During the 1990s, Russia’s domestic investment and capacity of contracting foreign investments were very low, that is why, at the beginning of 2000, Russia has completely changed its legislation. The increase of foreign direct investments (FDIs) in Russia started in 1999, right after the market crash of 1998. Due to its strategic geographical position, Russia has soon become an appealing destination for foreign investments. Currently, Russia attracts most FDIs in Eastern Europe.
Russia has a special legislation regarding foreign investment in strategic sectors. The main regulatory legislation is the Federal Law No. 57-FZ on the “Procedure of Making Foreign Investments in Companies of Strategic Importance for National Defense and State Security”.
The law was enabled in April 2008 and it is shortly known as the Strategic Investment Law that refers to the regulations on foreign investments in Russian industries and sets the procedures through which foreign enterprisers are allowed to access the “one stop shop” in the strategic industries. The Strategic Law applies to any foreign investor, company or individual, including Russian companies that are controlled by foreign enterprisers, and it also to foreign governments and international organizations that have opened subsidiaries in Russia, usually referred to as public foreign investors.
According to the Federal Law No. 57-FZ, a strategic entity is a business registered in Russia that undertakes at least one activity of strategic importance. There are 45 types of activities considered of strategic relevance according to the same law. These activities can be broadly encompassed in four categories:
- natural resources,
The Strategic Investment Law was amended in 2011, when certain operations were excluded from the strategic activities list, among these the cryptographic operations of banks. Banks in which the Russian government is not a stakeholder will not be granted special licenses and will not be deemed strategic activities, if distributing encryption equipment, provide maintenance of such equipment and provide encryption services.
The Strategic Investment Law is not the only legal framework regulating foreign investments in Russia, but it is the most complex. Other laws referring to FDIs in Russia are:
- the Law “On Investment Activity in the RSFSR” of 1991,
- the Law “On the Stock Market” of 1993,
- the federal laws no. 39 and no.160 “On Foreign Investments in the Russian Federation” of 1999,
- the Federal Law no. 173 “On Currency Exchange Regulation and Control” of 2003,
- the Federal Law no. 116 “On the Special Economic Zones within the Russian Federation” of 2005.
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