Draft Law on Territories of Priority Socio- Economic Development

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June 4, 2014
Practice Group(s):
Energy, Resources
and Infrastructure
Draft Law on Territories of Priority SocioEconomic Development
By Sergey Milanov, Georgy Daneliya
In April this year, the Government of the Russian Federation (Russian Government)
released a legislative bill “on the territories of priority socio-economic development and
other measures of state support of regions of the Far East” (Draft Law). As of May 21,
2014, the Draft Law has not yet been submitted to the Duma of the Russian Federation
(the lower chamber of the Russian legislative body). However, once submitted to the
Duma, it may be expected that the Draft Law would be reviewed and adopted within a
relatively short time, as is usually the case with legislative bills submitted by the Russian
Government.
The territorial scope of the Draft Law is limited to the regions of the Russian Far East1
and contemplates the establishment of so-called “territories of priority socio-economic
development” (Accelerated Zones). Each Accelerated Zone is established by a resolution
of the Russian Government.
The Draft Law introduces only the general framework for the establishment and operation
of Accelerated Zones, without specifying the exact amounts of the benefits (such as tax
benefits, etc.) that will be made available to the companies operating in the Accelerated
Zones. The exact amounts of such benefits will be set forth in each respective act of the
Russian Government establishing an Accelerated Zone on a case by case basis.
The Draft Law sets forth the procedure for the establishment of Accelerated Zones by the
Russian Government and the legal status of investor companies (foreign and Russian
alike) operating in an Accelerated Zone (Residents).
Here are several of the benefits available to Residents of Accelerated Zones:
 simplified regime of development of land lots within the Accelerated Zone
 lower rent for leasing of federal, regional and municipal lands and facilities
 tax benefits and benefits related to mandatory social insurance payments
 lower one-time charges for connecting to water, electricity, other utilities
 free customs zone (in certain cases - at the discretion of the Russian Government)
 simplified procedures for employment of foreign staff (quotas for employment of
foreign citizens will not apply; an employer will not need to obtain a special permit
allowing employment of foreigners)
 simplified procedures for the approval of design documentation of factories and other
facilities
 centralized issuance of building permits and commissioning of newly constructed
facilities
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The following Far East regions are covered by the Draft Law: Sakha Republic (Yakutiya), Primorsky Region
(Krai), Khabarovsky Region (Krai), Amurskaya Region, Kamchatsky Region (Krai), Magadan Region,
Sakhalin Region, Evreyskaya Autonomous Region, and Chukotskiy Autonomous Region.
Draft Law on Territories of Priority Socio-Economic Development
 simplified procedures for the establishment of easements on land lots for the
purposes of laying infrastructure.
Each Accelerated Zone is managed by a managing company wholly owned by the
Russian Government (Managing Company) and supervised by a specially designated
federal body. It is anticipated that the Ministry for the Development of the Russian Far
East would be designated as such body (Competent Authority). The Managing Company,
among others, develops the infrastructure of the respective Accelerated Zone with funds
provided by the federal, regional and municipal budgets. The Competent Authority grants
building permits and commissions new buildings, approves requested changes to the
category assigned to land lots in the respective Accelerated Zone, approves the types of
operations (ie land use) permitted on the land lots in the respective Accelerated Zone,
adopts general plans for the development of municipalities.
A company that plans to become a Resident of an Accelerated Zone is required to file an
application and a business plan with the Managing Company of such Accelerated Zone.
If the decision of the Managing Company after considering the application is favorable,
the Managing Company would offer to the applicant an opportunity to conclude an
agreement to allow its operations in the Accelerated Zone (Agreement). After the
conclusion of the Agreement, the Managing Company would register the new Resident in
the register of Residents of the Accelerated Zone.
Pursuant to the Agreement, a Resident would undertake to carry on certain operations
and make investments in such amounts and in such time periods as set forth in the
Agreement. The Managing Company, in its turn, would undertake to provide to the
Resident land and facilities (if required by the Resident). The maximum term of the
Agreement would be 10 years, with an option to extend one-time for an additional fiveyear term.
The Agreement may be terminated early by a decision of a competent Russian court in
cases of major violations by the Resident of the terms of the Agreement (such as failure
to start business operations as planned, failure to meet the investment volumes
scheduled in the Agreement).
In general, an Accelerated Zone is intended to function as a self-sufficient unit with full
infrastructure, from factories to housing and schools.
The integration of the Draft Law into Russian legislation would require considerable
amendments to the current tax, town-planning, land, and other provisions of the Russian
legislation. It is, therefore, quite possible that the Draft Law may be revised before it is
finalized by the Russian Government for submission to the Duma for consideration.
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Draft Law on Territories of Priority Socio-Economic Development
Authors:
Sergey J. Milanov
Georgy Daneliya
sergey.milanov@klgates.com
+81.3.6205.3604
georgy.daneliya@klgates.com
+81.3.6205.3616
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