in determining the order of investment activity in Russia? Let's consider them further.
Basic guarantees of investors
If we talk briefly about the legal regulation of foreign investment, it is necessary to highlight such basic provisions as the concept, legislative regulation, as well as guarantees for investors. What special guarantees does the Russian legislation provide for people who make a material contribution to the development of the country's economy?
It should be noted that many of the guarantees presented in the articles of the main regulatory acts are provided for in the content of the documents ensuring the legal regulation of foreign investment in private equity.
First of all, the Russian legislation guarantees in the event of requisition or nationalization of the investor’s property that he will be paid commensurate compensation. Of course, these actions can be carried out in exceptional cases, for example, when the object of investment is of strategic importance for the activities of the state.
Equally important is the guarantee of the transfer of duties and legal rights from one investor to another. It implies that, if desired and having a sufficient number of grounds, one investor has the right to transfer the property invested by him to another. To implement such a guarantee, the parties are required to conclude an agreement between them on the transfer of such.
Foreign investors, making a material contribution to the development of the Russian economy, have the right to participate in the privatization of property, as well as to purchase securities of a certain value. They can do this on the same grounds as ordinary Russian citizens. The same applies to the acquisition by such persons of real estate in Russia, natural resources, land, etc.
All the income that the investor receives as a result of his activities in Russia, he has the right to use at his discretion, but without violating the laws of the country.
Information, as well as values that were previously imported into the Russian Federation as investment values, a person who makes a contribution to the development of the economy and a particular sphere has the right to export from the country in an unhindered form. This concept implies the absence of the need for licensing or quotas for such an object.
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Many practicing lawyers, as well as theorists, draw attention to the fact that the legislation provides a certain list of guarantees and benefits for foreign investors, but at the same time, for the most part, does not specify them at all. Or, as some note, there are serious contradictions directly in the articles of laws. For example, the Law on Foreign Investments provides for the stability of the legislation for entities engaged in investment activities, however, it is immediately stated that such a guarantee is provided for a period of not more than 7 years.
A huge number of legal practitioners in the field of interstate relations and those who study the issues of international legal regulation of foreign investments note that the country's government needs to take up the development of normative regulation of investment from abroad at the regional level, and not only at the national level. This is due to the economic and social characteristics of different regions of the state.
Among other things, modern lawyers also highlight among the problems that in the legislation in force within the Russian Federation with regard to the legal regulation of foreign investment in private equity, the Russian legislation does not provide for such a normative legal act that would regulate certain law enforcement aspects with regard to resolution methods disputes arising at the interstate level. Also, according to the observations of practitioners, in the modern system there are no clear ways to enter the investment arbitration created at the international level.
And, finally, another important problem, which significantly slows down the investment activities of foreign individuals in Russia. It lies in the fact that, in addition to the aforementioned Government Commission, there are no bodies in the country that would directly deal with issues related to the protection of legitimate interests and the rights guaranteed to investors. In addition, there is an urgent question about the need to create specialized regional bodies, the main task of which is to conduct complaints handling in this area.