GILS Construction and Infrastructure: Russia
RUSSIA
1. What types of design and construction work require a licence in your country?
Today, a license is required to perform design and construction works for the preservation of cultural heritage objects. Licenses granting the right to engage in construction activities are divided into the following varieties:
- design - allows the development of construction projects;
- construction - provides the right to engage in the construction of houses and buildings;
- еngineering - provides the right to carry out engineering research and develop new solutions.
In other cases, such as:
- design activities of buildings and structures: drawing up design documentation for reconstruction, major repairs, construction and technical rearrangement;
- construction and installation works: general construction, special, commissioning, installation, sanitary and technical works,
Russian legislation contains provisions indicating the need to join a relevant self-regulatory organization (SRO) without a license if the object of work is not a cultural heritage object.
2. Can legal entities registered in foreign countries obtain a licence for design or construction?
The possibility for foreign legal entities to carry out licensed activities is established by the regulations on licensing of specific types of activities, if federal laws do not regulate this issue. For example, the Decree of the Government of the Russian Federation of 28.01.2022 № 67, providing for the procedure for licensing activities to preserve objects of cultural heritage, indicates the possibility of carrying out the relevant activities, including foreign legal entities.
As stated earlier, in other cases, a foreign legal entity is required to have membership in a self-regulatory organization (SRO):
- for SRO in the field of engineering surveys or design - the contractor can only be a legal entity, including a foreign one, or an individual entrepreneur (part 1 of article 55.6 of the Urban Development Code of the Russian Federation);
- for SRO in the field of construction - only a legal entity or an individual entrepreneur registered in the same constituent entity of the Russian Federation in which such self-regulatory organization is registered may be a contractor, except for foreign legal entities which may not be registered in the relevant constituent entity (part 3 of article 55.6 of the Urban Development Code of the Russian Federation).
It should be noted that in order to join an SRO, a foreign legal entity must either obtain branch accreditation or register a subsidiary in the territory of the Russian Federation.
3. Which foreign licences and permits in the field of construction and design can be recognized in your country?
Foreign licenses and permits in the field of construction and design will have no legal force and will not be the basis for admitting a foreign company to carry out construction or design work.
Russian legislation in the area of licensing of certain types of works regulates relations arising between the executive authorities of the Russian Federation and legal entities/individual entrepreneurs. Accordingly, licensing of certain types of works in the Russian Federation is carried out under special control of the Russian government authorities, in accordance with the procedure established by the Russian legislation.
4. Is it necessary to register a legal entity in your country to carry out design or construction work?
Foreign construction company may carry on entrepreneurial activities in Russia:
- through a permanent establishment/branch (Article 55 of the Civil Code of the Russian Federation);
- without a permanent establishment;
- through a resident subsidiary (establishment of an LLC in the territory of the Russian Federation or acquisition of a share in an already registered LLC in the territory of the Russian Federation).
These options for organizing entry into the Russian market imply different algorithms for the imposition of income tax, unified social tax, VAT and real estate tax.
5. What requirements are imposed on construction contracts and design and survey contracts, including when one of the parties is a non-resident of your country?
Construction contracts and contracts for design and survey work do not contain special requirements if one of the parties is a non-resident of the Russian Federation.
These contracts must be concluded in accordance with the Civil Code of the Russian Federation in a simple written form. It is not necessary to register the contracts.
6. In what cases should construction contracts and design and survey contracts be concluded following a special procurement procedure?
Only if the contract is concluded for the provision of state and municipal needs and the customer is a public-law entity, as well as subjects of natural monopolies.
7. What are the features of hiring local and foreign personnel in the implementation of construction and design and survey activities?
The involvement of foreign labor in construction and design and survey activities in Russia has its own specifics.
Let us disclose the main points.
The documents that give a foreign citizen the right to carry out labor activity in the Russian Federation are:
- patent (if a visa is not required);
- a work permit (if a visa is required).
The employer may not engage a foreign citizen in labor activity outside the borders of the subject of the Russian Federation, in the territory of which the foreign citizen was issued a work permit or a patent, as well as in a profession (specialty, position, type of labor activity) not specified in the work permit or patent.
The employer must conclude an employment contract with the foreigner and notify the migration division of the territorial body of the Ministry of Internal Affairs of Russia within 3 working days.
In case of employment of a foreign worker arriving from countries with a visa entry regime, the employer must have a permit to hire foreign labor.
There is a limit on the number of foreign workers in an organization set by the Government of the Russian Federation. According to the Russian Government Resolution No. 1823 of November 12, 2020, the share of foreign workers in organizations engaged in construction activities should not exceed 80% percent.
8. Is it possible to use foreign standard construction contracts?
Application of foreign model construction contracts in Russian national projects is possible. However, the terms of such model contracts may not contradict imperative norms of Russian legislation.
9. Is it possible to use foreign law and foreign courts when concluding construction contracts and design and survey contracts?
No special rule is established for the conclusion of these contracts.
Based on the content of Article 1210 of the Civil Code of the Russian Federation, the parties have the right to independently choose the applicable law in the presence of a foreign element of significance (for example, one of the parties to the disputed relationship is a foreign legal entity, the subject matter of the dispute is located in the territory of another state, the actions of the parties that are relevant to the dispute, which are associated with the emergence, change or termination of civil rights and obligations, were performed in the territory of another state).
If there is no such foreign element, the choice by the parties of the law of another country may not affect the effect of peremptory norms of the Russian Federation.
The parties are entitled to conclude a prorogation agreement (an agreement to select a competent court) or an arbitration agreement (an agreement to refer disputes to an arbitration court), including by selecting a foreign court or arbitration.
At the same time, these agreements do not apply to the categories of disputes referred to the exclusive competence of the courts of the Russian Federation (Article 248 of the Arbitration Procedure Code of the Russian Federation). Disputes arising out of construction contracts and contracts for performance of design and survey works do not fall within the exclusive competence of the courts of the Russian Federation.
Disputes involving persons in respect of whom restrictive measures (sanctions) have been taken (Article 248.1 of the Arbitration Procedure Code of the Russian Federation) also fall within the exclusive competence of the courts of the Russian Federation.
Authors: Pavel Balyuk (Counsel), Alisa Palant (Junior Associate); Juliya Zhadan (Counsel), Artem Kritsky (Junior Associate)
