Текст книги "Правовая поддержка иностранных инвестиций в России"

Автор книги: авторов Коллектив

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Pricing control

Today’s Russian economy is traditionally regarded as being a transitional one. State structures and public control play an important role in economic relations in Russia. At the same time, pricing conditions in the Russian Federation are quite in line with the norms and requirements adopted in most market economies. The Russian legislation continues to develop along the lines established over the last 15 to 20 years mainly by the member states of the European Union. There are also, however, features specific to Russia.

Price information

Pricing conditions are governed by a number of legal instruments, including the Russian Civil Code[53]53
  See: The Civil Code of the Russian Federation, Parts 1 and 2.


[Закрыть] and the Law “On Consumer Protection”[54]54
  See: Federal Law No. 2-FZ “On Consumer Protection”, dated 9 January 1996.


[Закрыть]. According to this Law, price information provided to consumers should be true and sufficient to enable them to make the right choice of goods. Pursuant to article 10 of the Law “On Consumer Protection”, information about goods must always include their price in roubles.

The prices of most goods are established by vendors themselves but, for certain goods (work, services), the Government of the Russian Federation establishes a list of details to be communicated to consumers and the methods for doing so. For example, there are special regulations by the Government of the Russian Federation setting general provisions on rates for postal services, television broadcasting, railway transportation, water supply and other areas subject to the Law “On Natural Monopolies”[55]55
  See: Federal No. No. 147-FZ “On Natural Monopolies” of 17 August 1995.


[Закрыть]. According to this law, natural monopolies include oil and gas transportation, heat and power transmission, and the services of transport terminals (such as airports).

Rates themselves are fixed by competent executive authorities. Thus, the Federal Tariff Service is authorised to exercise legal regulation in the sphere of state regulation of prices (tariffs) for goods (services), including tariffs for power transmission services, prices for goods designated for national defence, minimum prices for alcoholic products, etc.

Even natural monopolists are obliged to provide available price information to consumers[56]56
  See: Federal Law No. 176-FZ “On Postal Communication”, dated 17 July 1996.


[Закрыть].

Price information may be communicated to customers in various forms, for example, as a price-list or a menu. Price information on public transport services should be communicated in places where customers can buy tickets, that is, enter into a transport services agreement. Normally, such places are ticket offices. Power tariff information is communicated by mail or in announcements at payment points.

Infringement of the consumer right to receive true basic information about goods (work, services) entails imposition of an administrative fine from 50 to 100 minimum wages (for legal entities)[57]57
  See: Russian Code on Administrative Offences No. FZ-195, dated 30 December 2001.


[Закрыть].

The price constitutes a material condition for certain customer agreements. Thus, a credit sale agreement providing for payment by instalment will not be deemed to have been concluded if it does not specify the price of the goods among the other conditions.

Measures to combat unfair overpricing

As a rule, prices are set by vendors or, in statutory cases, by competent authorities. In certain cases, the government may enforce a lower price.

This is possible in the case of a contract of adhesion, that is, a contract that is made on the terms and conditions determined by one of the parties and may be accepted by the other party only by joining the contract in general. According to Part 1 of the Russian Civil Code[58]58
  See: Part 1 of Russian Civil Code No. 51-FZ, dated 30 November 1994.


[Закрыть], a joining party may require cancellation or modification of such a contract of adhesion if it does not contradict the law or other legal instruments but contains conditions that are obviously burdensome for it and that it would not have accepted if it had had an opportunity to influence the contract conditions. A court may revise this provision, for example, by reducing the price.

A price reduction may be imposed by a regulation of the antimonopoly authority. The Federal Antimonopoly Service[59]59
  See: The Federal Antimonopoly Service Regulations (approved by Resolution of the Russian Government No. 331, dated 30 June 2004).


[Закрыть] is empowered to issue directives aimed at preventing the formation of monopolies, as well as remedying the consequences of market monopolisation (such as overpricing).

State authorities exercise control over natural monopolies complying with the state regulations and requirements. Thus, the Russian Code on Administrative Offences[60]60
  See: Russian Code on Administrative Offences No. FZ-195, dated 30 December 2001.


[Закрыть] stipulates that over– or underpricing of goods (services), the prices for which are subject to state regulation, or setting prices for them in excess of or below statutory limits shall entail imposition of an administrative fine. The Moscow Law[61]61
  See: Moscow Law NO. 5 “On State Control over Compliance with the Pricing Procedures and Application of Regulated Prices”, dated 28 January 2004.


[Закрыть] also envisages that offenders deriving surplus income from breach of the pricing procedures shall be obliged to transfer this surplus income to the Moscow Government and also pay an administrative fine of 400 to 500 minimum wages[62]62
  See: Russian Code on Administrative Offences No. FZ-195, dated 30 December 2001.


[Закрыть].

Role of the Antimonopoly Legislation

As one way to combat monopolisation of the market, the state regulates competition. The fundamentals of competition regulation are laid down in the Law “On Competition and Restriction of Monopolistic Practices on Commodity Markets”[63]63
  See: Law of the RSFSR No. 948-I “On Competition and Restriction of Monopolistic Practices on Commodity Markets”, dated March 22, 1991.


[Закрыть]. The Law provides for combating monopolistic prices and service tariffs, with the exception of the tariffs of natural monopolies, which are subject to special regulations. The antimonopoly legislation prohibits market participants in a dominant position from undertaking anything that might result in prevention, restriction or elimination of competition, including fixing or maintaining monopolistically high or low prices. An entity qualifies as dominating a particular market if its market share exceeds 65 % or, in certain cases, is from 35 to 65 %.

The Federal Antimonopoly Service controls the market and reveals violations of the antimonopoly legislation, which may be committed, in particular, in the form of setting monopolistically high prices (that is, prices fixed by an entity dominating the market and enabling the entity to derive significantly higher profits than would be possible under comparable or competitive conditions)[64]64
  See: Law of the RSFSR No. 948-I “On Competition and Restriction of Monopolistic Practices on Commodity Markets”, dated March 22, 1991.


[Закрыть].

If a consumer believes that particular goods (services) are unreasonably overpriced, (s)he may report this case to the antimonopoly authority, which will perform market research into possible violations. The methods used for such researches are set out in regulations of the executive authorities[65]65
  For example, in Letter of the Russian State Committee for Antimonopoly Policy No. VB/1034 “On Identification of Monopolistically High Prices”, dated 14 March 1996; “Temporary Methodological Guidelines of the Russian State Committee for Antimonopoly Policy” No. VB/2053 of 21 April 1994.


[Закрыть] and represent economic assessments of the impact of existing prices on the position of other market participants and consumers.

In the event that a violation is identified, the Federal Antimonopoly Service issues an order. Failure to comply with this entails imposition of a fine. In particular, a legal entity may be fined from 2,000 to 5,000 minimum wages for non-fulfilment in due time of a legal order or decision by a federal antimonopoly body.

Pricing and Consumer Rights

Individual entrepreneurs are not obliged to inform consumers of their rights. The Consumer Protection Law only obliges manufacturers (service providers and vendors) to inform consumers of the warranty period or the use-by date, if any, as this is the period during which consumers may place claims with respect to inferior goods[66]66
  See: Article 19 of Russian Law No. 2300-I “On Consumer Protection”, dated 7 February 1992.


[Закрыть].

The Consumer Protection Law[67]67
  See: Article 18 of Russian Law No. 2300-I “On Consumer Protection”, dated 7 February 1992.


[Закрыть] envisages that, unless expressly stipulated by the vendor, a consumer who was sold inferior goods may, at his/her own discretion, require the seller:

• to eliminate, without extra charge, the defects in the goods or reimburse the cost of their repair by the consumer or a third party;

• to reduce the purchase price by an appropriate amount;

• to replace the defective goods with goods of a similar brand or concept or with a similar product identification number;

• to replace the defective goods with goods of the same nature but of a different brand or concept or with a different product identification number and to recalculate the purchase price as appropriate.

The consumer may rescind the sale and purchase agreement and require the seller to return the amount paid for the goods. The consumer must return the defective goods when required to do so by the seller and at the latter’s expense. The consumer may also require the seller to make reimbursement for losses incurred as a result of the poor quality of the goods sold to him/her.

For each of the above-listed requirements, there is a deadline that the seller must meet. In particular, the requirement to reduce the purchase price by a suitable amount, to reimburse the expenses incurred by the consumer in repairing the defects or in having them repaired by a third party, to return the money paid for the goods or to compensate for the losses incurred by the consumer as a result of the poor quality of the goods must be satisfied within ten days of the claim being entered[68]68
  See: Article 22 of Russian Law No. 2300-I “On Consumer Protection”, dated 7 February 1992.


[Закрыть]. In the event of delay in satisfaction of the claims, the vendor is liable to pay interest at a rate of 1 % of the price of the goods.

If the consumer brings an action and the court upholds the claim, the manufacturer (service provider, vendor, importer, authorised agent) is also subject to a fine of up to 50 % of the amount awarded to the consumer for failure to satisfy the consumer’s requirements voluntarily.

A. Chepik, Senior Attorney Pepeliaev, Goltsblat & Partners

Special aspects of hiring ex-pats

Federal Law No. 115-FZ of 25 July 2002 “On the Legal Status of Foreign Citizens and Stateless Persons in the Russian Federation” has introduced a new regulatory framework for hiring foreigners in Russia (foreigners also include stateless persons). Since the Law was enacted, a number of regulations have been issued to clarify or specify the procedures for obtaining permits to hire expatriates. Although the Law has been in effect for two years now, some of its provisions still remain unclear to employers, employees and the government authorities.

The Law requires employers wishing to hire expatriates to obtain a permit to engage foreigners and a work permit for each foreigner engaged. Let us note that, in terms of the Law, work may mean work under an employment contract or under a civil law contract. An engagement permit and a work permit will also be required if an expatriate acts as an individual entrepreneur.

Thus, irrespective of the terms on which foreign nationals work in Russia, the organisation for which they work or to which they render services must have a permit to engage foreigners, who, in turn, must have work permits.

There are exceptions to this rule. It should be emphasised that the Law is applicable only to Russian territory. A permit must be obtained only if the foreigner works in Russia. If the foreign employee is actually based outside Russia, there is no need to obtain any hiring permits.

In practice, this provision of the Law can hardly be enforced when a foreigner is appointed CEO of an organisaiton. The viewpoint of the government authorities is that, if a person is on the staff of an organisation, he/she works in Russia, hence all permits must be obtained for him/her. In addition, if a foreigner acting as the single-member executive body or as head of the representative office (branch) of an organisation does not work in Russia, the location of the organisation (representative office or branch) is questionable, since, under the Russian legislation, the location of the organisation is determined on the basis of the location of its executive body.

No engagement or work permit is required for hiring foreigners who are permanently or temporarily resident in Russia if they work for diplomatic representations or consular offices of foreign states or if they are employed by foreign companies (manufacturers or supplies) to perform installation operations (installation supervision), maintenance, guarantee or post-guarantee repairs on equipment imported into Russia, or for hiring certain other categories of expat workers.

In order to employ a foreigner who already has a job (or in order to sign a civil law contract with him/her, if he/she works for another organisation), the employer must obtain both an engagement permit and a work permit for this foreign employee, even though such documents have already been obtained by another employer.

If, however, a foreigner performs work for one organisation by order of another organisation by which he/she is employed, i.e., this work is performed under a civil law contract between the two organisations, no permits have to be obtained. In such cases, the matter of obtaining work permits concerns only the individual foreigners and the organisations that invited them.

The Law does not contain any requirements concerning the period of a foreigner’s stay in Russia. Even if he/she comes to Russia to perform work for two days, the organisation has to obtain an engagement permit and a work permit, which normally takes from four to six months, on average.

We have to admit that it is fairly difficult to comply with the legal requirement in such a situation. Such short trips should be treated as business trips, not as full-time work, because in holding negotiations or advising Russian partners in Russia, the foreigner also performs his/her job duties, these duties being determined by his/her relations with the foreign employer.

If we follow the letter of the Law, any activities by a foreigner in Russia, including temporary work performed outside the main place of employment, which under the Russian legislation is treated as a business trip, will be regarded as work requiring a work permit. In our opinion, a business trip should never be recognised as tantamount to full-time work.

How, though, can one distinguish between a foreigner performing his/her job duties during a business trip and one who is employed full-time in Russia? In this case, we have to address the notion of a business trip and the criteria established for this by the Russian legislation.

Art. 166 of the Russian Labour Code defines a business trip as a trip made by an employee by order of the employer, for a certain period of time, in order to perform an assignment outside the place of permanent employment.

While on a business trip, a foreigner acts for and on behalf of the foreign company that sent him on this business trip. The purpose of his visit to Russia is business. In this case, the foreigner comes to Russia on the basis of a business visa to perform the employer’s assignment. No engagement or work permit is required for such individuals.

This issue becomes particularly acute when a foreigner is sent to Russia under a personnel secondment agreement the purpose of which is specifically to supply the employee. Legally, the foreigner has an employment relationship with a foreign company, but he/she actually performs his job duties for the purchaser of the services in Russia and, as a rule, on a long-term basis. It is currently not clear how to treat the relationship of an expatriate employed by a foreign company to the Russian organisation. Personnel secondment is not regulated by the Russian legislation. In this case, the foreign employee may be treated as being on a business trip, but such a long business trip will actually mean that the foreigner is working in Russia.

In this context, it should be borne in mind that, according to Regulation No. 62 of 7 April 1988 of the USSR Finance Ministry, the USSR State Committee for Labour and Social Issues and the All-union Central Council of Trade Unions, the maximum period of a business trip is 40 days, travel time excluded. If this period is significantly longer, the authorities might find that the secondee is employed by the organisation to which he/she was supplied. In practice, if a foreigner works under a secondment agreement, the authorities issue an engagement permit and a work permit.

Let us consider the time required for obtaining permits. As noted above, it normally takes from four to six months to obtain them. It often becomes necessary to engage a foreign specialist when the need to start operations becomes really pressing and the permit will only arrive six months later. The Law does not contain any exceptions to the general rule for cases when the employer has already initiated the permit procedure. The Law states that “foreign citizens may work only if they have work permits”. Thus, until the permit is received, a foreigner has no right to work in Russia or be engaged by the employer.

Under the Law, it is the responsibility of the employer, not the individual, to obtain a work permit (clause 8, article 8 of the Law). If a foreigner has no work permit, the employer will be held administratively liable for breach of the rules for engaging and using foreign manpower in Russia (art. 18.10 of the Russian Code on Administrative Offences). An administrative fine ranging from 100 to 3000 minimum monthly wages may be imposed on the employer. In addition, the Federal Migration Service may suspend the permit to engage and use foreign workers until the violation is remedied and, if it is not remedied within the prescribed time limits, the engagement permit may be revoked (clause 11, 12, art. 18 of the Russian Code on Administrative Offences).

Foreigners working in Russia without a work permit may also be held administratively liable.

Administrative liability for this offence presupposes either a fine ranging from 10 to 20 minimum monthly wages or a fine accompanied by administrative deportation from the country (part 2, art. 18.10 of the Code). If a foreigner has been deported, no work permit may be issued to him/her for the next five years from the date of deportation (sub-clause 3, clause 9, art. 18 of the Law).

It is worth noting that foreigners found to be staying illegally in Russia (for example, if the rules governing the foreigner’s stay in the Russian Federation are violated) will be registered, photographed and finger-printed, and the resulting data placed in the central database of foreign citizens temporarily staying or residing in Russia (art. 33 of the Law).

Visas for foreigners

A foreigner working in the Russian Federation is supposed to have a working, not a business visa. Visas issued to foreign citizens depend on the purpose for which they come to and stay in Russia (art. 25.1; 25.6 of Russian Federation Law No. 114-FZ of 18 July 1996 “On the Procedure for Entering and Leaving the Russian Federation”).

A business visa is issued for a business trip and does not entitle its holder to work.

Thus, if a foreigner who entered Russia on the basis of a business visa works in the Russian Federation, he/she violates the rules governing the foreigner’s stay in Russia.

Visas are issued to foreign citizens on the basis of invitations to come to Russia, which are executed at the request of the inviting legal entities (art. 25 of the Federal Law “On the Procedure for Entering and Leaving the Russian Federation”). When making arrangements for an invitation, the inviting organisation specifies the purpose for which the foreigner is invited to Russia. If the purpose of the stay indicated by the inviting organisation differs from the actual purpose of the stay in the country, the foreigner may be refused entry to the Russian Federation.

In addition, if a foreigner violates the rules governing the foreigner’s stay in Russia, the responsible official of the inviting organisation may be held administratively liable for this offence and face a fine ranging from 25 to 100 minimum monthly wages (art. 18.9 of the Russian Code on Administrative Offences).

In accordance with existing practice, representative offices and branches of foreign companies are currently unable to arrange for invitations to be issued to foreign citizens for obtaining working visas. In this context, foreigners working there for whom engagement and work permits have been received stay and work in Russia on the basis of business visas.

According to the current rules for issue of entry invitations to Russia on behalf of a legal entity, said entity must register with the federal executive authority for internal affairs or its territorial office. Ye the position of Moscow UVIR GUVD, for example, is that branches and representative offices are not legal entities and may not be registered.

In this situation, foreign companies accredited in Russia may invite expatriates only through the body that granted them accreditation. Accreditation bodies, in turn, cannot issue an invitation for a working visa, since an entry invitation to Russia for work is issued by the competent federal authority only at the request of the employer.