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Get in-depth information about the city's economy, clusters, business solutions as well as details of doing business in St. Petersburg by reading fully-fledged English language guide designed …

Get in-depth information about the city's economy, clusters, business solutions as well as details of doing business in St. Petersburg by reading fully-fledged English language guide designed specially for exporters and importers, investors and start-ups.

This publication was developed by Enterprise Europe Network (EEN) - St. Petersburg in collaboration of professional legal, human resources, certification, research and real estate firms with the aim of providing start-ups, potential exporters and investors with the relevant information on starting and running business in St. Petersburg.

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  • 1. a
  • 2. Doing business in St. Petersburg2 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 3. Doing business in St. PetersburgEnterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 3
  • 4. Doing businessin St. PetersburgGuide for exporters, investors and start-upsCurrent publication was developed by and under supervision of the Enterprise Europe Network -Russia, Gate2Rubin Consortium, Module A Regional Center – St. Petersburg operated by St.Petersburg Foundation for SME Development with the assistance of the relevant legal, humanresources, certification, research and real estate firms.© 2012 The Enterprise Europe Network - Russia, Gate2Rubin Consortium, Module A RegionalCenter – St. Petersburg operated by St. Petersburg Foundation for SME Development. All rightsreserved. International copyright.Any use of materials of this publication is possible only after written agreement of St. PetersburgFoundation for SME Development and relevant contributing firms. Doing business in St. Petersburg4 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 5. Table of contentsWelcome to St. Petersburg ............................................................................................... 71. The city ...................................................................................................................... 8 1.1. Geography ............................................................................................................................. 8 1.2. Public holidays and business hours ....................................................................................... 9 1.3. Population ............................................................................................................................. 9 1.4. Political system .................................................................................................................... 10 1.5. Economy .............................................................................................................................. 13 1.6. Foreign trade ....................................................................................................................... 15 1.7. Foreign investments ............................................................................................................ 172. Key business sectors................................................................................................. 19 2.1. Overview of St. Petersburg’s industry ................................................................................. 19 2.2. Automotive industry ........................................................................................................... 22 2.3. Food and beverage production ........................................................................................... 25 2.4. Information and communication technology (ICT) ............................................................. 30 2.5. Pharmaceutical industry...................................................................................................... 37 2.6. Shipbuilding industry ........................................................................................................... 42 2.7. Transport and logistics ........................................................................................................ 463. Business solutions .................................................................................................... 55 3.1. Headquarters....................................................................................................................... 56 3.2. Research & Development.................................................................................................... 58 3.3. Production сenter................................................................................................................ 61 3.4. Distribution сenter .............................................................................................................. 68 3.5. Test market ......................................................................................................................... 704. Doing business ......................................................................................................... 72 4.1. Establishing a legal presence............................................................................................... 72 4.2. Foreign investments ............................................................................................................ 80 4.3. Taxation ............................................................................................................................... 85 4.4. Contracts ............................................................................................................................. 92 4.5. Employment ........................................................................................................................ 95 4.6. Product conformity assurance in Russia ........................................................................... 102 4.7. Intellectual property rights and franchising ...................................................................... 108 4.8. Special economic zones (“SEZ”) in St. Petersburg............................................................. 114 4.9. Public private partnerships and infrastructure development........................................... 116 4.10. Obtaining rights to state-owned land in St. Petersburg .................................................... 120 4.11. Buyout of land plots in St. Petersburg............................................................................... 129 4.12. Regulatory issues. Antimonopoly compliance .................................................................. 1335. Costs of doing business ...........................................................................................142 5.1. Costs of starting a company .............................................................................................. 142 5.2. Human resources .............................................................................................................. 144 5.3. Office, retail and warehouse market ................................................................................ 148 5.4. Communication ................................................................................................................. 154 5.5. Utilities .............................................................................................................................. 155 Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 5
  • 6. 6. SME support ...........................................................................................................157 6.1. Overview ........................................................................................................................... 157 6.2. Definition of SME – EU vs. Russia ...................................................................................... 157 6.3. Statistics ............................................................................................................................ 158 6.4. SME support and development programs ........................................................................ 1607. Contacts of the business support infrastructure .......................................................164 7.1. Overview of the business support infrastructure in St. Petersburg ................................. 164 7.2. Authorities ......................................................................................................................... 164 7.3. Investment support ........................................................................................................... 166 7.4. SME business cooperation support ................................................................................... 167 7.5. SME support ...................................................................................................................... 168 7.6. Financial support ............................................................................................................... 170 7.7. Techno parks and business incubators ............................................................................. 172 7.8. Educational programs and internships ............................................................................. 174 7.9. Chambers of commerce and industry ............................................................................... 175 7.10. Business associations ........................................................................................................ 175 7.11. Audit, tax and consulting firms ......................................................................................... 176 7.12. Banks ................................................................................................................................. 177 7.13. Certification and testing .................................................................................................... 177 7.14. Exhibitions ......................................................................................................................... 178 7.15. Law firms ........................................................................................................................... 178 7.16. Real estate ......................................................................................................................... 179 7.17. Recruitment....................................................................................................................... 179 7.18. Transport and logistics ...................................................................................................... 1808. Authors and contributors ........................................................................................182 Doing business in St. Petersburg6 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 7. Welcome to St. PetersburgI would like to welcome you to St. Petersburg - the city ofenormous business opportunities and development potential. Itis the second largest economic, transport, academic, cultural,and tourism center in Russia as well as a growing economy witha thriving private sector and an attractive businessenvironment.Whether you want to start your business or invest in Russia, St.Petersburg is the best place to do it. Favorable economic andgeographical location in the European part of Russia,developed infrastructure, extensive scientific, research andeducational potential, highly skilled workforce as well as broadmarket and competitive operating costs facilitate thedevelopment of efficient, safe and stable business.St. Petersburg is an attractive location for business and tradewhich has an established and effectively operating systemaimed at supporting investment activity in the city. TheGovernment of St. Petersburg takes every measure to make St.Petersburg a business-friendly environment by reducingadministrative barriers and simplifying the procedures required for business and investmentactivities, including issuance of building permits and registration of property rights.During the recent years many international companies have already implemented investmentprojects in St. Petersburg, including such leading companies as Coca-Cola, Pepsi, Gillett, Wrigley,British American Tobacco, Bosch Siemens, General Motors, Hyundai and many others. All of themconsidered St. Petersburg an ideal location for their business needs, whether it is an R&D center,test market, production center or distribution hub. Foreign businesses can benefit from governmentinvestment incentives aimed at boosting the local economy.This publication was developed by Enterprise Europe Network (EEN) - St. Petersburg incollaboration of professional legal, human resources, certification, research and real estate firmswith the aim of providing start-ups, potential exporters and investors with the relevant informationon starting and running business in St. Petersburg.The EEN branch in St. Petersburg focuses on providing business support to Russian companies andprovides free services to foreign companies to foster small business cooperation. In 2011 EnterpriseEurope Network (EEN) - St. Petersburg processed about 200 foreign requests and providedinformation on about 1,000 potential partners from St. Petersburg.Exporters, investors and businesses are also encouraged to use a special online tool – portal “Doingbusiness in St. Petersburg” (www.doingbusiness.ru) which contains extensive interactiveinformation in English on advantages and key issues of pursuing business in St. Petersburg as well asa regularly updated database of cooperation profiles and export products from St. Petersburg.Deputy chairmanCommittee for Economic Development,Industrial Policy and Trade Kirill SoloveychikGovernment of St. Petersburg Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 7
  • 8. 1. The city1.1. GeographyCoordinates: Latitude: 59° 57 North Longitude: 30° 19 EastArea: 1,439 sq.km.Climate: Maritime, with warm damp summers and moderately cold long wintersAverage temperature: July: + 25 C January: - 2 CTime: MSK ( UTC+4)Dialing codes: International country code: + 7 (Russia) Area code: 812 Doing business in St. Petersburg8 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 9. 1.2. Public holidays and business hoursOfficial holidays:  January 1-5 - New Year holidays  January 7 – Russian Orthodox Christmas  February 23 - Armed Forces Day  March 8 - Women’s Day  May 1 - International Labor Day  May 9 - Victory Day  June 12 - Day of Russia  November 4 - National Unity DayBusiness hours:  Offices: Mondays through Fridays - 9.00-18.00 (9 a.m. till 6 p.m.), lunch break – 13.00-14.00 (1 p.m. till 2 p.m.)  Banks: Mondays through Fridays - 9.00-18.00 (9 a.m. till 6 p.m.)  Stores: Mondays through Saturdays - 10.00-19.00 (10 a.m. till 7 p.m.), most stores are also open on Sundays  Restaurants: Mondays through Sundays – 12.00-23.00 (12 p.m. till 11 p.m.), many restaurants and cafes are open 24 hours1.3. PopulationPopulation 4,868,500 people(2011):Labor force (2010): 2,660,500 peopleUnemployment rate 0.6%(2010):Population density 3,288.3 per sq. km.(2010):Gender ratio male: 44.8%(2011): female: 55.2%Population age Male and female (0-15) Male (16-59); Malecomposition: female (16-54) (60 and above);(2010): female (55 and above) 12.9% 61.6% 25.5%Median age Total: 41.3 years Male: 38.2 years(2010): Female: 43.9 yearsBirth rate 12.1(per 1,000 people, 2010):Death rate 14.2(per 1,000 people, 2010):Ethnic groups Russian (84.7%), Ukrainian (1.9%), Belarus (1.17%), unspecified (7.89%)(2002 Census):Official language: Russian Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 9
  • 10. 1.4. Political systemCity day: May 27. The city was founded on May 27, 1703City name:  Conventional long form: Saint-Petersburg  Conventional short form: St. Petersburg  Local long form: Sankt-Peterburg | Санкт-Петербург  Local short form: С.-Петербург | Петербург  Former names: St. -Petersburg (1703-1914), Petrograd (1914- 1924), Leningrad (1924-1991), St.-Petersburg (1991 till present)Administrative division: While the city is divided into 18 districts (rayons), each district is divided into municipal formations. At the moment there are 111 municipal formations (munitsipalnye obrazovaniya). 1. Admiralteysky District 10. Kurortny District 2. Vasileostrovsky District 11. Moskovsky District 3. Vyborgsky District 12. Nevsky District 4. Kalininsky District 13. Petrogradsky District 5. Kirovsky District 14. Petrodvortsovy District 6. Kolpinsky District 15. Primorsky District 7. Krasnogvardeysky District 16. Pavlovsky and Pushkinsky Districts 8. Krasnoselsky District 17. Frunzensky District 9. Kronshtadsky District 18. Central District Doing business in St. Petersburg10 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 11. Political system: Source: Business Support Structure in St. PetersburgExecutive branch: The City Administration (www.gov.spb.ru) is the superior executive body of St. Petersburg headed by the Governor. The St. Petersburg Administration is formed of the Governor, the Government, the Governors Chancellery, the city committees and the subordinate administrative-territorial departments of the Administration.Legislative branch: The Legislative Assembly of St. Petersburg (www.assembly.spb.ru) is the standing effective supreme and sole legislative (representative) body of the state authority in St. Petersburg.Judicial branch: Charter Court of St. Petersburg (www.spbustavsud.ru), Judges of the Peace of St. Petersburg, City Court of St. Petersburg (www.gs.courts.spb.ru), Arbitration court of St. Petersburg and Leningrad region (www.spb.arbitr.ru) and Leningrad Military Circuit Tribunal (www.lvo.courts.spb.ru).Suffrage: 18 years of age; universal Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 11
  • 12. Symbolsof St. Petersburg: Coat of arms FlagDiplomatic 55 consular offices, including 34 consulates, 1 embassy office, 3 honoraryrepresentations: consuls general, and 19 honorary consuls are accredited in St. Petersburg. Doing business in St. Petersburg12 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 13. 1.5. EconomyGRP ofSt. Petersburg 1,901.9(billion roubles): 1,642.1 1,431.8 1,473.3 1,119.7 825.1 666.4 2005 2006 2007 2008 2009 2010 2011 (estimate) (forecast) Source: Committee for Economic Development, Industrial Policy and TradeGRP per capitain St. Petersburg(roubles): 389,595 341,683 310,567 320,914 245,023 180,315 145,174 2005 2006 2007 2008 2009 2010 2011 (estimate) Source: Federal State Statistics Service; Committee for Economic Development, Industrial Policy and TradeGRP sectoralcomposition Industrial production(2010): Other 19% 24% Real estate 7% Transport and 21% 10% communications Construction 18% Wholesale and retail trade Source: Committee for Economic Development, Industrial Policy and Trade Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 13
  • 14. City budget(billion roubles): 399.5 339.1 315.6 347 358.6 404 278.1 355.8 322.2 259.3 179.9 120.3 186.2 129.9 2005 2006 2007 2008 2009 2010 2011 Revenues Expenditures Source: Committee for Economic Development, Industrial Policy and TradeCity debt Total: 6,614.2 million roubles, including(01.01.2011): Internal: 6,614.2 roubles External: 0 roublesCredit ratings : Long-term credit international scale ratings in foreign currency:  Standard&Poor’s – BBВ (December 2009), forecast – stable  Moody’s Investors Service – Baa1 (May 2011), forecast – stable  FitchRatings – BBВ (September 2011), forecast – positive Long-term credit national scale ratings:  Moodys Interfax – Aaa.ru (July 2005)  FitchRatings – AAA(rus) (September 2011), forecast – stableLeading industries: Machinery, vehicle and equipment manufacturing, electronic and optical equipment, food, including beverages and tobacco; metallurgy and metalworking; chemical production.Priority sectors/clusters: Automotive, pharmaceutical, shipbuilding, power plant engineering, information technology, radiology, electronic engineering. Doing business in St. Petersburg14 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 15. 1.6. Foreign tradeForeign trade turnover(million USD): 25,734 23,643 24,524 20,685 17,786 17,839 14,177 12,658 13,437 11,817 10,116 4,914 2005 2006 2007 2008 2009 2010 Export Import Source: Territorial branch of the Federal State Statistic Service (Petrostat)Main trade partners(2010): Czech Republic 2.1% France 2.3% South Korea 2.4% Brazil 2.4% UK 2.5% Japan 3.1% Turkey 3.4% USA 3.7% CIS 4.2% Italy 4.3% Finland 4.7% Netherlands 8.6% Germany 9.1% China 17.5% Source: Territorial branch of the Federal State Statistic Service (Petrostat)Currency (code): Russian rouble (RUB)Exchange rates: RUB per EUR – 41.66 (November 2011), 40.3 (2010), 43.4 (2009), 41.40 (2008), 35.90 (2007), 34.70 (2006) RUB per USD – 30.29 (November 2011), 30.48 (2010), 30.24 (2009), 29.38 (2008), 24.55 (2007), 26.33 (2006) Source: Bank of Russia, Ministry of Finance of the Russian FederationFiscal period: calendar year Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 15
  • 16. 1.6.1. ExportExport volume (2010): 11,817 million USD (12.1% decline in comparison with 2009)Largest exporters JSC Gazprom Neft, JSC Admiralty Shipyards, LLC Novatek Severo-Zapad,(2010): CJSC PNT-GSM, VneshtorgbankExport structure (2010): 3% 4% Food products, agricultural raw materials Mineral products 15% Chemical products, natural rubber Leather and fur products 8% 0,2% Timber, pulp and paper products 65% Textile goods and 3% footwear Metal and metal products 0,4% 2% Machinery, equipment, vehicles Other Source: Territorial branch of the Federal State Statistic Service (Petrostat)1.6.2. ImportImport volume (2010): 24,524 million USD (37.8% increase in comparison with 2009)Largest importers LLC Nissan Manufacturing Rus, LLC General Motors Auto , LLC Petro,(2010): Northwestern branch of JSC MegaFon, branch of CJSC Russian Fish CompanyImport structure (2010): 7% Machinery, equipment, vehicles Metals and metal products Mineral products Timber, pulp and paper 36% products 27% Chemical products, natural rubber Textiles, textile goods, footwear 0.4% Leather and fur products 7% 12% Food products, agricultural 7% raw materials 1% Other 3% Source: Territorial branch of the Federal State Statistic Service (Petrostat) Doing business in St. Petersburg16 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 17. 1.7. Foreign investmentsVolume of foreign 6,284investments 5,928(million USD): 5,525 5,255 5,231 1,160 1,417 1,171 881 985 706 696 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Territorial branch of the Federal State Statistic Service (Petrostat)Structure of foreign 4investments (0.1%) 538(million USD, 2010): (10.3%) Foreign direct investment (FDI) Foreign portfolio investment (FPI) 4,689 (89.6%) Other foreign investment Source: Territorial branch of the Federal State Statistic Service (Petrostat)Foreign investments by Constructionsector of the economy (71)(million USD, 2010): Wholesale and Motor vehicles and equipment retail trade (766) (181) Manufacturing (4,764) Food, including beverages and Other (35) tobacco (550) Real estate (181) Source: Territorial branch of the Federal State Statistic Service (Petrostat) Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 17
  • 18. Major countries(million USD, 2010): France Belarus 18% South Korea 2.5% Belgium 2.9% 34.3% Kazakhstan 3.8% Cyprus 4.1% Sweden 4.4% 11.6% 8.4% Switzerland 10.2% Germany Other Source: Territorial branch of the Federal State Statistic Service (Petrostat) Doing business in St. Petersburg18 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 19. 2. Key business sectors2.1. Overview of St. Petersburg’s industry2.1.1. Structure and main indicatorsSt. Petersburg’s industrial complex represents the basis of the regional economic growth,accounting for the major source of budget.In the conditions of the global financial crisis, St. Petersburg’s industrial sectors showcased sufficientresilience and fast recovery following the recession. Initially sharp decline in economic growth wasrelatively quickly followed by renewed economic growth.Today, St. Petersburg’s industry, which employs approximately the fifth of the working population,accounts for 27% of the gross regional product and 36% of the total amount of tax revenues.Efficient operation of the industrial complex significantly affects the development of other sectorsof the economy, including transportation, construction, communication, trade and provides realopportunities for the solution of socio-economic goals of the city.Industrial complex of the city is represented by almost all industries. 700 large and mediumenterprises, a number of which represent the leading industrial enterprises of the RussianFederation, constitute the basis of the city’s industrial complex. More than 18 thousand smallenterprises, including microenterprises, also contribute to the development of the local economy.Large and medium enterprises, 2010Manufacturing (total) 675Electronic equipment, electronic and optical equipment 148Machinery and equipment 91Food, including beverages and tobacco 86Metallurgy and metal products 66Pulp and paper, publishing and polygraphic products 62Motor vehicles and equipment 48Non-metallic mineral products 47Chemical products 39Rubber and plastics 20Textiles and clothing 19Timber processing and timber products 14Leather, leather and footwear products 7Petroleum coke and petroleum products 3Other 25Electricity, gas and water production and distribution 50Mineral resources extraction 2Source: Committee for Economic Development, Industrial Policy and Trade, 2011In 2010 the volume of industrial production increased by 8.9%. This fact is attributed to thesignificant increase in the volumes of production of motor vehicles and equipment (2.4 timesincrease), metallurgy and metal products (26% increase), chemical products (24% increase). Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 19
  • 20. In 2010 the industry shipments of St. Petersburg’s enterprises constituted 1,461 billion roubles whichrepresents 124% to the level of 2009. Manufacturing enterprises determine operation of the localindustry. Such enterprises account for more than 90% of the total volume of industrial productsproduced in St. Petersburg (1,343 billion roubles). Machinery (144%), metallurgy and metal products(124%) and chemical products (126%) manufacturing enterprises contributed the most to thegrowth of production volumes in 2010.Structure of the volume of industry shipments, 2010 Mineral resources extraction 0.4% Manufacturing 91.9% Electricity, gas and water production and distribution 7.7%Source: Committee for Economic Development, Industrial Policy and Trade, 20112.1.2. ProfitabilityIn 2010 industrial complex accounted for 251 billion roubles in profit, including 228 billion roublesfrom manufacturing industries. While the share of profitable enterprises within the total number ofmanufacturing enterprises constituted 80% (77% in 2009), the volume of profit in the industrialcomplex increased by 37% in comparison with 2009. The most significant growth in profit incomparison with the previous year is reported in the production of motor vehicles and equipment(1.7 times) as well as metallurgy and metal products (1.6 times). In 2010 a high level of profitabilityremained in the production of food, beverages and tobacco (26%), chemical products (22%),machinery and equipment (17%).Profitability of manufacturing enterprises, 2010 Russian Federation 14.3% St. Petersburg 16.7%Source: Committee for Economic Development, Industrial Policy and Trade, 20112.1.3. Budget receiptsIndustrial complex accounts for major budget revenues in comparison with other sectors of the city’seconomy. In 2010 the tax revenues from industrial enterprises constituted 125 billion roubles (morethan 36% of the total amount), including 116 billion roubles received from manufacturing Doing business in St. Petersburg20 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 21. enterprises. Food production, including beverages and tobacco, motor vehicle and other types ofequipment production accounted for more than 85% of all budget receipts from the manufacturingsector.Structure of receipts into the budget of the Russian Federation from St. Petersburgsmanufacturing enterprises, 2010 2% 5% 2% 7% Food, including beverages Tobacco 8% 28% Chemical production Electronic and optical equipment Machinery and equipment 8% Metallurgy and metal products Motor vehicles and equipment 37% Non-metallic mineral products 3% OtherSource: Committee for Economic Development, Industrial Policy and Trade, 2011 Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 21
  • 22. 2.2. Automotive industry2.2.1. General overviewAutomotive industry and automotive parts manufacturing play an important role in St. Petersburg’stransport machinery complex. The city locates production facilities of the world’s leading carmanufacturers, including Nissan, Toyota, General Motors, Hyundai and Scania.Leading car manufacturing plants in St. Petersburg, 2011Brand name Opening Production Volume of Employees Model range volume, investment th.units/yearToyota 2007 50 133 mln USD 600 Toyota CamryGeneral Motors 2008 60 303 mln USD 1,300 Chevrolet Cruze, Chevrolet Captiva, Opel Astra, Opel AntaraNissan 2009 50 200 mln USD 1,500 Teana, X-trail, MuranoHyundai 2010 150 650 mln USD 2,400 SolarisScania 2010 6,5 10 mln Euro 600 all types of trucksSource: Committee for Economic Development, Industrial Policy and Trade2.2.2. Industry in numbersDevelopment of automotive clusters is one of the prerequisites of successful development ofautomotive industry. St. Petersburg has one of the fastest-growing and promising automotiveclusters, which makes the city a leading center of Russian car manufacturing industry.During the first stage of cluster development from 2005 to 2010 Nissan, Toyota, General Motors,Hyundai, Scania built their car assembling facilities in the city. With the total area of allocated landlots of 686.3 hectares and more than 6 thousand workplaces created, the volume of investment intothe construction of new car manufacturing facilities constituted 1.3 billion dollars. The total volumeof budget spendings directed towards the implementation of investment projects constituted 6.6billion roubles.Volume of car manufacturing in St. Petersburg, thousand units, 20112011F 225 2010 69.4 2009 19.9 2008 47.5Source: Committee for Economic Development, Industrial Policy and Trade Doing business in St. Petersburg22 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 23. 2.2.3. CompaniesLight motor vehicles General Motors General Motors opened its automobile factory in St. Petersburg in 2008. Global car making giant became the second foreign carmaker to open a factory in St. Petersburg. Investment in the project totalled 300 million dollars with up to 1,700 jobs created, followed by the opening of a second production line in 2010. Hyundai Motor Company Hyundai officially launched its full-cycle manufacturing plant in St. Petersburg in 2010. St. Petersburg’s plant is Hyundai’s sixth production facility outside its home market of South Korea. The facility is expected to roll out 105,000 vehicles in its first year of operation with the rise to 150,000 in 2012. Hyundai plans to create 5,300 jobs by 2012 in St. Petersburg together with eleven parts suppliers from Korea. Nissan Nissan Manufacturing Rus was established in St. Petersburg in 2009. The plant currently represents approximately a 150 million euro investment with the total volume of 28,500 units since the start of production. The plant currently employs 2,000 employees. Toyota Motor Corporation Toyota became the first Japanese carmaker to start production in Russia with its car assembly plant opened in St. Petersburg in 2007. The plant, with an annual output capacity of about 50,000 vehicles, initially built 20,000 Camry sedans per year while gradually expanding its production since then.Trucks Scania Scania opened its industrial facility for assembling and bodyworking trucks for the Russian market in St. Petersburg in late 2010. This Russian facility is Scania’s sixth delivery center. From the new Delivery Center in St. Petersburg, Scania supplies complete trucks that are adapted to the requirements and operating conditions that apply in Russia. St. Petersburg’s facility has a technical assembly capacity of about 5,000 truck chassis and 1,500 superstructures per year. It employs about 70 employees. Yarovit Motors Yarovit is a Russian manufacturer of cargo trucks, dump trucks, bolster trucks and concrete mixers. Yarovit’s manufacturing facility was set up in St. Petersburg in 2003. In 2012 ë-Auto, a joint venture of Yarovit and the Onexim investment group, will start the production of a hybrid electric car yo-mobile. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 23
  • 24. Components suppliers Magna International A global automotive supplier currently operates five production sites in Russia, three of which are located in the St. Petersburg region since 2010. The Cosym stamping and assembly plant in Shushary has 170 employees and produces body, chassis and energy-management systems for OEM customers such as Hyundai, General Motors, Nissan and Volkswagen. The Cosym assembly and sequencing plant in Kamenka is a Hyundai- dedicated production site that employs 50 employees. Magna announced the opening of a Magna Exteriors and Interiors facility in Kolpino which has approximately 25 employees producing exterior and interior components for OEM customers, including Ford and Nissan.2.2.4. Supporting institutions2.2.4.1. Associations St. Petersburg Association of Manufactures of Automotive Components (SPbAPAC) St. Petersburg Association of Manufactures of Automotive Components is the largest professional association of automotive components manufacturers in Russia which functions on the principle of a cluster. At present the association unties more than 60 enterprises which manufacture over 1,500 products. Active participation in regional, interregional and international exhibitions and conferences as well as support of the Government of St. Petersburg and the Union of Industrialists and Entrepreneurs makes the association one of the key players at automotive and automotive components market of the Russian Federation. Doing business in St. Petersburg24 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 25. 2.3. Food and beverage production2.3.1. General overviewFood complex in St. Petersburg is represented by 11 major industries, which include more than 80large and medium as well as 180 small enterprises. Brewing and tobacco manufacturing are the twomost developed sectors of the local food industry.High investment activity of St. Petersburg’s enterprises is one of the major factors accounting forthe successful development of food industry in the city. Increased automation and productionimprovements allowed companies to significantly diversify the assortment of produced foodproducts and improve their consumer appeal. Continuous renewal of assortment is one of thecharacteristics of the food industry in St. Petersburg. St. Petersburg’s enterprises develop at least100 new sorts of various bakery and pastry products, including bread and rolls, dried bread andbiscuits, pies and cookies. Assortment of the produced bakery products totals more than 400 itemswhich makes it the most diversified assortment present in Russia.2.3.2. Industry in numbersIn 2010 the volume of food industry shipments, including beverage and tobacco, constituted 14.6%of the total manufacturing industry in St. Petersburg. The shares of tobacco and confectioneryproduction industries in St. Petersburg represent more than 50% in the total Northwestern FederalDistrict output volume.Structure of industry shipments, 2010 Investment in fixed assets by industry, 2010 21% 77% 15% 49% 11% 8% 7% 12% Other manufacturing industries Electric power, gas and water production Motor vehicle and equipment manufacturing Food manufacturing, including beverages and tobacco Food manufacturing, including beverages and tobacco Metallurgy and metal product manufacturing Electric power, gas and water production Other industriesSource: Committee for Economic Development, Industrial Policy and Trade, 2011As of 2010, the food and beverage industry employs more than 11% of the total number of employeesoccupied in the St. Petersburg industrial complex and pays higher wages than any other industry in St.Petersburg (35.4 thousand roubles). Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 25
  • 26. As of 2010, food industry, including beverage and tobacco, is the most profitable industrial sector inSt. Petersburg (26%), followed by chemical (22%) and machinery and equipment production (17%).These industries account for more than 85% of all revenue receipts from the local manufacturingsector. More than 10% of all investment into industrial sector accounts for the production food,beverages and tobacco.12.3.3. CompaniesBakery Hlebny Dom JSC Hlebny Dom has operating at the Russian market for more than 70 years and is one of the largest baking enterprises in Russia. The company became a part of the Fazer Group in 1997. It is represented by 4 production sites in St. Petersburg as well as one in Moscow. Hlebny Dom produces bakery and confectionery products, long term storage foods as well as frozen and flaky dough products. Karavay JSC Karavay was established in St. Petersburg more than 80 years ago. Today, it is a modern fully-equipped bakery which produces more than 170 items of fancy and bakery products. Karavay is one of the leaders of baking industry in St. Petersburg. It currently possesses 4 baking plants.Beverage production Carlsberg Group Baltic Beverages Holding, a leader at the Russian beer market which manages Baltika, became a part of the Carlsberg Group in 2008. Carlsberg currently owns 89.01% of Baltika stock. Today, Baltika Brewery, founded in 1990, is the largest brewery in Eastern Europe and the second-largest brewery in Europe after Heineken Brewery. Coca-Cola Company Coca-Cola’s plant, opened in St. Petersburg in 1995, produces Coca-Cola products for more than 13 million customers in St. Petersburg and Northwestern Russia. It employs more than 1,000 people, while creating up to 200 additional seasonal workplaces during the peak seasons. Heineken Heineken has been operating in Russia since 2002 when it acquired the Bravo plant in St. Petersburg. St. Petersburg’s Heineken brewery also produces and distributes Budweiser beer, having signed a licensing agreement with Bud’s brand owner Anheuser-Busch. Pepsi Bottling Group, Inc. (PBG) PepsiCo drinks are produced by Pepsi Bottling Group at its four plants in Russia. One of the top global FMCG companies in Russia opened its St. Petersburg’s plant in 1992. PBG produces and distributes all PepsiCo products, including carbonated soft drinks, water, snacks, juices, teas.1 Committee for Economic Development, Industrial Policy and Trade Doing business in St. Petersburg26 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 27. Russian Standard Company A leading Russian premium vodka producer opened its distillery in St. Petersburg in 2006. Total investments into the facility amounted to 60 million dollars. The distillery produces 3.6 million dekaliters of vodka annually. A 30,000 square meter facility handles the production of the companys entire vodka portfolio, including Russian Standard Original, Russian Standard Platinum and Imperia.Candy Chupa Chups S.A. The Spanish candy maker launched its St. Petersburg’s production facility in 1991. Neva Chupa Chups produces Chupa Chups caramel lollipop candies of various flavors and colors not only for the Russian market but also for export to CIS countries. St. Petersburg’s factory has the capacity of making up to 200 million 200-gram rolls per year. Confectionery factory named after N.K. Krupskaya The history of the Confectionery factory began in 1938. In 2006 the factory was acquired by the Norwegian Concern Orkla which is one of the leading suppliers of branded consumer goods to Nordic food retailers as well as Central and Eastern Europe and Russia. Today, the factory is a modern industrial complex with capacity to produce more than 20 thousand tons of confectionery products per year. It produces more than 130 confectionery products, including chocolate of different sorts, diabetic products, chocolate semi-finished products for food industry.Chewing gum Wm. Wrigley Jr. Company The world’s largest maker of chewing gum has been operating a 70 million dollar plant in St. Petersburg since 1999. Wrigley is planning to expand its St. Petersburg plant with an investment of 100 million dollars. The company also announced that it might build a second factory in Russia and acquire local producers to tap its growth at the Russian market.Dairy Petmol dairy plant, Unimilk St. Petersburg dairy plant Petmol launched the production of dairy products in 1934. In 2003 LLC Unimilk became the main shareholder of the company. Today, Unimilk is one of the leading manufacturers of dairy products in Russia and CIS. Established in 2002, the company employs more than 14 thousand people and unites 28 enterprises in Russia, Ukraine and Belarus specialized in the production of dairy products and baby food. Baltic Milk, Wimm-Bill-Dann Baltic Milk Dairy Factory was launched in 1987. The factory became a part of the Wimm-Bill-Dann production and trade group in 2000. Will-Bill- Dann is the leader at the Russian market of dairy products and baby food as well as one of the leading producers at the soft drinks market in Russia and CIS. The company operates more than 35 processing plants in Russia, Ukraine and Central Asia and employs more than 18 thousand people. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 27
  • 28. Tobacco British American Tobacco (BAT) BAT’s plant in St. Petersburg operates 13 production lines producing five premium brands. It provides about 25% of BAT’s production volume in Russia. The company completed the construction of new production facilities at its plant in St. Petersburg in 2007 with the total investment of 110 million dollars, thus increasing St. Petersburg plant’s production capacity to 40 billion cigarettes a year. Japan Tobacco International (JTI) Petro JTI Petros cigarette making facility in St. Petersburg is the company’s biggest worldwide plant with the total of 400 million dollars invested. The brand portfolio includes over 30 brand names, both international and local. It supplies the firms Russian and Ukrainian plants with main tobacco components used for cigarette production. Philip Morris International (PMI) Philip Morris Inc. officially opened its third Russian cigarette factory in St. Petersburg in 2000. The total investment of 335 million dollars made this project the company’s largest cigarette plant in Europe. The plant, which employs 750 workers and operates 15 conveyer belts, produces the Marlboro, Parliament, Virginia Slims, L&M, Chesterfield and Bond Street brands. In 2002 the company began construction of a new processing line and a warehouse with the total investment estimated at 240 million dollars.2.3.4. Supporting institutions2.3.4.1. Universities St. Petersburg Institute of Management and Food Technology St. Petersburg Institute of Management and Food Technology is an institute of continuing professional education and professional development, international information, scientific research, analysis, exchange of experience, which has been operating for more than 43 years. Every year more than 3 thousand specialists from bread and baking pasta, yeast, brewery and other food industry enterprises undergo training, career and professional development at the Institute. St. Petersburg State University of Refrigeration and Food Engineering With more than 6 thousand students enrolled, St. Petersburg State University of Refrigeration and Food Engineering is the leading higher educational institution in refrigeration engineering and food processing in Northwest Russia. The University has educated more than 25 thousand engineers who continue to actively contribute to the development of refrigerating and cryogenic engineering, technology and equipment for food processing. The University is actively involved in research, scientific and innovative activities. Technopark has been operating on the basis of the University since 2000. It unites the University engineering departments as well as business structures and small innovative enterprises. During the period of 5 years Technopark carried out more than 300 projects, which have been implemented at the largest food enterprises across Russia.2.3.4.2. Research Institutions All-Russia Scientific and Research Institute of Fats All-Russia Scientific and Research Institute of Fats is the largest scientific and research center in Russia specialized in oil and fact industry. The institute carries out fundamental and applied Doing business in St. Petersburg28 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 29. scientific research and introduces the best research practices aimed at technological, economic and social development of agro-industrial complex. The institute carries out research of vegetable oil production and processing, vegetable food protein as well as margarine and mayonnaise production, etc. State Scientific Research Institute of Baking Industry, St. Petersburg branch State Scientific Research Institute of Baking Industry is the leading scientific center of bread and baking pasta industry in the Russian Federation and CIS. St. Petersburg branch specializes in the field of developing new technologies for baking. The priority research areas are the development and improvement of biotechnological processes and assortment of rye, rye and wheat bread as well as pastry.2.3.4.3. Professional associations St. Petersburg Union of Food Enterprises The Union is a non-profit organization established in 2005 by baking, meat processing, dairy, oil and fat, confectionery, alcohol and other food industry enterprises. The organization aims to coordinate business activities of its members and actively participate in the effective state regulation in the sphere of food industry. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 29
  • 30. 2.4. Information and communication technology (ICT)2.4.1. General overviewInformation and communication technology (ICT) sector is one of the most rapidly growing sectorsof the Russian economy. 60% of all Russian IT companies are based in St. Petersburg, including 49centers of leading international and Russian ICT companies. The development ICT cluster is apriority policy implemented by the Government of St. Petersburg. Availability of a developed ITinfrastructure, including a technopark, business incubator, modern research and scientificinstitutions, as well as highly qualified IT-personnel facilitate the development of St. Petersburg as aRussian leader in information and communication technology.2.4.2. Industry in numbersToday, ICT cluster is one of the youngest and most competitive sectors of innovation policyimplemented in St. Petersburg. The cluster represents not only an independent sector but also atrigger facilitating effective development of other sectors of the regional economy. As of 2009, thesector’s annual turnover constituted not less than 3.5 billion dollars. The amount of peopleemployed only in software development constitutes more than 36 thousand employees with almost100% of them possessing higher education degrees.Most of the companies and institutions comprising ICT cluster have the highest competitivenessrating, including Reksoft, Exigen Services, PROMT, Speech Technology Center, Spb Software,SPEEREO, Solvo and others.2Russian cities by number of head offices and remote development centers of IT companies, 2010Ranking City Number of offices1 Moscow 672 St. Petersburg 493 Moscow region 104-5 Novosibirsk 84-5 Voronezh 76 Rostov-on-Don 77 Tomsk 68-9 Yekaterunburg 58-9 Veliky Novgorod 48-9 Kazan 410-12 Nizhniy Novgorod 3 thSource: Russian software developing industry and software exports, 7 annual review, Russian Software DevelopersAssociation (RUSSOFT), 20102 Russian Software Developers Association (RUSSOFT) Doing business in St. Petersburg30 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 31. 2.4.3. CompaniesSuppliers of software development services Astrosoft Astrosoft is a premium level IT-services supplier with more than 10-year expertise in implementing projects all over Europe. The company is headquartered in St. Petersburg and provides a wide range of services in software development and integration, consulting and training. The key service areas include business applications development, business solutions development, business in Russia for start-up solutions, embedded systems development, legacy system re-architecture. Arcadia Arcadia is an innovative offshore software development based in St. Petersburg. The company provides a wide range of software development outsourcing services to customers worldwide. Today, Arcadia unites team of more than 170 software professionals with over 18 years of experience in custom development of business applications. AT Software AT Software is a leading software and hardware development company in Russia/CIS with customers in Europe, USA and Russia. AT Software was formed in 2008 as the result of merger of two leading Russian software development companies - Lanit-Tercom (St. Petersburg) and Artezio (Moscow). Today, its primary areas of expertise include telecommunications, industrial electronics, healthcare, banking and finance as well as education. The company offers a wide range of services, including software and/or hardware development outsourcing/offshoring (ODC), managed product development, enterprise services (custom applications development, audit, testing, customization, re-engineering, integration), IT consulting and research, IT staffing and out-staffing. DataArt DataArt is a custom software development company that provides advanced solutions for financial services, healthcare, hospitality and other industries. Founded in 1997, DataArt’s services include application development, quality assurance, team completion, reengineering and R&D. The company has been consistently named one of the top or fastest growing IT outsourcing providers worldwide by BusinessWeek. Headquartered in New York, DataArt runs R&D centers in Russia, including the center in St. Petersburg, Ukraine and maintains offices in London, UK. DevExperts DevExperts is a provider of professional software systems for on-line brokerage, exchange, and financial activities mostly on stock, options, and Forex markets. The company is specialized in the development, implementation, and support of financial systems intended to handle complex business activities, including a full set of advanced tools to meet both a traders and a brokers requirements. DevExperts is based in St. Petersburg and provides its services operating in the US, Great Britain, Russia, Japan as well as other countries. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 31
  • 32. Digital Design Headquartered in St. Petersburg, Digital Design is an IT consultancy which offers a full range of IT services to clients in Russia and all over the world. The company’s services include customs software development, corporate portals, software plus services enabling, application maintenance and legacy migration, enterprise application integration, data warehousing and analysis, nearshore development center, rail fleet management system. Founded in 1992, the company has become one of the largest IT services providers in Russia. Exigen Services Exigen Services is an Inc. 5,000 global IT company that provides application outsourcing services. The company has been delivering its services to clients operating in the field of financial services (banking, brokerage and insurance markets), media and entertainment, healthcare, and industries for 17 years. Today, it employs more than 1,700 highly skilled developers and application outsourcing experts within its global delivery network. Headquartered in San Francisco, USA, the company has one of the largest development centers in St. Petersburg. Reksoft Reksoft is a nearshore software engineering services provider established in 1991. The company is headquartered in St. Petersburg and has delivery offices across Europe. Reksoft specializes in supplying software development services, products and solutions to enterprises, ISVs, and system integrators operating in a variety of industries. Reksoft’s major services include software product engineering, enterprise application services, including consulting, custom application development, enterprise application integration, application management, migration and customization, as well as dedicated centers.Software product developers Doctor Web Doctor Web is a developer of highest-grade anti-virus protection Dr.Web®. The company is headquartered in Moscow with the Department of AV- Research and Development located in St. Petersburg. Doctor Web unites the team of more than 230 specialists with over half of them engaged in R&D. Dr. Web’s security products are distributed through its network of partners. Eureca Eureca has been operating at the Russian market since 1990. Today, the company offers a variety of services, including development of complex information systems, development and supply of integrated network solutions, development, production and supply of high-efficient servers and working stations, organization of automated data entry, storage, access and search systems and many others. The company has offices in St. Petersburg, Moscow and Kursk as well as a training center in St. Petersburg. Doing business in St. Petersburg32 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 33. PROMPT PROMT is a leading Russian developer of linguistic IT solutions for business and private users. The company has been successfully operating at the market of innovative linguistic technologies for 20 years and, today, offers translation systems for twelve languages. PROMT has 4 worldwide offices, including the corporate office in St. Petersburg, and provides its services to more than 10 thousand client companies all over the world. SPB Software SPB Software Inc. is a global company which develops mobile solutions for OEM mobile device manufacturers and mobile carriers as well as smartphone and tablet end users. With dozens of industrial awards and millions of customers worldwide, SPB provides a unique line of popular consumer products, ranging from mobile games to usability and productivity applications, business, communication, and multimedia software for mobile phones. Founded in St. Petersburg in 1999, the company retains its development headquarters in the city and has offices in USA, Brazil, Taiwan, and Thailand. Speech Technology Center Speech Technology Center is a leading provider of cutting-edge voice- based solutions in speech recording, processing and analysis. Founded in 1990, Speech Technology Center has over 20 years of experience in speech technology development. STC provides competitive solutions across a range of fast-growing technology sectors, including multi-channel and hand-held digital recording, noise cancellation, speech enhancement and biometric authentication and identification. STC is also a leading developer of speech recognition and synthesis engines for the Russian language. Speereo Speereo Software UK Ltd. was founded in 1998 and has a head office in London, UK as well as a R&D center in St. Petersburg. The company specializes in the development of its own proprietary speech recognition system as well as mobile and PC solutions based on Speereo Speech Recognition (SSE) Technology.Software development centers of international companies Alcatel-Lucent Alcatel has been operating its R&D center in St. Petersburg since 2005. Its main objectives lie in the development and integration of innovative telecommunications software systems, and adaptation of existing company’s products to the specific requirements of the regional market. The center covers three fields of applications, including fixed, mobile and enterprise networks, and employs 150 specialists trained at the specialist R&D centers in Europe and the US. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 33
  • 34. EMC Opened in 2007, EMC R&D center in St. Petersburg is an important part of the global EMC R&D investment program. The center focuses on rendering support and continuous development of a wide range of world’s leading software products. St. Petersburg’s center currently employs more than 170 program engineers specialized in data management and data storage systems. HP Labs HP Labs Russia is the newest member of the international HP Labs community, and the third new research lab created by the company in the last five years. Opened in St. Petersburg in 2007, it focuses on information management and development of new technologies linked to the explosion of information access brought about by the World Wide Web. The only Russian HP research lab delivers breakthrough technologies and technology advancements that provide a competitive advantage for HP and create business opportunities that go beyond HPs current strategies. Intel Opened in St. Petersburg in 2004, the Intel R&D center currently employs more than 100 specialists. The center focuses on conducting research and development of innovative software solutions for Internet-related technologies, including Dynamic Runtime Layer (DRL), communication technologies that enhance wireless communication, grid computing to optimize programming environment. St. Petersburg center works in close collaboration with the city universities with the aim of creating a solid academic foundation for information. Oracle Development Following the Sun Microsystems’ acquisition by Oracle in 2009, the Sun Microsystems’ center of high technologies in St. Petersburg has been functioning as Oracle Development LLC.System integrators BCC Group Founded in 1994, today, BCC Group is one of the leading companies providing IT-services and systems integration at the Russian market. The company’s major activities include enterprise management and business consulting, IT-consulting, software integration and installation services, telecom solutions for mobile and fixed communication networks, IT and telecom solutions for production and manufacturing and others. The company has 5 offices in Russia, including the office in St. Petersburg. Nienschanz Nienschanz is one of the largest IT-oriented holdings in Russia and an experienced solution provider. CJSC Nienschanz was founded in St. Petersburg in 1991 and since then has developed into a multi-profile group of companies. The major services include system integration, IT- consulting, fabrication, integrated supplies and service maintenance of computer facilities and peripheral units, integrated supplies of copying- and-duplicating machines, manufacture, integrated supplies, distribution and service maintenance of office furniture. Doing business in St. Petersburg34 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 35. SOLVO SOLVO Ltd. is a St. Petersburg based leading vendor of high-end logistics automation and control systems. The company provides solutions for automating the entire complex of business and technology processes within warehouses and container terminals. SOLVO offers its customers a wide range of services, including project customization, training and consulting, system implementation and deployment assistance, and technical support.2.4.4. Supporting institutions2.4.4.1. Universities St. Petersburg State Electrotechnical University St. Petersburg State Electrotechnical University is one of the world’s largest education and research centers specializing in radio engineering, electrical engineering, electronics and computer science. The University has a staff of more than 1,000 highly-qualified specialists and scientists, including the Nobel Prize Winner in physics Zhores Alferov. Electrotechnical University is alma mater for over 70 thousand students and over 3 thousand international students. St. Petersburg State Polytechnical University St. Petersburg State Polytechnical University was founded in 1899. It has recently become the National research University, thus recognized as a leading Russian and international center in the field of higher engineering and economics. The University attracts students form 96 countries of the world and provides education programs in the field of engineering, physics, economics, humanities and IT. Today, the University has 20 departments and institutes and 120 R&D labs and offers more than 150 concentrations. St. Petersburg State University Founded in 1724, St. Petersburg State University is the oldest institution of higher education in Russia. The University’s Department of Mathematics and Mechanics together with its comprising scientific institutions is one of the largest mathematical centers in the world. The Department offers 23 concentrations and also includes the Research Institute of Mathematics and Mechanics, a computer center and astronomy observatory. St. Petersburg State University of Information Technologies, Mechanics and Optics The National Research University of Information Technologies, Mechanics and Optics is one of the oldest higher education institutions in Russia. The school has been training specialists in cutting-edge technologies directed to science and technical development for more than 100 years. Today, the University has 10 departments offering 49 concentrations and enrolls more than 9,000 full-time students.2.4.4.2. Research Institutions St. Petersburg Institute for Informatics and Automation, Russian Academy of Sciences (RAS) St. Petersburg Institute for Informatics and Automation of the Russian Academy of Sciences was founded in 1978 and has since then grown into a large scientific research organization which gave rise to a new Center of Ecological Security of the St. Petersburg Scientific Research Center of RAS. Today, the Institute is engaged in fundamental research of informatization of society and information security, information and computer systems and networks, theoretical basics of development of soft- and hardware complexes for information real-time processing, IT for intelligent systems of research automation, control, manufacturing and other fields. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 35
  • 36.  St. Petersburg Department of Steklov Institute of Mathematics, Russian Academy of Sciences (RAS) The Institute was established in 1940 as a department of the Steklov Institute located in Moscow. Today, it is an independent research institute specializing in fundamental research on theoretical mathematics and mathematical models of theoretical physics, including mathematical logic and theory of algorithms, theory of numbers, geometry and topology, mathematical analysis, theory of probability, mathematical statistics and many other.2.4.4.3. Associations RUSSOFT RUSSOFT is a multinational association of software companies from Russia and Belarus. The association was founded in 1999 and is headquartered in St. Petersburg. Today, RUSSOFT unites more than 70 companies which employ more than 20 thousand highly-qualified programmers and software engineers. The association was created to represent Russian software development companies at the global market, enhance marketing and PR activities of its members, and lobby their interests in their countries governments. RUSSOFT is a part of the Russian Information and Computer Industry Association (APKIT) where it plays a role of Software Development and Export Committee. SPb CIO Club St. Petersburg CIO Club is a professional community uniting IT directors of leading companies of the Northwestern region of the Russian Federation. The organization’s major objectives lie in providing support and strengthening the development of professional community of IT directors. Established in 2004, the Club is at present the largest professional IT community in Russia. Doing business in St. Petersburg36 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 37. 2.5. Pharmaceutical industry2.5.1. General overviewThe development of pharmaceutical cluster is one of the priorities of the Government of St.Petersburg. According to Pharmexpert Market Research Center, St. Petersburg is the mostinvestment-attractive region of the Russian Federation as well as a launch pad for successfulimplementation of pharma and medical equipment projects.3The effectiveness of the pursued government policies is revealed in the increased interest ofinternational businesses in St. Petersburg as well as the results achieved. 11 projects on thelocalization of pharmaceutical facilities and creation of modern research infrastructure are beingimplemented in the framework of the cluster. The total volume of investments constitutesapproximately 30 million roubles. The projects are implemented with the participation of the leadingresearch and education centers, which play a pivotal role in establishment of joint modern researchcenters and labs.2.5.2. Industry in numbersThe volume of pharmaceutical market in St. Petersburg constituted more than 20 billion roubles in2009. This fact represents a significant trigger for development of competitive industry in theregion. The average per capita consumption of pharmaceuticals in St. Petersburg constitutes morethan 133.5 dollars, which is significantly higher than the average Russian consumption (82.1 dollars,respectively).4Nine investment projects with the volume of total investment of 25.12 billion roubles aimed atconstructing new pharmaceutical plants were launched in 2010. In addition to productionoperations, almost each project involves the construction of research labs for development of newpharmaceuticals.Major pharmaceutical investment projects, 2010Company Investment Production site Lab complexSamson-Med 1.5 bln RUB Industrial zone "Pushkin"Greopharm 2.3 bln RUB Industrial zone "Pushkin" SEZ "Noidorf"Neon 0.9 bln RUB Industrial zone "Pushkin"Pharm-Holding 0.7 bln RUB Industrial zone "Pushkin"Biokad 1.07 bln RUB SEZ "Noidorf" SEZ "Noidorf"Pharmasintez 1.7 bln RUB SEZ "Novo-Orlovskoe" SEZ "Novo-Orlovskoe"Vertex 1 bln RUB SEZ "Novo-Orlovskoe" SEZ "Noidorf"Immuno-Gem 0.6 bln RUB SEZ "Novo-Orlovskoe" SEZ "Novo-Orlovskoe"Novartis 15.35 bln RUB SEZ "Novo-Orlovskoe" SEZ "Novo-Orlovskoe"Source: Committee for Economic Development, Industrial Policy and Trade3 Committee for Economic Development, Industrial Policy and Trade4 Committee for Economic Development, Industrial Policy and Trade Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 37
  • 38. 2.5.3. CompaniesThe key pharmaceutical cluster projects in St. Petersburg: Biocad Biotechnological company Biocad is planning to construct a new research and pharmaceutical manufacturing plant on the territory of the Noidorf industrial zone within 2010-2017. The project aims to create an import substituting production of more than 40 essential pharmaceuticals in accordance with the GMP standards as well as scientific and research complex on oncology/hematology, gynecology/urology, neurology, viral infections and diabetes. The project will be implemented on the territory of 5 hectares and will include pilot production lab, 10 production lines for the production of substances, liquid and solid pharmaceuticals with the annual capacity of up to 60 million packages and storage facilities. GalenoPharm The company intends to construct a scientific center for the supply of respiratory pharmaceuticals. The project will be realized within 2010-2014 and will include a complex base for the development of pharmaceutical products to treat bronchial allergy, chronic wheezing illnesses as well as biologically active supplements and beauty products. Gem-standard Gem-standard became the resident of the Novo-Orlovskaya Special Economic Zone (SEZ) in 2011. The company is planning to construct a research and production complex for the development of innovative blood plasma pharmaceuticals. The project with the total budget of 865 million roubles will be implemented in 2011-2015 on the territory of 4 hectares and will use unique complex technology for deep and complete plasma processing. Geropharm Geropharm aims to create a modern high-tech industrial complex in compliance with the GMP standards to produce original Russian as well as generic pharmaceuticals. The project includes the construction of two complexes, including suppository manufacturing on the territory of 1.6 hectares with the total investment of 800 million roubles and injection drug manufacturing on the territory of 2.8 hectares with the total budget of 1.3 billion roubles. Both projects will be implemented on the territory of the Pushkinskaya industrial zone within 2010-2014. Neon Neon aims to launch the production of high quality effective Russian pharmaceuticals to address the demands of the Russian healthcare system. The project will be implemented within 2010-2014 on the territory of 2.9 hectares within the Pushkinskaya industrial zone. It envisages the establishment of a high-tech production in accordance with the GMP standards with the annual capacity of 960 million units. Doing business in St. Petersburg38 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 39. Novartis The world’s leading pharmaceutical company operating in more than 140 countries around the world held a ground breaking ceremony to mark the launch of construction of a pharmaceutical manufacturing plant in St. Petersburg on June 16, 2011. The construction of this facility represents the most significant Novartis investment into Russia to date. The new greenfield facility will be located on the territory of the Novo-Orlovskaya Special Economic Zone (SEZ) and will manufacture innovative patented pharmaceuticals and modern high quality generic medicines. The project with the total investment of 15.3 billion roubles will be implemented on the territory of 10 hectares within 2010-2014. It will include the construction of research complex for the development of new medicines, modern production operations organized in accordance with the GMP standards with the annual capacity of 1.5 billion solid peroral pharmaceutical as well as scientific and educational activities, including participation in Russian innovative projects. The plant will manufacture therapeutic pharmaceuticals to counter socially significant diseases, including cardiovascular, oncologic, immunologic diseases and diabetes. Pharmasyntez Pharmasyntez plans to construct a scientific and manufacturing complex for the development and production of oncology pharmaceuticals on the territory of 4.5 hectares located in the Novo-Orlovskaya Special Economic Zone (SEZ) within 2010-2015. The project with the total budget of 2 billion roubles envisages the development and transfer of pharmaceutical manufacturing technologies for the production of antitumor products to combat oncological diseases. The company will localize the production of 5 pharmaceuticals from the list of strategically significant pharmaceuticals. Pharm-Holding Pharma-Holding announced its plans to build a science research and production complex in St. Petersburg within 2010-2014. The project is aimed at increasing the availability of essential pharmaceuticals as well as establishment of effective scientific and production base. The total budget of the project which will be implemented on the site of 2.9 hectares located in the Pushkinskaya industrial zone constitutes 800 million roubles. The plant will manufacture C-peptide, cortagen and prostamax. Polysan Polysan aims to construct a modern pharmaceutical plant in accordance with the GMP standards within 2010-2012. The total investment of the project constitutes 2 billion roubles. The plant will produce high quality infusion pharmaceuticals. Samson-Med Samson-Med intends to construct a bio-substances and pharmaceutical manufacturing facility on the territory of 2.7 hectares in the Pushkinskaya industrial zone within 2010-2014. The project with the total budget of 1.5 billion roubles envisages organization of a complete technological cycle for the production of active pharmaceutical substances and pharmaceuticals in accordance with the GMP standards, including cardiology, neurology, pulmonology, ophthalmology, gastroenterology and genecology products. Doing business in St. PetersburgEnterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 39
  • 40. Vertex Vertex aims to construct a new scientific and manufacturing complex for the development and production of innovative pharmaceuticals. The project with the total investment of 1.6 billion roubles will be implemented within 2010-2014 on the territory of the Novo-Orlovskaya Special Economic Zone (SEZ). The complex will include research as well as pilot production labs.2.5.4. Supporting institutions2.5.4.1. Universities St. Petersburg State Chemical-Pharmaceutical Academy St. Petersburg State Chemical-Pharmaceutical Academy is a leading Russian center in educating high qualified process engineers occupied in industrial production of pharmaceuticals of various origin. The academy participates in TEMPUS program realized by the EU and Russian Federation in the sphere of training of GMP experts. St. Petersburg State Institute of Technology St. Petersburg State Institute of Technology is an acknowledged world’s center of chemistry, chemical and biotechnologies, nanotechnologies, cybernetics and engineering. The Institute possesses a vast range of methods of active pharmaceutical ingredients synthesis as well as pilot production of substances in accordance with the GMP requirements. It is a major center dedicated to training of personnel for scientific centers and industrial enterprises. St. Petersburg State Pavlov Medical University One of the leading medical schools in Russia carries out preclinical research, including study of new molecules and dosage forms, translational studies, clinical research, pharmacoepidemiological and pharmacoeconomic research as well as training of GLP, GCP, GSP and evidentiary medicine specialists. St. Petersburg State Polytechnical University St. Petersburg State Polytechnical University conducts a world top-level bioanalytical research in accordance with the FDA and GLP requirements. The oldest pharmaceutical institution of higher education in Russia carries out high-tech research projects on the development and study of active pharmaceutical substances of natural and synthetic origin and educates highly qualified specialists in the sphere of molecular biology.2.5.4.2. Research Institutions Institute of Cytology of the Russian Academy of Sciences (RAS) Institute of Cytology is the leading institution of the Russian Academy of Sciences within the field of modern cell biology. The institute is tasked with studying the structural organization and expression of nuclear genome, structure and function of cell organelles, investigation of intracellular processes and intercellular contacts. Institute of Toxicology The scientific center focuses on fundamental and applied research in the field of toxicology, pharmaceutical chemistry and pharmacology. The Institute specializes in the study of mechanisms of action of potential dangerous chemical and natural substances as well as development of novel antidotes and therapies. Research Institute of Influenza Research Institute of Influenza is involved in solving fundamental and applied tasks in the field of virology, epidemiology and infectious pathology, thus serving a goal of protecting and augmenting human health, developing healthcare and medical science. The institute is engaged in epidemiologic and etiologic influenza/ARI surveillance improvement, molecular genetic and Doing business in St. Petersburg40 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 41. phylogenetic analysis of influenza viruses, genetic classification of existing and newly emerging viruses, studies on molecular mechanisms of viral pathogenesis, nanotechnology-based diagnostic reagents generation, exploration of new ways for next-generation vaccine production as well as other relevant research areas. State Research Institute of Highly Pure Biopreparations The Institute is a biotechnological center specialized in novel therapeutics and diagnostics. The main scientific areas include elucidation of mechanisms of therapeutic activity of endogenous mediators for the development of new biopharmaceuticals, development of new drug delivery systems for targeted and sustained release of drugs as well as medicine manufacturing. St. Petersburg State Mechnikov Medical Academy The oldest and one of the most prestigious institutions of higher medical education in Russia represents a scientific and research center which includes morphology, genetics, biochemistry, immunology, physiology, mathematical modeling and epidemiological analysis labs. St. Petersburg Institute of Pharmacy St. Petersburg Institute of Pharmacy functions on the basis Adaptogen Interregional Center and St. Petersburg State Mechnikov Medical Academy. It is occupied in carrying out preclinical studies of new pharmaceuticals, specific food products, biologically active substances and beauty products.2.5.4.3. Life Sciences Park in St. PetersburgOn June 18, 2011 the Government of St. Petersburg signed the memorandum of intent with LifeScience Park STP BP stipulating mutual cooperation in the development of Life Sciences Park in St.Petersburg. Life Sciences Park is the largest project in Russia aimed at establishing a complexinfrastructure for the development of pharmacy, biotechnology and medical industry. The projectaims to create comfortable and competitive environment for the innovative development of lifesciences in St. Petersburg, strengthen cooperation between Russian and international businessesand research organizations, provide favorable conditions for the operation of companies engaged inR&D, diagnostic studies, product licensing, private clinic management, etc. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 41
  • 42. 2.6. Shipbuilding industry2.6.1. General overviewShipbuilding is one of the leading industrial sectors in St. Petersburg’s economy. For centuries thecity served as the sea capital of Russia as well as a recognized center for shipbuilding, naval scienceand education. Today, shipbuilding industry is undergoing major reorganization. High concentrationof industrial and scientific sectors as well as unique port infrastructure stipulates the development ofshipbuilding industry and provides new opportunities for pursuing effective forms of cooperationwithin the city.In September 2010 the Government of St. Petersburg signed an agreement with the UnitedShipbuilding Corporation on the establishment of a shipbuilding cluster in the city. The priority liesin construction of a new shipbuilding complex on the island of Kotlin. While the development of amodern complex in the Northwestern region of the Russian Federation will benefit not onlyshipbuilding but also a number of related sectors, it will facilitate the social and economicdevelopment of the city. The project envisages the development of a modern high-tech production,as well as facilitation of social and economic development of Kronshtadt.One of the first steps includes establishment of the engineering center on design and production ofmarine equipment, which will be used for Arctic exploration. As a result of the project’simplementation, St. Petersburg’s shipbuilding cluster will accommodate 200 shipbuildingenterprises engaged in manufacturing of import substituting equipment and components.Basic information on the shipbuilding complex on the Island of Kotlin, St. PetersburgMain products tankers, LPG tankers, offshore ice-resistant fixed platforms, ice-breakers, floatable nuclear heat and power plants, first rate ships, aircraft carriers, diesel- electric submarineAnnual gross receipts 38 billion roublesVolume of investment 35 billion roublesTotal number of employees 6,500 peopleCity tax revenue 3.5 billion roubles a yearImplementation period 8 yearsSource: Committee for Economic Development, Industrial Policy and Trade2.6.2. Industry in numbersThe Northwestern region is often referred to as a shipbuilding capital of Russia. High concentrationof scientific and industrial shipbuilding potential accounts for more than 80% of R&D and over 70%of all domestic industrial production. The region locates about 39% of all Russian shipbuildingenterprises as well as 58% of all personnel occupied in the industry. Today, the region accounts for72% of the total volume of production within the shipbuilding industry.543 shipbuilding organizations which employ more than 50 thousand specialists are located in St.Petersburg. Shipbuilding accounts for more than 50% of all products produced by the defenseindustry complex in St. Petersburg.6 St. Petersburg and Severodvinsk are the only two Russiancities, which locate shipbuilding facilities for the production of large-capacity ships and vessels.5 Ministry of Industry and Trade of the Russian Federation6 Committee for Economic Development, Industrial Policy and Trade Doing business in St. Petersburg42 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 43. Number of shipbuilding enterprises across the federal districts of the Russian Federation, 2011 Northwestern Federal District 2% 18% Urals Federal District Central Federal District 39% Southern Federal District 15% Far Eastern Federal District Siberian Federal District 10% 14% Volga Federal District 2%Note: Total number of shipbuilding enterprises in Russia - 167, including 113 industrial enterprises and 54 scientific andresearch organizationsSource: Modern state and perspectives of development of Russian shipbuilding industry, Department of ShipbuildingIndustry and Marine Equipment, Ministry of Industry and Trade of the Russian Federation, 20112.6.3. Companies United Shipbuilding Corporation United Shipbuilding Corporation is a government-owned company, which unites shipbuilding, repair and maintenance subsidiaries located across Russia. Today, the corporation has 3 subsidiaries, including the Western Shipbuilding and Repair Center in St. Petersburg, the Northern Shipbuilding and Repair Center in Severodvinsk and the Far Eastern Shipbuilding and Repair Center in Vladivostok. The shipbuilding enterprises united under the corporation are engaged in both commercial and naval shipbuilding and account for 80% of all shipbuilding projects in Russia. The Western Shipbuilding and Repair Center unites the following St. Petersburg-based shipbuilding enterprises: Admiralty Shipyard Admiralty Shipyard is one of the oldest and largest shipyards located in St. Petersburg. Founded in 1704 by Peter the Great, the shipyard is one of the major Russian enterprises engaged in design, manufacturing and modernization of civil and naval vessels of various types, including such naval warships as nuclear and diesel-powered submarines and large auxiliaries. ALMAZ Almaz Shipbuilding Company has been for many years specializing in manufacturing of high-speed ships and boats. The major products include hovercrafts, patrol boats, multi-purpose crafts as well as high-speed motor boats. Almaz also offers services in production of shipbuilding ways, metal processing, assemble-welding and mechanical engineering. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 43
  • 44. Baltiysky Zavod (Baltic Plant) Baltiysky Zavod is one of the leading shipbuilding enterprises in Russia. Founded in St. Petersburg more than 150 years ago, the shipyard specializes in manufacturing of ice-breakers and ice-classed vessels, large commercial vessels intended for various types of cargo, as well as naval ships. The shipyard also develops a wide range of marine propulsion equipment and machinery as well as head exchanges for nuclear power plants, non-ferrous and core-mould castings. Kronstadt Marine Plant Founded in 1858, Kronstadt Marine Plant is one of the oldest shipbuilding plants in the world specialized in manufacturing of marine steel vessels with power systems. Severnaya Verf (Northern Shipyard) Established in St. Petersburg in 1912 originally only for military shipbuilding, today Severnaya Verf is one of the major shipyards manufacturing both naval and civilian ships. It is the only enterprise in Russia which has experience in manufacturing ships and vessels using a three-dimensional mathematical model developed in the specialized shipbuilding system. Sredne-Nevskiy Shipyard Sredne-Nevskiy Shipyard is one of the leading shipbuilding enterprises in Russia. Founded in 1912, the shipyard has since then manufactured more than 500 ships and vessels working for the Russian Navy as well as export contracts.2.6.4. Supporting institutions2.6.4.1. Universities St. Petersburg State Marine Technical University St. Petersburg State Marine Technical University is the only institute of higher education in Russia which educates world class marine engineers specialized in design, manufacture and maintenance of marine vessels, surface ships and submarines, technical equipment for exploration and extraction of oil, gas and other undersea mineral resources. Founded in 1902, today the University offers educational programs at 5 departments, including natural and social sciences and humanities, naval architecture and ocean engineering, marine engineering, marine electronics and control systems, business and management.2.6.4.2. Research Institutions Avrora Avrora is a scientific and production association established in St. Petersburg in 1970. Today, the company is engaged in the development and manufacturing of control systems and devices for commercial and naval vessels, including automated control systems of technical facilities, automated combat information and control systems, complex control systems, training systems and simulators, development and manufacturing of control systems for industrial, technological and power generation objects, transportation and port facilities, automated control systems of technological processes of oil and gas extraction, processing and transportation as well as other industrial, medical and technical products. Doing business in St. Petersburg44 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 45.  Elektropribor, Central Scientific and Research Institute Elektropribor is the leading Russian research institute located in St. Petersburg. The Institute carries out a full cycle of work, including fundamental research as well as product manufacturing. Main products include integrated satellite/inertial navigation systems, mobile airborne marine gravimeter, periscope complex. The institute supplies its products not only to the Russian Navy but also foreign companies from China, Finland, Germany, India, Japan, Norway and the Republic of Korea. Krylov Shipbuilding Research Institute Krylov Shipbuilding Research Institute is the leading scientific institution of the national shipbuilding industry and has a status of the Russian Federation State Research Centre for naval commercial ships. This status comes due to both high qualifications of the staff researchers and experts who have established their own world-recognized schools of learning and a unique complement of experimental facilities combined with innovative in-house research methods and tools. The Institute is engaged in performing naval ship conceptual design studies, hydrodynamics, commercial ship and offshore engineering conceptual design studies, structural mechanics, marine power plants and power generation as well as other marine-related technologies. Shipbuilding and Ship Repair Technology Center Shipbuilding & Ship Repair Technology Center is one of the major research institutions in St. Petersburg and a leading center of shipbuilding technologies in Russia. The Center carries out fundamental and exploratory research in the field of creation of modern technologies for shipbuilding and engineering sectors and participates in the development and implementation of large-scale investment projects. Today, the Center incorporates research laboratories, design and construction divisions engaged in the development and modernization of shipbuilding yards, water-development facilities and engineering enterprises, on-shore bases for marine objects, design and manufacturing of ship fittings, design of fishing and fish-processing vessels, special-purpose vessels, as well as production facilities for manufacturing of designed equipment. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 45
  • 46. 2.7. Transport and logistics2.7.1. General overviewSt. Petersburg is a major transport hub of Russia, which handles international freight and passengeroperations via all means of transportation. All types of transport infrastructure, including car roads,railway network, river and sea transport, airport, oil and gas pipelines, are present on the territory ofthe city.2.7.2. Industry in numbers2.7.2.1.1 Water TransportInland water transport plays an important role in the transport complex due to the widecontinuation of the Neva – Ladoga Lake system. While the Svir-Onega Lake system provides accessto the Republic of Karelia, the Belomor-Baltic canal provides access to the White Sea. Anotherwaterway, Volga-Baltic Waterway, connects St. Petersburg with the European North of the country,Central Russia, Volga-Vyatka region, Cis-Ural region, Volga region as well as ports on the CaspianSea. The Volga-Don canal connects St. Petersburg with the Caucasus, Cis-Azov region as well as theBaltic Sea ports. Cargo operations In 2010 approximately 8 million tons of cargo was shipped on St. Petersburg’s part of the Volga- Baltic Waterway, including 7.7 million tons in the Volga-Baltic direction and 0.2 million tons in the Baltic-Volga direction. Up to 80% of all inland waterway operations is carried out in cooperation with the Large Port of St. Petersburg. Transit to other ports represents approximately 20% of all shipments.7 Passenger operations Total passenger turnover on St. Petersburg’s inland waterways constituted 2,122.4 thousand people in 2010. Approximately 290 thousand people were transported in 2010 in the framework of the water fixed-route taxi program. High-speed transit operations increased by 15% in 2010.87 Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg8 Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg Doing business in St. Petersburg46 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 47. Structure of cargo turnover on the Volga- Structure of passenger traffic flow, 2010Baltic Waterway, Blagoveschensky bridgepoint, 2010 2% 6% 1% 7% 28% 38% 18% 66% 34% Oil products Operations along rivers and canals Metal products Timber Local transit operations by high-speed Fertilizers fleet Construction materials Operations along the Neva River with General cargoes the exit to the Gulf of FinlandSource: Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St.Petersburg2.7.2.2. Rail TransportSt. Petersburg’s railway hub includes 423 km of railroads. Railways and stations in St. Petersburgoccupy approximately 4 thousand hectares. Annual cargo turnover of St. Petersburg’s railway hubconstitutes more than 110 million tons. Today, the city’s railway hub mainly functions as a sortingcenter for foreign cargo and companies from other regions directed towards Finland, the Baltic andBaltic Sea ports.The node includes 5 stations (Baltic, Vitebsk, Moscow, Ladoga, Finland), 2 yards (St. Petersburg,Moscow Sorting, Shushary), 1 Port Station (New Port), 10 passenger destinations (Oranienbaum,Gatchina, Luga, Pavlovsky, Malovisherskoe, Volhovstroevskoe, Irinovskoe, Priozersk, Vyborg, andSestroretsk).A new high-speed train Allegro was launched on route St. Petersburg - Helsinki (Finland) - St.Petersburg in December 2010.9 Cargo operations In 2010 the volume of cargo turnover at St. Petersburg’s railway hub constituted 108.6 million tons. Within the structure of cargo operations transit operations prevail over local cargo shipments.10 Passenger operations 60.6 million people departed from railway stations located in St. Petersburg in 2010, including 4.21 million people on long-distance direct connections, 4.31 million people on long-distance local connections and 52,15 million people on local connections. The total number of passengers9 St. Petersburg Open City, Committee for Investment and Strategic Projects10 Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 47
  • 48. departing from St. Petersburg stations decreased by 35% within the period of 5 years (2006- 2010) mainly due to the decrease in the number of passengers travelling on local connections. 11Dynamics and structure of cargo and passenger turnover of St. Petersburg railway hub, 2010 Passenger turnover, million people 52.15 8.42 Cargo turnover, million tons 59.6 49 Transit Local cargo turnover Local connections Long-distance connectionsSource: Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St.Petersburg2.7.2.3. Air TransportAir transport has been actively developing in St. Petersburg. The city has adopted a master plan forthe development of air transport till 2025. St. Petersburg is served by Pulkovo International Airport,which is the fourth busiest airport in Russia. The airport handled 9,610,767 passengers in 2011which represents a 14% increase in comparison with 2010.Pulkovo Cargo Terminal is one of the five leading cargo terminals in Russia and is the largest cargoterminal in the Northwest Russia. It has the annual cargo handling capacity of 30 thousand tons.Pulkovo has been undergoing a major 1 billion euro modernization since 2007. The first phase ofreconstruction, which includes the construction of a new passenger terminal and other airportinfrastructure improvements, is scheduled for completion in 2013.12 Cargo operations Today, 85% of all cargo shipments is handled by passenger airplanes. In 2010 Pulkovo Airport handled 25.3 thousand tons of cargo operations. The share of foreign air companies and charter flights in the structure of cargo operations has increased. 30-40% of all cargoes shipped by Russian air companies accounts for JSC Rossiya Airlines.13 Passenger operations In 2010 passenger turnover at Pulkovo Airport constituted 8.4 million passengers, which represents a 25% increase in comparison with the previous year. 14 As of 2009, Pulkovo handles regular aircraft operations along 59 international and 46 domestic routes as well as 25 routes to the CIS. 31 international air companies, 29 Russian air companies and 11 companies from the CIS have regular flight operations from Pulkovo Airport.15Dynamics and structure of cargo and passenger turnover at Pulkovo Airport, 2010 Cargo turnover, thousand tons 2.5 16.2 6.7 Passenger turnover, thousand people 7,674 770 Regular flights Charters Russian airlines Foreign airlinesSource: Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St.Petersburg11 Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg12 Pulkovo St. Petersburg Airport official website13 Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg14 Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg15 Pulkovo Airport, 2009 Annual Report Doing business in St. Petersburg48 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 49. 2.7.2.4. Large Port of St. PetersburgThe Large Port of St. Petersburg is the largest port in the Northwest Russia and one of the mostimportant components of St. Petersburg’s transport complex. The water area of the port constitutesapproximately 164.6 square kilometers. The port has 200 berths with the length of berthing line of31 kilometers. Most of the berths are capable to process different kinds of cargoes as well as acceptvessels with a draft of up 11 meters and length of up to 320 meters.28 stevedoring companies perform cargo handling operations on the territory of the Large Port ofSt. Petersburg.16 Cargo operations Cargo turnover of the Large Port of St. Petersburg constituted 58 million tons which is 15% more than in 2009.17Structure of cargo turnover in the Large Port of St. Petersburg, 2010 4% Containers 4% 9% Oil products 5% 33% Mineral fertilizers Ferrous metals 8% Refrigerated cargoes 11% Coal, coke 28% General cargoes OtherSource: Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St.Petersburg Passenger operations Recent years have seen a significant growth in passenger traffic. The number of cruise passengers has increased by 38.5%, while the number of ferry passengers has increased 4 times since 2008. Passenger traffic in 2010 constituted 604 thousand people. The opening of St. Petersburg – Helsinki ferry line in April 2010 as well as introduction of amendments into the Russian legislation, which allows foreign tourists travelling by ferry to be present on the territory of the Russian Federation visa free for 72 hours, played a major role in the growth of ferry traffic in St. Petersburg.1816 Administration of the Sea Port “Large Port of St. Petersburg” official website17 Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg18 Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 49
  • 50. 2.7.2.5. Road TransportSt. Petersburg has a well-developed road network with major highways and national roads,connecting Northwest Russia with the rest of Russia as well as Nordic and Baltic countries.St. Petersburg and the surrounding Leningrad region have the highest density of roads with a roadnetwork covering approximately 1,300 km. Railroad network which is one of the most efficient anddynamic forms of transport in the region is also connected to the Large Port of St. Petersburg andother port complexes in the region.The major highways connect the following routes in Russia (St. Petersburg - Moscow), Kola (St.Petersburg – Murmansk), Scandinavia (St. Petersburg - Vyborg - State border with Finland), Narva(St. Petersburg - Ivangorod - State border with Estonia) as well as other routes, including St.Petersburg – Pskov, St. Petersburg – Vologda and St. Petersburg - New Ladoga. Cargo operations In 2010 large and medium-sized organizations registered in St. Petersburg transported 12.5 million tons of cargo, including 80% by non-general purpose transport. 21 million tons of cargo was transported in connection with the Large Port of St. Petersburg. The volume of operations carried out within the city is significantly higher due to the large number of carriers from other regions operating in the city.19Structure of motor park of trucks registered in St. Petersburg, 2010 Motor park of trucks, thousand units 72.6 56.4 Legal entities Physical entitiesSource: Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St.Petersburg Passenger operations As of 2010, 506 legal and physical entities possess certificates authorizing passenger operations. Their motor car park constitutes more than 7,500 buses. Inner city passenger operations constituted 430 million people in 2010. 121 regular routes between St. Petersburg and other regions of the Russian Federation as well as 32 regular international routes operate in St. Petersburg.202.7.2.6. Terminal and Storage FacilitiesDevelopment of logistics, terminal, storage and distribution facilities on the territory of St.Petersburg is a major priority in the development of transport and logistics complex of the city. In2010 the total area of terminal and storage infrastructure constituted 6.4 million square meters,including 1.52 million square meters of A and B class facilities. In 2010 the total of 66.9 thousandsquare meters of storage space was constructed.21 Cargo operations The year 2010 marked a gradual revival of the physical volume of cargo turnover since the crisis. Cargo turnover of terminal and storage facilities constituted 105.7 million tons in 2010, which is 23 million tons more than in the previous year.2219 Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg20 Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg21 Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg22 Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St. Petersburg Doing business in St. Petersburg50 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 51. Cargo turnover of terminal and storage facilities, million tons, 2010 Logistics terminals 4.4 A and B+ class storage facilities 15.52 B, C and D class storage facilities 27.72 Port terminals 58.05Source: Transport and logistics complex of St. Petersburg in 2010, Union of Industrialists and Entrepreneurs of St.Petersburg2.7.3. CompaniesWater Transport North Western Shipping Company The company was established 88 years ago and is one of the largest water transport companies present at the Russian market. The North Western Shipping Company is a successor of the North-Western River Shipping Company established in 1923. Today, the company provides a variety of cargo and passenger operations, shipping and ship repair services and incorporates 6 subsidiaries, including a shipping company ”North-Western Fleet”, a passenger port and shipbuilding and ship repairing yards.Rail Transport Russian Railways (RZhD) The Russian Railways is a government-owned national rail carrier headquartered in Moscow. The company has the world’s second largest network with over 86 thousand kilometers of common carrier routes as well as a few hundred kilometers of industrial routes. The company, established in 1992, is responsible for more than 42% of total Russia’s cargo traffic, including pipelines, and more than 32% of passenger traffic. Every year the Russian Railways transports more than 0.95 billion passengers and 1.2 billion tons of cargo across 11 time zones.Sea Transport Large Port of St. Petersburg, Administration of Sea Port The Large Port of St. Petersburg is a state enterprise which provides the organization of trading navigation in the sea port of St. Petersburg as well as behind its limits in established zones of responsibility of the Russian Federation. It is the largest port in the North-Western Russia located on the islands of Neva Delta, in the Neva Bay in the eastern part of the Gulf of Finland of the Baltic Sea. The Large Port of St. Petersburg includes moorings of sea trading, wood, fish and river ports, an oil terminal, ship- building, ship-repair and other yards, a sea passenger station, a river passenger port, and also moorings of Kronstadt, Lomonosov, Gorskaya, Bronka. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 51
  • 52. Marine Facade The Marine Facade is a project of additional expansion of St. Petersburg on Vasilievsky island at the Neva River’s mouth with the view of creating a new sea passenger port. The project is implemented within the framework of a public-private partnership between the City of St. Petersburg and Marine Façade Company. The Russia’s first and only passenger port was constructed and officially transferred into the ownership of St. Petersburg in May 2011. Since the start of its operations, the Marine Facade has become an important feature of the cruise and ferry industry, thus turning St. Petersburg into one of the most attractive centers for international tourism. Rosmorport, St. Petersburg branch The federal state unitary enterprise Rosmorport aims to contribute to the development of sea transport infrastructure as well as higher competitiveness of Russian seaports. St. Petersburg branch is engaged in maintenance, operations and development of federal property assigned to the branch, providing services in the Large Port of St. Petersburg, Passenger Port of St. Petersburg and the seaport of Primorsk as well as implementation of federal target programs of marine transport development. Sea Port of St. Petersburg, Group of companies Sea Port of St Petersburg is the largest group of stevedoring companies in St. Petersburg port and Northwestern Russia. Today, it provides a full range of stevedoring services to more than 2,000 companies from Russia, CIS and foreign countries accepting all types of cargoes, including heavy- lifts and out-of-gauge cargoes. In 2010 the companies of the group handled over 12.1 million tons of cargoes. The share of the group in the total turnover of the Large Port of St. Petersburg constitutes approximately 17 %.Road transport Gorelektrotrans Gorelektrotrans is a state enterprise engaged in the organization of passenger operations by electric transport, development of route network, improvement of transportation fleet and facilities efficiency, facilitating sustainable functioning of city electric transport operations. The enterprise includes 5 tram parks, 3 trolleybus parks, a combined tram and trolleybus park, a trolleybus yard and motor transport base and other subsidiary services. Passazhiravtotrans Passazhiravtotrans is a St. Petersburg state enterprise of passenger motor transport and is one of the largest passenger bus carriers in the Northwestern region of Russia. It operates 5 bus parks and carries out regular urban, suburban, intercity and international passenger bus operations along 11 urban, 8 suburban and 32 intercity routes. Doing business in St. Petersburg52 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 53. Piteravto Piteravto was founded in 1993 to provide a full range of transportation services to passengers. Founded initially as a small transport company, it gradually grew into the group of companies. Today, the holding includes a managing company, a central transport company with three divisions and three regional transport companies. The company’s bus fleet includes over 2.2 thousand buses of different varieties with over 3 thousand drivers employed.Air Transport Pulkovo Airport Pulkovo Airport is one of the fastest developing air transport hubs in Russia. Infrastructure of the airport includes airfield with two runways, two terminals, cargo terminal, fuel-supply complex, parking complex and other infrastructure objects. The airport handled more than 9.5 million passengers in 2011 which represents a 14% increase in comparison with 2010. Since April 2010 the operation of the Pulkovo airport is managed by the Northern Capital Gateway in the framework of public-private partnership agreement. The priority of consortium lies in reconstruction of the airport building and new international passenger terminal, modernization of the domestic passenger terminal, reconstruction of technical airport facilities as well as development of commercial infrastructure. Rossiya, Russian Airlines Rossiya Airlines is one of the biggest Russian airlines and the leading air carrier in the Northwestern region of the Russian Federation. Rossiya Airlines is headquartered in St. Petersburg and operates up to 40% of its flights from Pulkovo Airport. Formerly known as Pulkovo Airlines, the company changed its form of ownership and was transformed into Rossiya Airlines in 2006. Today, the fleet of Rossiya Airlines includes 29 modern liners. The company is a full member of IATA and is a registered member of the Multilateral Interline Traffic Agreements (MITA). Rossiya works with over 100 Russian and foreign partners which enables the company to take passengers nearly anywhere in the world.2.7.4. Supporting institutions2.7.4.1. Government Institutions Committee for St. Petersburg Transport Infrastructure Development, Government of St. Petersburg The Committee is engaged in implementing the state policy and managing the development of road and bridge complex and transport infrastructure of St. Petersburg, including roads, tunnels, elevated road, bridges and other road facilities, hydraulic facilities, airfields, airports and other aviation infrastructure and capital development facilities. Committee on Transport and Transit Policy, Government of St. Petersburg Committee on Transport and Transit Policy is a governmental agency which supervises the development of transport complex in St. Petersburg. It aims to increase freight traffic and passenger traffic within the St. Petersburg transport complex, maximize the city role as an international transport and transit center, increase volume of transport services in export-import operations and improve environment for state and private investments directed towards transport infrastructure development. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 53
  • 54.  Coordination council on the development of transport system of St.-Petersburg and Leningrad region under the direction of the Minister of transport of the Russian Federation The Coordination council on the development of transport system of St.-Petersburg and Leningrad region is an important mechanism established with the view of facilitating coordinated development of transport infrastructure of St. Petersburg and Leningrad region and abolishing infrastructural restrictions in adjacent territories of the specified subjects of the Russian Federation. External Transport Agency St. Petersburg State Institution External Transport Agency is a subdivision of the Committee on Transport and Transit Policy tasked with the development and implementation for cargo traffic management measures aimed at improvement of road safety and road capacity, organization of public transportation services by water and air transport, detention of vehicles subject to state registration, material and technical support as well as other measures aimed at reducing adverse environmental consequences of water transport. Marine Board under the Government of St. Petersburg Marine Board under the Government of St. Petersburg was established 2004 with the aim of providing concerted actions by the federal executive bodies, executive bodies of the Government of St. Petersburg, companies and organizations in the field of maritime activities. Transport Board under the Government of St. Petersburg Established in 2006, the Board is an advisory body under the Government of St. Petersburg which is tasked with providing proposals and recommendations for the Governor of St. Petersburg and the Government of St. Petersburg on the issues related to state policy in transport and logistics sphere. Transportation Committee, Government of St. Petersburg The Transportation Committee is an executive body of state authority tasked with implementing the governmental policy of St. Petersburg in the sphere of urban and suburban transport as well as intercity passenger motor transport, organization of road traffic and coordination of activities of other executive bodies functioning in this area. Doing business in St. Petersburg54 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 55. 3. Business solutionsSt. Petersburg is an ideal location for the following business needs: Headquarters Favorable economic and geographical position, highly educated, efficient and motived workforce as well as developed infrastructure make St. Petersburg an ideal location for Russian headquarters of any international business. Research & Development center (R&D) St. Petersburg is an acknowledged scientific and educational center as well as a Russian leader in information technology, which possesses all necessary innovative infrastructure and extensive government support to accommodate your R&D activities. Production center One of Russia’s most important production centers provides you with developed logistics, innovative and flexible business environment as well as highly efficient and motivated workforce to accommodate your production facilities in the city. Distribution center St. Petersburg’s westernmost mainland location in Russia and well-developed transport infrastructure makes it an ideal location for your Russian and European distribution center. Test market St. Petersburg is an ideal test market in the European part of Russia, which will allow you to assess the demand for your new products and improve your technology and business models. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 55
  • 56. 3.1. HeadquartersSt. Petersburg is the second largest city in the Russian Federation. It is a major European culturalcenter and an important Russian port on the Baltic Sea. A close proximity to Europe, developedinfrastructure and favorable investment climate make St. Petersburg an attractive location forRussian headquarters of numerous international corporations, banks and other businesses.Russian rating agency Expert ranked St. Petersburg among the most attractive regions of theRussian Federation for trade and investment (1A) characterized by high investment potential givenminimum risks. St. Petersburg is also ranked as the most business-friendly city in the RussianFederation (A+) characterized by favorable business climate and excellent conditions for pursuingbusiness in the city.233.1.1. Advantages Favorable economic and geographical position St. Petersburg is the world’s northernmost city with over one million population. It is the largest westernmost city of the Russian Federation conveniently located along the shores of the Neva Bay of the Gulf of Finland. A complex system of river ports is interconnected with the system of seaports, thus making St. Petersburg the major link between the Baltic Sea and the rest of Russia through the Volga-Baltic Waterway. St. Petersburg is a major trade gateway as well as a financial and industrial center of the Russian Federation specialized in power plant engineering, machine tool technology, shipbuilding and instrument engineering. The city boasts a highly developed iron steel and nonferrous metal industry, chemical industry as well as consumer goods, food and printing industries. Highly educated, efficient and motived workforce Flexible and highly educated labor market provides excellent conditions for establishing your headquarters in St. Petersburg. St. Petersburg is the fourth most populated city in Europe with more than 40% of residents having higher education degrees. Destined by the European location and close proximity to the European markets, residents of the city possess foreign language skills which makes them an ideal workforce for any headquarter located in the city. Developed infrastructure St. Petersburg has a well-developed infrastructure which connects European part of Russia with the Nordic and Baltic regions, thus conveniently suiting the business needs of your headquarter. Moreover, the ongoing development of a major strategic investment transportation project will determine further development of the city as a major world transport hub. The Western High- Speed Diameter (WHSD) envisages construction of a motorway which will link passenger and freight transport along the busiest traffic lines and St. Petersburg transport hub, including the Large Port, to the national road network. By 2013 the totally new Pulkovo Airport will provide fast and efficient connections to major destinations around the world.23 Investment rating of Russian regions 2010-2011, Expert RA Rating Agency Doing business in St. Petersburg56 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 57. 3.1.2. CasesThe following national and international companies have already registered, located or announcedtheir plans to relocate headquarters to St. Petersburg: Gazprom Neft One of the largest oil producing and refining companies in Russia, which is an oil arm of Gazprom, has a fully operational head office in St. Petersburg since December 2011. Rostelecom Russia’s national telecommunications operator with the largest domestic backbone network has its de jure headquarters in St. Petersburg. Russian Standard One of the leading banking and alcohol beverage groups which holds the stock of Russian Standard Company, a producer and distributor of Russian Standard Vodka, as well as Russian Standard Bank, announced its plans to register to St. Petersburg in 2007. Sovcomflot Russian state-owned maritime shipping company specialized in petroleum and LNG shipping relocated its headquarters to St. Petersburg in 2006. Transaero The first private company and one of the largest airline companies in Russia operating since 1991 registered to St. Petersburg in 2006. Transneft Russian state-owned company which transports about 93% of all oil produced in Russia and owns the largest oil pipeline system in the world, announced its plans to register to St. Petersburg in 2005. VTB Bank VTB Bank is one of the largest banks in Russia, a backbone financial institution with over 85% of the lender’s securities held by the state. VTB Bank moved its headquartered to St. Petersburg in 2005. X5 Retail Group The largest retail chain in Russia announced its plans to relocate to St. Petersburg in 2007. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 57
  • 58. 3.2. Research & DevelopmentDue to its unique scientific and educational base, St. Petersburg plays a major role in thedevelopment of nanotechnology industries in Russia, thus making it an ideal location for your R&Dactivities. The majority of Russian R&D centers and facilities of international companies are based inSt. Petersburg. As a result of innovation activity in 2011 St. Petersburg was included in the list of themost innovative regions of the Russian Federation.243.2.1. Advantages Largest scientific and educational center St. Petersburg is a leading scientific and educational center of the Russian Federation which possesses 10% of all intellectual potential of the country. The city is home to 252 scientific institutes and organizations with more than 170 thousand scientific workers employed. 8% of all Russian students and 15% of all Russian post graduate students pursue their studies in St. Petersburg. St. Petersburg is home to more than 100 higher education institutions, including St. Petersburg State Electrotechnical University (ETU) which along with the National Research Nuclear University functions as the coordinator of educational activities within the National Nanotechnology Network. Extensive government support The Government of St. Petersburg applies systematic approach to the development of innovation and technology. The city adopted a complex program aimed at developing and supporting a modern competitive regional innovation system. The government views the development of the following industrial clusters as a priority in sustaining innovative climate in the city: automotive industry, pharma and biotechnology, shipbuilding, information and communication technologies, radiology and power plant engineering. In addition, every year the city hosts the St. Petersburg International Economic Forum (SPIEF), a flagship event which serves a major platform for economic talks between Russian and CIS leaders as well as the world’s business elite. Innovative special economic zone A special economic zone of technical-implementation type has been functioning in St. Petersburg since 2010. The zone focuses on rendering tax, customs and other type of concessions to the companies engaged in the development of high-tech solutions. Simplified customs regime facilitates the development of export/import activities, thus creating favorable conditions for promoting foreign economic activities.25 A leader in information technology 60% of all Russian IT companies are based in St. Petersburg, including 49 centers of leading international and Russian ICT companies. Availability of developed IT infrastructure, including a technopark, business incubator, modern research and scientific institutions, as well as highly qualified IT-personnel facilitate the development of St. Petersburg as a Russian leader in information technology.24 Rating of innovation activity in the Russian Federation in 2011, St. Petersburg Policy Fund, Russian Presidential Academyof National Economy and Public Administration, RBC daily25 For more information, please see Section 4.8 Special economic zones (“SEZ”) in St. Petersburg Doing business in St. Petersburg58 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 59. 3.2.2. CasesThe following national and international companies have already located their R&D facilities in St.Petersburg: Alcatel-Lucent Alcatel has been operating its R&D center in St. Petersburg since 2005. Its main objective lies in the development and integration of innovative telecommunications software systems and adaptation of existing Alcatel products to the specific requirements of the regional market. The center covers three fields of applications, including fixed, mobile and enterprise networks, and employs 150 specialists trained at the specialist Alcatel R&D centers in Europe and the US. AstraZeneca AstraZeneca is planning to establish a Predictive Science Center in St. Petersburg within 2012. It is the company’s first Predictive Science Center in Russia which will focus on the development of bioinformatics, data analysis methods, software and systems to better predict the safety and efficacy of potential new medicines. The center will employ around 30 specialists who will work in close collaboration with local companies and organizations as part of a related agreement with the St. Petersburg government. Corning Corning scientific center was founded in 1996 in St. Petersburg and is specializing on mathematic and computer modelling of materials, products and technological processes. EMC Opened in 2007, EMC R&D center in St. Petersburg is an important part of the global EMC R&D investment program. The center focuses on rendering support and continuous development of a wide range of world’s leading software products. St. Petersburg’s center currently employs more than 170 program engineers specialized in data management and data storage systems. Google Google opened its second R&D center in Russia in 2006. Today, Russia is only the second country outside the US in which Google has two R&D centers, including Moscow and St. Petersburg. St. Petersburg division focuses on the development of security software and its adaptation to the needs of Russian users. It employs around 10 software engineers engaged in the development of Chrome Developer Tools as well as improvement of V8 virtual machine. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 59
  • 60. HP Labs HP Labs Russia is the newest member of the international HP Labs community, and the third new research lab created by the company in the last five years. Opened in St. Petersburg in 2007, HP Labs Russia focus on information management and development of new technologies linked to the explosion of information access brought about by the World Wide Web. The only Russian HP research lab delivers breakthrough technologies and technology advancements that provide a competitive advantage for HP and create business opportunities that go beyond HPs current strategies. Intel Opened in St. Petersburg in 2004, Intel R&D center currently employs more than 100 specialists. The center focuses on conducting research and development of innovative software solutions for Internet-related technologies, including Dynamic Runtime Layer (DRL), communication technologies that enhance wireless communication, grid computing to optimize programming environment. St. Petersburg center works in close collaboration with the city universities with the aim of creating a solid academic foundation for information. LG MC Russia R&D Lab LG MC Russia R&D Lab (LGERP), opened in St. Petersburg in 1997, is a central LG division in CIS. The Lab plays a key role in the development of innovative high tech solutions for LG Electronics. LG MC Russia R&D Lab focuses on three major directions, including mobile communications, digital television and household appliances. Microsoft In June 17, 2011 the Government of St. Petersburg and Microsoft signed the cooperation agreement stipulating the development of education and training system for IT specialists and introduction of modern technologies into the public management system. Microsoft has already been working and launching a number of educational programs in St. Petersburg. The new agreement involves the establishment of Microsoft Information Center within Ingria Technopark located in St. Petersburg as well as the company’s participation in the development of St. Petersburg IT cluster. Sitronics Sitroninics opened its 5th international R&D center in St. Petersburg in June 2011. Investment into the R&D center operating in telecommunications sector constituted 177,000 dollars. The center which is to employ 120 specialists will specialize in the development and testing of convergent billing decisions, including highly-productive rating systems for tariffs in real-time mode. In the future the center plans to carry out research in the field of self-service systems, including web- portals, terminals, pad-computers and communicator applications, CRM- decisions. Doing business in St. Petersburg60 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 61. 3.3. Production сenterToday, St. Petersburg is Russia’s second most important production center, specializing in theproduction of complex machinery and equipment. Leading industries in this sector includeshipbuilding, instrument manufacture as well as production of electrical generators and turbines,machine tools and machines for printing, textile, paper, food, automotive and leather industries.During the recent years St. Petersburg turned into the Russia’s automobile manufacturing center,which already hosts the production facilities of the world’s largest automakers and automobile partsmanufacturers, including Hyundai Motor Company, Toyota Motor Corporation, General MotorsCompany, Nissan Motor Company and Scania.3.3.1. Advantages Highly qualified and motivated workforce St. Petersburg is a major scientific and educational center of the Russian Federation, which possesses 10% of all intellectual potential of the country. The city is home to a number of leading technical universities, including St. Petersburg State Electrotechnical University (ETU) which along with the National Research Nuclear University functions as the coordinator of educational activities within the National Nanotechnology Network. St. Petersburg boasts a diverse pool of technical specialists given the city’s reputation as a Russian IT center. Innovative and flexible business environment The city’s innovative business environment provides production companies with access to a diverse pool of talented specialists who can help you innovate and improve your production processes. The fact that 20% of all Russia’s advanced technologies are created in St. Petersburg indicates a high degree of production process development and automatization, which significantly enhances the value of your production processes as well as end product. Moreover, the flexibility of existing labor market provides an ideal environment for flexible production, which can be easily scaled up and down. Acknowledged R&D center and test market St. Petersburg is one of the most innovative regions in Russia and an acknowledged R&D center and test market on the territory of the Russian Federation. Excellent framework conditions, open and fast-adopting market as well as high purchasing power of the population will help you assess the demand and improve your new products as well as research and development efforts, technology implementations and business models. Developed logistics Due to the ideal geographical location and scarcity of Russian ports on the Baltic Sea, St. Petersburg is Russia’s foremost logistics hub. The city’s transport infrastructure with highly developed motor transport network, railway, air, river and sea transport, including Russia’s main port of foreign trade and sea gate to Europe, might serve as a key asset in your decision to locate your production center in the city. In addition, the city has a number of modern multifunctional logistics complexes and parks (Pulkovo, Kolpino, Yanino) suitably located to address storing, processing and customs clearance needs of your business. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 61
  • 62. 3.3.2. CasesThe following international and leading Russian companies have already located their productionfacilities in St. Petersburg:Bakery Fazer Group Fazer Group started operating on the food catering and services market in Russia in 2006, and has invested 204.78 million dollars in its operations in Russia during the last ten years.Beverage production Carlsberg Group Baltic Beverages Holding, a leader at the Russian beer market which manages Baltika, became part of the Carlsberg Group in 2008. Carlsberg currently owns 89.01% of Baltika stock. Today, Baltika Brewery, founded in 1990, is the largest brewery in Eastern Europe and the second-largest brewery in Europe after Heineken Brewery. Coca-Cola Company Coca-Cola opened its plant in St. Petersburg in 1995. The facility produces Coca-Cola products for more than 13 million customers in St. Petersburg and Northwestern Russia. It employs more than 1,000 people, while creating up to 200 additional seasonal workplaces during the peak seasons. Heineken Heineken has been operating in Russia since 2002 when it acquired the Bravo plant in St. Petersburg. St. Petersburg’s Heineken brewery also produces and distributes Budweiser beer, having signed a licensing agreement with Bud’s brand owner Anheuser-Busch. Pepsi Bottling Group, Inc. (PBG) PepsiCo drinks are produced by Pepsi Bottling Group, Inc. (PBG) at its four plants in Russia. One of the top global FMCG companies in Russia opened its St. Petersburg’s plant in 1992. PBG produces and distributes all PepsiCo products, including carbonated soft drinks, water, snacks, juices, teas, and sports and energy drinks. Russian Standard Company A leading Russian premium vodka producer opened its distillery in St. Petersburg in 2006. Total investments into the facility amounted to 60 million dollars. The distillery produces 3.6 million dekaliters of vodka annually. A 30,000 square meter facility handles the production of the companys entire vodka portfolio, including Russian Standard Original, Russian Standard Platinum and Imperia. Doing business in St. Petersburg62 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 63. Candy Chupa Chups S.A. The Spanish candy maker launched its St. Petersburg’s production facility in 1991. Neva Chupa Chups produces Chupa Chups caramel lollipop candies of various flavors and colors not only for the Russian market but also for export to CIS countries. St. Petersburg’s factory has the capacity of making up to 200 million 200-gram rolls per year.Car assembly General Motors General Motors opened its automobile factory in St. Petersburg in 2008. Global car making giant became the second foreign carmaker to open a factory in St. Petersburg. Investment in the project totalled 300 million dollars with up to 1,700 jobs created, followed by the opening of a second production line in 2010. Hyundai Motor Company Hyundai officially launched its full-cycle manufacturing plant in St Petersburg in 2010. St. Petersburg’s plant is Hyundai’s sixth production facility outside its home market of South Korea. The facility is expected to roll out 105,000 vehicles in its first year of operation with the rise to 150,000 in 2012. Hyundai plans to create 5,300 jobs by 2012 in St. Petersburg together with eleven parts suppliers from Korea. Nissan Nissan Manufacturing Rus was established in St. Petersburg in 2009. The plant currently represents approximately a 150 million euro investment with the total volume of 28,500 units since the start of production. The plant currently employs 2,000 employees. Scania Scania opened its industrial facility for assembling and bodyworking trucks for the Russian market in St. Petersburg in 2010. This facility is Scania’s sixth delivery center. From this new delivery center, Scania supplies complete trucks that are adapted to the requirements and operating conditions that apply in Russia. St. Petersburg’s facility which employs about 70 employees has a technical assembly capacity of about 5,000 truck chassis and 1,500 superstructures per year. Toyota Motor Corporation Toyota became the first Japanese carmaker to start production in Russia with its car assembly plant opened in St. Petersburg in 2007. The plant, with an annual output capacity of about 50,000 vehicles, initially built 20,000 Camry sedans per year while gradually expanding its production since then. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 63
  • 64. Chewing gum Wm. Wrigley Jr. Company The world’s largest maker of chewing gum has been operating a 70 million dollar plant in St. Petersburg since 1999. Wrigley is planning to expand its St. Petersburg plant with an investment of 100 million dollars. The company also announced that it might build a second factory in Russia and acquire local producers to tap its growth at the Russian market.Components suppliers Magna International A global automotive supplier currently operates five production sites in Russia, three of which are located in the St. Petersburg region since 2010. The Cosym stamping and assembly plant in Shushary has 170 employees and produces body, chassis and energy-management systems for OEM customers such as Hyundai, General Motors, Nissan and Volkswagen. The Cosym assembly and sequencing plant in Kamenka is a Hyundai- dedicated production site that employs 50 employees. Magna announced the opening of a Magna Exteriors and Interiors facility in Kolpino, which has approximately 25 employees producing exterior and interior components for OEM customers, including Ford and Nissan.Electronics HP – Foxconn Hewlett-Packard and component maker Foxconn opened a pilot assembly line to make computers in St. Petersburg in 2010. A pilot production line on a rented 10,000-square-meter facility in Shushary produces HP, HP Pro and Compaq models. It currently employs 100 workers, although the staff is expected to grow as production increases. A 32,000-square-meter main facility is expected to cost 50 million dollars and have an annual capacity of 500,000 personal computers.Elevators Otis Elevator Company The worlds largest manufacturer of vertical transportation systems has three manufacturing plants in Russia, including the one operating in St. Petersburg since 1994. Otis St. Petersburg was established in 1991 to meet the elevator need for new construction as well as for the replacement market. With 470 employees, Otis St. Petersburg is the only company that manufactures European standard elevators in Russia. Since the opening of the production line, St. Petersburg’s plant has shipped more than 3,000 elevator units to CIS countries and other Russian regions.FMCG P&G P&G opened its Gillette razor manufacturing plant in St. Petersburg in 2000 with an investment of 40 million dollars and 500 people employed. It has soon become one of the major razor manufacturing plants in the world with a capacity of 860 million blades a year. In 2004 the facility was expanded with an investment of 502 million roubles and several Gillette factories’ productions moved to St. Petersburg. Doing business in St. Petersburg64 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 65. Unilever Unilever has been operating in Russia since 1992 and has 7 manufacturing and production sites, including the one located in St. Petersburg. The plant was opened in 1994 and currently focuses on the production of home care, personal care and tea products. In 2009, the company acquired the sauces business of Baltimor Holding, a leading ketchup business in Russia. The acquisition included ketchup, mayonnaise and tomato paste business, accounting for annual turnover of around 70 million euros, as well as a production facility at Kolpino, near St. Petersburg.Home Appliances Bosch and Siemens The largest manufacturer of home appliances in Europe and one of the leading home appliances companies in the world opened its manufacturing plant in St. Petersburg in 2007. St. Petersburg’s plant manufactures Bosch and Siemens cooling appliances. In 2007 the company laid the foundations for a washing machine factory with the capacity of 300,000 machines per year, which is due to be built by 2012. In 2010 the company launched a new line of washing machines and a second line of refrigerators at its existing plant in Strelna. It has also announced about the expansion of its logistics center. The Strelna factory currently employs 420 people and is to create 100 additional workplaces with the expansion of the production line.IT NEC Corporation One of the worlds leading providers of Internet, broadband network and enterprise business solutions established NEC Neva Communications System, a public switching system manufacturing facility, in 1997. It was the first high-tech alliance between a Japanese and Russian company. NEC delivers tailored solutions in the key fields of computer, networking and electron devices, by integrating its technical strengths in IT and networks, and by providing advanced semiconductor solutions through NEC Electronics Corporation.LED manufacturing OptoGan Group A vertically integrated European LED & luminaire manufacturer acquired the Russian subsidiary of Elcoteq together with its industrial facility and infrastructure in St. Petersburg in 2010. Elcoteq started the production of electronic devices and telecom equipment in St. Petersburg in 2006. OptoGaN has already invested over 9.5 million euros in new production lines. The first line with the capacity of 30 million LEDs per month was launched in fall 2010. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 65
  • 66. Packaging Amcor Tobacco Packaging Originally built by Alcan Packaging in the Krasnoselskaya industrial zone of St. Petersburg in 2005, a tobacco packaging plant started operating under Amcor Tobacco Packaging brand after Amcor acquired Alcan Packaging from Rio Tinto in 2010. With the original investment of 40 million euros, the plant’s current capacity constitutes 3 billion units per year.Pharmaceuticals Novartis In 2010 Novartis started a construction of a new greenfield pharmaceutical manufacturing plant in St. Petersburg, as part of 500 million dollar five-year investment into the Russian healthcare infrastructure. The facility will be constructed in the Novoorlovskaya Special Economic Zone (SEZ) located to the north of the St. Petersburg city center. Once completed and approved for commercial production, which is expected in 2014, the facility will produce approximately 1.5 billion units of both innovative pharmaceuticals and generics per year.Pipe products Severstal One of the Russia’s largest steel and mining industry companies opened its Izhora Pipe Mill at Kolpino outside St. Petersburg in 2006. The plant with the capacity of 600 thousand tons per year specializes in manufacture of large diameter pipes from strip made by Cherepovets Steel Mill. The plant produces unique products for Russian domestic pipe industry which allow to expedite the process of pipeline construction as well as lower the costs and enhance reliability.Telecommunication Alcatel-Lucent Alcatel has been operating its R&D center in St. Petersburg since 2005. Its main objective lies in the development and integration of innovative telecommunications software systems, and adaptation of existing Alcatel products to the specific requirements of the regional market. The center covers three fields of applications, including fixed, mobile and enterprise networks, and employs 150 specialists trained at the specialist Alcatel R&D centers in Europe and the US.Tobacco British American Tobacco (BAT) BAT’s plant in St. Petersburg operates 13 production lines producing five premium brands. It provides about 25% of BAT’s production volume in Russia. The company completed the construction of new production facilities at its plant in St. Petersburg in 2007 with the total investment of 110 million dollars, thus increasing St. Petersburg plant’s production capacity to 40 billion cigarettes a year. Doing business in St. Petersburg66 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 67. Japan Tobacco International (JTI) JTIs cigarette making facility in St Petersburg is the company’s biggest worldwide plant with the total of 400 million dollars invested. The brand portfolio includes over 30 brand names, both international and local. It supplies the firms Russian and Ukrainian plants with main tobacco components used for cigarette production. Philip Morris International (PMI) Philip Morris Inc. officially opened its third Russian cigarette factory in St. Petersburg in 2000. The total investment of 335 million dollars made this project the company’s largest cigarette plant in Europe. The plant, which employs 750 workers and operates 15 conveyer belts, produces the Marlboro, Parliament, Virginia Slims, L&M, Chesterfield and Bond Street brands. In 2002 the company began construction of a new processing line and a warehouse with the total investment estimated at 240 million dollars. Doing business in St. PetersburgEnterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 67
  • 68. 3.4. Distribution сenterSt. Petersburg’s westernmost mainland location in Russia as well as well-developed infrastructureand logistics makes it an ideal location for your Russian and European distribution center. St.Petersburg is an administrative center of the fourth largest federal district in Russia. With adistribution center located in St. Petersburg your business will be able to directly cover 1.7 millionsquare kilometers of the northern part of European Russia and reach more than 13 millionconsumers within short-term delivery.3.4.1. AdvantagesExisting transport infrastructure supported by extensive rail and road network, one of the busiestRussian airports, developed port infrastructure and efficient inland water transportation systemmake St. Petersburg an ideal location for your Russian and European distribution center. By air St. Petersburg is served by the Pulkovo International Airport, which is the fourth busiest airport in Russia. The airport handled 9,610,767 passengers in 2011 which represents a 14% increase in comparison with 2010. Pulkovo Cargo Terminal is one of the five leading cargo terminals in Russia and the largest cargo terminal in the Northwest Russia. It has the annual cargo handling capacity of 30 thousand tons. Pulkovo has been undergoing a major 1 billion euro modernization since 2007. The first phase of reconstruction, which includes the construction of a new passenger terminal and other airport infrastructure improvements, is scheduled for completion in 2013.26 By land St. Petersburg has a well-developed rail and road network with major highways and national roads, connecting northwest Russia with the rest of Russia as well as Nordic and Baltic countries. St. Petersburg and the surrounding Leningrad region have the highest density of roads with a road network covering approximately 1,300 km. Railroad network which is one of the most efficient and dynamic forms of transport in the region is also connected to the Large Port of St. Petersburg and other port complexes in the region. By river Inland water transportation is one of the largest and most unique logistical competitive advantages of St. Petersburg and northwest Russia. St. Petersburg and the Neva River serve a major terminal point for the Volga-Baltic Waterway, which is a part of the Unified Deep Water System (UDWS) of European Russia, providing inland water connection from the Baltic Sea to the Caspian Sea, the Black Sea and onwards to the world oceans. By sea Sea transport is one of the most important transport modes in St. Petersburg. Today’s northwest Russian port infrastructure is concentrated on the eastern end of the Gulf of Finland, mainly in St. Petersburg. The Large Port of St. Petersburg connected to the Baltic Sea through a channel is Russia’s main port of foreign trade and the country’s main sea gate to Europe.26 Pulkovo St. Petersburg Airport official website Doing business in St. Petersburg68 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 69. 3.4.2. CasesThe following international and leading Russian companies have already located their distributioncenters in St. Petersburg: LaserPLY American company’s product line includes flat dieboards, rotary dieboards and platforms. The company’s platforms are used in birch core/maple face and back flat dieboards, flat dieboards with a wood and polymer veneer combination, as well as core material for rotary dieboard production. Today, the company operates two international distribution centers, including the one strategically located in St. Petersburg. Lenta One of the Russia’s largest hypermarket chains operating on the market since 1999 opened its 20 thousand square meters distribution center in St. Petersburg in 2007. Total investments into the project constituted 20 million dollars. Distribution warehouse utilizes the latest processing technologies, thus allowing to reduce costs in shelf storage, cross-docking as well as packaging arrangement and dispatching. Onninen The Finnish company provides comprehensive materials’ services, including complex electrical, lighting, heating and plumbing as well as other engineering products and services for contractors, industry, public organizations and technical retailers in nine countries. Onninen officially opened its Russian headquarters and distribution center in St. Petersburg in 2007. The company’s distribution center serves all northwest Russia and has the capacity of 9,000 pallets, including 18,000 products from 200 suppliers. Static Control Components The worlds largest manufacturer and global distributor of parts and supplies supporting the laser toner remanufacturing industry is headquartered in Sanford, USA. Static Control operates 20 separate manufacturing plants and operates through the network of global distribution partners. The company’s distribution partner in Russia operates several distribution centers, including the one strategically located in St. Petersburg to ensure fast product delivery all across Russia. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 69
  • 70. 3.5. Test marketSt. Petersburg’s market is a perfect test market for new products and technologies. It is an ideal testmarket in the European part of Russia for high-tech companies longing to assess the demand andimprove their new products as well as research and development (R&D) efforts, technologyimplementations and business models.3.5.1. AdvantagesExcellent framework conditions, open and fast adopting market as well as high purchasing powermake St. Petersburg an ideal test market located in the European part of Russia. It will allow you toassess the demand for your new products and improve your technology and business models. Excellent framework conditions St. Petersburg is conveniently located in the northern part of European Russia, which can be reached from the capital city of Moscow within an hour by plane. It is the second largest city in Russia as well a major European cultural center. Destined by its geopolitical location as well as historical development, St. Petersburg is often described as the most western city of the Russian Federation. It is characterized by homogeneous population, which is highly receptive to new ideas and products. Open and fast-adopting market St. Petersburg has one of the most advanced information societies in Russia with the most innovative, motivated and critical consumers. Given St. Petersburg’s open, receptive and fast- adopting market, the decision to test your business models, technologies or products in St. Petersburg will allow you to effectively improve and adjust your solutions before entering all- Russian or European markets. High purchasing power Given the existing variations in population’s income and buying power across different regions of the Russian Federation, the most well-to-do population is concentrated in Moscow, St. Petersburg and large regional centers. St. Petersburg’s population is characterized by high income and purchasing power, thus facilitating the growth of demand for high quality and innovative products, technologies and solutions. Doing business in St. Petersburg70 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 71. 3.5.2. CasesThe following international companies chose St. Petersburg as a test market for their products aswell as technology and information sharing: AstraZeneca AstraZeneca is planning to establish a Predictive Science Center in St. Petersburg within 2012. It is the company’s first Predictive Science Center in Russia, which will focus on the development of bioinformatics, data analysis methods, software and systems to better predict the safety and efficacy of potential new medicines. The center will employ around 30 specialists who will work in close collaboration with local companies and organizations as part of a related agreement with the St. Petersburg government. Google Google opened its second R&D center in Russian in 2006. Today, Russia is only the second country outside the US in which Google has two R&D centers, including Moscow and St. Petersburg. St. Petersburg division focuses on the development of security software and its adaptation to the needs of Russian users. It employs around 10 software engineers engaged in the development of Chrome Developer Tools as well as improvement of V8 virtual machine. Microsoft On June 17, 2011 the Government of St. Petersburg and Microsoft signed the cooperation agreement stipulating the development of education and training system for IT specialists and introduction of modern technologies into the public management system. Microsoft has already been working and launching a number of educational programs in St. Petersburg. The new agreement involves the establishment of Microsoft Information Center within Ingria Technopark located in St. Petersburg as well as the company’s participation in the development of St. Petersburg’s IT cluster. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 71
  • 72. 4. Doing business4.1. Establishing a legal presence Information for the current chapter was developed and kindly provided by DLA PiperEstablishing a legal presence in Russia and choosing the appropriate corporate form to register isone of the most important stages before undertaking business activity in Russia. The corporate formchosen will influence all activities, including financial and tax reporting, customs and currencycontrol. Therefore, any foreign investor should give careful consideration as to which type ofcorporate form will best fit its investment goals, whilst at the same time meeting all the legalrequirements.In Russia, a foreign investor may either establish a representative office or branch of a foreign legalentity, or establish a Russian registered legal entity.4.1.1. Establishing a representative office and/or a branch of a foreign legal entityA representative office is an officially recognized extension of a foreign legal entity, whichrepresents that foreign legal entity’s interests in Russia. According to the effective legislation of theRussian Federation (hereinafter - RF), representative offices are officially not allowed to undertakecommercial activity under the Civil Code of the Russian Federation (hereinafter - Civil Code).Instead, their main purpose is generally to promote commercial relations between the foreign legalentity, which they represent, and Russian enterprises, and to gather information about the Russianmarket. Given that a representative office does not, in theory, undertake commercial activity, it willnot be subject to profits tax, unless its activities give rise to a "permanent establishment" for taxpurposes (for example, if a foreign legal entity engages in regular commercial activity (such asselling goods or providing services) through a representative office). The advantages of operatingthrough a representative office, compared to a Russian registered legal entity are as follows: it has fewer administrative, tax and accounting obligations; foreign employees may obtain personal accreditation, which confers some practical benefits; it is considered to be a non-resident for currency control purposes; and it is possible to benefit from a relevant double tax treaty (if applicable).A branch is a subdivision of a foreign legal entity, which may undertake commercial activity andfulfill all or part of the functions of its founding foreign legal entity. This may inter alia include theemployment of a sales force and conduct of sales activity.The representative office or branch must have a manager or head of the office/branch, who acts onthe basis of a power of attorney that is granted by an officer of the founding foreign legal entity.Since a representative office or branch does not have a separate legal identity, the founding foreignlegal entity will bear full liability for the actions and obligations of the representative office orbranch. Doing business in St. Petersburg72 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 73. 4.1.2. Establishing a Russian legal entity (subsidiary)There is no special legal form of legal entity for foreign investment in Russia. Typically subsidiariesof foreign companies are established in Russia either in the form of a Limited Liability Company("LLC") or in the form of a Joint Stock Company ("JSC"). Joint stock companies may be either of aclosed type (i.e. Closed Joint Stock Companies) or of an open (public) type (i.e. Open Joint StockCompanies). The latter (OJSC) are designated mainly for large number of shareholders andgenerally are intended to be utilized for the public placement of shares.LLCs and JSCs are able to engage in all types of commercial activities not prohibited by the laws ofthe Russian Federation. Certain types of activities may be conducted only upon the receipt of aspecial permission (license). LLCs and JSCs are liable for their obligations with all of the assets andproperty belonging to them. Generally, the founders, participants or shareholders of LLCs or JSCsare not liable for the obligations of the companies and bear the risk of losses related to companyactivities only to the extent of the value of their contributions (share value). The founders,participants or shareholders may however be held liable for the obligations of an LLC or JSC if theyhad the right to give mandatory instructions to such companies, and caused the insolvency of, orlosses to, the latter.All Russian legal entities are subject to state registration and are considered as created from thedate of the relevant entry in the Unified State Register of Legal Entities. The Federal Tax Service ofthe Russian Federation has authority for the state registration of legal entities and for theirregistration as tax payers in Russia. In St. Petersburg this is an Interdistrict Inspectorate of theFederal Tax Services of the RF No. 15.Generally, the submission of the following documents is necessary for registration purposes: a standard form application (the signature of the person signing the application has to be notarized); the protocol of the founders meeting or, if the LLC or JSC has only one founder, the resolution of the sole founder on the establishment of the company the charter of the LLC or JSC; confirmation of the legal status of the founder(s) (e.g. an extract from the state register, trade register and/or certificate of good standing); and confirmation of payment of the state registration fee.All documents from a foreign legal entity must be notarized and apostilled/legalized in the countryof execution and any documents supplied in a language other than Russian must be accompanied bya translation which has notarized certification.In the process of preparation to the registration of a legal entity the founders shall decide upon: what will be the name of a new company; what will be the registered (legal) address of the company; determine the amount of charter capital and how the shares will be split between the founders; decide on the management structure of a new company; decide on the bank in which the temporary account for the payment of charter capital shall be opened.The following issues have to be taken into account when preparing for the registration of a legalentity: Russian corporate law does not have national limits on who can be the general director of a company or the member of the board of directors. That said, though, there are work permit and visa requirements for a foreign national. This process takes a few months and cannot begin until Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 73
  • 74. the company is already registered. In this context, if it is planned to have a foreign executive in the role of general director, it is probably best to appoint a local employee as the initial general director while the work permit and visa applications are processed for the permanent general director. Alternatively, in case it is decided to have the local employee to take this role on a permanent basis, there will be no need to deal with the work permit or visa at all. Despite the fact that this is not directly provided by the law, the board of directors cannot consist of one person. Moreover, in order to prevent deadlocks the quantity of the board of directors should be odd. Under the Russian law, the sole founder of a Russian legal entity cannot be a one-shareholder company itself, i.e. the sole founder as such must consist of at least two shareholders. It is not necessary that these shareholders should be independent. It may be the companies of the same group.Upon gathering and preparation of all the documents required for registration, the package ofdocuments shall be filed with the registration authorities. In practice, the process of stateregistration usually takes about 5-10 business days.The legal entity must also be registered with the Russian non-budgetary funds (Social Insurance,Medical and Pension). Currently, registration with these funds is performed automatically: theregistration body sends the necessary details to the respective funds and, based on this information,the funds allocate registration numbers and issue registration certificates. The registrationcertificates thereafter shall be sent to the legal address of the company. However, in practice it isadvisable to visit the non-budgetary funds and obtain the certificates in person (generally it is doneby an accountant of a company, if any).4.1.3. Limited Liability CompaniesThe establishment and operation of LLCs is governed by the Civil Code and the Federal Law OnLimited Liability Companies dated 8 February 1998 (as amended) ("LLC Law").Key features of LLCs: May be established by one or more persons (the "participants"), but not more than 50. The charter capital is divided into "participation interests". Information about the participants and their participation interests is recorded in a list of participants maintained by the LLC and in the Unified State Register of Legal Entities. All transactions in connection with the transfer or pledge of participation interests in LLCs have to be notarized. Participants have certain rights (e.g. to participate in the management, to share distributed profits, to sell their interest, etc.) which are set out in the LLC Law and the company charter. Participants have certain obligations (e.g. to contribute to the charter capital, to maintain confidentiality, etc.), which are set out in the LLC Law and the company charter. The minimum charter capital is RUB 10,000. At least 50 per cent of the charter capital must be paid in by the date of the LLCs registration and the balance must be paid in full within the first year of its operation.4.1.3.1. Management structureThe typical management structure of an LLC includes either three levels, as described below, or twolevels when no board of directors is created in the company: General Participants Meeting - the highest body of an LLC. Board of Directors (optional) - matters delegated from the General Participants Meeting. Executive Body - day-to-day management of the LLC. Doing business in St. Petersburg74 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 75. The General Participants Meeting has the right to amend the charter; define the basic goals anddirections of the LLC; to delegate to a commercial organization or to an individual entrepreneur theauthority reserved to the LLCs Executive Body and approve the conditions of any agreements withsuch organizations or persons (this is commonly referred to as appointing an "external"management company or manager); assign supplemental rights and duties to the participants in theLLC; approve the annual financial report and distribution of profits; alter the amount of the chartercapital; approve regulations governing the internal activities of the LLC; and reorganize or liquidatethe LLC, appoint a liquidation commission and approve the liquidation balance sheet of the LLC.An LLC charter may provide for the establishment of a Board of Directors. The competence of theBoard of Directors should be set out in the charter and can include such issues as the determinationof the basic goals and directions of the LLC, the appointment of the executive bodies and earlytermination of their powers, decisions on major and interested party transactions, the establishmentof representative offices and branches, the approval of internal regulations and other issues.The Executive Body is responsible for all matters which do not fall within the competence of theGeneral Participants Meeting (or the Board of Directors if there is one). Generally this comprises theday-to-day management of the LLC. Usually, the day-to-day management of the LLC is carried outby a general director, but sometimes this may be in conjunction with a collective executivemanagement board (in Russian "правление", or "pravlenye"), in which case the general directorbecomes the chairman of the management board. Alternatively day-to-day management may bedelegated to an external commercial organization (management company) or to an externalindividual manager, in both cases on a contractual basis.An LLC charter may also provide for the establishment of an Auditing Commission (or InternalAuditor). The creation of the Auditing Commission is mandatory if the LLC has more than 15(fifteen) participants.4.1.3.2. Rights of participantsThe participants in an LLC have the right, amongst other rights granted by the LLC Law and anyadditional rights set forth in the company charter, to: participate in the management of the LLC in accordance with the procedures established by the LLC Law and the company charter; obtain information concerning the activities of the LLC and have access to its accounting and other documents in accordance with the procedures established by the company charter; participate in the distribution of profits; sell or transfer their participation interests in the LLC charter capital, or a part thereof, in accordance with the procedure established by the LLC Law and the company charter; receive a portion of the assets left after settlement with creditors in the event of the liquidation of the company; demand the expulsion of any participant who grossly violates his obligations as a participant, or whose actions (or lack thereof) substantially hinder the LLC or make its activity impossible27; withdraw from the LLC by selling its participation interest back to the company (if this right is expressly stipulated in the charter), or to require the company to buy-out their participation interests where such right is set out in the LLC Law; and27 Available to participants who either individually or collectively hold at least a 10 per cent interest in the LLCs chartercapital. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 75
  • 76.  enter into binding shareholders agreements in which they are able to agree on the exercise of voting rights, the sales of participatory interests and other matters that may be regulated in such agreements.4.1.3.3. Obligations of participantsThe LLC participants also have various obligations, which include, amongst other obligationscontained within the LLC Law and any additional rights set forth in the company charter, thefollowing: to make contributions to the charter capital as specified in the LLC Law and the foundation agreement (or in the decision on the establishment of the LLC, if there is only one participant in the LLC) and within the time period specified in the LLC Law; and to keep confidential all information concerning the activities of the LLC.4.1.3.4. Charter capitalThe charter capital of an LLC consists of the nominal value of the participation interests of theparticipants and should be denominated in Russian Roubles. The initial charter capital may not beless than RUB 10,000.At least 50 per cent of the charter capital must be paid by the date of the LLCs registration and thebalance must be paid in full within the first year of its operation. Contributions may be in cash or inkind and certain customs benefits may be available for in-kind contributions made by foreigninvestors. The charter capital may be increased only after the original charter capital has been paidin full.4.1.3.5. Participation interestsA participation interest in an LLC is not considered a security under current Russian legislation andtherefore, unlike shares in a JSC, no registration with the securities regulator is required.Transactions in connection with the transfer or pledge of participation interest in LLCs have to benotarized. The Federal Tax Service of the Russian Federation has to be informed of any transfer ofthe participation interest. Information on the participants and their participation interests isrecorded in the list of participants maintained by the LLC and in the Unified State Register of LegalEntities.Participation interests may be sold to third parties, but are subject to the right of pre-emption of theexisting participants on the same terms upon which the participation interests are offered to thirdparties.4.1.4. Joint Stock CompaniesThe establishment and operation of a JSC is governed by the Civil Code, the Federal Law On JointStock Companies dated 26 December 1995 (as amended) ("JSC Law") and the Federal Law On theSecurities Market dated 22 April 1996 (as amended).Key features of JSCs: Issues shares to raise capital for its activities. The founders of the JSC must pay in 50 per cent of the JSC charter capital within three months following its state registration, with the balance payable in full within the first year.4.1.4.1. Management structure General Shareholders Meeting - almost exclusive competence for all matters set out in the JSC Law. Doing business in St. Petersburg76 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 77.  Board of Directors (optional for CJSCs and OJSCs with less than 50 shareholders, but compulsory for OJSCs with 50 or more shareholders) - the authority defined in the charter. Executive Body (general director, sometimes in conjunction with a collective executive management board, - "правление" or "pravlenye") - for day-to-day management. Internal Auditing Commission or an Internal Auditor - oversees the JSCs financial and economic activities, members of which must be elected by the shareholders.The General Shareholders Meeting is the highest governing body of the JSC, whose authority isoutlined in the JSC Law and cannot be substantially altered. Each common share carries one vote atthe General Shareholders Meeting (except for cases of cumulative voting where provided for in theJSC Law). Most decisions are made by a simple majority vote, although for certain key decisions asuper-majority of 75 per cent is required.The daily management of the JSC is the responsibility of the Executive Body. The most standardExecutive Body is a general director, however sometimes this will be in conjunction with a collectiveexecutive management board (in Russian "правление", or "pravlenye"), in which case the generaldirector becomes the chairman of the management board. Alternatively the General ShareholdersMeeting may (by majority vote) choose to delegate the powers of the Executive Body to an externalcommercial organization (management company) or to an external individual manager, in bothcases on a contractual basis (however, this decision may be taken only pursuant to a proposal fromthe Board of Directors if the company has a Board of Directors).4.1.4.2. Two types of JSCOJSCs (open joint stock companies): May have an unlimited number of shareholders. Shareholders are freely entitled to dispose of their shares. Shareholders have pre-emptive rights to acquire newly issued shares that are to be privately placed in proportion to their existing shareholding. Shareholders have pre-emptive rights to acquire newly issued shares that are to be publicly placed in proportion to their existing shareholding. Shareholders have no pre-emptive rights to acquire shares offered by other shareholders for sale to third parties. The initial charter capital at the date of this publication is RUB 100,000.CJSCs (closed joint stock companies): The number of shareholders may not exceed 50 (a CJSC must be transformed into an OJSC within one year should the number exceed 50). Shareholders have pre-emptive rights to acquire shares offered for sale by other shareholders to third parties. Shareholders have pre-emptive rights to acquire newly issued shares that are to be privately placed, in proportion to their existing shareholding. The initial charter capital at the date of this publication is RUB 10,000.4.1.4.3. Incorporation of a JSCIndividuals or legal entities may be founders of a JSC. A JSCs foundation document, the charter,must include the following information: the name, legal address and type of JSC (i.e. OJSC or CJSC); the amount of the charter capital; the quantity, nominal value, categories (common or preferred) of shares and classes of preferred shares issued and distributed by the JSC; the rights of the holders of shares of each category; Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 77
  • 78.  the structure and competence of the governing bodies of the JSC and their decision making procedures; the procedure for preparing and holding the General Shareholders Meeting, including a list of issues requiring either unanimous consent or a resolution adopted by a qualified majority of votes; information on branches and representative offices; information on the existence of any special right of participation in the management of the company (a "golden share") vested in the Russian Federation, a constituent entity of the Russian Federation or a municipality of the Russian Federation; and other provisions required by law.The charter may include other provisions, provided that they comply with the applicable Russianlegislation.The rules on the incorporation of JSCs are generally similar to those described above in connectionto LLCs. The only additional requirement in respect of JSCs is the registration of the issuance of theJSC shares with the Federal Service for the Financial Markets of the Russian Federation, which isobligatory upon the establishment of the JSC.4.1.4.4. Shares and other types of securitiesA JSC can issue securities in the form of shares, bonds and issuers options. Generally, the issuanceof securities must be registered with the competent regulatory body, which is the Federal Servicefor the Financial Markets of the Russian Federation. A JSC can issue common shares and/or severalclasses of preferred shares, however the total value of the preferred shares must not exceed 25 percent of its charter capital.A fractional share can come into existence when it is not possible to acquire the whole share duringthe consolidation of shares, when a shareholder exercises its pre-emptive right or in the course ofacquiring additional shares. A fractional share grants its owner the same rights that are granted bythe whole share of the corresponding category or class, on a pro rata basis.4.1.5. Choosing between LLC and JSCHistorically, the LLC has been the preferred form of legal entity for foreign investors looking for theestablishment of a wholly owned subsidiary in Russia. This is because the procedure for establishing,operating and transferring participation interests in an LLC were simpler than for a JSC. However,the 2009 amendments to the LLC Law have imposed greater administrative regulation of LLCs, forexample LLCs are now obliged to maintain and update a register of participants, and share purchaseagreements and pledge agreements connected with participation interests in LLCs must now benotarized in Russia.Both the shareholders of a JSC and the participants of an LLC can enter into binding shareholdersagreements in which they are able to agree on the exercise of voting rights, sales of shares(participatory interests) and other matters.Other aspects of the LLC, which may be a benefit or a hindrance depending on the aims of theforeign investor, are that: Participants (members) of an LLC who either individually or collectively hold at least a 10 per cent interest in the LLCs charter capital may apply to a court seeking the expulsion of another participant. To succeed the participant(s) seeking the expulsion must prove that the other Doing business in St. Petersburg78 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 79. participant substantially hindered the companys operations or materially breached its obligations; If this right is expressly stipulated in the charter, participants may withdraw from the LLC by selling their participation interest back to the company; and The LLC Law sets forth a significant number of matters which require a unanimous voting decision of all of the LLC participants. This could be a disadvantage for a joint venture partner with a majority participation in the LLC. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 79
  • 80. 4.2. Foreign investments Information for the current chapter was developed and kindly provided by BEITEN BURKHARDT4.2.1. Legislative basisThe document regulating foreign investments in the Russian Federation is Federal Law No.160-FZdated July 9, 1999 “On Foreign Investments in the Russian Federation” (hereinafter the “Law onForeign Investments”). In accordance with this law, which determines and guarantees thefundamental rights of foreign investors, there are other documents that are also both directly andindirectly aimed at regulating investment-connected relations, such as, for instance, Federal LawNo.225-FZ dated December 30, 1995 “On Production Sharing Agreements”, and Federal Law No. 57-FZ dated April 29, 2008 "On Procedure of Making Investments in Economic Entities of StrategicImportance for National Defense and State Security".Investors may be granted certain extra guarantees under bilateral international agreementsconcluded by the Russian Federation. In particular, assistance agreements on the encouragementand mutual protection of capital investments have been concluded with the governments of suchstates as Switzerland, Norway, Italy, USA, Japan, and China. Besides, the Russian Federation is thelegal successor to the former USSR under similar agreements concluded with the governments ofGermany, France, Great Britain, Austria, and Finland.4.2.2. Main provisionsForeign investments in the Russian Federation may be carried out in any form not expresslyprohibited by legislation of the Russian Federation.The legal structure provided for foreign investors in the Russian Federation is identical to the oneprovided for Russian organizations. Any restrictions on rights of foreign investors may be imposedonly by federal laws and only to the extent necessary to protect the fundamentals of theconstitutional regime, morals, health, rights and lawful interests of other persons, and ensurenational defense and state security.Any property belonging to foreign investors or commercial organizations, in which foreign investorsparticipate, may not be seized. Exceptions to this rule may only be established by a legislativeprocedure and must provide for compensation for losses.Upon payment of taxes and charges stipulated by the Russian Federation legislation, foreigninvestors are entitled to freely use revenues and profits in the Russian Federation and to transfer thesame outside Russia.Foreign investors may transfer their rights and obligations to another party on the basis of anagreement. Additionally, foreign investors are indemnified against losses inflicted by unlawfulactions (or omissions) of state or local authorities or officials of such authorities.4.2.3. Priority investment projectsWhen foreign investors make direct investments or implement priority investment projects theymay be granted certain concessions and additional guarantees.Direct investments carried out by a foreign investor are construed as: a foreign investor’s acquisition of no less than 10% of the shares in the charter capital of an already existing or newly established commercial organization in the Russian Federation in the Doing business in St. Petersburg80 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 81. form of an economic partnership or a company in accordance with the Russian Federation civil legislation; contribution of funds to the fixed assets of a foreign legal entity’s branch to be established in the Russian Federation; acting as a lessor in the Russian Federation with respect to particular types of equipment, whose customs value amounts to no less than 1 million rubles.A priority investment project is an investment project that meets all of the following conditions: The total amount of investments in the project equals no less than 1 billion rubles (or its equivalent in a foreign currency at the exchange rate of the Central Bank of the Russian Federation quoted on the date when the Law on Foreign Investments came into force – approximately EUR 40,000,000), or the share of foreign investments in the charter capital of the commercial organization implementing the project equals no less than 100 million rubles (or its equivalent in a foreign currency at the exchange rate of the Central Bank of the Russian Federation quoted on the date when the Law on Foreign Investments came into force – approximately EUR 4,000,000); The investment project is included in the list of priority investment projects to be approved by the Government of the Russian Federation. However, it should be noted that at the time of drafting this brochure, the list of priority investment projects was not approved.The Law on Foreign Investments provides foreign investors with a guarantee, widely used ininternational practice, of protection from negative changes in legislation of the host country(“grandfather clause”). In accordance with Article 9 of the Law on Foreign Investments, new federallaws and other legal regulatory acts of the Russian Federation that increase the total tax burden onthe activities of an investor and commercial organization with foreign investments or establish a lessadvantageous regime with respect to foreign investments shall not be applied during the paybackperiod of the project, but for no longer than seven years as of the date of commencement of thefinancing of this project by means of foreign investments.The guarantee of protection from negative changes in the Russian Federation legislation is appliedto investors and commercial organizations with foreign investments that implement priorityinvestment projects (regardless of the amount of the share of foreign investments in the chartercapital) as well as to commercial organizations with the share of foreign investments in chartercapital exceeding 25%. The guarantee is valid with respect to the following taxes: import customs duties (with the exception of customs duties that were imposed as a result of measures aimed at protecting the economic interests of the Russian Federation in terms of foreign trade according to the Russian Federation legislation); federal taxes (with the exception of excise taxes and VAT on commodities produced in the Russian Federation); payments to state extra-budgetary funds (with the exception of payments to the Pension Fund of the Russian Federation).Currently, Russian tax legislation does not provide protection for investors from negative changes inlegislation, which makes this guarantee difficult to implement in practice.4.2.4. Investments in St. Petersburg. Strategic investment projectsIn St. Petersburg investment activities are governed by Law of St. Petersburg No. 185-36 dated July08, 1998 "On State Support of Investment Activities on the Territory of St. Petersburg" whichestablishes the legal framework for state support for investors (including foreign investors) carryingout their activities on the territory of St. Petersburg. The respective support measures may include,inter alia, granting the citys sureties, tax benefits, deferred rent rates for lease of the citys property,etc. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 81
  • 82. An investment project to be implemented on the territory of St. Petersburg may be recognized asstrategic in cases stipulated by the Law of St. Petersburg No. 742-136 dated December 03, 2008"OnStrategic Investment Projects, Strategic Investors and Strategic Partners of St. Petersburg". Inparticular, the investment project can be recognized as strategic if the following criteria are met: improvement of socioeconomic and cultural living conditions of citizens of St. Petersburg; increase of investment attractiveness of St. Petersburg; development of an important sector of the national economy in St. Petersburg; promotion of development of certain territories of St. Petersburg.A strategic investment project shall also conform to the following requirements: economic efficiency of the investment project in terms of its payback period and profitability; the aggregate amount of investments in development of the production sector or transport and logistics hub of no less than 3 billion roubles, in other investment projects – 15 billion roubles; use of high-tech, energy-conservative, resource-saving and other high-efficiency technologies (if the investment project is connected with industrial production).Decision on recognition of a strategic investment project is adopted by the Government of St.Petersburg. Strategic investment projects are implemented on the basis of an agreement enteredinto between St. Petersburg and respective investor.4.2.5. Restriction on foreign investors activitiesNormally, foreign and local investors in the Russian Federation have equal status subject to certainexceptions. For instance, there are restrictions on investments made by foreign parties in thebanking and insurance sectors as well as businesses that are strategically important.4.2.5.1. Banking sectorFederal Law No. 395-I dated December 2, 1990 “On Banks and Banking Activities” sets forthadditional requirements for the foundation and commercial activities of credit institutions withforeign investments and branches of foreign banks in the Russian Federation.Pursuant to Article 18 of the mentioned Federal Law, the admissible share of foreign capital in thebanking system of the Russian Federation shall be established in accordance with a legislativeprocedure. The admissible share of foreign capital in the banking system of the Russian Federationis calculated as a ratio of the total amount of stakes belonging to foreign investors in the chartercapitals of credit institutions and the amount of stakes belonging to foreign banks to the totalamount of capital of all credit institutions registered on the territory of the Russian Federation. TheCentral Bank of the Russian Federation is entitled to prohibit an increase in the charter capital oralienation of shares in the charter capital of credit institutions if as a result of such actions theadmissible share of foreign capital in the banking system of the Russian Federation is exceeded.However, to date the federal law that sets forth the share of foreign capital in the banking system ofthe Russian Federation has not been adopted.4.2.5.2. Insurance services sectorThe basic legal act regulating the insurance services sector is Federal Law No. 4015-1 datedNovember 27, 1992 "On Organization of Insurance Business in the Russian Federation", whichestablishes certain restrictions on foreign insurance organizations’ activities through theirsubsidiaries and associated companies on the territory of Russia.According to Article 6 of the mentioned law, subsidiaries of foreign investors (foreign insurancecompanies) and insurance organizations, in which foreign investors’ share exceeds 49%, may notprovide obligatory insurance or life insurance. They also may not provide obligatory state insurance Doing business in St. Petersburg82 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 83. or issue property insurance related to making deliveries or performing works for state needs orinsure property interests of state and municipal organizations.An insurance organization, being a subsidiary of a foreign investor, has the right to carry outinsurance activities in Russia provided that the foreign investor has been an insurance company forat least 15 years, is performing its activities in accordance with legislation of the state ofincorporation, and has been participating in activities of insurance companies established on theterritory of Russia for at least 2 years.It should be noted that these restrictions do not apply to cases where foreign investors arecompanies from EU countries.The share (quota) of foreign capital in the charter capitals of all insurance companies registered inRussia may not exceed 25%. When the indicated maximum allowable shareholding is either reachedor exceeded, the controlling authority supervising the insurance sector stops issuing permits for theperformance of insurance activities to subsidiaries of foreign insurance companies and insuranceorganizations, in which foreign investors’ share exceeds 49%.Permission (prior consent) of the insurance supervisory authority is required for transferring sharesin the charter capitals of Russian insurance companies to foreign investors and their subsidiaries.Increase in the capital of an insurance company with funds from foreign investors and theirsubsidiaries also requires prior permission from the insurance supervisory authority.4.2.5.3. Ownership rights to certain categories of land plotsIn Russia, foreign investors are not allowed to own certain categories of land plots.Article 3 of the Federal Law “On Turnover of Land for Agricultural Purposes” provides for thatforeign citizens, foreign legal entities, stateless persons as well as Russian legal entities, in whichmore than 50 percent of the share capital belongs to foreign citizens, foreign legal entities orstateless persons may not hold ownership rights to agricultural land.Pursuant to Clause 3 of Article 15 of the Russian Land Code, foreign citizens, stateless persons andforeign legal entities may not hold ownership rights to land plots located in border territories (thelist of respective territories is approved by the Decree of the President of the Russian Federation No.26 dated January 09, 2011) and other special territories mentioned in federal laws.Such entities may only lease land plots of the said categories.4.2.5.4. Investments in economic entities of strategic importanceFederal Law No. 57-FZ dated 29 April, 2008 "On Procedure of Making Investments in EconomicEntities of Strategic Importance for National Defense and State Security" (hereinafter the "Law OnForeign Investments in Economic Entities of Strategic Importance") establishes the restrictions onforeign investors when purchasing shares in businesses, which are strategically important fornational defense and state security, as well as when making other deals with foreign investorsentailing establishment of control over such businesses.A business that is strategically important for national defense and state security (hereinafter a"business of strategical importance") is a company established in the Russian Federation in the formof a limited liability company or an additional liability company or a joint stock company, whichcarries out at least one type of activity, which is strategically important. The Law on ForeignInvestments in Economic Entities of Strategic Importance outlines forty two types of such activities,which can be consolidated into several groups: activity connected with nuclear materials or radioactive substances; development, production, distribution, renovation, or usage of military technology, weapons, ammunition and explosive materials; Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 83
  • 84.  space activity, activity related to aviation security, development, production, testing and overhaul of aviation technology; mass information activity; development, production, distribution or technical service of encoded (cryptographic) assets; development, production, distribution and identification of electronic machinery intended for secret collection of information; surveying and extracting useful substances from subsoil of land plots of federal importance and catching of biological water resources; activity connected with the use of infectious disease agents; executing work influencing hydrometeorological and geophysical processes and phenomena.The issue of establishing control over an acquisition target is a decisive criterion that determineswhether such acquisition shall be subject to the Law on Foreign Investments in Economic Entities ofStrategic Importance. The table below shows the cases when approval of acquisition is required: Investor Private foreign investor State foreign investorCompany – General enterprise Approval is required if over 50% is Approval is required if overacquisition of strategic acquired (also in certain 25% is acquired, whiletarget importance circumstances if a lesser interest is acquisition of over 50% is acquired) prohibited Enterprise, which Approval is required if 10% or more is Approval is required if 5% or develops subsoil acquired (other than in cases when more is acquired, while plots of federal the Russian Federation owns over acquisition of over 50% is importance 50%) prohibitedIt is important to note that other transactions resulting in control of foreign investor over a businessof strategical importance (such as agreements on a foreign investor carrying out the functions of amanager of a company, transactions resulting in the possibility to elect more than 50% of thecomposition of the board of directors (or supervisory board) or to appoint the sole executiveauthority or more than 50% of the composition of the collective executive body of such a business,etc.) also require prior approval for their execution.A foreign investor intending to conduct any of the said transactions or establish control over abusiness of strategical importance must submit to the authorized state body a respective petitionfor prior consent to such transaction or a petition for consent to establishment of control. Theconsideration of a petition takes approximately three months. Doing business in St. Petersburg84 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 85. 4.3. Taxation Information for the current chapter was developed and kindly provided by DLA PiperThe following table summarizes Russian taxes in general and in St. Petersburg.Tax To be paid to the To be paid to the budget of Total tax rate federal budget St. Petersburg (standard rates)Profits tax 2% 18% 20%VAT 18% - 18%General 13% - 13%personalincome taxMineral 0-17.5% - 0-17.5%extraction tax (depending on the type of mineral) 28Water tax RUB 4-1,700 - RUB 4-1,700 (depending on the type of waters)Property tax - 2.2% 2.2%Transport tax - RUR 24-1,000 RUB 2.5-200 (depending on the engine power of vehicle)Land tax - 0.004-1.5% 0.3-1.5% (depending on the type of land)At a regional level, the authorities are authorized to grant a reduction in the profits tax rate (in thepart payable to the regional budget) by 4.5 per cent (i.e. down to 13.5 per cent from 18 per cent of aregular rate) for any period they consider necessary.As far as property tax, transport tax and land tax is concerned, the regional authorities also have aright to reduce the tax rates.4.3.1. Special tax regimes in RussiaUnder the Tax Code of the Russian Federation, there are two different tax regimes: a common oneand a special one. If a taxpayer applies the common tax regime, he/she is obliged to pay such taxesas corporate profit tax, VAT, personal income tax, social insurance contributions, excise duties,property tax, land tax, transport tax, mineral extraction tax and water tax.In addition, the Tax Code of the Russian Federation envisages special tax regimes pursuant to whicha taxpayer is obliged to pay only one specific tax instead of a number of taxes. Such special taxregimes include a simplified tax system, a tax on imputed income, a unified agricultural tax and a taxon production sharing agreements.The simplified tax, the unified agricultural tax and the tax on imputed income replace profits tax fororganizations, income tax for individual entrepreneurs, VAT (except for imports) and property tax.A taxpayer can apply a particular special tax regime if certain requirements are met.28 1 EUR appr. equals 42 Russian Roubles; 1 USD appr. equals 32 Russian Roubles. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 85
  • 86. 4.3.1.1. Tax on imputed incomeTax on imputed income is a federal tax established by the Tax Code and which is in force by the localtax authorities. In St. Petersburg the tax on imputed income is constituted by the Law of St.Petersburg N299-35 dated 17 June, 2003.Specific types of business activities mainly performed by small or medium sized legal entities aresubject to tax on imputed income. Such types of business activities include consumer domesticservices, veterinary services, vehicle maintenance, repair and washing, catering, retail trade,transport advertising and passenger and cargo transportation.A taxpayer can apply a tax on imputed income if he/she satisfies the following requirements: less than 25 per cent of company’s capital is owned by other organizations; the average annual staff headcount is less than 100 people.The tax on imputed income has a rate of 15 per cent and is imposed on the amount of the "imputedrevenue" established for each specific type of activity per month adjusted by special coefficients.Usually it involves a very immaterial tax base and is advantageous to taxpayers operating on thebasis of the imputed income tax system.Payable imputed income tax could be reduced by deducting insurance contributions for mandatorypension insurance, medical insurance and social insurance for temporary disability or maternityleave.4.3.1.2. The simplified tax systemA company and individual entrepreneurs can apply the simplified tax system if the followingconditions are met, inter alia: the companys annual turnover does not exceed a certain threshold (RUB 60 million from 1 January 2010 until 2013), and the company employs less than 100 people.Some entities may not apply the simplified tax system. Such companies are: foreign legal entities; Russian legal entities with branches; Russian legal entities with more than 25 per cent of the capital owned by other organizations; insurance agencies, banks and investment funds, parties of production sharing agreements, taxpayers of unified agricultural tax, etc.The simplified tax rate is: 6 per cent if a taxpayer selects revenue as a tax base; or 15 per cent if a taxpayer selects "income less deductible expenses" as the tax base.Taxpayers are subject to quarterly advance payments, whereas the annual final payment is due by 31March of the following calendar year. Advance tax estimates and annual tax returns are due duringthe same terms as the corresponding payments.4.3.1.3. The unified agricultural taxUnder article 346.1 of the Tax Code, agricultural producers are allowed to apply the unifiedagricultural tax. As mentioned, this tax replaces profits tax for organizations, income tax forindividual entrepreneurs, VAT (except for import) and property tax.For the purposes of the unified agricultural tax the term "agricultural producers" denotesorganizations, (individual) farms and individual entrepreneurs producing agricultural products onagricultural lands and selling these products, in particular, products resulting from the processing Doing business in St. Petersburg86 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 87. thereof, if the portion of proceeds from the sale of the products make up at least 70 per cent of thetotal proceeds from the sale of the goods (works, services) of these organizations, (individual) farmsand individual entrepreneurs.The unified agricultural tax is levied on income minus deductible expenses. Income and expenses arecalculated in accordance with general profits tax rules.The unified agricultural tax rate is 6 per cent.4.3.2. Tax concessions in St. PetersburgUnder the Russian tax legislation, profits and property tax incentives and exemptions can be interalia provided through regional legislation. At a regional level, the authorities have limited powers togrant profits tax incentives and are only authorized to grant a reduction in the profits tax rate (in thepart payable to the regional budget) by 4.5 per cent (i.e. down to 13.5 per cent from 18 per cent of aregular rate) for any period they consider necessary. As far as the property tax is concerned, theregional authorities also have a right to reduce the maximum 2.2 per cent property tax rate or toprovide a full exemption from the property tax at their discretion.Thus, when a foreign investor is considering investing in a particular Russian region, it is importantto examine not only the relevant federal laws, but also the relevant regional laws. As the variousregions of Russia compete to attract foreign investors, each have passed numerous laws, regulationsand other legal measures aimed at improving the particular social and economic conditions in theirregion, including favorable tax conditions.Such incentives are generally granted to major investors or entities operating in a particularindustry. However, given that the criteria for the application of such incentives can be discretionallyset by the regional authorities, the reduction in profits tax can be potentially available to any groupof investors (taxpayers).In St. Petersburg, a number of additional tax concessions (the "Concessions") have been introducedby the St. Petersburg Law On Tax Concessions No. 81-11 dated 14 July, 1995 (the "Law").4.3.2.1. General rules for the application of the ConcessionsScope of the Concessions:Under the Law, a legal entity paying profits tax and property tax to the budget of St. Petersburg andmaking capital investments (the "Investment") on the territory of St. Petersburg may be entitled tothe following Concessions:1. a full exemption from property tax (from the maximum tax rate of 2.2% to 0%) in relation to respective fixed assets, and2. a reduction in the regional part of the profits tax rate from 18% to 13.5% if the sum of the qualifying Investment equals RUB 800 million or more.The Concessions are granted for a period of 5 tax periods in a row starting from the date when theright for the Concessions arose in accordance to the provisions of the Law.Types of qualifying investment activities:The Law limits the scope of the Concessions only to manufacturing companies engaged in specificeconomic sectors to be determined in accordance with the All-Russia Classifier of EconomicActivities. In particular, the following main types of activities qualify for the Concessions29:29 The full list of qualifying activities is listed under section D "Production and services of the manufacturing industry", E"Electricity, gas and water production" and I "Transportation and connection" of the All-Russia Classifier of EconomicActivities (although there are some exemptions). Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 87
  • 88. Production and services of the manufacturing  Food and beverages;industry  Tobacco and tobacco products;  Clothing and textiles;  Wood pulp;  Chemical products (rubber, non-mineral products etc.);  Metal products;  Machinery and equipment;  Equipment for the media;  Medical equipment;  Transportation vehicles;  Furniture;  Scrap metal;  Cars and auto components;  Ships and other transportation vehicles;  Others.Electricity, gas and water production  Electrical energy produced by thermoelectric plants, gas / diesel / nuclear / turbines;  Electrical energy, gas, steam and hot water;  Water and ice.Transportation and communications  Land transport;  Water transport;  Air transport;  Additional transportation services: o Terminals (airport etc.) activity, management of airports; o Management of air traffic; o Operation of takeoffs and landings, runways etc.; o Activities on the overland services of air transport. At the same time, some particular economic activities are excluded from the qualifying list. Please find a list of such activities below:  Lease of cargo automobiles / sea / internal waters / air transport with crew;  Additional transport activity (including forwarding, storage services etc.);  Communications.However, according to the Law, the application of the Concessions by companies engaged in retailtrade, real estate lease (even if they have met other criteria) is directly restricted.Definition of qualifying investment:The Law provides that when determining the required sum of the Investment (i.e. RUB 800 million -the "Threshold") only the net investment shall be taken into account, i.e. the sum of the investmentmade in the respective year must be reduced by the net book value of fixed assets which were usedby the taxpayer in St. Petersburg but were alienated (written off) during the same year. Doing business in St. Petersburg88 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 89. For the purposes of the Law, the Investment means (a) the acquisition30 of fixed assets and (b)placing those fixed assets into operation.In order to qualify for the Concessions, the Investment must be made:1. to the fixed assets which were not previously used on the territory of St. Petersburg and which are intended for production purposes (i.e. for the production of goods (work, services) and/or for management purposes),2. in the required Threshold,3. on the territory of St. Petersburg, and4. within a period of no longer than three consecutive calendar years starting from 2010.Investment in the form of land is clearly excluded from the qualifying investment.Additional requirements for the application of the Concessions:The Law provides certain additional requirements for the application of the Concessions whichinclude: A "claw back" rule which stipulates that if the fixed assets subject to the Concessions are alienated (or relocated from St. Petersburg) by the taxpayer before the expiration of a 5 year period (after the right for the Concessions appeared), the taxpayer automatically forfeits his right to the Concessions claimed in relation to the alienated assets and must restore and pay to the budget the respective profits tax and property tax. "Actual payment of the investment" requirement The Law also leaves open the question as to whether the investments should be actually paid during the investment period or not. In this respect, a conservative position would be to make sure that the required sum of the investment has actually been paid during the period of putting the fixed assets into operation. Reorganization issues The question of whether the successor has a right for the Concession or not, remains unregulated directly by the Law. However, according to the Tax Code the obligations and the rights of the reorganized company (including a right for the concessions) are transferred to the legal successor.4.3.2.2. Concessions for the companies engaged in the innovative sectorA legal entity that is involved in the manufacturing and selling certain innovative products (that arelisted in the Law), may be entitled to a reduction of the regional part of the profits tax from 18% to13.5% under the following conditions: it fulfills the above-mentioned conditions for the qualifying investor; it makes the Investment in the amount of RUB 50 million or more; 80% of the total taxable profit must be derived from selling of the said innovation products.4.3.2.3. The Concessions for the strategic investors (until 2013)The Law also provides that a qualifying legal entity paying profits tax and property tax to the budgetof St. Petersburg and making the Investment to the amount of RUB 3 billion or more on the territoryof St. Petersburg may be entitled to the following Concessions:1. a full exemption from property tax (from the maximum tax rate of 2.2% to 0%) in relation to the respective fixed assets, and30 Including the acquisition by way of construction, reconstruction, modernization, in-kind contribution of fixed assets intothe charter capital or obtainment of fixed assets under the lease agreement (if under such agreement the leased fixedassets are accounted at the lessees accounts). Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 89
  • 90. 2. a reduction in the regional part of the profits tax from 18% to 13.5%.The conditions for the application of the Concessions described in this section slightly differ fromthe general conditions which were described above. In particular, the Investment of RUB 3 billion ormore must be made starting from 2007 within three calendar years.Acquisition of the qualifying fixed assets under the lease agreement is directly restricted.Furthermore, the Law contains the so-called minimum "tax test" rule. This means that the qualifyinginvestor forfeits his/her right to apply the Concession if the total amount of taxes due to the budgetof St. Petersburg for one calendar year is less that the said amount of taxes for the year precedingthe first year when the Concessions were applied.The Concession may be granted only to the investors performing qualifying types of activities(please see Section "Types of qualifying investment activities": Production and services of themanufacturing industry) above. The Concessions may be provided for a period of 5 years startingfrom the first month of the calendar year following the year when the qualifying investment wasmade.The above Concession is available for the qualifying investors that meet the above-mentionedcriteria until 2013 for a period of 5 years as indicated in the previous paragraph.4.3.3. Tax administration in RussiaOne of the main purposes of the tax administration reform which has been implemented in theRussian Federation lies in the creation of a more transparent and predictable tax controlmechanisms. On the one hand, this mechanism must protect taxpayers from official pressure; onthe other hand, it must ensure an effective control over the observation of tax legislation by thestate.4.3.3.1. Tax auditsRussian law provides for two types of tax audits that may be conducted by the tax authorities: In-house tax audits (the review of tax returns filed by taxpayers). These audits are carried out solely on the basis of such tax returns and other documents submitted by a company, and On-site tax audits (the review of the three calendar years preceding the period in which the tax audit is being performed). Generally, an on-site tax audit covers all taxes. The duration of an on- site tax audit is limited by law to a maximum of two months.As a result of both in-house tax audits and on-site tax audits the tax authorities are obliged to issuean act reflecting the results of the respective audit. According to the Russian law, the auditedcompany is entitled to object to the act in writing and to defend its position at the proceedings heldby the tax authorities. Based on the act and on the proceedings, the tax authorities then issue adecision, which, in practice, generally repeats the wording of the act issued by the tax authorities.According to the Russian law, a company may challenge the decision of the tax authorities throughan appellate procedure by filing a petition with the higher tax authority. From 2009, suchadministrative proceedings have been obligatory before the company may go to court. The highertax authority has to issue its decision within one month from the date of receiving the petition, thisperiod may be prolonged for 15 business days. Only as of this moment will the decision of the highertax authority come into force.If the decision is endorsed by the higher tax authority, the company may challenge the decision byfiling a court claim with the relevant State Arbitration Court. The claim may be accompanied by anapplication requesting an injunction from the court which, if granted, shall disallow the taxauthorities from unilaterally withdrawing the amounts equal to the sum of the charges from thebank accounts of the company. Doing business in St. Petersburg90 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 91. 4.3.3.2. Reclassification of transactions for tax purposesThe tax authorities have recently changed their focus from reviewing mainly defects in accountingbusiness operations for tax purposes to disregarding the legal form of a contract when making a taxre-assessment. In its Ruling No. 53 of 12 October, 2006, the Plenum of the High Arbitrazh Courtspecifically stated that the courts should take into account that transactions not compliant with thelaw or other legal acts, as well as sham and fictitious transactions, are to be deemed void with taximplications arising therefrom regardless of their recognition by courts. The same ruling has alsoformulated a different concept that if the court has decided, on the basis of evidence submitted bythe tax authorities and the taxpayer itself, that the taxpayer has accounted for business operationsnot in accordance with its actual economic meaning, then the court "shall define the scope of therights and obligations of the taxpayer based on the true economic content of the businesstransaction". In such a case, the court can find a tax benefit unjustified and disallow such a benefitreceived by the taxpayer if the transaction concerned: is lacking economic substance and legitimate business reasons other than obtaining a tax benefit ("business purpose principle"); or was recorded for tax purposes not in accordance with its actual economic substance ("form over substance principle").4.3.3.3. Tax penaltiesThe carrying out of business activities without registration with the tax authorities is subject to a fineto the amount of 10 per cent of the respective income, but not less than RUB 40,000.Late submission of a tax return is subject to a fine equal to 5 per cent of the tax due under such a taxreturn per calendar month (full or partial).Non-payment of a tax as a result of a reduction in the tax base is subject to a fine to the amount of20 per cent of the unpaid tax. The fine may be increased by up to 40 per cent if the violation isintentional.Late payment of tax is subject to an interest equal to 1/300 of the effective rate per day of theCentral Bank of the Russian Federation. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 91
  • 92. 4.4. Contracts Information for the current chapter was developed and kindly provided by BEITEN BURKHARDTReasonable actions on the part of foreign companies in the Russian market can lead them toextremely impressive financial results. However, thorough preparation and maximum awareness area prerequisite for such results. Several principal aspects that should be kept in mind whenestablishing contractual relations with counterparties in Russia are briefly covered below.4.4.1. Analyzing counterparties prior to signing contractsWhen taking a decision on whether to enter into a partnership with a Russian company, it isnecessary to verify its solvency and reliability. Thus, it is possible to distinguish between reputableand solvent partners and doubtful or newly established fly-by-night companies, which reducescounterparty default risks under agreements.The most simple and fast way to obtain information about a potential partner is to review openofficial data sources, in particular the Unified State Register of Legal Entities, the Unified StateRegister of Rights to Immovable Property and Transactions Therewith, the Land Cadastre, Registersof Intellectual Property (Rospatent), and the websites of federal courts, services and agencies.Furthermore, information on various organizations can be requested from special informationagencies.4.4.2. Recommendations for entering into contractsThe main criteria for the "reliability" of a signed agreement are its validity and enforceability.Moreover, it should be noted that subordination of an agreement to any foreign law cannot precludepossible problems related to subsequent performance of the agreement. Form of contract According to the Russian Civil Code, foreign trade transactions shall be executed in a written form under pain of invalidity. This means that dispatch of goods (rendering of services, performance of works) to or by foreign entities without entering into a written contract (e.g., on the basis of invoices) is not allowed. Choice of governing law Normally, foreign counterparties would like the provisions of an agreement to be executed thereby to be governed by the national law. However, such choice of law may adversely affect the validity of the agreement as any terms and conditions contradicting imperative provisions of the Russian law are deemed null and void and cannot be judicially protected or enforced in Russia. Like in many countries, a number of issues in Russia are subject to exclusive regulation by the Russian law, in particular transfer of rights to real estate, shares and interests in Russian companies, protection of consumer rights as well as matters related to establishment and operations of Russian companies. Jurisdiction As a general rule, the parties to a contract may select a competent court for considering disputes that may arise in connection with the contract. Like the choice of the governing law, in certain cases the choice of jurisdiction is limited. For example, disputes over rights to immovable property located (registered) in Russia may be settled by a Russian state court only. It should also be mentioned that only court decisions of the countries, with which Russia has treaties on mutual recognition and enforcement of court judgments, are enforceable in Russia. In particular, there are such treaties with Italy, Spain, the Baltic States, and certain countries of Doing business in St. Petersburg92 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 93. the Central and Eastern Europe. In the absence of such treaty, a judicial act may prove to be useless. A common method of avoiding such risks is to enter into an arbitration agreement providing that all disputes fall within the jurisdiction of Russian or foreign international arbitration. Aside from the confidentiality, an undeniable advantage of international arbitration is the enforceability of its awards in more than 140 countries, including Russia. At the same time, it is important to remember that to be enforceable in Russia foreign international arbitration awards shall be recognized by a Russian state court at the place of location of a debtor (in St. Petersburg – the Arbitration Court of St. Petersburg and Leningrad Oblast). Liability of parties Generally, the grounds for and limits of liability for improper performance of contractual obligations are stipulated by the parties to the contract. However, certain restrictions of "free will" should be born in mind: Russian law does not permit limiting liability given premeditation of the breaching party. For harm caused by a defective product within its established lifespan, liability of the seller (producer) ensues regardless of fault of the seller or the presence of contractual links. At their option, victims may file a lawsuit for damages against either the seller (importer) or the manufacturer of the product. The only basis for a release from liability is a proven fact of improper product use.4.4.3. Securing contract performanceFor the purposes of protecting business interests it is necessary to consider in advance effectivemeans of securing a counterpartys performance of its obligations. The most common means ofsecurity under the Russian law include pledge/mortgage, surety and a bank guarantee.1. Pledge/mortgage: A pledge is one of the most reliable means of security and, in the event the debtor does not fulfill its contractual obligations, it entitles the creditor to satisfaction of his/her claims out of the debtors property being the subject of pledge. Moreover, a pledge lender has the preferential right to satisfaction of its claims in priority over all other creditors of the debtor. One type of pledge is mortgage – pledge of land, buildings (including buildings under construction) and other real estate. The law establishes considerably strict requirements for mortgage agreements as well as the obligation of state registration.2. Surety: Oftentimes Russian companies have quite modest charter capitals and assets, which are not enough for satisfying claims which could arise in the future. Consequently, a popular form of securing obligations is a personal surety of company founders – individuals or companies affiliated with the debtor and owning assets. The surety and the debtor bear joint liability for performance of the secured obligation.3. Bank guarantee: A distinct feature of a bank guarantee is its independence from the main (secured) obligation. This means that within the period established by the bank guarantee agreement the creditor is entitled to satisfaction of its claims from the guarantor bank even if the secured obligation is invalid (unenforceable). A bank guarantee is one of the most reliable means of securing obligations. When executing one it is necessary to very precisely formulate, which documents the creditor must present to the bank along with a claim for payment, as well as to consider the requirements of current court practice on the execution of guarantees (including validity periods).4.4.4. Currency controlIn accordance with the Federal Law “On Currency Regulation and Currency Control”, whenimplementing cross border transactions, residents (Russian citizens and companies incorporatedpursuant to the Russian laws) shall comply with special requirements stipulated by the law andnormative acts of currency regulation authorities. The most important regulatory acts related to Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 93
  • 94. making payments to foreign recipients are issued by the Bank of Russia. Pursuant to the generalrule, residents shall provide authorized Russian banks with special documents when makingpayments within the framework of foreign trade activities. Responsibility for violating the currencylegislation of the Russian Federation and the acts of the currency regulation authorities is specifiedin the Administrative Offences Code (KoAP). In accordance with currency control regulations, someoperations (e.g., an offset of mutual claims) may be prohibited.4.4.5. Specific features of supply agreements containing conditions on equipment installationIf within the framework of a supply agreement a foreign supplier also undertakes to provide servicesassociated with installation or supervision of installation of the equipment supplied, it is necessary totake into consideration a number of aspects of Russian tax and migration legislation as well asprovisions on regulation of construction activities.Should a foreign company render services associated with supply, it is recommended that therespective relations in regard to supply and services be formalized by separate agreements. First ofall, this is due to tax consequences – on the one hand, when determining the contract price includingthe cost of goods and services without dividing it into respective parts, customs payments shall becharged on the entire contract price; on the other hand, in some cases services rendered by a foreigncompany in Russia may be subject to VAT (depending on the type of services) and corporate profitstax (if a permanent establishment is formed in accordance with the criteria set forth by legislation).In the above cases if a foreign company does not have its own divisions, through which activities inRussia are performed, a Russian company being a party to the respective agreement and acting as atax agent of the foreign company shall calculate and withhold VAT and corporate profit tax on theamount payable to the foreign counterparty as remuneration for its services.Any issues related to formation of permanent establishments of foreign companies are regulated bybilateral international double taxation treaties and the Tax Code of the Russian Federation. As ageneral rule, a permanent establishment of a foreign company is deemed to have formed ifrepresentatives of the foreign company perform regular commercial activities in Russia. Moreover, aforeign company shall be mandatorily registered with Russian tax authorities if such activities areperformed for more than 30 days during one calendar year. However, some double taxation treatiesestablish special rules with respect to construction (building areas) and installation works(installation objects). Pursuant to general rules, the activity of a foreign company that performsconstruction or installation works on the territory of the Russian Federation is not taxable in Russia ifsuch activity is performed for no longer than 12 months. For example, such provisions are set forth inSubclause 3 of Clause 5 of the Double Taxation Treaties with Germany dated 29.05.1996, theNetherlands dated 16.12.1996 and Great Britain dated 15.02.1994.Also, it should be taken into consideration that in certain cases in order to perform installation worksa company may have to obtain a permit to perform construction works and join a self-regulatingorganization (SRO) registered in Russia. It is necessary to check whether a permit is required withrespect to each particular type of works to be performed. In accordance with the current rules,performance of installation supervision works usually does not require a permit of a member of SRO.As a work permit is not required foreign citizens performing installation (supervision) works, serviceand warranty maintenance as well as post-warranty repairs in Russia, they usually stay in Russia onthe basis of a multi-entry business visa. However, it should be noted that the aggregate period for aforeign citizen to stay in Russia on the basis of such visa may not exceed 90 days during each periodof 180 days. If the above works are performed for more than 90 days, the foreign company mustreview other options – e.g. replace the personnel each 90 days, obtain new business visas orrespective work permits. Doing business in St. Petersburg94 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 95. 4.5. Employment Information for the current chapter was developed and kindly provided by BEITEN BURKHARDTLabor relations and other relations directly connected therewith are regulated by labor legislationwhich consists of the Labor Code of the Russian Federation (hereinafter the "Labor Code"), otherfederal laws and laws of the constituent territories of the Russian Federation, as well as by otherregulatory legal acts containing labor law regulations. Requirements of the Russian labor legislationare also applicable to foreign citizens and foreign company employers participating in relationsinvolving the performance of labor activities in Russia.4.5.1. Employment agreementAn employment agreement is the basic document regulating the relations between the employerand the employee. It is mandatory that an employment agreement be concluded between theemployer and the employee in writing prior to the commencement of work. Given actualadmittance of the employee to work, the employer must execute an employment agreement withhim/her in writing within 3 business days after the employee was actually admitted to work.The following conditions must be included into an employment agreement: information on the employer and the employee; place of employment; date of commencement of work; position (labor function); conditions determining the nature of the work (mobile, connected with travel, in transit, etc.); compensation, and benefits to the employee for working in severe, detrimental, and dangerous conditions; work and holiday time; terms of remuneration of labor (salary, possible premiums, bonuses, etc.); provision on mandatory social insurance in accordance with legislation.An employment agreement may also include other conditions not contradicting the effectivelegislation.The conditions of an employment agreement may be amended by an agreement of the partiesexecuted in writing. In certain exceptional cases the labor legislation allows the employer tounilaterally change the conditions of an employment agreement (without the employees consent).4.5.2. Term of an employment agreementEmployment agreements may be concluded for an indefinite term (unlimited agreements) or for afixed term not exceeding 5 years (fixed-term agreements).Generally, employment agreements are concluded for an indefinite term. A fixed-term employmentagreement may be entered into only in cases stipulated by the Labor Code and other federal laws,for instance: for the time of performing the obligations of an absent employee, for whom theworkplace is preserved; for the time of performing temporary (up to 2 months) or seasonal work; forthe time of carrying out work beyond the employers usual activities; etc. By agreement of theparties, a fixed-term employment agreement may also be concluded with executives, deputyexecutives and chief accountants of an organization; persons combining jobs; persons studying fulltime and other persons specified by the Labor Code. Entering into a fixed-term employmentagreement in cases not stipulated by the Labor Code or other federal laws is not allowed. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 95
  • 96. It must be noted that if neither party has requested termination of a fixed-term employmentagreement upon expiration of its term and the employee continues to work after expiration of theemployment agreement, the agreement is deemed concluded for an indefinite term.4.5.3. Probation periodRussian labor legislation provides for the possibility of establishing probation for an employee inorder to verify his/her suitability for the job entrusted. Probation may be established for a period ofup to 3 months. For executives and their deputies, chief accountants and their deputies, executivesof separate structural subdivisions (branches, representative offices) the maximum probation periodis 6 months. Probation may not be established for certain categories of employees specified by theLabor Code (pregnant women; women with children up to 1.5 years of age; persons under 18 yearsof age; young specialists; etc.).During the probation period the employer has the right to terminate the employment agreementwith the employee who failed to pass probation, under a simplified procedure. In such case, theemployer must notify the employee of the termination of the employment agreement in writing atleast 3 days in advance. Moreover, the employer must state the reasons, for which the employee isdeemed to have failed to pass probation.4.5.4. SalaryThe amount of the salary shall be specified in the employment agreement and may not be less thanthe federal minimum wage established for the entire territory of the Russian Federation (4,611rubles on the date of preparation of the brochure) and the regional minimum wage established byregional laws annually. In St. Petersburg the regional minimum wage is established in the amount of7,781 rubles for the year 2012.Salaries must be paid at least every half-month in the currency of the Russian Federation, i.e.Roubles.4.5.5. Working hoursIn the Russian Federation the normal duration of working hours may not exceed 40 hours per week.By agreement between the employee and the employer, part-time work may be established. Theemployer must establish a part-time working day for certain categories of employees upon theirrequest. Such employees include: pregnant women; one of the parents having a child aged up to 14years or a disabled child up to 18 years; persons caring for a family member who is ill. In case of part-time work the employees labor is paid pro rata to the time worked by him/her or the amount ofwork performed.Russian labor legislation provides for the possibility to establish various working schedules by theemploying company, i.e. various means of distributing work within a certain period (week, month,quarter, etc.), including: standard working day, non-standard working day, flexible working hours,record of cumulative hours worked.The Labor Code also allows engaging an employee in overtime work subject to the employeeswritten consent. The maximum duration of overtime work is 4 hours within 2 consecutive days and120 hours per year. Overtime work shall be compensated for by granting the employee additionaldays-off or paying the employee at least one and a half times the regular hourly rate for the first 2hours and at least twice the regular hourly rate for any subsequent hours.4.5.6. LeaveEach employee shall be granted at least 28 calendar days of paid leave per annum (basic paid leave).An employment agreement, collective agreement, or internal documents of the employer may also Doing business in St. Petersburg96 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 97. provide for granting the employee an additional paid leave, the duration of which is not limited bylaw.As a general rule, leaves are granted to employees in calendar days .Upon agreement between theemployee and the employer the annual leave may be divided into parts. At least one part of theleave shall not be less than 14 calendar days.The employee may be granted a short-term unpaid leave, the duration of which shall be agreed bythe employee and the employer. Such leave shall be granted due to family circumstances or othervalid reasons upon the employee’s written application.4.5.7. Statutory holidaysRussian labor legislation establishes 12 statutory holidays per year, which are: January 1, 2, 3, 4, and5; January 7; February 23; March 8; May 1 and 9; June 12; and November 4. If a holiday falls on a day-off, the following business day becomes a day-off. The statutory holidays coming for the paid leaveperiod are not included in the number of calendar days of the leave and are not paid.Work on holidays and days-off is prohibited, except for the cases provided by law, and, as a rule,requires the employee’s written consent. Such work shall be paid at least twice the regular rate.4.5.8. Secondary employment. Prohibited competitionDuring the time free from the main work an employee is entitled to perform another regularly paidwork for the same employer (internal secondary employment) or for another employer (externalsecondary employment). Working hours at a secondary job may not exceed 4 hours per day. It ispermissible to conclude secondary employment agreements with an unlimited number ofemployers.In accordance with the Russian legislation, an employment agreement may not stipulate that theemployee is prohibited for the term of the employment agreement from performing work orbusiness activities that compete with the employer’s activities. No employee may also be prohibitedfrom competing with his/her employer following the expiration of the employment agreement.4.5.9. Termination of employment agreementsAn employment agreement may be terminated only on the grounds stipulated by the Labor Code orother federal laws. Dismissing an employee on other grounds is not allowed.The Labor Code provides for the following grounds for termination of employment agreements:1. Termination of an employment agreement by agreement of the parties Any employment agreement – whether concluded for an indefinite term or fixed term – may at any time be terminated by agreement of the parties. This procedure for terminating labor relations is widely used in practice as it is connected with minimal potential risks for the employer. The labor legislation does not obligate an employer to pay any compensation to an employee; however, it is possible if provided for by the conditions of the agreement between the employee and the employer. The amount of and procedure for paying compensation are determined by mutual consent of the parties.2. Resignation of an employee An employee is entitled to terminate the employment agreement at any time upon his/her own initiative. Such employee must notify the employer of the resignation in writing at least 2 weeks in advance. Prior to expiration of the resignation notification period the employee is entitled to withdraw the letter of resignation at any time. In such case dismissal does not occur. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 97
  • 98. If upon expiration of the resignation notification period the employment agreement is not terminated and the employee does not insist upon resignation, the employment agreement remains valid.3. Termination of a fixed-term employment agreement A fixed-term employment agreement terminates upon expiration of the term stated therein. If upon expiration of the term of the employment agreement neither the employee nor the employer has requested termination of the labor relations, the provision regarding the term of the agreement loses effect and the agreement becomes indefinite. In case of termination of a fixed-term employment agreement due to expiration of its term the employer is obligated to notify the employee thereof in writing three calendar days prior to dismissal, otherwise the agreement will also be deemed prolonged for an indefinite term.4. Termination of labor relations due to circumstances beyond the parties control In some cases an employment agreement is subject to termination due to circumstances beyond control of the employer and the employee. The list of such circumstances is stipulated by the Labor Code and, in particular, includes the employee being called to military service; reinstatement of the employee that previously performed the respective job duties; recognition of the employee as completely incapable of working; disqualification of the employee; the employee being sentenced to punishment under a court verdict, and other circumstances.5. Termination of an employment agreement on the initiative of the employer Dismissal upon the employers initiative always requires certain substantiation directly stated in the Labor Code, as well as compliance with the mandatory procedure and careful execution of all required documents. The Labor Code contains a relatively broad list of the grounds for dismissal of an employee upon the employer’s initiative. The most important of them are:  Dismissal for reasons connected with the employees conduct, including: repeated nonperformance of employment duties resulting in disciplinary sanctions; single gross breach of employment duties; presentation by the employee of falsified documents when being hired, and other grounds.  Dismissal for reasons associated with the employees insufficient professional qualifications.  Dismissal for production reasons: liquidation of the organization or a separate subdivision thereof; staff reduction. In these cases the employees must be notified at least two months prior to dismissal and paid a severance pay in the amount established by the Labor Code. It is prohibited in all cases to dismiss an employee on the employers initiative during the employees temporary incapacity to work or leave, as well as pregnant women, other than in case of liquidation of the organization. Should any legislative requirements be breached, the dismissal of an employee may be deemed unlawful. In such case the employee may be reinstated at work and the employer may be obligated to compensate for the emotional distress caused to the employee by the unlawful dismissal.4.5.10. Specific features of employment of company executivesCompany executives are individuals vested by virtue of law, other regulatory legal acts and/or thecompany foundation documents with the right to manage the company, in particular, to performthe functions of its single-member executive body. The term "executive" used in Russian legislationis of general character and when applied to a company of a particular type may be replaced withother terms, for example "director", "general director", "president", "chairman of the board", etc. Doing business in St. Petersburg98 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 99. An executive is considered to be a company employee. Due to this, an employment agreement shallbe entered into by the executive and the company, and relations between them are regulated notonly by civil legislation and the company corporate documents but also by labor legislation.Employment of company executives has the following specific features: An executive is employed on the basis of either an indefinite employment agreement or a fixed- term employment agreement, which is established by the foundation documents or the employment agreement. The employment agreement with an executive may stipulate a longer probation period: up to 6 months. An executive may occupy paid positions in other companies (i.e. have secondary employment) only subject to permission of the employers authorized body (general meeting of participants / shareholders, board of directors, etc.). An executive bears full material liability for direct actual damage caused to the employer and is obligated to compensate for losses, including lost profit, caused to the company by his/her wrongful acts, in cases established by Russian legislation. Along with the general grounds for terminating an employment agreement with a company executive, legislation also provides for additional grounds, for example: o The authorized body of the employing company taking a decision to prematurely terminate the employment agreement with the executive. In the absence of wrongful acts (omissions) by the executive, he/she is paid a compensation in the amount determined by the employment agreement, but not less than three times the executives average monthly salary. o Bankruptcy of the employing company. o Other grounds agreed upon by the parties in the employment agreement. Federal laws and company foundation documents may extend the above specific features of employment to the members of the companys collective executive body, who entered into an employment agreement with the company.4.5.11. Financial liability of employees and employersFinancial liability of an employee is limited to the amount of direct actual damages incurred as aresult of a wrongful act or omission by the employee. Pursuant to the law, the employer may notclaim lost profits from the employee.Russian labor legislation distinguishes between limited and full financial liability of an employee. Asa general rule, an employee who has caused losses to an employer shall be held liable within thelimits of his/her average monthly salary (limited liability). Full financial liability means that anemployee is obligated to compensate for all losses that he/she has caused to the employer, even ifsuch losses significantly exceed his/her average monthly salary. The employee shall bear fullfinancial liability only in the cases directly stipulated by the Labor Code, in particular, maliciousdamage; damage caused while inebriated; damage caused as a result of the employees criminaloffence; damage caused while not fulfilling employment duties; damage caused as a result ofdisclosure of a legally protected secret, including a trade secret; and other cases.Labor Code provides for 4 main cases of financial liability of the employer: Compensation for damages caused to the employee due to illegal deprivation of the possibility to work, including unfair dismissal, illegal transfer to another job, delays in obeying a court ruling to reinstate employment and other cases. The compensation shall be paid in the amount equal to the employees average salary for the entire period of deprivation of the possibility to work. Compensation for damages to the employee’s property. The damage shall be compensated for in full at the current local market prices. Compensation (interest) for delaying payment of salary, Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 99
  • 100. leave allowances or other sums due to an employee are calculated at the rate of at least 1/300th of the current Central Bank refinancing rate for each day of delay. Compensation for the emotional distress caused to the employee by the employers unjust actions in the amount determined by the agreement between the employee and the employer or by court. The employment agreement or written agreements attached thereto may provide for the liability of the parties to such agreement(s). However, such contractual liability of the employer may not be lower, and employee’s liability may not be higher than that stipulated by the Labor Code or other federal laws.4.5.12. Employment of foreign citizensEmployers have the right to engage foreign employees provided that respective permittingdocuments and a special Russian visa are obtained by the employer and the foreign employee.Depending on the status of the foreign citizen, the following documents shall be obtained: Employment of highly qualified foreign specialists, i.e. foreign employees who have work experience, skills or achievements in a particular area of activities and are paid salaries of at least 2 million rubles per year, requires obtaining a work permit and a work visa for the said specialist. Both documents are issued for up to 3 years. Employment of other foreign citizens is possible provided that the employer obtained a permit to engage and use foreign employees and the employee obtained a work permit and a work visa. These permits and the work visa are issued for the period of up to 1 year.The said procedure does not apply to foreign citizens holding residence permits; foreign citizensemployed by diplomatic missions and consular establishments of foreign countries in the RussianFederation, international organizations; journalists accredited in Russia; employees of foreign legalentities performing assembly works, service and guarantee maintenance as well as follow-up servicefor technical equipment installed in Russia, and other categories of foreign citizens specified by theRussian legislation.4.5.13. Taxation of employees incomeEmployees income (salary and other payments under employment agreements) is subject to thepersonal income tax at the following rate: 13% – for Russian tax residents (i.e. persons staying on the territory of the Russian Federation for more than 183 days per year irrespective of their citizenship) and highly qualified foreign specialists (irrespective of their tax residency); 30% – for other employees not considered Russian tax residents.Although employees are taxpayers of the personal income tax, in accordance with tax legislation it isemployers acting as tax agents that are obligated to calculate, deduct from the remunerationamount, and pay to the budget the personal income tax.4.5.14. Social insurance of employeesPursuant to the Labor Code, employers are obligated to ensure mandatory social insurance for theiremployees. Russian legislation establishes the following types of mandatory social insurance: medical insurance; pension insurance; social security insurance, which provides for insurance against such cases as temporary incapacity to work, industrial accidents, occupational diseases, maternity and other cases.Insurance contributions are made on the basis of remuneration of and other payments to employeesunder employment agreements. Remuneration of and other payments to foreign employees, who Doing business in St. Petersburg100 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 101. entered Russia on the basis of a visa and are not granted a temporary or permanent residencepermit, are not subject to insurance contributions, except for contributions towards insuranceagainst industrial accidents and occupational diseases.Contributions towards mandatory social insurance are paid by employers to the state insurancefunds (the Pension Fund of the Russian Federation, the Social Security Fund of the RussianFederation, the Federal Mandatory Medical Insurance Fund) at the rates established by the federallegislation. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 101
  • 102. 4.6. Product conformity assurance in Russia Information for the current chapter was developed and kindly provided by SGS Vostok Limited, Russian subsidiary of the SGS Group4.6.1. What is the acting legal framework for product conformity assurance in Russia?Back in 1993, the Russian Government enacted legislation obliging to certify a number of consumerand industrial products and introduced the GOST R system of mandatory certification with theintention of protecting health and safety of Russia’s population. GOST R certification impliesassessment of product conformity against applicable GOST R standards with regard to safety andquality characteristics by an independent properly accredited certification body. The GOST Rsystem has been complemented by other conformity assurance systems relating to sanitaryregulations, phitosanitary and veterinary aspects, industrial safety etc.The Russian Federal Law No.184 on Technical Regulating dated on 27.12.2002 introduced dramaticchanges to the former conformity assurance system with the objective to harmonize Russiantechnical barriers to trade with international practices. It established new rules of state regulatoryrequirements for industrial and consumer goods, buildings, related business processes, as well as forconsumer services. According to this Law, a Technical Regulation (in Russian: TekhnicheskiyReglament) has been the primary document, which stipulates the obligatory requirements forvarious goods to be sold and/or consumed in Russia, whereas standards and norms should be usedas a supportive base only. Apart from mandatory certification another form of conformity assurancehas been introduced called “declaration of conformity”. However, until new Technical Regulationsare adopted, the GOST R conformity assurance system has been still valid.In view of the Agreement signed on October 6, 2007 Belarus, Kazakhstan and Russia haveestablished the Customs Union in the framework of the Eurasian Economic Community (EAEC orEurAsEC). In December 2009, the Agreement on the circulation of products liable to mandatoryconformity assurance within the Customs Union was signed, followed by a number of more specificregulatory documents. As a result, the national legal framework in the area of conformity assuranceand supervision over product safety has to be gradually replaced by the Customs Union legalframework.By January 2012, the first 24 Technical Regulations out of the 47 top-priority Technical Regulationsof the Customs Union have been passed. The first 10 Technical Regulations should come into forcein July 2012. In 2012, the remaining top-priority Technical Regulations of the Customs Union shouldpass according to the agreed schedule. Those 47 Technical Regulations would cover over 60% of thegoods circulating within the Customs Union. During the period from 2013 to 2015, unifiedrequirements should be adopted towards all significant product categories marketed in the CustomsUnion. As soon as a Technical Regulation of the Customs Union comes into force, the relevantnational requirements are abolished.A Technical Regulation can be either generic or specific. Example of a generic document can be theTechnical Regulation on Electromagnetic Compatibility, which concerns a number of industries.Specific Technical Regulations relate to specific product categories like, for example, the TechnicalRegulation on Safety of Toys or the Technical Regulation on Juice Products from Fruits andVegetables.To summarize, by early 2012, three major co-existing conformity assurance regulatory frameworksin Russia are as follows: Doing business in St. Petersburg102 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 103.  Technical Regulations of the Customs Union; Technical Regulations of the Russian Federation – applied only when there is no relevant Technical Regulation of the Customs Union; GOST R system – applied only when there are no relevant Russian or Customs Union Technical Regulations.In addition, there are special requirements from Russian and Customs Union authorities with regardto conformity assurance against veterinary, phitosanitary, sanitary and industrial safety norms.4.6.2. How to find out whether the product is liable to mandatory conformity assurance in Russia?Starting from July 1, 2010 the Single list of products liable to mandatory conformity assessment(verification) in the framework of the Customs Union resulting in unified document issuance hasbeen enacted. The unified document implies either the Certificate of Conformity or the Declarationof Conformity drafted according with the same unified template in Russia, Belarus and Kazakhstan.This list has been updated on a regular basis.The other documents to refer to are: the Single list of products liable to sanitary-epidemiological supervision on the customs border and in the customs territory of the Customs Union approved by the Decision of the Customs Union Commission No.299 dated on 28.05.2010; the Single list of products liable to veterinary supervision in the Customs Union approved by the Decision of the Customs Union Commission No.317 dated on 18.06.2010; the List of products liable to quarantine phitosanitary supervision on the customs border and in the customs territory of the Customs Union approved by the Decision of the Customs Union Commission No.318 dated on 18.06.2010.If the product is not included in the Single product lists of the Customs Union, then one shouldconsult two national regulatory documents: the Single list of products liable to mandatorycertification and the Single list of products whose conformity verification is to be made in the formof a declaration of conformity (both approved by the Decree of the Russian Government No. 982dated on December 1, 2009 and since then regularly updated).Besides, one should consult the acting Technical Regulations of the Customs Union and the RussianFederation, and if there are any relevant regulations pertaining to the product category in question,then one should check the scope of the Technical Regulation to find out whether the specificproduct is liable to mandatory verification of conformity.If the product is not mentioned in any of the product lists and any of the acting TechnicalRegulations either of the Customs Union or the Russian Federation, then the product is not subjectto mandatory verification of conformity in Russia.4.6.3. What kinds of permissive documents are there in Russia?There are two forms of conformity assurance in Russia: declaration of conformity (by themanufacturer) and certification of conformity (by a properly accredited certification body beingindependent from the manufacturer). Declaration of Conformity and Certificate of Conformity haveequal legal status and are valid throughout the whole territory of the Russian Federation. Theappropriate form of conformity assurance is stipulated by regulatory documents applicable to theproduct in question. Sometimes, both forms are possible.The following types of approvals are usually required to prove product compliance in Russia: Declaration of Conformity with Technical Regulations or Certificate of Conformity with Technical Regulations; Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 103
  • 104.  GOST R Declaration of Conformity or GOST R Certificate of Conformity.For some measuring instruments the so-called Pattern Approval Certificates need to be obtained.These are issued by a state authority called Rosstandart based on results of tests performed byaccredited State Scientific Metrological Centers.When the product is liable to sanitary and epidemiological regulations of the Customs Union,Certificate of State Registration may be required. For products subject to veterinary andphitosanitary supervision there may be a requirement to obtain Veterinary Certificate, PhitosanitaryCeritificate and/or Import Quarantine Permit.Some other documents may be required at the stage of commissioning for industrial equipment,such as Technical Passports or Permits to Use.4.6.4. When are Russian permissive documents required?Mandatory verification of conformity is conducted before the product has been launched to theRussian market. This concerns both locally produced and imported goods.Approving documents are required at different stages of doing business in Russia, such as: Concluding a sales deal; Customs clearance at the Russian border; Advertising and PR activities; Placing a product in retail; Commissioning of equipment.4.6.5. What labelling/marking requirements are there in Russia?According to the Russian Law No.2300-I “About Consumer Rights protection” dated 07.02.1992, allconsumer goods, both food and non-food, exported to and distributed in Russia require Russianlanguage labelling and the sale of imported products without consumer information in Russianlanguage is illegal.Russian labelling has to cover the following items: Name of a product; Country of origin; Name and address of manufacturer or any other contact information for consumers; How and where the product is to be used; The main characteristics and description of the product; Safety requirements; Conformity assurance and licensing information (relevant Mark of Conformity); Expiration date, if applicable ; Other information required by the applicable Technical Regulations.This information can be contained on a box, label, or any other appropriate material concerning theproduct such as technical brochures or manuals. Doing business in St. Petersburg104 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 105. The following marks demonstrate to the consumer the product’s compliance to the applicablemandatory requirements:Mark Symbol DefinitionGOST R Mark of The product is compliant with GOST R standardsConformityTR Mark of The product is compliant with Russian TechnicalConformity Regulations (TR)CU TR Mark of The product is compliant with Customs Union (CU)Conformity Technical Regulations (TR)4.6.6. How long does it take to get certified?The conformity verification process in Russia can take from a few hours up to several months. Itsduration depends on the following factors: The type of certificate you opt for (e.g. verification process for a 3-year validity Certificate of Conformity for serial production normally takes longer than a certificate valid for just one shipment); The need to make tests, number and complexity of the tests; Number of certificates you have to obtain prior to the targeted permissive document; Your ability to quickly collect the internal documents needed for verification; Time spent upon translation of required documents into Russian language; Your previous experience with Russian certification (i.e. obtaining a permissive document for the very first time commonly lasts longer than subsequent similar applications).As a result, you are able to speed up the process by means of manipulating the above-mentionedfactors.4.6.7. Which international certificates are accepted in Russia?Many procedures in the conformity assurance system of Russia and the Customs Union were copiedfrom the West (especially the EU), and foreign manufacturers face similar requirements foroperation in their local market. Still, there are some discrepancies.The reason for that partly lies in the Russian specific climate conditions, partly in the historicalbackground (many of the Russian standards have not been re-viewed since the Soviet times). Quiteoften, verification methods considerably differ from those applied in the Western Europe or the US.To cite some examples: in Russia, testing of toys includes verification of formaldehyde and phenolcontent, although not checked in the EU; transformers have to be tested at -40°C temperature, i.e.in twice as cold conditions as in Europe; steel pipes might be subject to 100% testing as opposed to10-20% sampling in Europe.Therefore, even if your products are well-known throughout the world and recognized as safe in theEU or any other country, you still have to prove that they comply with Russian/Customs Union Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 105
  • 106. requirements in accordance with locally accepted methodology. However, availability of aninternational certificate might facilitate the procedure of obtaining the appropriate Russianapprovals.4.6.8. Does it matter whether exporter or importer handles product conformity assurance?When negotiating sales contracts with Russian partners, exporters need to raise issues related toconformity assurance expenses, namely which party bears the costs, procedures andresponsibilities. In some cases, exporter and importer alike are able to carry out certification andobtain proper permissive documents. However, a declaration of conformity can be signed only by aRussian legal entity. For an international company it means that the declaration of conformity canbe signed either by their Russian distributor representing the foreign manufacturer on the basis of aformal contract for conformity assurance purposes, or by their Russian agent, or by their subsidiarylocated in Russia.Exporters should bear in mind that in case the certificate or declaration is issued under the name oftheir importer, the latter will become their exclusive distributor in the Russian market during thewhole validity term of the certificate. Therefore, those exporters who wish to keep control over theirRussian marketing strategy and preserve their independence from any local partner arerecommended to take care of their products’ conformity assurance on their own.4.6.9. How much would it cost to get certified?The cost for conformity verification services is very much dependable on such factors as complexityof a product, complexity of manufacturing process and type of required permissive document.Relevant expenses would usually consist of the following elements: Cost of samples selected for destructive tests; Expenses for packing, storage, freight handling and transportation of samples to the testing laboratory; Cost of product tests in accredited laboratory; Audit expenses, including travel costs; Translation services; Labor expenses of the certification body (man-days * daily rate) over processing of your inquiry, verification of documents, issuance of certificate; Overheads.You may be offered discounts in case you wish to obtain a relatively large number of certificates or ifyou are applying for the same service repeatedly. Such cost reduction is due to decreasingoverheads, number of required samples and number of tests.4.6.10. How to make the certification cost-effective?To make the certification process cost-effective, we recommend correlating the type of certificatewith anticipated volume of exports and range of exported goods. Thus, if you are planning toregularly ship your goods to Russia, and their range is quite wide, it might be wiser to opt for a serialcertificate valid for a few years. Although it will require higher single payment versus shipmentcertification, in the long-term such scheme can save both your time and money. In fact, wholeproduct line will have to be sampled and tested in the framework of a shipment certification,whereas only a limited number of samples will be tested for serial certification since productionaudit will certify conformity of the rest.Be prepared that the certification cost might appear not proportional versus cost of the product tobe certified. Therefore, if your company intends to take part in a tender for a project in Russia, the Doing business in St. Petersburg106 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 107. advice is to plan ahead and ask preliminary quotation for certification from a professional body so asto include the cost to your bidding. Otherwise, there is the risk that once the project wins the bid nottaking into account real certification cost, your anticipated profit will not be sufficient to cover actualexpenses. In some cases, your certification body might suggest slight modifications of initial designfor a machine or industrial unit in order to lower your certification expenses.4.6.11. Whom to address for Russian conformity assurance?Any approving document is to be issued by an accredited body. There are about 1500 certificationbodies and 3550 testing facilities accredited within GOST R system, not counting other certificationsystems. In July 2010, the Single Register of Certification Bodies and Testing Laboratories of theEurasian Economic Community (EurAsEC) Customs Union was established. Only organizationsincluded in this Register (1010 certification bodies and 2114 test laboratories by the end of 2011) areallowed to issue Certificates of Conformity and Declarations of Conformity recognized in threemember countries of EurAsEC, namely Russia, Belarus and Kazakhstan.Often, certification bodies focus on a specific type of approvals or on a specific industry (e.g. textileor telecom). It is reflected in their accreditation scope. Only the largest ones provide integratedservices assisting in getting a range of approvals in one place.While selecting a certification body, request for the accreditation certificate and for the referencelist, consider whether the future partner is experienced in the kinds of approvals you need and ableto guide you in the Russian regulatory environment. Unprofessional or fraudulent service mightcause headache in the future such as arrest of the shipment at the customs border or costly delays indelivery schedule. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 107
  • 108. 4.7. Intellectual property rights and franchising Information for the current chapter was developed and kindly provided by BEITEN BURKHARDT4.7.1. General information on the legal regulation of intellectual property4.7.1.1. Regulation of intellectual property in RussiaThe institution of intellectual property in Russia is governed by Part 4 of the Civil Code of the RussianFederation (hereinafter the “Civil Code”), which entered into force on January 1, 2008, replacing amultitude of specialized laws and subordinate legislation.A foreign legal entity or individual may exercise and seek protection for IP rights in Russia, providedthat the relevant legal requirements are satisfied. Russia is a party to numerous internationaltreaties on IP rights, including: the Patent Cooperation Treaty; the Paris Convention for the Protection of Industrial Property; the Madrid Agreement on the International Registration of Trademarks; the Protocol to the Madrid Agreement; the Universal Copyright Convention (UCC); the Berne Convention for Protection of Literary and Artistic Works (Berne Convention); the Convention for the Protection of Producers of Phonograms against Unauthorized Duplication of their Phonograms (Geneva Convention); the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations (Rome Convention).4.7.1.2. Types of protected objectsPart 4 of the Civil Code uses the following classification of intellectual properties and equivalentmeans of individualization: copyright (literary, scientific, and artistic works, including computer programs and databases); rights related to copyright (performance right, recording right, on-air and cable broadcast right, right of a database producer, publisher’s right to a scientific, literary, or artistic work); patent right (patents for inventions, industrial designs, and utility models); right to the results of selective breeding; right to semiconductor topographies; right to a production secret (know-how); rights to means of individualization of participants of legal entities, goods, works, services, and enterprises (corporate name, trademark, denomination of origin of goods, brand); right to use intellectual properties as part of an integrated process.4.7.1.3. Transactions with intellectual propertyA system of agreements for administration of IP rights is unified for all types of protected objectsand includes the following types of agreements: agreement on alienation of the exclusive right; license agreement (exclusive or non-exclusive license).Under an agreement on alienation of the exclusive right to intellectual property, the right holdertransfers to the acquirer its exclusive right to the respective object. That being said, the original rightholder loses the right to independently use the object. Doing business in St. Petersburg108 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 109. Agreement on alienation of the exclusive right shall be executed in a written form. If intellectualproperty is subject to state registration, respective agreement shall also be registered with theFederal Service for Intellectual Property, Patents, and Trademarks (hereinafter, “Rospatent”) underpain of invalidity.Pursuant to a license agreement, the owner of the exclusive right to IP (licensor) grants the licenseethe right to use such IP within the limits established by the agreement, with or without indication ofthe territory, in which use is permitted.The licensee under a license agreement may use respective IP only within those scope of rights andmeans of use that are stipulated by agreement. The right to use IP, which is not directly specified inthe license agreement, is not deemed to be granted to the licensee.A license agreement shall be executed in a written form and, if intellectual property is subject tocompulsory state registration, be registered with Rospatent under pain of invalidity.License agreements are divided into two types: ordinary (non-exclusive) license: the licensee is granted the right to use IP, and the licensor reserves the right to issue licenses to other parties; exclusive license: the licensee is granted the right to use the trademark, and the licensor does not reserve the right to issue licenses to other parties.The licensee may grant a third party the right to use IP (a sublicense agreement) only with thelicensor’s written consent.Under a sublicense agreement, the sublicensee may be granted rights to use IP only to the extent ofsuch rights and means of use that are contemplated by the license agreement for the licensee.In all other respects, a sublicense agreement is subject to the same rules as a license agreement.4.7.2. Trademarks and service marksPart 4 of the Civil Code defines a trademark as “a symbol serving to individualize the goods of legalentities or individual entrepreneurs” and a service mark as “a symbol serving to individualize theworks performed by legal entities or individual entrepreneurs or the services rendered by them”.Trademarks may be represented by words, pictures, three-dimensional signs and other designations(or combinations thereof). The Civil Code does not provide for the exhaustive list of types oftrademarks and allows for the existence of other types of trademarks, provided they meet thecriteria for registration stipulated by law. The criteria for registration of a symbol as a trademark are:distinctiveness (possibility to identify products (services) among similar ones) and novelty(trademark shall not be identical or confusingly similar to existing means of individualization).Legal protection of a trademark in the Russian Federation is provided on the basis of its stateregistration in accordance with the procedure established by law or under international treaties ofthe Russian Federation. The registration of symbols as trademarks in Russia is performed byRospatent.The owner of a trademark acquires the exclusive right to use the trademark only for those goods andservices, for which the trademark has been registered. Trademarks are registered with the use of theInternational Classification of Goods and Services, in accordance with which the applicant mayselect the desired classes of goods and services.The initial term of the trademark registration is equal to 10 years, at the end of which the trademarkowner may renew the registration an unlimited number of times.The owner of a registered trademark is granted the exclusive right to use it within the RussianFederation. Without the owner’s consent, no one is entitled to use in civil turnover the trademark Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 109
  • 110. itself or an identical or confusingly similar trademark. The rightholder is able to use the symbol ®notifying of that respective trademark is protected on the territory of Russia.4.7.3. Copyright and related rightsScientific, literary, and artistic works that are the result of creative activity and exist in someobjective form are protected in Russia as copyright objects. The key criteria for granting legalprotection are as follows: presence of a creative component in the work; objective form of expression of the work, e.g., written or oral form (in the form of a public utterance, public performance and other similar form), in the form of an image, audio or video recording, in three-dimensional form.At the same time, a work is protected by copyright irrespective of its artistic value, purpose, andmeans of expression.Part 4 of the Civil Code contains an open-ended list of the types of works that are protected bycopyright (literary works, musical works, audiovisual works, etc.). Copyright objects also includecomputer programs (protected as literary works), derivative works (translations, stagings, etc.) andcomposite works (including databases, anthologies, encyclopedias, etc.).Official documents and their official translations, state symbols and marks, folklore works andinformative reports on events and facts are not protected as copyright objects.Unlike trademarks and properties protected by a patent, copyright protection is granted by virtue ofthe very fact of creation of the work as of the moment when the work takes on an objective form.No additional formalities must be observed to obtain the right to protection.Use of the symbol of copyright protection – “©” – in conjunction with the name of the author andthe year of creation of the work is not a condition for granting legal protection, but it may serve as anotice that the work is protected.Programs and databases can be registered with Rospatent. Such registration procedure is voluntaryand does not give rise to rights to the computer programs or databases, but rather it is intended tofacilitate proving authorship and time of creation. At the same time, agreements on alienation ofthe exclusive right to registered programs and databases must also be registered with Rospatent.In accordance with the traditions of the countries of continental Europe, it is customary in Russiancopyright law to divide copyrights into personal non-property and exclusive (property) rights.Personal non-property rights (e.g., right of authorship, right of integrity in a work, right ofwithdrawal) are closely related to the author’s identity and, therefore, cannot be transferred to thirdparties. An exclusive (property) right (e.g., distribution of a work, public performance of a work, on-air broadcasting), on the contrary, can be alienated by the author in favor of third parties.As a general rule, copyright protection lasts for the author’s lifetime plus 70 years after his/herdeath. Upon the expiration of a copyright, the copyright object is considered to be in the publicdomain and may be freely used by all interested parties.The exclusive right of a database producer originates as of the completion of its creation and iseffective for 15 years. With every update of the database, the effective term of the producersexclusive right is renewed.4.7.4. Industrial propertyAnother institution in Russian intellectual property law is patent law, in the context of whichprotection is granted to technical achievements and new industrial developments. In contrast tocopyright law, which protects the form of an authors works, including scientific and artistic works, Doing business in St. Petersburg110 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 111. patent law aims to protect the essence and content of technical industrial solutions. Part 4 of theCivil Code identifies inventions, utility models, and industrial designs as patentable objects.A technical solution in any area relating to a product or method is protected as an invention. Thefollowing may be patented as inventions relating to a product: a device; a substance; a microorganism strain; a plant or animal cell culture.Processes acting on a tangible object with material resources are protected as method-relatedinventions. Exclusive rights to a method are complemented by rights to the product directlymanufactured by the patented method (indirect protection), with the new product being deemedmanufactured by the patented method, unless proven otherwise.An invention is granted legal protection if it meets the criteria of novelty, level of invention, andindustrial applicability.A utility model is a technical solution relating to a device. In essence, a utility model is similar to aninvention, but differs in that the level of invention requirement does not apply to it. The criteria forregistration of a utility model are only novelty and industrial applicability.An artistic design solution for an industrial or artisanal product that defines its outward appearanceis protected as an industrial design. This category is largely similar to shape trademarks, whichmeans that the author of the intellectual property is able to choose between these two types ofprotection.Industrial designs may be either three-dimensional or flat, as well as being a combination of two-and three-dimensional elements. An industrial design must meet the criteria of novelty andoriginality.The following may not be covered by patent rights: methods of cloning a human being; methods of modifying the genetic continuity of cells of human embryos; use of human embryos for industrial and commercial purposes; other solutions contradicting public interests or humane and moral principles.Legal protection of inventions, utility models, and industrial designs is provided on the basis ofpatents issued by Rospatent. A decision to register an invention, industrial design, or utility model istaken based on an examination of the application. Number of stages of examination and contentthereof depends of type of industrial property being registered.A patent certifies the exclusive right of the party, to which the patent has been issued, to use thepatented object. The exclusive right of a patent holder means that third parties are not entitled touse the patented object without the patent holder’s consent.The effect of a patent is limited in time and space.The terms of patents are as follows: a patent for an invention – 20 years from the date of submission of the application; a patent for a utility model – 10 years, with right of renewal for 3 years; a patent for an industrial design – 15 years, with right of renewal for 5 years.The exclusive right from a patent issued by Rospatent is valid only within the Russian Federation.Each year, the patent holder must pay the state fee to maintain the patent in force. If the fee has notbeen paid on time, the patent is canceled, although it may be reinstated within three years after the Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 111
  • 112. expiration of the deadline for paying the fee. At the same time, a party that has started using thepatented object during the period between the cancelation of the patent and its reinstatementretains the right to continue using it free of charge.4.7.5. Right to a production secret (know-how)Relationships arising in connection with the creation and use of production secrets are governed byPart 4 of the Civil Code (Chapter 75). In addition, the articles of Federal Law No.98-FZ of July 29,2004 “On Trade Secrets” governing the procedure for establishing trade secret protection remain inforce.Production secrets are understood as information of any kind, including information aboutintellectual properties in the scientific and technical sphere and information on methods ofperforming professional activities, that has current or potential commercial value by virtue of beingunknown to third parties, that is not freely accessible to third parties by legal means, and for whichthe owner of such information has established trade secret protection.Relationships relating to the establishment, alteration, and cancelation of trade secret protectionare governed by the Federal Law “On Trade Secrets”. Trade secret protection is deemed establishedafter the following measures have been taken by the owner of the information: compiling a list of the information that constitutes a trade secret; limiting access to the information that constitutes a trade secret by implementing procedures for handling the information and monitoring the compliance with such procedures; listing the individuals receiving access to information that constitutes a trade secret and/or the parties to which such information has been disclosed or transferred; regulating relationships with regard to the use of information that constitutes a trade secret by employees on the basis of employment contracts and by contracting parties on the basis of civil law contracts; marking tangible media (documents) containing information that constitutes a trade secret with the words “Trade Secret” and the name of the owner of this information.The law rules out the necessity of registering a production secret with state authorities. Therefore,the exclusive right to a production secret arises for the right holder as of the establishment of tradesecret protection.The exclusive right to a production secret may also arise directly at the time of obtaining theinformation, if the obtained information qualifies as information for which trade secret protectionhas already been implemented.The law allows for the possibility of several right holders possessing the exclusive right to one andthe same production secret, if each of the right holders has obtained the information constitutingsuch production secret independently of the others. Honesty and independence in obtaining aproduction secret means that the party that has become a new owner of the production secretobtained the respective information as a result of entirely independent intellectual activities withoutthe knowledge and use of information belonging to other owners of the production secret.The exclusive right to a production secret remains valid as long as the confidentiality of theinformation constituting such secret is maintained. As soon as the respective information is nolonger confidential, the exclusive right of all right holders to the production secret shall lapse.4.7.6. FranchisingAccording to the Civil Code, under a franchise agreement (Russian name "commercial concessionagreement" [договор коммерческой концессии]) the franchisor (rightholder) grants to thefranchisee, for a consideration, a set of territorially exclusive rights, including the right to conduct Doing business in St. Petersburg112 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 113. business using the franchisors trademark or service mark. A franchise agreement may also apply toother IP rights, such as the right to use a trade name or the right of access to trade secrets.As every franchise in Russia involves a trademark, the respective trademark must be valid in Russiawhen the franchise agreement is submitted for registration. Such validity can be based either onRussian trademark registration or on World Intellectual Property Organization trademarkregistration with Russia as a designated registrant country.A franchise agreement shall be registered with Rospatent. Equally, no amendment to or earlytermination of a franchise agreement shall be valid until registration has been performed.A franchise agreement may be concluded for the term agreed by the parties thereto or for anindefinite term. In the latter case, each party is able to unilaterally terminate the agreement bysending a written notice at least six months prior to termination.Provided that the franchisee duly performed its obligations while the franchise agreement was ineffect, once the franchise agreement expires, the franchisee has the statutory right of first refusal torenew the agreement for a new term. However, in this case the franchisor may change the terms, onwhich the agreement is renewed, in accordance with current market demands.A franchisor and franchisee are jointly and severally liable for defects in goods and services producedunder the franchise agreement. The franchisor is secondarily liable for defects in goods provided tothe franchisee pursuant to the franchise agreement, even if the franchisor has no direct control overthe franchisees actions.The parties to a franchise agreement may agree upon restrictions of their rights thereunder. Inparticular, such agreement may provide for: obligation of the franchisor not to grant to third parties the same exclusive rights for their use on the franchisees territory or to refrain from own similar activities in such territory; obligation of the franchisee not to compete with the franchisor on the territory covered by the franchise agreement; refusal of the franchisee from entering into franchise agreements with regard to similar exclusive rights with the franchisors competitors; obligation of the franchisee to distribute goods (perform works, render services) at prices set by the franchisor as well as obligation of the franchisee not to distribute similar goods (works, services) with the use of trademarks or trade names of other holders; obligation of the franchisee to distribute goods (perform works, render services) only within the agreed territory; obligation of the franchisee to negotiate places of location of commercial premises used in the course of exercising of exclusive rights as well as their external and internal design.It should be noted that franchise agreements in terms of the Federal Law "On Protection ofCompetition" are deemed to be so-called vertical agreements, which are not subject to the most ofrestrictions relating to concerted practices established by the said Federal Law. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 113
  • 114. 4.8. Special economic zones (“SEZ”) in St. Petersburg Information for the current chapter was developed and kindly provided by DLA PiperThe SEZ Law31 states that an SEZ is a Russian territory, which benefits from a preferential regime forconducting business on that territory, thereby encouraging investment in the territory. SEZs areselected by the Russian Government on a tender basis from proposals submitted by the regionalauthorities. The term for which a territory will benefit from a SEZ status depends upon the type ofbusiness activity for which the SEZ status was granted; this may be for up to 20 years for the high-tech industry and health and recreation industry or up to 49 years in respect of investment intransport infrastructure.There are various types of SEZ in Russia: High Technology Incubation Zones ("TIZs"); Industrial Production Zones ("IPZs"); Zone of Tourism and Recreation ("ZTR"); Port Zones ("PZs").In addition to the SEZs considered above, other legislation has been enacted with respect to specificfree economic zones. An example of such legislation is the Federal Law On the Special EconomicZone in the Kaliningrad Region of 10 January 2006 and the Federal Law On the Special Economic Zonein the Magadan Region of 31 May, 199932.4.8.1. TIZ in St. PetersburgIn general, existing TIZs in Russia are located in the Moscow region (Dubna (nuclear technology,energy saving, aerospace and civil engineering) and Zelenograd (microelectronics,nanotechnologies and medical studies), Tomsk (new materials, micro- and nanoelectronics) and St.Petersburg (computer programs, databases, complex equipment, medicine).The territory of the TIZ "St. Petersburg" will benefit from SEZ status until 2025. According to theSEZ Law, this term cannot be extended.The TIZ "St. Petersburg" consists of two platforms which are “Noidorf” and “Novo-Orlovsky”.4.8.1.1. General requirements for the resident of the TIZ in St. PetersburgThe benefits of the TIZ only apply to foreign investors upon the creation of a Russian subsidiaryregistered on the territory of the TIZ "St. Petersburg", as only Russian legal entities may make anapplication to become a TIZ resident. Russian legal entities interested in participating in the TIZshould make an application to obtain the status of a TIZ resident. The application should besupported by a business plan.A special SEZ Council decides on whether the applicant qualifies as a TIZ resident based on a scoringsystem that takes into account, amongst other things, the prior expertise of the applicant or itsfounder in the relevant industry, the investment recoupment period envisaged, competition in therelevant market, etc.The qualifying applicant enters into an investment agreement with the Russian ministry. The TIZresident is entitled to perform innovation activities inside the TIZ only under the conditionsenvisaged in such agreement.31 Federal Law On Special Economic Zones in the Russian Federation dated 22 July 2005.32 More information on SEZ development can be found at www.rosez.ru. Doing business in St. Petersburg114 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 115. 4.8.1.2. Tax incentives for the TIZ residents in St. PetersburgTIZ residents in St. Petersburg benefit from a number of tax concessions with regard to property tax,land tax, corporate profits tax and other taxes.Profits tax rate paid to the budget of St. Petersburg is reduced from 18% to 13.5% for the TIZresidents in St. Petersburg. The reduced tax rate is applicable during the period when the TIZ "St.Petersburg" exists (i.e. till 2025).The TIZ residents in St. Petersburg enjoy full exemption from property tax in respect to the propertylocated inside the TIZ which is used inside of the TIZ and accounted for on the balance of the TIZresident.The TIZ residents are exempt from the transport tax for a period of 5 years starting from the date ofthe transport vehicle registration in St. Petersburg. The said exemption does not apply in relation towater and air transport vehicles.The TIZ residents in St. Petersburg also benefit from an exemption from the land tax for the periodof 5 years starting from the registration of the property rights for that land plot.Unlike other SEZ residents, the TIZ residents also benefit from a low rate of social insurancecontribution rates (14% (till 2017) and 28% (starting from 2019) compared to the general rate of34%).4.8.1.3. Other tax and customs incentives for the TIZ residents in St. PetersburgIn addition to the above tax benefits, the customs regime of the free economic zone functions onthe territory of TIZ "St. Petersburg". The said customs regime envisages an exemption from customsVAT, customs duties and non-tariff regulation in respect to foreign goods (equipment, rawmaterials, components, construction materials) imported to the territory of the TIZ. Goodsproduced within the Customs Union (Russia, Kazakhstan and Belarus) that are imported into TIZ arealso exempt from export duties, any exclusions and limitations.Until the 1st of January, 2017 TIZ residents (registered before 2012) are allowed to import theirproducts, which were manufactured within the TIZ using imported raw materials, into the territoryof the Customs Union free from duties and taxes conditional upon the sufficient processing of thegoods.The TIZ residents have a right to apply accelerated depreciation in relation to their own fixed assetsby setting a multiplier (maximum of 2).R&D costs (including those that were not successful) may be deducted in the tax (accounting) periodwhen they were actually incurred without any limitation in size.The tax position of TIZ residents cannot be worsened by any Russian tax laws, including regional taxlaws or any tax laws of the municipal districts during the term of the investment agreement.4.8.1.4. Other benefits for TIZ residents in St. PetersburgApart from tax incentives St. Petersburg is highly attractive for the investors because of the otherbenefits it may offer to investors. Specifically, the Government of St. Petersburg supports investorsby providing the state guarantees of St. Petersburg, providing tax deferrals and low land rent rates.The TIZ territory in St. Petersburg contains all the necessary infrastructure.The TIZ residents who have built any real estate on the rented land plot have a right to buy the landplot lying under the real estate at discounted rates. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 115
  • 116. 4.9. Public private partnerships and infrastructure development Information for the current chapter was developed and kindly provided by DLA PiperA public private partnership (hereinafter - "PPP") is a cooperation of a public authority and privateinvestor through a long-term agreement in areas of services traditionally provided by the publicsector. PPPs are aimed at increasing the quality of the public services/infrastructure and efficiency ofprivate gains through the combination of public and private financial and management instruments.As the need for the improvement of public infrastructure and services in Russia is enormous, publicauthorities show a constant growth of interest in PPPs.Unlike many European countries where PPP legislation is well established and numerous PPPprojects have been successfully implemented, the Russian PPP legislation is still evolving. Inpractice, the lack of experience implies the intention of the public authorities to have a greatercontrol over the PPP projects, than is usually expected in Europe. To reap the full benefits of PPP(particularly, through increasing foreign investment) the authorities need to be prepared torelinquish greater control of the procured public services/infrastructure to the private sector.A series of high-profile PPPs have already been launched in Moscow, St. Petersburg and otherregions of Russia. The largest number of projects carried out relate to transport infrastructure (e.g.the Western High Speed Diameter Motorway and Pulkovo Airport in St. Petersburg, the Roadinterchange between Moscow ring road and High speed motorway "M-1: Belarus" in Moscow).Within the last few years more and more PPP projects have been launched in the following sectors:water treatment (e.g. the Northern Water Treatment Plant in St. Petersburg, the Water TreatmentStation in Rostov-on-Don), waste treatment (the Waste treatment facility in St. Petersburg),education (the construction and operation of buildings for educational purposes in the Pushkinskiydistrict of St. Petersburg).4.9.1. Legal FrameworkPPP projects that involve the federal authorities are implemented on the basis of the Federal LawNo FZ-115 On Concession Agreements of 21 July 2005 as amended ("Concession Law"), togetherwith a series of model concession agreements for different types of infrastructure.Regional and local PPP projects may also be carried out on the grounds of the Concession Law orspecial regional laws on PPPs that usually provide more flexibility and comfort to investors. Regionallaws on PPPs are adopted in the majority of the regions of Russia. In particular, the Law of St.Petersburg No 627-100 On the Participation of St. Petersburg in Public Private Partnerships of 25December 2006 ("St. Petersburg PPP Law") was among the first regional laws on PPP, and isconsidered to be the most effective one.4.9.2. Concession LawThe Concession Law applies to thirteen types of infrastructure including, amongst others,motorways, roads, railways, the underground, pipelines, sea ports, airports, communal services, andvarious cultural, sporting and tourism facilities.The Concession Law includes provisions on: entities involved in the concession granting process; concession facilities; tender and selection procedure; concession agreements; and Doing business in St. Petersburg116 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 117.  certain guarantees for the private entities and public bodies.Generally, the Concession Law is flexible and does not impose rules on how relations between thepublic and private bodies will be conducted during the concession period, these relations are to begoverned by the detail of the concession agreement itself once concluded. However, the ConcessionLaw contains numerous shortcomings, the main ones are summarized below: Ownership of the Facility The Concession Law only relates to the PPP projects constructed as Build-Operate-Transfer ("BOT") and Rehabilitate-Operate-Transfer ("ROT") models. Under these models, the private entity builds/rehabilitates the facility and upon completion transfers the ownership of the facility to the public body. Thereafter, the private entity takes over the operation and maintenance of the facility under a lease back from the public body for the contract period. Other PPP models that incorporate the ownership of the real estate object by the private entity (for example, BOOT33) are not provided for under the Concession Law. Security As a general rule the Concession Law provides against the possibility of a concessionaire to pledge rights under the concession agreement or to assign the rights during the construction stage of a concession. Based on the practical needs of the investors and financing institutions an exception to this rule was introduced with regard to the concessions on social facilities and amenities (such as water and waste treatment plants, energy supply facilities, street lightning and others). The concessionaire is entitled to pledge his/her rights under the concession agreement to a lender, who provides financing for the fulfillment of the concessionaires obligations under the concession agreement. In compliance with the Concession Law the rights under the concession agreement may be pledged only to a single lender (independent of the existence of any other financing parties). The lender, concessionaire, and the grantor of the concession enter into a direct agreement stipulating the rights of each party in case the concessionaire does not meet his/her obligations under the financial or concession agreement.Alternative security instruments are available in Russia, but the aforementioned restrictions are asignificant hindrance when it comes to structuring the security package and finding lenders.4.9.3. Negotiation of the contractConcession agreements are granted through the tender procedure which is defined in the tenderdocumentation. Usually the tender documentation contains a draft of the concession contract thatis supposed to be executed with the winner of the tender. According to the Law on Concessionswithin 5 days from the date of announcement of the winner of the tender the organizer of thetender provides the winner of the tender with the concession contract that shall be signed by thewinner of the tender within a certain time specified in the tender documentation. The Law onConcessions does not provide for the possibility for the winner of the tender to negotiate changes inthe concession agreement. With reference to the above, even if bidders are requested to present asa part of their bids a mark-up of a concession agreement, the winner of the tender may be stillbound to the published version of the concession contract and exposed to potential liability ifunwilling to sign it in its published form with very limited carve-outs.33 In a Build-Own-Operate-Transfer ("BOOT") project the private entity carries out the capital investment in construction ofthe facility, which it then owns and operates for a period specified in the contract. Following the expiration of that periodthe facility is returned to the public body. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 117
  • 118. 4.9.4. St. Petersburg PPP LawThe St. Petersburg PPP Law was enacted in response to the shortcomings of the Concession Lawand is aimed at better facilitating the St. Petersburg administrations pipeline of PPP projects, whichis regarded as one of the most advanced in Russia. The principal features of the St. Petersburg PPPLaw, which improve on the Concession Law, are as follows. There is no restriction on the use of PPP models under which the private entity retains ownership of the facility. The St. Petersburg PPP Law directly establishes 8 forms of PPP, among which are Build-Own- Operate-Transfer ("BOOT"), Build-Own-Operate ("BOO"), Rehabilitate-Own-Operate-Transfer ("ROOT") and others. In addition to the greater variety of forms of PPP directly stipulated, the St. Petersburg PPP Law entitles the Government of St. Petersburg to establish other forms of PPP if required. There is no legal prohibition to pledge the projects assets, or to pledge or assign the rights under the PPP agreement as part of the security package. Usually the conditions under which the private partner is entitled to pledge/assign its rights under the PPP agreement, as well as the rights to the project assets, are stipulated in the project agreement and lenders direct agreement. These conditions underlie negotiations between the public authority, the private partner, and the financing organizations. There is greater flexibility for the private entity to negotiate and mark-up the PPP agreement, provided as a part of the tender documentation. The St. Petersburg PPP Law directly provides for negotiations between the city and the winner of the tender to discuss possible amendments to the draft of the PPP agreement. Limitation of possible amendments shall be established in the tender documentation, and in any case shall not change the provisions of the bid of the winner of the tender. The law states that in the case where the tender documentation does not provide for a larger period of time, negotiations shall be commenced and the PPP agreement signed within 20 days. In practice the period for negotiations and the execution of the PPP agreement, as usually established in the tender documentation, is 6 months.4.9.5. Other Issues/Risks in PPP fieldNotwithstanding the notable limitations of the Concession Law, there are additional issues thatdiffer from project to project. The most common ones that shall be considered by an investor arelisted below: Market volatility and currency risk; The risk is usually taken by the investor. Political risk and state intervention; According to the legislation and general practice, the authorities usually undertake the obligation to indemnify the investor in case such a risk arises. Provisions of laws governing budget, tax, licensing and antimonopoly regulation; These provisions usually imply additional obligations on the investor in the course of the implementation of the PPP project. Geographical concentration of major projects; The potentially negative attitude of consumers being charged for services that used to be free, for example through the introduction of toll roads; Dispute resolution procedure. Russian policy favors the jurisdiction of the Russian courts for the resolution of contractual disputes. However, for various reasons, most international PPP participants would prefer dispute resolution to be conducted through recognized international arbitration institutions. Doing business in St. Petersburg118 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 119. Also, it may be noted that in a number of current projects the public body did opt for internationally recognized arbitration.4.9.6. PPP Finance InstitutionsIn November 2005 the regulations on the State Investment Fund ("SIF") were adopted by theRussian government, signalling another move towards PPP. The SIF is intended to be one of thefederal primary PPP funding sources and to act as a catalyst in attracting private investment. Theplanned volume of the SIF in 2012 exceeds RUB 65 billion (which is approx. USD 2.1 billion). Themaximum amount of investment to be made from the SIF is limited with the amount established inthe federal budget for the corresponding year and shall not exceed 75 per cent of the project capitalcosts for federal projects, and 50 per cent of the project capital costs for regional projects.To qualify for SIF support, an investment project must: be performed through concessions, or in the sectors of transport, energy, or engineering infrastructure; have a value in excess of RUB 5 billion (which is approx. USD 166 million) for federal projects, and RUB 500 million (which is approx. USD 16.6 million) for regional and local projects; comply with public sector priorities; generate social benefits, and breakeven.In addition to the above, regional investment project must also be financed from the regionalbudget to an amount not less than that estimated for the regional/municipal co-financing ofinvestment projects by the Ministry of Regional Development.The investor, qualifying for SIF support, shall prove that the implementation of the project isimpossible without SIF investments.In May 2007, the Federal Law No FZ-82 On the Russian Bank of Development of 17 May 2007 setrules and principles of the activities of Vnesheconombank ("VEB"). VEB is a state owned bankinginstitution tasked with promoting Russian infrastructure and in particular, with supporting anddeveloping PPP projects. VEB is currently considered as one of the institutions that will play a keyrole in the further development of Russian PPPs. In this regard a PPP task force has recently beencreated within VEB to study, standardize and promote PPP practices in Russia.The European Bank for Reconstruction and Development and VEB have agreed to explore thepossibility of co-financing the projects in certain areas and in February 2008 a memorandum ofunderstanding in this regard was signed. The priority sectors under the agreed arrangementsinclude transport infrastructure, energy and municipal services and those with significantenvironmental and energy efficiency potential. With the help of other interested organizations, thetwo institutions will also consider setting up a unit to help manage the project preparation processfor PPPs in infrastructure, a move that could be extremely beneficial in attracting investors.In August 2009, VEB signed a formal agreement with a private infrastructure fund to become thefunds joint manager and cornerstone investor with a commitment of USD 200 million. Otherinvestors in the fund include the IFC (USD 100 million), the EBRD (USD 100 million) and the Kazakhdevelopment institution Kazyna Capital Management (USD 30 million) as well as private sectorinvestors. The fund expects to invest in PPP projects such as Pulkovo Airport, and the Moscow to St.Petersburg toll road. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 119
  • 120. 4.10. Obtaining rights to state-owned land in St. Petersburg Information for the current chapter was developed and kindly provided by DLA PiperAn entity interested in receiving rights to state-owned land in St. Petersburg (hereinafter - theEntity) may acquire the rights to the land (a) owned by the Russian Federation (hereinafter - theFederal land) and (b) owned by St. Petersburg or the land not delimited between St. Petersburg andthe Russian Federation (hereinafter - the City land).The rights to the land plots from the state-owned land can be granted: at a tender, and without a tender.The choice of the procedure depends on the following principal issues: Type of rights o Subsequent to the results of a tender, the person can be granted either ownership or lease rights to the land depending on what has been put up to tender. o If the land plot is allocated without a tender then only the lease rights to the land plot can be acquired unless otherwise stipulated by an international agreement ratified by the Russian Federation. In both the cases when the land plot is granted for lease, after the commissioning of the building and the state registration of the title of ownership to it, the Entity may acquire the long-term lease rights or the title of ownership to the land plot under the building erected. Initiative o The tender is initiated by the authority. The choice of the land plot, its formation, and the preparation of the documentation is done by the competent authorities and no action is required from the Entity before applying for the participation in a tender. o If the land plot is granted without a tender, the procedure is initiated by the Entity and the land plot is chosen during the prior approval of the allocation of the object as a part of the procedure for the allocation of the land plot. Determination of the price or the amount of the lease payment o The price or amount of the lease payment in the contracts is concluded as a result of a tender and is the highest price which has been proposed during the conduct of the tender but not less than the initial price.34 o The amount of the lease payment, if the land plot is allocated without a tender, is determined on the basis of the valuation report prepared during the procedure of the allocation. We would like to draw your attention to the fact that the lease payment in the contracts concluded as a result of the allocation of the land plot without a tender is regarded also as an investment condition. In practice this means that the lease payment for the whole period of time indicated in the lease agreement should be paid as a full sum even if the construction has been realized earlier than was stated in the contract and therefore the lease period was shorter.34 The price or the amount of the lease payment is determined either by choice of the highest bid proposed in closedenvelopes or by increasing the initial price or lease payment by announcing the new price (which is not more that 1 to 5 percent from the previous price) during a tender until only one participant is left who is ready to buy or lease the land plot atthe newly announced price. Doing business in St. Petersburg120 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 121.  Establishment of the boundaries and cadastral registration of the land plot o The land plot that is put up to tender is already formed, meaning that the land plot has fixed boundaries, has undergone State Cadastral Registration in the Real Estate State Cadastre and has been assigned a cadastral number. The preparation of the land plot for tender is carried out by the appropriate state authorities. o Establishment of the boundaries of the land plot, if the land plot is allocated without a tender, and the State Cadastral Registration in the Real Estate State Cadastre are undertaken by the Entity which is a time-consuming procedure. The existence of town-building documentation and other limitations The land plot is granted only at a tender if the drafts of the territory planning and the drafts of the territory survey have been elaborated in regard to the territory where the requested land plot is located.35 Besides, the land plot is granted only at a tender in the event there is more than one application (i.e. at least two or more) from investors regarding a specific land plot.4.10.1. Acquisition of ownership or lease rights to the land at a tenderThe acquisition of the rights to state-owned land at a tender is regulated mainly by the Land Code ofthe Russian Federation and the Rules on the Organization and Conducting of the Tender on Sales ofthe Land Owned by the State or Municipals and on the Rights for the Conclusion of the LeaseAgreement in Regard to the Same Land approved by the Decree of the Government of the RussianFederation dated 11 November 2002 No.808, as well as by the Regulation on the Order ofCooperation of the Executive Authorities of St. Petersburg when Making Decisions on the Allocationof the Immovable Property for the Construction, Reconstruction and Adaptation for Modern Use,approved by the Decree of the Government of St. Petersburg dated 30 December 2010 (lastamended 2 August 2011) No. 1813.The tender may be held in the form of an auction or a competition. A distinctive feature of thecompetition is the fact that the state sets certain conditions (obligations) on the use of the land plot.Unlike at auction, the winner of the competition should not only make the highest bid, but shouldalso undertake the obligations to meet the conditions of the competition. An auction is a morewidespread form of tender.The major steps for the acquisition of a land plot at a tender are the following:1. Address plan For the purposes of the preparation of documents required for the allocation of the land plot for construction at a tender (without preliminary approval of the place of the property allocation), each year the Investment Department of St. Petersburg (during the last month of each calendar year) prepares and provides to the Committee on Construction the Address Plan for the preparation of documents for the tender procedures. This Address Plan must be approved by the Chair of the Construction Committee and the Vice-Governor of St. Petersburg responsible for such matters. The Address Plan contains a list of land plots (sites) which shall be put for tender.2. Procedure for adopting a decision on the allocation of the land plot for construction at a tender The land plots available for tender procedures may, among others, include both the land plots located within the territories for which the drafts of territory planning and drafts of territory survey have already been developed and approved, and the land plots located within the35 Item 11 article 30 of the Land Code of the Russian Federation. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 121
  • 122. territories for which the drafts of the territory planning and territory survey have not been approved yet.  For the purpose of the preparation of documents regarding the land plots, for which the drafts of territory planning and territory survey have not been approved, the Investment Department of St. Petersburg directs a request to the Committee on Town-Planning and Architecture. The latter issues a report which shall include information on the permitted use of the land plot and functional purpose of the property to be constructed on such a land plot, taking into account the applicable town-planning limitations, as well as the time terms for the issuance of a town-planning map of the land plot.  The Investment Department of St. Petersburg directs inquiries to a number of government authorities in order to obtain their reports. For instance, such inquiries are sent to: o the Committee on Land Resources and Land Development (which reviews factual information about the land plot, its address, total area, data on any real estate objects located on the land plot, allocation of zones with special regime of treatment on the land plot, etc.), o the Committee on City Property Management (which reviews encumbrances of the land plot and the properties located on it, if any, as well as information on the registration of ownership title of St. Petersburg to the land plot and real estate located on it, etc.), o the Committee on State Control, Use and Protection of Cultural Properties (which reviews whether the land plot or real estate on it, if any, are regarded as cultural heritage properties or whether such properties are located within the borders of the protection zone of properties of cultural heritage, as well as a review of the applicable limitations to construction and other works on such properties), o the Committee on Energy (which reviews the technical conditions for connection to utilities, etc.), o and several other committees of the St. Petersburg Government.  The Investment Department of St. Petersburg also directs a notification to the Construction Committee of St. Petersburg on the necessity to obtain information from the Department of Rospotrebnadzor for St. Petersburg. Upon the receipt of such a notification, the Construction Committee shall direct an inquiry to the Department of Rospotrebnadzor for St. Petersburg on the compliance of the planned use of the targeted land plot with the sanitary rules established by the Federal Law "On sanitary-epidemiological wellbeing of the population", and submit the received response to such an inquiry to the Investment Department of St. Petersburg.  Upon the obtainment by the Investment Department of St. Petersburg of the reports of all the government authorities mentioned above (which shall be prepared by the relevant government authorities within 10-14 business days in accordance with applicable legislation), the Investment Department procures the performance of cadastral works and state cadastral registration of the land plot, and the evaluation of the market value of the real estate or complex of rights to the real estate, as well as requests from the Committee on Town-planning and Architecture issuance of the town-planning map of the land plot.  All of the documents gathered by the Investment Department of St. Petersburg regarding the land plot and reports are then transferred to the Construction Committee for the purpose of the preparation of the draft Decree of the Government of St. Petersburg on the allocation of the real estate for construction purposes at tender proceedings.  Upon the adoption by the Government of St. Petersburg of the Decree on the sale of the land plot at tender or sale at tender of the right to execute the lease agreement of the land Doing business in St. Petersburg122 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 123. plot for construction purposes, the Construction Committee directs a package of documents required for the organization and performance of the tender to the organizer of the tender.3. Results of the tender The results of the tender (auction or competition) are formalized in the minutes on the results of the tender which shall be signed by the tender organizer, the auctioneer (when the tender is held in the form of an open auction) and the winner on the date of the tender.4. Conclusion of a land sale-and-purchase contract or a land-lease contract The signed and effective minutes on the results of the tender serves as the grounds for the conclusion of the land sale-and-purchase contract or the land-lease contract between the winner and the appropriate authority.365. State registration of the lease or ownership rights in the Unified State Register of Rights to Immovable Property and Transactions Thereof by the Department of Federal Services on state registration, cadastre and cartography in St. Petersburg.4.10.2. Acquisition of lease rights to the land without a tenderThe procedure for the acquisition of City Land37 is regulated in detailed form under the followingmajor acts: the Law of St. Petersburg dated 26 May 2004 (last amended 04 July 2011) No. 282-43 “On the procedure of the allocation of immovable properties owned by St. Petersburg for construction and reconstruction” (hereinafter - the St. Petersburg law); the Regulation on the Order of cooperation of the Executive authorities of St. Petersburg when making decisions on the Allocation of Immovable Properties for the Construction, Reconstruction and adaptation for modern use, approved by the Decree of the Government of St. Petersburg dated 30 December 2010 (last amended 2 August 2011) No. 1813 (hereinafter - the Decree).The principal stages for providing land plots from the City land for construction without a tender inaccordance with current legislation are the following:1. The Investor applies to the Construction Committee of St. Petersburg with an application for the allocation of a land plot.2. If there are no grounds for denial of the application, the Construction Committee of St. Petersburg forwards the application to the Investment Department of St. Petersburg within 5 (five) business days.3. The Investment Department of St. Petersburg directs inquiries to a number of government authorities in order to obtain their reports on the possibility of the allocation of a land plot. For instance, such inquiries are sent to:  the Committee of Town-Planning and Architecture (which reviews various town-planning limitations, the permitted use of the land plot, functional purpose of the object of planned construction, etc.),  the Committee of Land Resources and Land Development (which reviews factual information about the land plot, its address, total area, data on any real estate located on the land plot, allocation of zones with special regime of treatment on the land plot, etc.),36 In regard to City land it is the local agency of the Committee on City Property Management; and in regard to the Federalland - the appropriate Territorial department of the Federal Agency for State Property Management of St. Petersburg.37 Although the possibility of allocation of the land plot without tender is established in the Land Code, the procedure canbe factually realized only in regard to the City land as soon as there is no competent authority for Federal land. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 123
  • 124.  the Committee of City Property Management (which reviews encumbrances of the land plot and the real estate located on it, if any, as well as information on the registration of ownership title of St. Petersburg to the land plot and real estate located on it, etc.),  the Committee on State Control, Use and Protection of Cultural Properties (which reviews whether the land plot or the real estate located on it, if any, are regarded as cultural heritage properties or whether such properties are located within the borders of the protection zone of cultural heritage properties, as well as a review of applicable limitations to construction and other works on such properties),  the Committee on Energy (which reviews technical conditions for connection to utilities, etc.),  and several other committees of St. Petersburg Government. Upon the obtainment of reports from the abovementioned committees (which shall be prepared by relevant government authorities within 10-14 business days in accordance with applicable legislation), the Investment Department of St. Petersburg directs such reports to the Construction Committee.4. The Construction Committee, within five business days from the receipt of the above- mentioned reports, adopts a decision on the denial of the allocation of the land plot or on preparation of the memorandum to the attention of the Vice-Governor of St. Petersburg on the possibility of the preparation of the draft Decree of St. Petersburg on the allocation of the land plot for construction under investment conditions.5. The Vice-Governor solicits the approval of the Governor of St. Petersburg.6. The Governor of St. Petersburg may issue an approval and give orders regarding further action to be implemented by authorized government authorities. In pursuance of such orders the Investment Department of St. Petersburg:  directs an inquiry to the Committee on Land Resources and Land Development for the issuance of the plan of allocation of the land plot on the cadastral map of the territory;  sends to the competent authorities of St. Petersburg a notification on the necessity to inform the population on the possible provision of the land plot for construction (this is done in accordance with the requirements of the law of St. Petersburg No. 400-61 dated 5 July 2006 “On the order of organization and conduct of public hearings and informing the population of construction/town-planning activities in St. Petersburg”);  directs to the Construction Committee the plan of allocation of the land plot on the cadastral map and notifies about the necessity to obtain information from the Department of Rospotrebnadzor for St. Petersburg. Upon the receipt of such notification the Construction Committee shall direct an inquiry on the ecological conditions of the use of the land plot to the Department of Rospotrebnadzor for St. Petersburg in accordance with the Federal Law “On the sanitary-epidemiological wellbeing of the population”.7. Upon receipt of the replies to the abovementioned inquiries, the Construction Committee provides for the signing of the Act on the allocation of the land plot by representatives of the Committee on Land Resources and Land Development, the Committee on State Control, the Use and Protection of Cultural Properties and the Committee on Town-planning and Architecture and approves the Act on allocation of the land plot itself. The Act on allocation of the land plot is subject to official publication. The Act is regarded as a decision on the preliminary approval of the place of allocation of the property and serves as the basis for the further adoption of the decision on the provision of the land plot for construction and stays in effect for 3 years.8. On the basis of the issued Act on the allocation of the land plot, the Investor shall perform the requirements of effective legislation, including cadastral works and state cadastral registration Doing business in St. Petersburg124 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 125. of the land plot, the evaluation of the market value of the real estate or complex of rights to the real estate and obtainment of reports from a number of Committees of St. Petersburg Government (including the Committee of Land Resources and Land Development, the Committee of City Property Management, the Committee of State Control, the Use and Protection of Cultural Properties, and several others as listed in the Decree of St. Petersburg Government No.1813 dated 30 December 2010).9. Having fulfilled all the requirements listed in item 7 above, the Investor applies to the Construction Committee for the issuance of a Decree of St. Petersburg on the allocation of the land plot for the construction under investment conditions.10. Unless there are grounds for denial of the Investors application, the Construction Committee prepares a draft Decree of St. Petersburg on the allocation of the land plot for construction under investment conditions and refers it to the St. Petersburg Government for enactment.11. Upon adoption of the Decree on the allocation of the land plot for construction under investment conditions by the St. Petersburg Government, the Construction Committee submits the necessary documents to the Committee of City Property Management for execution with the Investor of the lease agreement under investment conditions. The contract on the land plot lease is concluded for the period of construction.12. Upon the signing of the lease agreement, the lease rights to the land shall be registered in the Unified State Register of Rights to Immovable Properties and Transactions Thereof by the Department of Federal Service on state registration, cadastre and cartography in St. Petersburg.4.10.3. Requirements on the location (zoning)When investor considers to obtain rights to a land plot for the purpose of construction, it isnecessary to take into account the applicable zoning requirements which are contained in thefollowing documents: The Master Plan of St. Petersburg approved by the St. Petersburg Law dated 22 December 2005 No. 728-99 (hereinafter referred to as "the Master Plan"). This determines the directions for the town-planning development of St. Petersburg and bases the arrangement and distribution of the functional zones. The Rules on Land Use and Territory Development in St. Petersburg approved by St. Petersburg Law dated 16 February 2009 No. 29-10 (hereinafter referred to as "the Rules"). These clarify the function of a territory determined by the Master Plan and establish the types of permitted use and the ultimate parameters of the permitted construction/reconstruction for land plots that are located within the boundaries of territorial zones. The drafts of territory planning (hereinafter referred to as "the DTP") and the drafts of territory survey (hereinafter referred to as "the DTS") to be elaborated with regard to the parts of a territory of St. Petersburg and to be approved by the Decree of the St. Petersburg Government. The DTPs determine the density and the parameters of development of territories of quarters, the total area of the sites for capital construction for specified designated purposes, and the characteristics of development of social, transport maintenance and technical-engineering systems required for the development of the territory. The DTSs are elaborated to establish the sizes and boundaries of the built-on and vacant land plots and clarify the design solutions valid in DTPs for specific land plots.As of today, only a part of the territory of St. Petersburg is covered by the elaborated DTPs andDTSs. When there is no elaborated DTP and DTS in regard to the territory in the frames of which theconsidered land plot is situated, the DTP separately or together with the DTS is elaborated by the Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 125
  • 126. Entity. The DTP (together with DTS) is developed on the basis of the statement of work receivedfrom the Committee of Town-Planning and Architecture.38 The development of the DTP (togetherwith DTS) is carried out by a specialized organization under a contract within the time periodsagreed on in the contract. In actual practice, on average, the overall period for the DTP (and DTS)development, coordination and approval by the Decree of St. Petersburg Government, takes fromhalf a year to 8 months.In certain cases, construction plans shall meet and comply with the requirements stipulated in theeffective legislation on the protection of items of cultural heritage.39Such requirements are regarded for items of cultural heritage (newly founded cultural heritageproperties), their territories and zones for the protection of items of cultural heritage, and providethe following peculiarities to be taken into account while locating the construction on the territoryof the historically formed districts of St. Petersburg:1. The zones for the protection of items of cultural heritage (the protective zone and the zone of regulated development of the central regions of St. Petersburg) represent the territories adjacent to the land plots on which the items of cultural heritage are located. For the purpose of the safety for the items of cultural heritage a special order of use for land plots located within the boundaries of such zones has been established (the regime of the zone). The boundaries of the protective zone and the zone of regulated development of central regions of St. Petersburg and their regimes are described in the St. Petersburg Law dated 19 January 2009 No. 820-7 “On the boundaries of zones for the protection of items of cultural heritage on the territory of St. Petersburg and the regimes of land use within the boundaries of such zones and on amending the St. Petersburg Law “On the Master Plan of St. Petersburg”. The above law specifies the following material conditions for land plot use and the limitations within the zones for protecting items of cultural heritage:  new construction is prohibited in the protective zone and limited in the zone of regulated development in the central regions of St. Petersburg;  reconstruction and refurbishment in both zones is limited by the height of the buildings, façade configuration, color and other parameters and requires special approval from the Committee on State Control, the Use and Protection of Cultural Properties and the St. Petersburg Committee on Town-Planning and Architecture;  all town planning, construction and ground work shall be approved by the Committee on State Control, Use and Protection of Cultural Properties.2. The information on items of cultural heritage (including the subject of the protection) is contained in the state register: in the federal register with regard to items of cultural heritage of federal meaning, in the regional register with regard to items of cultural heritage of regional meaning and in the register of newly founded items of cultural heritage with regard to such properties. The demolition of items of cultural heritage is prohibited. Only the following work may be performed with regard to items of cultural heritage (all of these are intended for the safety of38 Item 4 of the Instruction on the order of elaboration, structure and content of the documentation of territory planningapproved by the Order of the Committee of Town-Planning and Architecture of St. Petersburg Government dated 22 May2006 No. 515.39 St. Petersburg Law No.29-10 “On the Rules on Land Use and Territory Development in Saint-Petersburg” dated 16February 2009; St. Petersburg Law No.820-7 “On the boundaries of zones of protection of items of cultural heritage on theterritory of St. Petersburg and regimes of use of lands within the boundaries of such zones and on amending the St.Petersburg Law “On the Master Plan of St. Petersburg” dated 19 January 2009; St. Petersburg Law N.333-64 “On thedefense of items of cultural heritage” dated 12 July 2007; Federal Law No. 73-FZ “On items of cultural heritage for thepeople of the Russian Federation” dated 25 June 2002. Doing business in St. Petersburg126 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 127. the items of cultural heritage and cannot lead to changing the features that constitute the subject of the protection of the properties):  repairs;  restoration;  conservation;  adaptation to modern use. Please note that only in the course of adaptation to modern use reconstruction of the item of cultural heritage is deemed possible.4.10.4. Construction permit documentationPerformance of the construction work on the land plot requires the receipt of certain permitdocumentation under the town-building legislation so that the safety and the legitimacy of theprocess is controlled.Fulfilling construction work does not require the obtainment of a license any more as it was requiredin 2005. At the same time the state system of licensing was replaced with a system of admissionsthat are issued by the self-regulated organizations. Under the town-building legislation a self-regulated organization is a non-commercial partnership that unites a particular number of legalentities and entrepreneurs fulfilling the survey or design or construction works and has thecompensation fund to cover the harm (damages) caused in the result of the defaults of the survey,design and construction work done by the united members of such a self-regulated organization.A precise list of the work that requires admissions of the self-regulated organizations is approved bythe order of the Ministry of Regional Development of the Russian Federation dated 30 December2009 No. 624. Each self-regulated organization may issue only the admissions to those works thathave been approved as the sphere of activities of the relevant self-regulated organization at thegeneral meeting of the members of the self-regulated organization.40 The admissions are issuedonly to the legal entities and entrepreneurs who answer the requirements established by therelevant self-regulated organization and the minimum requirements of the Town-Building Code ofthe Russian Federation.We would like to draw your attention to the fact that the work that requires admission of the self-regulated organization includes such works as organization of design documentation preparation(function of a general designer), organization of construction works (function of a generalcontractor), control over the construction process implementation of which is imperative under thetown-building legislation.Before starting the construction of a building on a land plot the subject also requires that thefollowing major documents are received: (a) a town-planning map; (b) a positive conclusion of thestate expertise on the results of survey work and on the design documentation and (c) a constructionpermit.1. A town-planning map41 is the document, which contains significant town-building information such as boundaries of a land plot, permitted use etc. The town-planning map is prepared by the Committee of Town-Planning and Architecture based on the application of the subject filed with the necessary documents (e.g. materials of topographic mapping, cadastral passports of the land plot).42 The normative term for the preparation of the town-planning map is 30 days from the date of application.2. The positive conclusion of the state expertise on the results of the survey work and on the design documentation is given if the elaborated design documentation answers the requirements of40 Item 5 of article 55.8 of the Town-Building Code of the Russian Federation.41 Item 1 of article 44 of the Town-Building Code of the Russian Federation.42 The order of the Committee on the Town-Planning and Architecture of St. Petersburg dated 11 June 2009 N 96. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 127
  • 128. the technical regulations and the requirements to the content of the design documentation. The state expertise is conducted by the St. Petersburg state autonomous agency "Center of State expertise"43 subject to the Service of State Construction Supervision and Expertise of St. Petersburg. In regard to a technically complicated or unique property the state expertise will be conducted by the Federal State Agency Glavgosexpetisa of the Russian Federation.44 The term of the state expertise depends on the complexity of the building but should not exceed three months. 453. After the receipt of the positive conclusion from the state expertise on the results of the survey work and on the design documentation, the subject applies for the obtainment of the construction permit attaching all the required documentation in accordance with the Town- Building code of the Russian Federation. The construction permit is given in the name of the person who enjoys the rights (lease or ownership) to the land plot.The construction permit is issued if the design documentation is in conformity with the town-planning map. Currently, the construction permit is granted by the Service of State ConstructionSupervision and Expertise of St. Petersburg. In regard to the technically complicated or uniqueproperty - the permit will be issued by the Ministry of the Regional Development.46 The normativeterm for issuing of the construction permit is 10 days from the date of application.4743 The Decree of the Government of St. Petersburg dated 23 October 2009 N.1177 On creation of St. Petersburg stateautonomous agency "Center of State expertise"; item 4.2, 6.1 of article 49 of the Town-Building Code of the RussianFederation.44 The order of the Federal agency on construction and housing and communal services dated 16 March 2007 N 64; item4.1 of the Town-Building Code of the Russian Federation.45 Item 7 article 49 of the Town-Building Code of the Russian Federation.46 Decree of the Government of the Russian Federation dated 23 May 2009 N 441.47 Item 11 article 55 of the Town-Building Code of the Russian Federation. Doing business in St. Petersburg128 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 129. 4.11. Buyout of land plots in St. Petersburg Information for the current chapter was developed and kindly provided by DLA PiperAccording to Article 36 of the Land Code of the Russian Federation, citizens and legal entities whichown real estate (buildings and constructions) located on state land have an exclusive right to theprivatization or lease of the land plots on which such real estate is located.Therefore, if a citizen or a legal entity owns real estate located on a state land, such citizen or legalentity may choose to:1. acquire the land plot on which the real estate is located under ownership, or2. execute a long-term lease agreement of the land plot for 49 years.In order to obtain either of the above-mentioned rights to the land plot, the citizen or the legalentity (hereinafter – the Investor) shall apply to an authorized government authority with anapplication. In St. Petersburg such authority is vested in the Committee for City PropertyManagement.4.11.1. Procedure for the buyout of land plotsThe list of documents, which shall be submitted to the Committee for City Property Managementwith an application on the buyout, has been recently revised and is currently established by theOrder of the Ministry of Economic Development of the Russian Federation dated 13 September 2011No. 475 “On the adoption of the list of documents required for the acquisition of rights to the landplot”. Such documents include the following:1. Copy of the document, confirming the identity of an applicant.2. Copy of the certificate of state registration of the individual as an entrepreneur or a copy of the certificate of state registration of a legal entity or an extract from the state register regarding the legal entity or the individual entrepreneur applying for the buyout of land.3. Copy of the document confirming the authority of the representative of an individual or a legal entity, in the event the applicant appoints a representative.4. Extract from the Unified State Register of Rights to Real Estate Property and Transactions Therewith regarding the rights to real estate (buildings and constructions) located on the targeted land plot, or notification on the absence of such data in the Unified State Register of Rights to Real Estate Property and Transactions Therewith (or copies of documents confirming rights to such real estate if such rights are considered as existing irrespective their registration at the Unified State Register of Rights mentioned above).5. Extract from the Unified State Register of Rights to Real Estate Property and Transactions Therewith regarding the rights to the targeted land plot, or notification on the absence of such data in the Unified State Register of Rights to Real Estate Property and Transactions Therewith (or copies of documents confirming rights to the land plot if such rights are considered as existing irrespective their registration at the Unified State Register of Rights mentioned above).6. Cadastral passport of the land plot.7. Copies of documents entitling the Investor to acquire the land plot, unless the grounds for the right to acquisition of the land plot are evident from the above-mentioned documents.8. Reference from the applicant, containing the list of all buildings and other constructions located on the targeted land plot, with an indication of the cadastral numbers and addresses of such real estate.According to clause 2 of the Order of the Ministry of Economic Development of the RussianFederation dated 13 September 2011 No.475, the documents listed in items 2, 4, 5 and 6 above Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 129
  • 130. cannot be requested (demanded) from the applicant by the authorities, however, the applicant hasthe right to submit these documents together with an application. This provision comes into forcewithin the following timeline: from 1 October 2011 (but not earlier than upon expiration of 10 days from the date of the official publication of the Order) – for documents required for the acquisition of rights on federal land (land plots which are currently under federal ownership); from 1 July 2012 – for documents required for the acquisition of rights on other land plots of state or municipal property.According to item 5 of Article 36 of the Land Code of the Russian Federation, the governmentauthorities (i.e. the Committee for City Property Management in St. Petersburg) cannot demandfrom the applicant to submit any additional documents other than those indicated in the OrderNo.475.Upon the submission of documents by the applicant, the Committee for City Property Managementhas one month for the adoption of the decision on provision of the land plot into ownership as perthe buyout request of the applicant. Within one month from making a decision on provision of theland plot into ownership, the competent government authorities shall prepare a draft of the sale andpurchase agreement regarding the targeted land plot and provide it to the applicant for review andsigning.Please note that in the event that the cadastral registration of the targeted land plot has not beenperformed before the submission of an application by the applicant for obtainment of rights to suchland plot, the respective cadastral works shall be performed by the applicant at its own cost, and therights to the land plot will be granted only subject to the completion of such cadastral works and thecadastral registration of the land plot.Please note that the total area of the targeted (for buy-out) land plot shall be balanced with the totalarea of the real estate located on it. The law provides for the possibility of buy-out of the land plotwhich is necessary for operation of the real estate located on it. Therefore, in the event small realestate located on a very large land plot, the Investor will be able to buy-out not the whole land plot,that, for example, was provided for construction purposes, but only a part of the land plot which isrequired for the operation of the real estate (unless the Investor proves that there are sufficientreasons for a buyout of the whole land plot for further operation of the real estate located on it).According to Article 8 of the Civil Code of the Russian Federation the rights to the land plot have tobe registered in the Unified State Register of Rights to Real Estate and Transactions Therewith.Therefore, upon signing the sale and purchase agreement regarding the targeted land plot, therespective documents shall be filed for registration. The Investor will formally obtain his/herownership title to the land plot only after registration of the transfer of rights at the Unified StateRegister of Rights to Real Estate and Transactions Therewith.4.11.2. Local legislation influencing the procedure of land plots buyoutOn 31 August 2006 the Decree of the Committee for City Property Management of St. PetersburgNo.262-р “On the order of cooperation of the structural subdivisions of the Committee for CityProperty Management and Open joint stock company “The Property Fund of St. Petersburg" in theprocess of the sale of state-owned land plots to the owners of real estate located on such land plots”was adopted. The decree remains effective (as amended) as of the present time.According to the Decree, the application and package of documents submitted by the Investor forbuyout of a targeted land plot are accepted by the Department on the disposal of state property ofthe Committee for City Property Management (hereinafter - the Department of the Committee).The Department of the Committee registers submitted applications on the date of their submissionand no later than within two business days from the date of registration of the application sends the Doing business in St. Petersburg130 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 131. inquiries regarding the targeted land plot and the real estate located on it to a number of othergovernment authorities, including the following: Committee of State Control, Use and Protection of Cultural Properties; Committee of Land Resources and Land Development; Department (agency) of real estate property of St. Petersburg District, on the territory of which the targeted land plot is located (hereinafter - the Agency); Department of the Federal Service for State Registration, Cadastre, and Cartography for St. Petersburg; etc.Upon gathering of the information from various government authorities, confirmation that atargeted land plot can be disposed of to Investors ownership, the Department of the Committeeprepares a Transfer Order on the transfer of the targeted land plot into the Investors ownership.The Transfer Order serves as an assignment to the Property Fund of St. Petersburg to conclude theSale and Purchase agreement of the targeted land plot with the Investor.Upon the execution of the Sale and Purchase agreement of the targeted land plot, the documentsare filed for the registration of the transfer of rights to the land plot with the Unified State Registerof Rights to Real Estate and Transactions Therewith, upon completion of which the Investorformally obtains its ownership title to the land plot.4.11.3. Buyout price of the targeted land plotAccording to Article 36 of the Land Code of the Russian Federation, the buyout price for state-owned land shall be determined by the government authorities as follows: with respect to federal land – by the federal government authorities; with respect to the land owned by the subjects of the Russian Federation – by government authorities of the subject of the Russian Federation; with respect to municipal land – by municipal authorities.In any case, the buyout price shall not exceed the cadastral price of the land plot. In the event thatthe mechanism for the calculation of the buyout price is not determined, the buyout price shall equalthe cadastral price of the land plot.According to the Federal Law dated 25 October, 2001 No. 137-FZ “On entering into force of the LandCode of the Russian Federation”, there are two categories of potential acquirers of land plots, forwhich different rules for the calculation of the buyout price are established.The first category of potential acquirers of land plots includes the following:1. legal entities which own real estate located on targeted land plots and are acquiring the land plots in the course of re-registration of their right of permanent perpetual use;2. citizens and non-commercial organizations, which acquired ownership title to real estate located on the targeted land plots before the Land Code of the RF came into force and for which no special procedure for acquisition of ownership title to the land plots was established by the federal law;3. legal entities and entrepreneurs which own real estate located on targeted land plots, if such real estate was privatized (disposed of from state or municipal property), including when real estate was constructed or reconstructed on the land plots;4. legal entities and entrepreneurs which own real estate located on targeted land plots, if such real estate was constructed on targeted land plots instead of destroyed or earlier privatized and currently demolished real estate.The second category of potential acquirers of land plots includes persons, which own real estatelocated on targeted land plots and are not included in the first category. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 131
  • 132. In St. Petersburg the calculation of the buyout price is regulated by the St. Petersburg law dated 15February 2010 No. 59-19 “On the establishment of the price of the land plots in St. Petersburg”,taking into account the rules for the determination of the buyout price established by the FederalLaw dated 25 October 2001 No. 137-FZ “On entering into force of the Land Code of the RussianFederation”.According to the St. Petersburg law dated 15 February 2010 No. 59-19 “On the establishment of theprice of the land plots in St. Petersburg”, the buyout price for the first category of potential acquirersas described above shall be calculated as follows: 15% of the cadastral value of the land plots – when the land plots are being bought-out by the owners of real estate constructed on such land plots and when such land plots were provided for performance of investment activity in accordance with the laws of St. Petersburg, or when such land plots are used for the purposes of allocation of industrial property and at least 70% of the land plot is occupied by such industrial property; 19.5% of the cadastral value of the land plots – when the land plots are sold to other owners of real estate located on the land plots.The buyout price for the second category of potential buyers shall be calculated as follows: 10-fold rate of the effective land tax –- when the land plots are being bought-out by the owners of real estate constructed on such land plots and when such land plots were provided for performance of investment activity in accordance with the laws of St. Petersburg, or when such land plots are used for the purposes of allocation of industrial property and at least 70% of the land plot is occupied by such industrial property; 13-fold rate of the effective land tax – when the land plots are sold to other owners of real estate located on the land plots.The St. Petersburg Law No. 59-19 also provides for a 9-fold rate of effective land tax for calculationof the buyout price for the land plots which were provided to strategic investors of St. Petersburg orinvestors implementing strategic projects on the territory of St. Petersburg for the purposes ofconstruction on such land plots of the plants producing cars and/or automobile components.However, this provision of the St. Petersburg law loses its effect (becomes inoperative) from 1January 2012.Please note that, theoretically, starting from 1 January 2012 the buyout price for the land plots maychange in the event that the local authorities adopt any amendments to the St. Petersburg LawNo.59-19. No such amendments were adopted as of November 2011. However, it is recommendedthat Investors monitor this issue further. Doing business in St. Petersburg132 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 133. 4.12. Regulatory issues. Antimonopoly compliance Information for the current chapter was developed and kindly provided by DLA PiperThe basic law for antimonopoly regulation in the Russian Federation is the Federal Law “OnProtection of Competition” dated 26 July 2006, as amended ("Competition Law"). Under theauspices of the Federal Antimonopoly Service ("FAS") the Competition Law regulates competition inboth the commodities market and the financial services market and includes seven areas ofparticular interest to foreign investors: establishment of companies; mergers and acquisitions; agreements limiting competition; abuse of a dominant position; unfair competition; state aid; and selection of a financial organization by subjects of natural monopolies and various states and municipal bodies.Certain activities in each of the abovementioned areas require a prior approval or notification of theantimonopoly authorities in order to comply with antimonopoly laws and such requirements have tobe taken into account when planning investment activities.4.12.1. Establishment of companiesAccording to the currently effective legislation, the founders of a new company must obtain a priorapproval of the FAS for the establishment of a new company only if the charter capital of the newcompany is paid by the contribution of shares, participation interests and/or property assets(excluding cash assets) of another legal entity ("Target") (unless such a legal entity is a "financialorganization"48), if the newly established company acquires: more than 25 per cent of the shares of the Target (if the Target is a JSC and the charter capital of the newly established company is paid by contribution of shares in the Target); or more than one-third of the participation interests of the Target (if the Target is an LLC and the charter capital of the newly established company is paid by contribution of a participation interest in the Target); or more than 20 per cent of the book value of the main production (fixed) assets and intangible assets of any of its founders,and if: the balance sheet value of the total aggregate assets of the founders (including their respective "groups of persons"49) and the Target (including its groups of persons) exceeds RUB 7 billion; or48 Meaning an individual or legal entity rendering financial services, including credit organizations, insurers, stock/currencyexchange organizations, pension funds, investment funds, etc.49 In determining the threshold for asset values and aggregate revenues in the context of mergers and acquisitions, theFAS takes into consideration not only the purchaser and the target, but also the persons (individuals and legal entities) intheir respective "groups of persons". The broad term "group of persons" means all persons and/or entities that directly orindirectly control the company, are directly or indirectly controlled by the company or are under common control with thiscompany and/or entities directly or indirectly controlled by it. For the purpose of the definition of the group of persons,"control" means holding of any of the following: (i) over 50% of votes (including combined participation), (ii) CEO position;(iii) rights to give to a company binding instructions; (iv) right to appoint CEO; (v) right to appoint over 50% of themanagement board and/or the board of directors. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 133
  • 134.  the aggregate revenue earned by the founders (including their respective groups of persons) and the Target (including its groups of persons) from the sale of goods in the past calendar year exceeds RUB 10 billion; or the Target is included in the FAS Register of dominant entities or legal entities with a Russian market share exceeding 35 per cent.The establishment of a new company whose charter capital is paid by the contribution of shares,participation interests and/or property assets of a financial organization, will require prior approvalof the FAS if the balance sheet value of the total aggregate shares, participation interests and/orproperty assets of such a financial organization exceeds an amount that is established by theRussian Government.504.12.2. MergersEntities (except financial organizations) involved in a consolidation, affiliation or merger must obtaina prior approval of the FAS51 if: the balance sheet value of the total aggregate assets of the merging entities (including those of their respective groups of persons) exceeds RUB 3 billion; or the aggregate revenue earned by the merging entities (including those of their respective groups of persons) from the sale of goods during the last calendar year exceeds RUB 6 billion; or either of the merging entities (including their respective groups of persons) is included in the FAS Register of dominant entities or legal entities with a Russian market share exceeding 35 per cent.Consolidations, affiliations or mergers of financial organizations will require a prior approval of theFAS if the total value of the entities assets exceeds the amount established by the RussianGovernment.524.12.3. Acquisitions4.12.3.1. Acquisition of participation interests in a Russian company (LLC)Preliminary approval of the FAS is required where a purchaser, be it an individual or legal entity andits group of persons, acquires: more than one-third (on a first acquisition); or more than a half (on a first or any further acquisition); or more than two-thirds (on a first or any further acquisition) of the target LLCs total participatory interests, and if (unless the purchaser is a financial organization):53 the balance sheet value of the total aggregate assets of the purchaser and the target LLC (including their respective groups of persons) exceeds RUB 7 billion and the balance sheet value of the total aggregate assets of the target LLC (including its group of persons) exceeds RUB 250 million; or50 This amount differs depending on the type of financial organization.51 Preliminary FAS approval is not necessary if: (i) the consolidation, affiliation or merger is going to be performed betweenthe parent company and its subsidiary; (ii) entities, participating in the consolidation, affiliation or merger belong to thesame group of persons, information on which was disclosed within a special procedure, provided by the Competition Law;(iii) the consolidation, affiliation or merger is stipulated by the acts of the President or the Government of the RussianFederation.52 This amount differs depending on the type of the financial organization.53 For financial organizations the thresholds in this regard are: the balance sheet value of the total aggregate assets of thefinancial organization exceeds the amount established by the Government of the Russian Federation. This amount differsdepending on the type of the financial organization. Doing business in St. Petersburg134 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 135.  the aggregate revenue earned by the purchaser and the target (including their respective groups of persons) from the sale of goods in the past calendar year exceeds RUB 10 billion and the balance sheet value of the total aggregate assets of the target LLC (including its group of persons) exceeds RUB 250 million; or either the purchaser or the target LLC (including their respective groups of persons) is included in the FAS Register of dominant entities or legal entities with a Russian market share exceeding 35 per cent.4.12.3.2. Acquisition of shares in a Russian Company (JSC)Preliminary approval from the FAS is required where a purchaser, be it an individual or legal entityand its group of persons, acquires: more than 25 per cent (on a first acquisition); or more than 50 per cent (on a first or any further acquisition); or more than 75 per cent (on a first or any further acquisition), of the target JSCs total share interests, and if (unless the purchaser is a financial organization): the balance sheet value of the total aggregate assets of the purchaser and the target JSC (including their respective groups of persons) exceeds RUB 7 billion and the balance sheet value of the total assets of the target JSC (including its group of persons) exceeds RUB 250 million; or the aggregate revenue earned by the purchaser and the target (including their respective groups of persons) from the sale of goods in the past calendar year exceeds RUB 10 billion and the balance sheet value of the total assets of the target JSC (including its group of persons) exceeds RUB 250 million; or either the purchaser or the target JSC (including their respective groups of persons) is included in the FAS Register of dominant entities or legal entities with a Russian market share exceeding 35 per cent.4.12.3.3. Acquisition of assets in a Russian companyThe preliminary approval from the FAS is required where a purchaser, be it an individual or legalentity and its group of persons, acquires the right of ownership or the right to use the mainproduction (fixed) assets (except for land plots or non-industrial buildings, unfinished buildings,structures, constructions, premises and parts of premises) or intangible assets of an entity, if theacquired assets account for more than 20 per cent of the book value of the main production (fixed)assets and intangible assets of another legal entity (the Owner), and if (unless the Owner is afinancial organization): the aggregate book value of the assets of the purchaser and the Owner (including their respective groups of persons) exceeds RUB 7 billion and the balance sheet value of the total assets of the Owner (together with those of its group of persons) exceeds RUB 250 million; or the aggregate revenue earned by the purchaser and the Owner (including their respective groups of persons) from the sale of goods in the past calendar year exceeds RUB 10 billion and the balance sheet value of the total assets of the Owner (together with its group of persons) exceeds RUB 250 million; or either the purchaser or the Owner (including their respective groups of persons) is included in the FAS Register of dominant entities or legal entities with a Russian market share exceeding 35 per cent.4.12.3.4. Acquisition of rights in a Russian companyPreliminary approval from the FAS is required where a purchaser, be it an individual or legal entityand its group of persons, acquires rights conferring the ability to determine the commercial behaviorof the target company (including as a result of change of indirect control over a Russian targetcompany) or of the right to perform the functions of its executive bodies. Such persons, entities or Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 135
  • 136. group of entities involved in the acquisition must receive prior approval from the FAS if (unless thepurchaser is a financial organization): the aggregate book value of the assets of the purchaser and the target (including their respective groups of persons) exceeds RUB 7 billion and the balance sheet value of the total assets of the target (together with those of its group of persons) exceeds RUB 250 million; or the aggregate revenue earned by the purchaser and the target (including their respective groups of persons) from the sale of goods in the past calendar year exceeds RUB 10 billion and the balance sheet value of the total assets of the target (together with its group of persons) exceeds RUB 250 million; or either the purchaser or the target (including their respective groups of persons) is included in the FAS Register of dominant entities or legal entities with a Russian market share exceeding 35 per cent.In practice, the FAS supervises those offshore mergers or other transactions involving theacquisition of shares, as a result of which indirect control over a Russian entity changes. It ispresumed by the FAS that as a result of an indirect change of control of a Russian legal entity, theforeign entity acquiring the shares would obtain rights over the Russian entity which would allow itto determine the conditions of the Russian entitys own business activity.4.12.3.5. Exemptions from rules on the application for prior approvalThe Competition Law provides several exemptions from the obligatory rules on obtainingpreliminary FAS approval: the acquisition will be performed between a parent company and its subsidiary; or the entities, participating in the acquisition belong to the same group of persons, information on which has been disclosed within a special procedure, provided by Article 31 of the Competition Law; or the acquisition is stipulated by the acts of the President or the Government of the Russian Federation.4.12.3.6. Post-completion notification procedureAny proposed transaction that meets the relevant conditions and thresholds (as described in thepreceding paragraphs of this section on "Acquisitions") will generally require a preliminary FASapproval. However, in exceptional cases it may be permissible to notify the FAS post-completion ofsuch transactions provided that: the parties to the transaction belong to the same group of persons and information on such group was disclosed under the special procedure, provided by the Competition Law; and the parties to the transaction are a parent company and its subsidiary.Please, also note that post-completion notification is also required with respect to thosetransactions in which the aggregate assets and the aggregate revenue of the purchaser and thetarget company (including their respective groups of persons) is over RUB 400 million and, inaddition, the aggregate value of assets of the target company and the companies of its groupexceeds RUB 60 million.544.12.3.7. Procedures and timingAfter all the required documents have been submitted, the FAS has 30 days to review theapplication or notification. If the FAS believes that the transaction may lead to a restriction of54 Provided that the prior approval thresholds (as described in the preceding paragraphs of this section on "Acquisitions")are not met. Doing business in St. Petersburg136 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 137. competition, the review period may be extended for additional two months, during which the FASplaces information about the transaction on its official website and invites all interested parties tosend their opinions on the transaction.Any company established, either as a new company or as a result of a merger, consolidation oraffiliation, without the requisite prior approval of the FAS can be liquidated or reorganized if it isdetermined that its establishment has led or may lead to the reduction of competition, in particularas a result of emergence or strengthening of a dominant position.Any acquisition made without the requisite prior approval of the FAS shall be declared invalid if it isdetermined that its establishment has led or may lead to the reduction of competition, in particularas a result of emergence or strengthening of a dominant position.As for post-completion notification, the deadline for its submission is 45 days from the completiondate of the respective transaction.4.12.3.8. Agreements and concerted actions limiting competitionCompetition Law prohibits agreements, concerted actions or other business activities that lead ormay lead to the following: control or fixing of prices, discounts, bonus payments or surcharges; an increase or reduction of prices or the manipulation of prices at tenders; the division of the market by reference to territories or according to the volume of sales/purchases, the range of marketable goods or the range of sellers or purchasers; refusal to enter into a contract with particular sellers or customers without an economic or technological justification; imposition of contractual terms that are disadvantageous to the other party or do not relate to the subject matter of the contract; setting different prices on the same goods without economic or technological justification; discontinuance or the reduction of production of goods for which there is a consumer demand if it is possible to produce them on a profitable basis; restriction of access to the market or the removal from the market of other entities that sell or purchase particular products, etc.Competition Law further prohibits other agreements if such agreements lead or may lead to thelimitation of competition.These bans are not applicable to agreements if they qualify as "vertical agreements". Verticalagreements are agreements between economic entities not competing with each other, one ofwhich acquires goods or is the potential acquirer, while the other supplies goods or is the potentialseller. Competition Law enacts only two per se bans applicable to vertical agreements: setting resaleprices and exclusivity (i.e. contractual ban on selling competing goods). However, these bans do notapply to vertical agreements which are either vertical agreements between economic entities wherethe market share of each one is less than 20 per cent or vertical agreements in a written form whichare commercial concession agreements. This means that vertical agreements between two parties,none of which has a market share in excess of 20 per cent, are exempt from all bans underCompetition Law applicable to the agreements.In certain cases activities which would prima facie seem to limit competition may be permitted if itcan be proved that the positive effects of the action, including any positive socio-economic effects,outweigh its negative consequences, or if the relevant Government Regulation permits suchagreements or business activities. Such Government Regulations exist for vertical agreements55 and55 Government Decree “On Cases of Permissibility of Agreements between Business Undertakings” dated 16 July 2009. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 137
  • 138. for agreements between credit and insurance companies.56 In this context it is worth mentioningthat if the parties intended to enter into an agreement have certain doubts as to its compliance withor permissibility under Competition Law they have the right to file the draft of such agreement withthe FAS and ask the FAS to give its opinion on whether or not the agreement complies with theCompetition Law requirements (Article 35 of the Competition law). This filing procedure is possiblewith respect to specific agreements between specific parties only (i.e. no blanket clearances). Inaddition, in approving agreements, the FAS may issue binding prescriptions designed to ensurecompetition in the market.Anti-competitive agreements are deemed by Competition Law as the severest violation. Eachcompany being a party to an anti-competitive agreement can be subject to turnover-based finesvarying from 1 per cent to 15 per cent of the partys turnover in the market to which the agreementin question relates. At the same time the maximum fine to be imposed on the violator cannotexceed 4 per cent of the violators total turnover on a worldwide basis. Please, also note thatcompanys officers can be also penalized or even subjected to criminal liability.In addition, Competition Law also prohibits so-called "coordination of economic activities"57amongst economic entities, if such coordination may lead to restriction of competition.4.12.3.9. Abuse of dominant positionDetermining whether a particular entity, group of entities and/or their respective groups of personsenjoy a dominant position involves a complex evaluation of various factors, most notably therelevant entitys market share: For entities with a market share of more than 50 per cent there is a presumption of market dominance. Entities with a market share of between 35 per cent and 50 per cent (inclusive) may be deemed dominant by the FAS on the basis of an investigation into the relevant market. For entities with a market share less than 35 per cent, there is a conclusive presumption of non- dominance, with several exceptions provided by the Competition Law for entities and financial organizations and oligopoly markets.For those in a dominant position, the Competition Law prohibits any of the following activities: setting and/or support of a monopoly for high or low prices; withdrawal of goods from circulation if the result of such a withdrawal is a rise in the price of the goods; creation of conditions that place one or more business entities in an unequal position as compared to other entities in their ability to access the market for particular goods (i.e. discriminatory conditions); the imposition of contractual terms by one contracting party on another that are either disadvantageous to the other contracting party or do not relate to the subject matter of the contract; discontinuance or reduction of the production of goods for which there is a consumer demand if it is possible to produce them on a profitable basis;58 unjustified refusal to enter into a contract with particular customers if it is possible to produce or deliver the relevant goods to such customers;56 Government Decree “On Cases of Permissibility of Agreements between Credit and Insurance Organizations” datedApril 30, 2009.57 "Coordination of economic activities" is understood to be the coordination of actions between economic entities who arenot a "group of persons" (i.e. one economic entity coordinating its activities with one or more third party economicentities).58 Activity may be allowed if the dominant entity can prove that the positive effects of a particular activity outweigh itsnegative consequences. Doing business in St. Petersburg138 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 139.  setting different prices for the same goods where it is not economically or technologically necessary to do so; creation of discriminatory conditions;58 creation of barriers to market entry or market exit for other business entities;58 and violation of pricing rules.4.12.3.10. Unfair competitionThe Competition Law prohibits unfair competition in Russia. That is, any actions of commercialentities aimed at acquiring competitive advantages in commercial activity, which contradictCompetition Law, business customs, the requirements of good-faith, reasonableness and fairness,which have caused or may cause losses to other competing legal entities, or damage their businessreputation.Typical activities that would constitute unfair competition for the purposes of Competition Lawwould include: the distribution of false, inaccurate or distorted information by a commercial entity, which may cause losses to or otherwise damage the business reputation of another commercial entity; the misleading of consumers about the nature, method and place of production and quality of a commercial entitys goods; the incorrect comparison by a commercial entity of goods produced or sold by it against those of another commercial entity; the sale of goods by a commercial entity in contravention of certain intellectual property rights (e.g. abuse of trademarks); and the abuse by a commercial entity of certain commercial secrets (i.e. the receipt, use or disclosure of such information without relevant consent).4.12.3.11. State preferencesState preferences are new to Russian competition legislation and were introduced by theCompetition Law.In accordance with the Competition Law, state (or municipal) preferences consist of grantingeconomic entities certain privileges ensuring that such economic entities have more favorableconditions for their activity by transferring state (or municipal) property and/or civil rights or bygranting a material privilege.The Competition Law regulates the procedure of providing state (or municipal) preferences for thefollowing purposes: ensuring the livelihoods of the population in the Arctic regions and equivalent areas; development of education and science; conduct of scientific research; environmental protection; conservation, usage, popularization and state protection of the cultural heritage (historical and cultural monuments) of peoples of the Russian Federation; development of culture, arts and conservation of cultural values; development of physical fitness and sports; ensuring defense powers and the security of the state; agricultural production; social protection of the population; labor protection; health care of citizens; support of small and medium businesses; and socially oriented non-commercial organizations in accordance with the Federal Law No. 7-FZ dated 12.01.1996 (as amended); and Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 139
  • 140.  other purposes, defined by the legislation of the Russian Federation.State (or municipal) preferences shall be granted with the preliminary written approval from theFAS, unless such preferences are directly granted by federal law, a law of a constituent entity of theRussian Federation or a regulatory act of the local government on the budget, or are granted fromthe reserve funds for financial security of extraordinary expenses in compliance with budgetarylegislation of the Russian Federation or in the amount which does not exceed limits established bythe Central Bank of the Russian Federation for settlements in cash in the Russian Federationbetween legal entities, if such preferences are granted no more frequently than once a year for acertain entity.In order to provide state (or municipal) preferences, the authority intending to grant the preferencesmust submit an application to the FAS in order to obtain the FAS approval to the granting of suchpreferences together with: a draft act which provides for the granting of the state preferences with an indication of the goals and the amount of the preferences; a list of the beneficiary entitys activities over the two years preceding the date of the FAS application; and other information as provided for by the Competition Law.The FAS shall make a decision on the application within one month from the date it is submittedtogether with all necessary documents. The FAS may extend the period for its review of theapplication for a term of up to two months.4.12.3.12. Recent development of antimonopoly legislationOn December 6, 2011 the President of the Russian Federation signed Federal Law No. 401-FZ “OnAmendment of the Federal Law “On Protection of Competition” and Other Laws of the RussianFederation” – a so-called “Third Antimonopoly Package”. The Third Antimonopoly Package wasofficially published and most of the new rules will come into force from January 6, 2012.The main purposes of such debated amendments are as follows: the development of competition on goods markets; the perfection of principles of control over activities of monopolies; the minimization of legal risks for business.The representatives of antimonopoly authorities are sure that the Third Antimonopoly Package willsignificantly liberalize current antimonopoly legislation, soften the liability of entities for theviolation of antimonopoly laws and reduce a number of bans (prohibitions) established by thecurrent antimonopoly legislation.The amendments to the currently effective Competition Law, suggested by the Third AntimonopolyPackage, among other things include the following: The Third Antimonopoly Package excludes criminal liability for concerted actions. The new amendments also distinguish the terms "agreement" and "concerted action" and limit the number of agreements currently prohibited by antimonopoly legislation. Agreements within the group of entities shall not fall under the bans established by antimonopoly legislation (ex. Article 11 of the current Competition Law) in the event of the control of one entity within the group over another. Concerted action shall mean only such actions where each participant has initially been aware of the said action due to public declaration on performance of such actions (however, the amendments remain unclear as to who shall make such public declaration and in what form). Doing business in St. Petersburg140 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 141.  The bans established by the Competition Law in regard to agreements limiting competition and/or concerted actions shall cover only such agreements and actions which are performed by entities working on the same market (i.e. between competitors). The amendments also limit the applicability of the bans for concerted actions in connection to such entities, the joint share of which on the goods market does not exceed 20% and the share of each of which does not exceed 8%. However, in any case there is still a risk that the actions by the said entities may be qualified as coordination. The amendments establish fixed administrative fines for abuse of a dominant position, which did not lead to limitation/elimination of competition (however, this rule shall not apply to activities of monopolies to which turn-over fines shall still be applicable). The Third Antimonopoly Package also limits the possibility of qualification as coordination of economic activity only to such coordination of entities activity by a third party, where such third party does not perform any activity on the same goods market as the market on which coordination is being performed. The new amendments increase thresholds currently established for preliminary approval of reorganization (merger, etc.) of legal entities: the balance sheet value of the total aggregate assets of the merging entities (including those of their respective groups of persons) shall exceed RUB 7 billion and the aggregate revenue earned by the merging entities (including those of their respective groups of persons) from the sale of goods during the last calendar year shall exceed RUB 10 billion. The Third Antimonopoly Package also clarifies the situation related to acquisition of a foreign company which has no legal presence in Russia, but supplies goods (renders services, performs works in) to Russia. Thus, if such sales exceed RUB 1 billion within one year preceding the transaction and the acquirer obtains more than 50% of voting shares (participatory interest) in a foreign company or obtains other rights conferring the ability to determine business conduct of a foreign company, or the right to perform the functions of its executive bodies, the preliminary FAS approval may be required. The new law introduces mitigating circumstances and aggravating circumstances when considering administrative cases in the field of competition/antimonopoly issues. A number of amendments are devoted to auctions. The new amendments suggest establishing a procedure for the consideration of complaints regarding the violation of the auction procedure and procedure for the execution of agreements as a result of an auction. It is also provided to establish the order of the calculation of administrative fines for the said violations on the basis of the value of the item put to auction. Besides, the Third Antimonopoly Package provides for a number of sanctions for agreements and concerted actions at auction. It is provided to establish administrative liability not only for non-submission of information to antimonopoly authorities as currently provided by the law, but also for untimely submission of such information to antimonopoly authorities;Undoubtedly, the above-mentioned examples refer only to the amendments introduced by theThird Antimonopoly Package. It will bring important changes to the currently effective CompetitionLaw of the Russian Federation and influence business activity on the Russian market. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 141
  • 142. 5. Costs of doing business5.1. Costs of starting a company5.1.1. OverviewStarting a business in St. Petersburg involves completing a series of legal activities. Russiancompanies, as well as branches and representative offices of foreign companies in Russia, must beregistered with several authorities. Companies must be registered with the State RegistrationAuthority (currently, tax authorities), which takes care of state registration and registration for taxpurposes, as well as with the State Statistical Committee and three social funds. Branches andrepresentative offices must be registered with the tax authorities and accredited as well asregistered with the State Statistical Committee and three separate social funds. In St. Petersburgregistration is carried out through the Unified Registration Center, which registers companies withall required establishments and authorities.59In the preliminary phase, it is required to gather and draft all documents, which are to be filed withcompetent authorities (notarized and apostilled corporate documents of a foreign company,constitution documents of the newly established Russian company or business, etc.).Additional steps are necessary for Russian companies, branches, and representative offices to befully operational, e.g. opening of bank accounts, development of a corporate seal, registration of theissuance of shares (for JSCs only) with the securities authorities, etc.You can establish a company with your own financial and human resources, however it is highlyrecommended to refer to the services provided by consulting, law or special registration companiesto expedite the whole process.5.1.2. Costs and dutiesThe following state duties are applied while registering a company through the Unified RegistrationCenter in St. Petersburg:60 Individual entrepreneur / sole proprietorship State duty: 800 RUB Registration time: no more than 5 business days Legal entity (all types) State duty: 4,000 RUB Registration time: no more than 5 business daysThe following costs may be incurred while registering and starting a company in Russia: Notary services Some documents submitted for registration have to be approved by notary Cost: starting at 200 RUB59 For more information, please see Section 4.1 Establishing a legal presence60 Effective January 30, 2010 Doing business in St. Petersburg142 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 143.  Stamp In order to run a business all legal entities in Russia are required to have a company stamp Cost: starting at 400 RUB Bank account In order to run a business it is necessary to have a bank account Cost: varies depending on the bank Certification and other issues Certification might be required depending on the nature of your business and products Cost: starting at 2,000 RUB5.1.3. ContactsAdministration of the Federal Tax Service in St. PetersburgUnified Registration Center at Interdistrict Tax Inspection #1510-12 Krasnogo Tekstilschika Street191124 St. Petersburg, RussiaTel.: +7 812 335 14 03, 335 14 00 | Fax: +7 812 335 14 02i784700@r78.nalog.ruwww.r78.nalog.ru Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 143
  • 144. 5.2. Human resourcesAccording to the Territorial branch of the Federal State Statistic Service (www.petrostat.gks.ru),average nominal salary in St. Petersburg constitutes 29,642 roubles (as of September 2011). InSeptember 2011 real accrued salary calculated with consideration of consumer price indexconstituted 102.7% to the level of August 2011 and 103.5% to the level of September 2010.5.2.1. Average salaries by industryIndustry September 2011, In % to RUB August September Average 2011 2010 levelAgriculture 27,770 101.5 112.5 93.7Mining 41,810 116.3 100.4 141.0Manufacturing 29,810 100.5 110.9 100.6Electricity, gas and water 36,389 97.9 109.0 122.8production and distributionConstruction 26,499 99.1 107.7 89.4Wholesale and retail trade; repairof motor vehicles, motorcycles 23,624 98.9 109.2 79.7and personal and household goodsHotels and restaurants 16,751 108.2 109.1 56.5Transport and communication 33,185 97.1 113.5 112.0Financial activity 51,989 100.1 113.5 1.8 timesReal estate operations, rent and 35,064 104.4 111.5 118.3servicesPublic administration, military 29,727 108.2 103.1 100.3security, social insuranceEducation 21,775 111.9 110.6 73.5Health care and social services 24,881 105.6 110.1 83.9Other community, social and 28,998 117.5 125.9 97.8personal servicesSource: Territorial branch of the Federal State Statistic Service Doing business in St. Petersburg144 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 145. 5.2.2. Salary, benefits and compensation survey Information for the current chapter was developed and kindly provided by CASECASE conducts cross-industry and industry-specific surveys of salaries, benefits and compensationsin St. Petersburg and other cities in Russia twice a year in spring and fall.5.2.2.1. Sample characteristics90 Russian and foreign companies engaged in different business sectors took part in a surveyconducted in October-November 2011. Employers provided information on 154 positions of variouslevels in various professional fields. CASE analyzed salaries of more than 21 thousand employees.Type of company Business area 6% Production 34% Russian Industry / B2B 33% Foreign FMCG, DCG 49% 44% 50% Services 28% Joint IT – Telecom 17% Retail 12%Size of company less than 100 employees in 14% St.Petersburg 100-500 employees 40% 46% more than 500 employees5.2.2.2. Salary raiseIn 2011 64% of the analyzed companies raised salaries for their employees. The average raiseconstituted 9-10%. Only 44% of the companies reported their intent to raise salaries in 2012. Theplanned average raise constitutes 8-10%. 60% of the companies reported their intent to re-examinesalaries once a year, 9% - twice a year, 30% - without specific periodicity. Most of the companies re-examine their salaries in January, April or July.Pay raise percentage (from September 2010 to October 2011) Salary 8.6% Total income 6.8% Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 145
  • 146. 5.2.2.3. BonusesMore than 70% of the companies pay periodic bonuses (monthly, quarterly) based on performance.Approximately 70% of the companies pay yearly bonuses.Share of bonuses and commissions in employees’ annual income 19% 14% 19% 24% 36% 81% 86% 81% 76% 64% Production Office Sales Middle Top management management Salary Other income5.2.2.4. Average salaries (as of October 2011) and personnel characteristicsPosition Average salary, RUB Average monthly income (salary + (prior to individual income tax bonuses), RUB withholding) (prior to individual income tax withholding)Secretary 25,083 26,851HR specialist 32,148 35,200Accountant 35,359 38,615System administrator 42,174 45,806Advertising & marketing specialist 38,040 41,772Customer representative 25,192 41,168Sales assistant 15,942 24,016Manufacturing line operator 23,924 28,624Mechanic 32,493 37,374Warehouse attendant 24,559 28,642 Average personnel turnover coefficient – 23% Average age of employees (operational personnel) – 35 years Training and development opportunities – 93% Availability of programs for attracting young specialists – 41% Cooperation with Universities – 84%While 49% of the companies are not planning to change the number of employees in 2012, 43%intend to increase and 8% - to decrease the number of employees. Doing business in St. Petersburg146 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 147. 5.2.2.5. Benefits, compensations and working conditions Financial assistance 84% Meals 54% Sport benefits 33% Add. sick leave payments 46% Add. vacation days 46% Add. insurance 62% VHI 79% Mobile phone* 97% Company car* 70% * for specific group of employees Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 147
  • 148. 5.3. Office, retail and warehouse market Information for the current chapter was developed and kindly provided by Jones Lang LaSalle5.3.1. Office market overview5.3.1.1. Supply In 2011 modern office stock (Classes A and B) in th.sq.m Class A&B stock dynamics St. Petersburg exceeded 2 million sq.m, 2400 including 523,500 sq.m of Class A and 1,502,200 2200 sq.m. of Class B premises. Completions volume 2000 returned to average pre-crisis level, although it 1800 was lower than in 2008-2009, when over 1600 300,000 sq.m. were delivered annually. In 2011 1400 the total volume of completions reached nearly 1200 170,080 sq.m. Future office projects currently 1000 under construction are not numerous. Around 320,000 sq.m of office space will be delivered to 800 the market by the end of 2013 not considering 600 delays. The volume of completions announced 400 for 2012, however, is only around 200,000 sq.m, 200 mainly due to a number of projects announced 0 2004 2005 2006 2007 2008 2009 2010 2011 2012F for delivery in 2011 being delayed. The geographical distribution of new supply in the Class A Class B next two years is split between the central part of the city and Moskovsky district of St.Petersburg, where over 30% of future supply is announced for delivery.5.3.1.2. Demand After the first quarter of 2011, when significant th.sq.m. Completions and net absorption amount of office space was absorbed via purchases, owner-occupied construction and 140 lease, the city witnessed subdued activity from 120 tenants. Even at the year-end normal spike in tenants’ activity was not observed. In 2011 net 100 absorption figures for Classes A and B reached 80 about 236,800 sq.m, whereas in 2010 the 60 annual volume of net absorption was 173,000 sq.m. 40 Sector wise, the most active companies in the 20 market were those from Wholesale & Retail industry with 24% share, Construction and 0 Mining & Exploration industries with 16% and Q1 2007 Q3 2011 Q3 2007 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 -20 13% respectively. Recent activity of Construction sector confirms its recovery after the crisis. At the same time Banking & Finance Completions Net absorption sector remains subdued, operating mainly in the B2C segment and leasing street-retailpremises. IT companies were also active on the market in 2011. Doing business in St. Petersburg148 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 149. 5.3.1.3. Market balance and rents Rent and vacancy rate dynamics Since the beginning of the year the average USD/sq.m/ vacancy rate has decreased from 19.7% to year 13.5%. At the end of 2011, the volume of 800 30% available space was around 270,000 sq.m. 700 25% Potential tenants remain price-sensitive, which 600 limits rental growth. In 2011 rental rates 20% remained stable with only minor changes 500 explained mainly by currency rate at USD 320- 400 15% 400 for Class A and USD 240-320 for Class B 300 10% office buildings. Slight growth within 5% for 200 rouble-denominated rents was observed 5% throughout the year. Prime office rents rose 100 from USD 500 to USD 550 per sq.m/year 0 0% (excluding VAT and OpEx). Further growth is 2004 2005 2006 2007 2008 2009 2010 2011 expected to be uneven due to high volumes of Base rent, Class A remaining available space. Base rent, Class B Vacancy rate (R axis)5.3.1.4. OutlookFurther market development will be highly dependent on the general economic conditions in thecountry, which in turn influence demand for office space. The expected higher level of completionswill result in sustained vacancy rates. The current elevated level of available space will also limitpotential rental growth. Real rental increase is expected to be at 5-7% with the most popular officeproperties demonstrating even greater increases. 2004 2005 2006 2007 2008 2009 2010 2011Stock at the end of 506.7 634.8 821.3 997.2 1,402.7 1,713.6 1,825.6 2,025.7year (thousand sq.m)Completions 192.3 128.1 186.5 175.9 405.6 310.9 111.9 170.08(thousand sq.m)Vacancy rate (%) 5.0 5.0 6.1 5.8 15.0 25.9 19.7 13.5Prime base rent 500 600 800 900 1,000 600 500 550(USD/sq.m/year)Source: Jones Lang LaSalle, 2011 Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 149
  • 150. 5.3.2. Retail market overview5.3.2.1. Supply In 2011 the quality shopping center stockth. sq.m. Shopping center stock reached almost 1.6 million sq.m. The level of 2000 14% completions in 2011 exceeded average retail 12% volumes delivered in 2009-2010 (i.e. 100,000 1600 sq.m.) and reached 200,000 sq.m. Seven new 10% quality shopping centers were delivered to the 1200 market in 2011, with the largest projects being 8% Leto SEC (79,000 sq.m.) and City Mall 2nd phase 6% (30,400 sq.m.). Around 200,000 sq.m. of new 800 quality retail space is planned for delivery in 4% 2012 not considering possible delays. 400 2% The year 2011 was characterized by a number of market trends, including redevelopment of 0 0% existing outdated retail schemes and 2004 2012F 2013F 2005 2006 2007 2008 2009 2010 2011 concentration of new shopping centers of Annual completions average size (from 20,000 to 40,000 sq.m. of Stock at the beginning of the year leasable space) near new metro stations, Vacancy rate (R axis) whereas larger formats have been focused on actively developed residential zones.Both projects that were frozen in crisis period, and new retail schemes are once again being activelydeveloped. Approximately 460,000 sq.m. of retail space will be delivered to the market in 2012-2013, although previously the estimations of future pipeline were more moderate.5.3.2.2. Demand Real turnover growth in January-October 2011 Retail turnover and income showed low but positive values, increasing 2.6% dynamics YoY in real terms. Real income growth dynamic 80% was quite moderate as well, at 3.6% YoY based on the first nine months in 2011, whereas pre- 60% crisis indicators rarely showed annual growth values below 10%. 40% Lower indicators such as these may limit the 20% interest of international newcomers to the market, although a number of retailers, who 0% have already started their activity in Moscow, Mar 08 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 are considering St. Petersburg market for -20% further development as well. Those brands, that have not entered the Russian market yet, -40% are opting to wait for the economic situation to Real income growth, % YoY become clearer. At the same time, both local and international Retail turnover real growth, % YoY retailers which are already present in the city,are expanding their presence. Their expansion is restrained, however, by the lack of quality retailspace in popular shopping centers. In 2011 the average vacancy rate declined from 7% to 6%. Doing business in St. Petersburg150 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 151. 5.3.2.3. Rents Prime rental rates in high quality shopping Prime base rents, USD/sq.m/year centers remained at USD 2,000 per sq.m. throughout the year, whereas rents for some Budapest types of tenants, such as cafes and restaurants, entertainment, supermarkets and Hamburg hypermarkets, showed growth between 10- Warsaw 20% depending on segment. Berlin Turnover rent, as an alternative for fixed rents, remains as an option in leasing contracts. Prague However, the target turnover rent is rarelySt. Petersburg achieved, so fixed rate is applied more widely than that based on turnover. Rents Paris denominated in USD or EUR often specify a London fixed lower limit of the exchange rate. Rouble- denominated rental contracts usually include Moscow an annual increase of 5-10%. Foreign 0 500 1000 1500 2000 2500 3000 3500 4000 4500 developers are using LIBOR and HICP indices for rental indexation.5.3.2.4. OutlookThe lack of retail turnover growth and instability of the world economy might force retailers to slowdown their expansion plans. There will be a limited number of new brands entering market in 2012.Competition between brands already operating on the market will continue to strengthen as long asthe developers will be considering them as potential occupiers in the situation of lack of newinternational retailers. As a result, prime rents are expected to show a raise during next year. Therental increase is expected to reach about 5-10% in 2012. 2004 2005 2006 2007 2008 2009 2010 2011Stock at the end of 117.6 186.2 809.5 101.5 1,194.8 1,234.8 1,380.5 1,581.1year (thousand sq.m)Completions 61.7 68.6 623.3 201.0 184.4 40.0 145.7 200.6(thousand sq.m)Vacancy rate (%) 0.5 0.5 0.7 1.0 3.0 13.0 7.0 6.0Prime base rent 2,000 2,100 2,400 3,000 3,000 1,800 2,000 2,000(USD/sq.m/year)Source: Jones Lang LaSalle, 2011 Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 151
  • 152. 5.3.3. Warehouse market overview5.3.3.1. Supply By the end of 2011, quality warehouse stock inth.sq.m. Stock and vacancy rate dynamics St. Petersburg reached 1.76 million sq.m. Four 1800 25% Class B warehouse projects were delivered to the market with the total leasable area of 1500 20% 43,800 sq.m, including the owner-occupied complex of 19,800 sq.m. Annual supply was 1200 15% very low, as there were no speculative 900 warehouse complexes delivered to the market in the previous three quarters of 2011. 10% 600 After the construction boom of 2007-2008, 5% when half of the existing supply was delivered, 300 developers are not eager to return to active expansion. Currently, there is a small number of 0 0% projects under construction. However, some 2012F 2004 2005 2006 2007 2008 2009 2010 2011 developers resumed work under previously stalled projects or announced new projects for Existing stock Vacancy rate (R axis) 2012-2013. At the same time, key market players prefer to work on ‘built-to-suit’ projects. This trend is expected to grow in the nearesttwo years as a number of such projects is in negotiation stage now.5.3.3.2. Demand Demand for new warehouse space in 2011 wasUSD/sq.m/y Prime rental rates ear comparable with 2010. Net absorption reached around 152,000 sq.m. from the beginning of 160 2011, with the share of H2 deals constituting 140 more than half of the total volume. The total volume of deals was even higher. The most 120 popular size of a single deal was still 5,000- 100 10,000 sq.m. Larger spaces were also in demand. One third of all deals closed in 2011 80 were in a range of 15,000-20,000 sq. m. 60 In January-September 2011 the most active occupiers on the St. Petersburg warehouse 40 market were manufacturing, and retail and 20 distribution companies. Logistic companies became more active in the end of the year, and 0 as a result the volume of deals in this segment 2011 2003 2004 2005 2006 2007 2008 2009 2010 reached more than 30% (62,000 sq. m) of all space leased in quality warehouse complexes from the beginning of 2011. Doing business in St. Petersburg152 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 153. 5.3.3.3. Market balance and rents Warehouse demand breakdown The vacancy rate has been declining since the by company name beginning of 2010. In 2011 it went down from 16% in the beginning of the year to 4% in the end of the year. This was a result of 2011 supply/demand misbalance, when very low 2010 completion level was accompanied by high absorption level throughout 2011. Currently, 2009 the volume of available space in quality 2008 warehouse projects is well below 100,000 sq.m. 2007 Stable growth of demand resulted in rental increase. In 2011 rental rates increased from 2006 USD 95-105 to USD 110-120 per sq.m/year showing annual growth of 5-10% on average 0% 20% 40% 60% 80% 100% and up to 15% for the most demanded Logistic properties. As the volume of available space Manufacturing remains limited, rent is expected to grow Retail and distribution throughout the next year as long as economic Other situation remains stable.5.3.3.4. OutlookTrends observed during the last year will continue in 2012. Vacancy rate will continue to decline dueto the limited number of projects planned for delivery to the market. Rental rates will increase withthe same speed as in 2011 showing 5-10% growth per year. A tangible lack of class A premises isexpected as only two warehouse projects with the total leasable area of 50,000 sq.m. are planned toenter the market. Occupancy rate in these projects is already close to 50%. 2004 2005 2006 2007 2008 2009 2010 2011Stock at the end of 118.3 460.8 595.8 1,081.7 1,511.9 1,644.1 1,717.9 1,756.7year (thousand sq.m)Completions 110.3 342.5 135.0 485.9 430.2 132.1 73.8 43.8(thousand sq.m)Vacancy rate (%) 0.1 0.3 0.5 1 19.7 22.3 16.2 4.4Prime base rent 110 115 125 150 110 90 105 120(USD/sq.m/year)Source: Jones Lang LaSalle, 2011 Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 153
  • 154. 5.4. CommunicationYou can easily find all communication channels to suit your business needs in St. Petersburg.Providers offer various telephone, mobile and internet services, depending on your location(technical availability) and needs. Stationary and mobile telephone networks are well developed in St. Petersburg. Quality phone coverage is available at affordable prices.61 Landline communications are available from a number of operators. Most mobile operators in St. Petersburg run on GSM and CDMA 2000 networks. GSM networks are mostly widely used and cover all parts of the city. CDMA offers quality communication as well as high-speed Internet access. The largest GSM operators are Beeline, Megafon, MTS, Tele2; CDMA 2000 – Skylink. IP calling cards are intended for international, national and local calls. You can use the following cards to optimize you international communication costs – Apollo Phone, Arctel, Master, Metrocom, Peterstar, Phoneclub, Web plus, West call. Virtually all forms of technology for Internet connections are available in the city. Depending on your location, it is possible to obtain a necessary connection type, including dial-up connection, ADSL, dedicated channels, Wi-Max. Free or paid Wi-Fi hotspots can be accessed at the airport, major hotels, shopping and office centers & restaurants.61 Detailed information on tariff plans and services can be found on company’s websites. Doing business in St. Petersburg154 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 155. 5.5. UtilitiesUtility prices (electricity, water, heating and gas) for business as well as consumer purposes in Russiaare regulated by the state. In St. Petersburg the regulating bodies are the Regional EnergeticsCommission of St. Petersburg Government and the Tariff Committee of St. PetersburgAdministration.5.5.1. ElectricityThe following electricity tariffs are effective beginning January 1, 2012 and ending June 30, 2012:Grades and zones Units Tariffs*1 grade tariff RUB/kW per hour 2.80Tariffs varied per day/night zones Night zone RUB/kW per hour 1.71 Day zone RUB/kW per hour 2.81*Inclusive of VAT. Tariffs provided for residential customers.Source: Tariff Committee of St. Petersburg Administration.5.5.2. Water supply and water dischargeThe following water tariffs by the State Unitary Enterprise “Vodokanal of St. Petersburg” areeffective beginning January 1, 2012 and ending December 31, 2012:Type of customers Units Tariffs* Drinking water Technical water Water dischargePopulation RUB per cubic 15.78 — 15.78 meterOther RUB per cubic 18.70 3.38 21.74 meter* Tariffs (with the exclusion of residential customers tariffs) are indicated exclusive of VAT. Tariffs provided for residentialcustomers are valid till June 30, 2012.Source: Tariff Committee of St. Petersburg Administration.5.5.3. HeatingThe following heating tariffs are effective beginning January 1, 2012 and ending June 30, 2012:Type of customers Units Tariffs* Hot water SteamCustomers (that pay for RUB per 1,207.34 1,207.34heat generation and hectocalorytransfer)Population RUB per 1,424.66 — hectocalory* Tariffs (with the exclusion of residential customers tariffs) are indicated exclusive of VAT.Source: Tariff Committee of St. Petersburg Administration. Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 155
  • 156. 5.5.4. Natural gasNatural gas tariffs may vary depending on location, season, volume of consumption and otherissues.The following natural gas tariffs are effective beginning January 1, 2012: Units Tariffs* 01.01.2012 – 30.06.2012 01.07.2012 – 31.12.2012Natural gas RUB per 100 3,805.78 4,375.07 cubic meters* Inclusive of VAT. Tariffs provided for residential customers.Source: Tariff Committee of St. Petersburg Administration.5.5.5. Gasoline and diesel fuelFuel prices are not regulated by the state. Numerous local and international supplies, including BP,Shell and Statoil, operate in St. Petersburg.The average retail prices of gasoline and diesel fuel in St. Petersburg are provided in the followingtable.Fuel Units Average retail price*GasolineA76 RUB per liter 25.79Ai 92 RUB per liter 26.48Ai 95 RUB per liter 28.60Diesel RUB per liter 28.13* Retail prices (inclusive of VAT) as of December 2011.Source: Committee for Economic Development, Industrial Policy and Trade. Doing business in St. Petersburg156 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 157. 6. SME support6.1. OverviewSt. Petersburg has been and still remains the leader in the development of small businesses amongother regions of the Russian Federation. During the recent years small business has been gainingmore weight in the local economy.According to the National institute for system studies of entrepreneurship, St. Petersburg is rankedas the leader along the number of key indicators: #1 region in the number of small businesses (368.7) per 100 thousand residents #1 region in the volume of small business turnover (312%) per capita in percentage of the average in the Russian Federation #2 region in the number of residents employed in small businesses (345.3 thousand).62As for world rankings, St. Petersburg is ranked 18th in the number of small businesses per 100thousand residents and 33d in the share of residents employed in small businesses. These indicatorsare three times and 1.3 times higher than the respective average Russian indicators.636.2. Definition of SME – EU vs. RussiaSmall and medium-sized enterprises (SMEs) are non-subsidiary, independent firms, which employless than a given number of employees. This number, however, varies across countries. In the wordsof the Organization for Economic Co-operation and Development (OECD) Glossary of StatisticalTerms "the most frequent upper limit designating an SME is 250 employees, as in the EuropeanUnion". Some countries set the limit at 200 employees, while the United States considers SMEs toinclude firms with less than 500 employees. In most OECD countries small enterprises are those withless than 50 employees, while micro-enterprises have at most 10 or, in some cases, 5 employees. Inaddition to this, financial assets are also used to define SMEs.64The federal law #209-FZ “On small and medium business development in the Russian Federation”which defines small, medium-sized and micro enterprises was adopted in 2007. The following tablesummarizes the differences in definitions of medium-sized, small and micro enterprises in Russianand the European Union. Medium-sized Small MicroIndicators EU Russia EU Russia EU RussiaHeadcount, and 250 101-250 50 15-100 10 1-15either: Turnover € 50 mln RUB 1 bln € 10 mln RUB 400 mln € 2 mln RUB 60 mln. ≈ € 24 mln ≈ € 9.6 mln ≈ € 1.4 mlnOr: Balance sheet total € 43 mln - € 10 mln - € 2 mln -Source: European Commission. Enterprise and Industry. Small and medium-sized enterprises (SMEs): SME Definition;Federal law #209-FZ “On small and medium business development in Russian Federation”.62 As of the beginning of 201163 Committee for Economic Development, Industrial Policy and Trade64 OECD Glossary of Statistical Terms (www. stats.oecd.org/glossary). Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 157
  • 158. 6.3. StatisticsNumber of smallbusinesses(thousand units): 301.4 276.3 261.5 227.8 180.8 01.01.2007 01.01.2008 01.01.2009 01.01.2010 01.01.2011 Source: Committee for Economic Development, Industrial Policy and TradeType of smallbusinesses 207(thousand units): 185.1 189.7 162.4 126.9 86.6 94.4 76.4 65.4 53.9 01.01.2007 01.01.2008 01.01.2009 01.01.2010 01.01.2011 Individual entrepreneurs Companies Source: Committee for Economic Development, Industrial Policy and TradeSmall businesses bysector of economy 4% Wholesale and retail trade, repair of(2010): motor vehicles and household goods Manufacturing Construction 20% Hotels and restaurants 4% 45% Transportation and communication Other communal, social & personal services 9% 8% 8% Real estate, rental & leasing and other 3% services Other Source: Committee for Economic Development, Industrial Policy and Trade Doing business in St. Petersburg158 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 159. Turnover of smallbusinesses 1,266(billion roubles): 1,086.4 981.3 927.8 608.7 2006 2007 2008 2009 2010 Source: Committee for Economic Development, Industrial Policy and TradeInvestment in fixedcapital of smallbusinesses 01.01.2011 542 749 2,401(million roubles): 01.01.2010 406 257 2,280 01.01.2009 1,098 857 1,731 01.01.2008 407 991 2,253 Manufactruring Trade Other Source: Committee for Economic Development, Industrial Policy and Trade Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 159
  • 160. 6.4. SME support and development programsSmall business development program has been functioning in St. Petersburg since 2008. A numberof special programs have been implemented since the launch of the program, including theestablishment of the Venture Fund, City Business Incubator, Fund for Small Business CreditAssistance, and Enterprise Europe Network - St. Petersburg branch.The city has managed to significantly reduce the problems of limited financial resources for start-ups, high rental costs, unfavorable credit conditions and complexities of new market entry. Duringthe program implementation period the number of small businesses has increased by almost 70%(from 181 thousand in 2007 to 301 thousand in 2011).656.4.1. Implementation of the Action Plan aimed at development and support of small business in St. Petersburg (2008-2011)The priorities of the Action Plan implemented during the period of 2008-2011 included: Development of human resources potential; Financial support; Strengthening of market positions; Development of social partnership; Information support; Increasing public significance; Improving information management of authorities.The total financing of the program amounted to 4,078.4 thousand roubles. In 2010 the Action Planstipulated the implementation of 30 activities, which included both direct and indirect support ofsmall businesses. 879.7 million roubles were allocated for the implementation of the activities in2010.The following 9 special programs of the Action Plan envisaged direct and indirect subsidizing ofparts of expenditures incurred by small businesses: Business loans from commercial banks for small businesses; Rental subsidies for separate groups of businesses; Participation in exhibitions and fairs; Leasing of fixed assets; Grid connection subsidies; Small business start-up grants; Export subsidies for small businesses manufacturing export products or/and works, services.Manufacturing enterprises represent a priority target group of the subsidy program. In 2010manufacturing enterprises were granted 22,7445.9 thousand roubles in subsidies, thus accountingfor 62.6% of the total volume of all subsidies for small businesses.6665 Committee for Economic Development, Industrial Policy and Trade66 Committee for Economic Development, Industrial Policy and Trade Doing business in St. Petersburg160 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 161. The results of the implementation of the Action Plan aimed at development and support of smallbusinesses in St. Petersburg (2008-2011) are presented in the following table.Major problems Program solution ResultsLimited financial Special programs 1 bln roubles in subsidies granted toresources 3,787 small businesses Special credit assistance program 1,151 subsidies granted to the amount of 240 mln roubles Establishment of the Fund for Small 859 contracts of guarantee to the amount Business Credit Assistance of 2.7 bln roubles which allowed to secure 6.2 bln roubles in creditsHigh rental costs Establishment of the First City Business More than 100 small companies have Incubator undergone business incubation period Buy-back of rental premises 1,361 purchase and sale agreements concludedShortage of qualified Special program - Regional University of More than 2,500 specialists educated andhuman resources Small Business trainedComplexities linked Establishment of Enterprise Europe Services provided to 800 small businessesto new market entry Network - St. PetersburgAdministrative Establishment of the Public Council on Effective dialogue pursued betweencontrol issues Small Business Development under the businesses and authorities auspices of the Governor of St. PetersburgSource: Committee for Economic Development, Industrial Policy and Trade6.4.2. Program for small and medium business development in St. Petersburg for 2012-2015A new Program for small and medium business development in St. Petersburg envisages theimplementation of the following major goals till 2015: Increasing the comfort of living Promoting affordability and diversified assortment of products and services provided to the residents of St. Petersburg Increasing self-employment among population Increasing the number of work places, growth in the number of population employed in small business Changing the sectoral structure of small business Increasing the share of manufacturing and innovative sectors, growing small businesses into medium-sized businesses, thus increasing budget tax receipts.The Program’s budget constitutes around 3.4 billion roubles for the period from 2012 till 2015 withthe largest share allocated for the financing of special subsidy programs as well as placement ofgovernment contracts with small and medium-sized business.The Program envisages a 1.5% increase in the share of products (works, services) produced by smalland medium-sized businesses in the total GRP volume as well as a 5% increase in tax receipts fromsmall and medium-sized businesses, and a 10% increase in the share of innovative andmanufacturing enterprises. Small and medium-sized business is to increase the number of workplaces by 7%, which will allow to increase the share of population employed in this sector by 2.5%.The growth in the average salary paid by small and medium-sized businesses is to constitute 10%.6767 Committee for Economic Development, Industrial Policy and Trade Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 161
  • 162. The major activities implemented in the framework of the Program are presented in the followingtable: Focus of the Program Types of support 1. Improved access to financial Special programs: resources - Leasing of fixed assets - Business incubator - Business loans from commercial banks for small manufacturing businesses - Subsidies for small arts & crafts businesses - Grid connection subsidies - Small business start-up grants - Franchising costs subsidies - Increasing the assets of the Fund for Small Business Credit Assistance - Increasing the assets of the Fund for Venture Investments Development into Small Scientific and Technology Businesses 2. Strengthening of SMEs positions Special programs: at intraregional, interregional and - Enter the regional markets international markets - Exhibitions and trade fair activities - Certification - Intellectual rights protection - Enterprise Europe Network – St. Petersburg - Export subsidies for small businesses manufacturing export products or/and works, services - Improvement of energy efficiency of SMEs production Subsidies: - Support of SMEs pursuing innovative activities within a cluster through acquisition of manufacturing and technological equipment - Development of the localization, import substitution and subcontracting system - Establishment of the regional center for the coordination of export-oriented SMEs 3. Development of social - Functioning of the Public Council on Small Business partnership Development under the auspices of the Governor of St. Petersburg and specialized commissions 4. Development of human resources Special programs: potential - Regional University for Small Business - Basics of entrepreneurship for school students - Women entrepreneurship support - Technological internships - Promoting youth entrepreneurship 5. Increasing public significance of - Popularization of entrepreneurship; SMEs - Support of business initiatives of socially unprotected groups of population 6. Improved information support - Complex monitoring of SMEs - Collection, analysis, systematization and distribution of legal, economic, marketing and other business information for SMEs via Internet - Development and management of the state information system of St. Petersburg “St. Petersburg’s Register of SMEs and business support infrastructure”Source: Committee for Economic Development, Industrial Policy and Trade Doing business in St. Petersburg162 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 163. 6.4.3. Further informationFurther details are available at the official website of the Program for Small Business Developmentin St. Petersburg at www.spb-mb.ru.6.4.4. ContactsCommittee for Economic Development, Industrial Policy and Trade16 Voznesensky prospect190000 St. Petersburg, RussiaTel.: +7 812 576 00 01 | Fax: +7 812 570 35 54info@cedipt.spb.ru | www.cedipt.spb.ru | www.spb-mb.ru Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 163
  • 164. 7. Contacts of the business support infrastructure7.1. Overview of the business support infrastructure in St. PetersburgBusiness support infrastructure provides extensive opportunities for business development duringthe economic downturn and support for securing future economic prosperity and growth. Thissection of the guide summarizes the existing support from government to help your businesssucceed, including financial support, advice, consulting, information, skills training, etc.7.2. Authorities7.2.1. Committee for Economic Development, Industrial Policy and TradeThe Committee for Economic Development, Industrial Policy and Trade is tasked with long-termobjectives of development of growing economy with high level of competitiveness and share ofhuman capital. The Committee is comprised of the following 6 blocks each formed of specializeddepartments and units: Economic Planning; Development of Industry, Agri-Industrial Complex andEconomic Security; Support of Industry, Small and Medium-Sized Entrepreneurship; Developmentof Innovations and Investment Attraction; Consumer Market and Licensing; Improvement of PublicContracting, External Economic Activity, Development of Medical and Pharmaceutical Projects.Tasks Implementation of socio-economic development program of St. Petersburg; Development and implementation of programs aimed at supporting industry, small and medium-sized businesses in St. Petersburg; Support of implementation of investment projects in St. Petersburg; Implementation of innovation policy in St. Petersburg; Implementation of cluster policy; Regulation of trading activities; Licensing of certain activities; Organization and implementation of citywide celebrations, forums and trade fairs.The Committee is also entrusted with evaluation and coordination of other committees of theGovernment of St. Petersburg as well as district administrations in the above-mentioned areas.Together with the Finance Committee, Tariff Committee and Labor and Employment Committee,Committee for Economic Development, Industrial Policy and Trade forms the financial andeconomic sector of the Government.ContactsCommittee for Economic Development, Industrial Policy and Trade16 Voznesensky prospect190000 St. Petersburg, RussiaTel.: +7 812 576 00 01 | Fax: +7 812 570 35 54info@cedipt.spb.ru | www.cedipt.spb.ru Doing business in St. Petersburg164 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 165. 7.2.2. Committee for External RelationsThe Committee for External Relations of the Government of St Petersburg is tasked withimplementation of the government policy of St. Petersburg in the sphere of development ofexternal relations and interregional cooperation. The Committee includes the following specializeddivisions and departments: State Protocol Division; Department for Europe, North America andAustralia; Asian, African and Latin American Countries Department; Department for Coordination ofState Programs for Interethnic Relations, Cooperation with Compatriots Abroad and Regions of theRussian Federation.Tasks Implementation of the government policy of St. Petersburg in the sphere of the development of external relations of St. Petersburg, interregional cooperation of St. Petersburg Coordination of activities in the development and implementation of international technical assistance and business cooperation programs, including those related to the development of the city economy, social sphere, education, culture and health care in St. Petersburg Coordination of activities in the organization of participation of citizens and organizations in interregional and international conferences and other interregional and international events held by the executive agencies of the St. Petersburg government Implementation of the government policy aimed at supporting and developing ethnic cultures, languages, traditions and customs of the communities residing in St. Petersburg Organization of work aimed at supporting compatriots residing abroad and using their potential for the development of relations with foreign countries Other issues of foreign relations of St. Petersburg in compliance with the legislation in force.ContactsCommittee for External Relations of St. PetersburgSmolny191060 St. Petersburg, RussiaTel.: +7 812 576 71 13 | Fax: +7 812 576 76 33kvs@gov.spb.ru | www.kvs.spb.ru Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 165
  • 166. 7.3. Investment support7.3.1. St. Petersburg Investment Promotion Agency (St. Petersburg State Institution “City Agency for Industrial Investments”) St. Petersburg Investment Promotion Agency (St. Petersburg state institution “City Agency for Industrial Investments”) has been working on implementation of St. Petersburg investment policy and providing integrated support of investment projects for 7 years. The Agency has thestatus of a duly authorized organization of the St. Petersburg Government for attraction ofinvestments into the City. The mission of the Agency is to increase the investment potential of St.Petersburg and improve its competitiveness both on domestic and external markets.The Agency liases closely and personally with every customer and renders full spectrum of investorsupport services free of charge.ServicesThe Agency renders the following services: Information and consulting support at all stages of investment projects; Providing information necessary to make decisions on investment, e.g. conditions for doing business in St. Petersburg, availability of sites and condition of infrastructure facilities, applicable legislation and forms of state support, possible partners and project financing sources; Selection of land plots most suitable for project implementation; Arrangement and carrying out of meetings with participation of stakeholders and project implementation organizations, resolution of current and extraordinary matters; Support of investment projects at all stages of design, construction and commissioning of facilities; Coordination of investor interaction with executive agencies of the State Government in St. Petersburg, subordinate institutions and other entities participating in projects; Assistance in obtaining necessary approvals (statements, permitting documents) from authorized agencies and organizations; Preparation of documents for obtaining initial permits and town-planning documents for designing and construction, commissioning of construction/ reconstruction facilities, execution of property rights for land plots and real property facilities.ContactsSt. Petersburg Investment Promotion AgencySt. Petersburg State Institution “City Agency for Industrial Investments”88-90 A Griboedov Canal Embankment190068 St. Petersburg, RussiaTel.: +7 812 320 50 16 | Fax: +7 812 320 50 15gapi@spbgapi.ru | www.spbgapi.ru Doing business in St. Petersburg166 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 167. 7.4. SME business cooperation support7.4.1. Enterprise Europe Network – Module A Branch – St. Petersburg The Enterprise Europe Network (EEN) is a key instrument in the EUs strategy to boost growth and jobs. Bringing together 570 business support organizations from 49 countries, we help small companies seize the unparalleled business opportunities in the EU Single Market. ENN’s mission lies in helping small businesses make the most of the business opportunities in Russia and the European Union.Enterprise Europe Network - Russia, Gate2Rubin Consortium, Module A Regional Center – St.Petersburg is co-financed by the Government of the Russian Federation and the Government of St.Petersburg and is operated by St. Petersburg Foundation for SME Development since 2008.ServicesThe EEN branch in St. Petersburg focuses on providing business support to Russian companies. Ourservices to foreign companies are provided free of charge and are aimed at fostering businesscooperation: Events Together with our partners we implement a number of international and national events aimed at developing and promoting international business cooperation. Basic partner search In order to find business partners, suppliers or subcontractors in St. Petersburg, please contact your local EEN branch and our colleagues will guide you through the partner search process. Partners, business offers and products from St. Petersburg You can find business offers and products from companies located in St. Petersburg on our portal at www.doingbusiness.ru . Information support Our internet portal “Doing business in St. Petersburg” is an entry point for international SMEs, investors and other parties interested in pursuing trade, outsourcing, investment activities and starting business in St. Petersburg.Extensive information on our services as well as key business and investment issues is available inEnglish at www.doingbusiness.ru.ContactsEnterprise Europe Network – RussiaGate2Rubin Consortium,Module A Regional Center – St. Petersburg14 Izmaylovsky prospect190005 St. Petersburg, RussiaTel.: +7 812 325 84 16, 325 8351, 575 04 80 | Fax: +7 812 712 66 07info@enterprise-europe-network.ru | www.doingbusiness.ru Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 167
  • 168. 7.5. SME support7.5.1. St. Petersburg State Institution “Center for Business Development and Support” The Center of Business Development and Support (CBDS) aims to improve the quality and accessibility of state services for juridical entities and individual entrepreneurs. CBDS was established in 2010 and is managed by the Committee for Economic Development, Industrial Policy and Trade.Services Do you need to get permit, license, agreement to develop your business? Make use of the services provided at the Multi-Services Center. The Multi-Services Center started to provide various state services for entrepreneurs on the basis of one-stop shop in cooperation with 11 executive authorities of St. Petersburg from January 2012. Would you like your company to participate in state support programs? CBDS advises SMEs on state support programs, such as crediting by commercial banks, backing the costs caused by product exports, protection of intellectual property, certification, acquisition of fixed assets on leasing, energy efficiency. CBDS contributes to involvement of St.Petersburg’s SMEs in the process of creating high-tech products on subcontract basis paving the way for localization of the leading foreign companies. Further, the Center implements the mechanism of import substitution in cooperation with large -scale enterprises of St. Petersburg. Do you have any ideas? Do you want to create or have you already been creating new products and technologies? CBDS facilitates the implementation of measures aimed at stimulating R&D activities and contributes to the development of Technological platforms. The Center provides support to St. Petersburg companies participating in competitions for funding of innovative projects by the programs of innovative development of companies with state participation, government corporations, federal state unitary enterprises, as well as in federal programs. The Center cooperates with development institutions and St. Petersburg organizations tasked with ensuring continuous financial and non-financial support for innovative projects. CBDS promotes the creation of R&D-centers in St. Petersburg.The Center conducts educational seminars, panel discussions, meetings and consultations as well asassists in the organization of fairs and exhibitions. Extensive information on services and activities isavailable at www.crpp.ru.ContactsSt. Petersburg state institution “Center of Business Development and Support”16 Voznesenski prospect190000 St.-Petersburg, RussiaTel.: +7 (812)576-25-89 | Fax: +7 (812)576-25-89info@crpp.ru | www.crpp.ruMulti-Services Centerlet. O 10-12 Krasnogo tekstilschika streetTel.: +7 (812) 417-31-31, 417-31-30Business hours: M-Th 9:30 am to 5.30 pm; Fri 9.30 am to 4.30 pm, Sa-Sun closed. Doing business in St. Petersburg168 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 169. 7.5.2. Public Council on Small Business Development under the auspices of the Governor of St. Petersburg Consulting and advisory body under the auspices of the Governor of St. Petersburg on the issues pertaining to the realization of government policy inthe sphere of small business development and support.Public Council unites representatives of the most important public business organizations, includingthe Union of Industrialists and Entrepreneurs of St. Petersburg, St. Petersburg Chamber ofCommerce and Industry, OPORA RUSSIA, St. Petersburg Union of Entrepreneurs, St. Petersburgbranch of «Business Russia», Merchant club of St. Petersburg and many others.Services Rendering assistance to executive authorities in the implementation of government policy in the sphere of small business development and support; Aligning interests of executive authorities and small business associations regarding the issues of implementation of socio-economic development policy of St. Petersburg; Developing recommendations on protection of rights and interests of small businesses in the course of development and implementation of economic, proprietary, city planning and social policy; Informing the Governor of St. Petersburg, Government and other executive authorities on the most acute problems of small business development; Developing positive image of small business, raising public confidence in businesses, developing business culture and business ethics.Public Council actively carries out analyses of legislative acts regulating business activities. A lot ofattention is also paid to information support. Public Council publishes periodical «Public CouncilNewsletter», presents TV program «Small business of a big city», organizes 4 city competitions –«Best entrepreneur of St. Petersburg», «Young, bold, ambitious», «Business lady Petersburger»,«Mass media about small business».Public Council regularly holds seminars, conferences, round tables on acute issues for businesses.ContactsPublic Council on Small Business Development under the auspices of theGovernor of St. Petersburg46/5 Mayakovskogo Street191014 St. Petersburg, RussiaTel.: +7 812 576 25 66, 576 26 59, 576 26 58 | Fax: +7 812 273 58 45sovet@osspb.ru | www.osspb.ru Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 169
  • 170. 7.6. Financial support7.6.1. Nonprofit organization “Fund for Small Business Credit Assistance” Nonprofit organization “Fund for Small Business Credit Assistance” was established by the Government of St. Petersburg in 2007. The Fund carries out two programs aimed at supporting small and medium businesses in St. Petersburg:Services Credit guarantee for businesses to the amount of 50% of the total credit amount and up to 12 million roubles Conditions of the credit guarantee program: - Credit agreements concluded for at least 3 months - Fund’s commission: 1.75% per annum - 37 participating banks Eligibility requirements: - Small and medium-sized businesses - At least 3 months of business activity prior to the date of application - No breaches of previously concluded credit agreements, loan agreements, leasing, etc. 6 months prior to the Fund’s guarantee application Loans to individual entrepreneurs and legal entities to the amount of 50,000-1,000,000 roubles at 10% interest per annum Conditions of the micro finance program: - Application review period: 3 to 5 days - Percentage accrues on the actual amount outstanding - Overpayment for 12 months: 5.5% - Maturity: 3 to 12 months - Repayment any time, commission free - Individual approach to every customer - Standard package of documents Means of loan guarantee: - Business owner guarantee - Loans up to 100,000 roubles: business owner guarantee - Loans over 100,000 roubles: guarantee and collateral (motor vehicles, property, bank guarantees, etc.)ContactsFund for Small Business Credit Assistancelet. A, 46 Mayakovskogo Street191014 St. Petersburg, RussiaTel.: +7 812 576 25 75 | Fax: +7 812 273 49 55credit-fond@bk.ru | www.credit-fond.ru Doing business in St. Petersburg170 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 171. 7.6.2. Nonprofit organization “Fund for Venture Investment Development Assistance for Small Science and Technology Enterprises of St. Petersburg” The Fund for Venture Investment Development Assistance for Small Science and Technology Enterprises of St. Petersburg was established by the Government of St. Petersburg with the participation of the Committee on Economic Development, Industrial Policy and Trade.The Fund aims to create and develop venture (risk) financing infrastructure for small science andtechnology businesses in St. Petersburg.Services Selection of innovative investment projects for small science and technology enterprises engaged in priority areas of science, technology and engineering in Russia The Fund carries out the selection of innovative projects for investment from two sources – (1) Closed-End Mutual Fund for High-Risk (Venture) Investments “Regional Venture Fund for Investment in Small Science and Technology Enterprises of St. Petersburg” and (2) “Fund for Seed Investments of the Russian Venture Company”. Selection criteria (1): - Volume of investment requested – from 10 to 90 million roubles - Transmission of more than 25% of shares to the Fund - Strong business team capable of developing a company in conditions of fast growth and limited resources - Availability of intellectual property rights (patents, copyrights, certificates) - Project aimed at development of a new type of knowledge intensive products (works, services) or increase of its technical level, introduction of new and improvement of applied technologies - High level of project development, potential for mid-term business development (4-7 years) at the regional, Russian and international markets, clear company development strategy and plan for application of investment resources - Business development plan, including description of risks linked to financing Selection criteria (2): - Volume of investment requested – up to 33.3 million roubles - Qualified team - Availability of intellectual property rights (patents, copyrights, certificates) - Attraction of investments with the aim of acquiring, development, manufacturing and promotion of commercial version of innovative product/service - Withdrawal from Investment company in 1-5 years is carried out though transmission of shares to strategic partner or venture fund or through buy-out of company’s management Expert support and consulting of project authors and innovation companies on investment support and preparation of investment projects The Fund advises entrepreneurs on venture infrastructure in St. Petersburg and provides information on government measures aimed at small business support.ContactsFund for Venture Investment Development Assistance forSmall Science and Technology Enterprises of St. Petersburg37 Sedova Street, office 802, 192148 St. Petersburg, RussiaTel.: +7 812 640 96 45, 910 34 33 | Fax: +7 812 640 96 45venture-spb@bk.ru | www.vf-spb.ru Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 171
  • 172. 7.7. Techno parks and business incubators7.7.1. Ingria Technopark and Business Incubator Ingria Technopark will be created on the principles of public-private partnership with the support of the Government of the Russian Federation and the Government of St. Petersburg. The project is a part of thefederal program aimed at creating techno parks in the sphere of high technologies. The total volumeof investment equals 30 billion, including 64% of private investment. The construction of the firststage will start in 2012 with the opening planned for 2013. Microsoft and DataArt have alreadyannounced their plans to locate their R&D centers in Technopark. Ingria Technopark is a member ofthe Association of technoparks in the sphere of high technologies of Russia since 2011.Business Incubator Ingria began operating as a pilot project of Technopark in December 2008. It is asubdivision of the managing company OJSC Technopark tasked with rendering assistance inaccelerated development of innovative companies. Information technologies is the keyspecialization of the residents. During the first 3 years of its operation the Incubators residentsattracted more than 500 million roubles in investments from international IT companies, private andstate funds, business angels. Ingria is actively developing its cooperation with Russian and St.Petersburg Universities, thus sharing its experience with other regions. Nowadays, BusinessIncubator Ingria has about 70 residents.Ingria residents are winners and finalists of many contests, including Web Ready, Start-11, the bestproject in the cluster in St. Petersburg, BIT-Online, the International Young Interactive EntrepreneurAward 2010, IBTEC-2010, Product/Solution of the year-2011 and many others.Services Programs offered to the residents Pre-Incubation and Incubation: Pre-Incubation lies in formation of a business model, while Incubation is aimed at progressing the business and entering the market. Regardless of incubation program, companies can reside in the office during their cooperation with Ingria. Organization of events Every year Business Incubator Ingria organizes more than 100 events, including Open Days Ingria (featuring lectures of famous speakers), Lead The Way (discussions of technology trends), StartupLynch, Train&Develop Program (specialized trainings), VC Corner, seminars, round tables, conferences as well as partners’ and residents’ events. During these events start-ups have an opportunity to receive expert feedback, investment estimation of their projects and improve their presentation skills. Experts and mentors Ingria cooperates with major IT and technological companies and venture funds. As a part of joint programs Ingria engages leading experts as mentors of business incubator’s residents.ContactsIngria Technopark Business Incubator70 Obukhovskoy Oborony prospekt, building 2192029 St. Petersburg, RussiaTel.: +7 812 313 10 85, 313 10 86 | Fax: +7 812 313 10 87startup@ingria-park.ru | www.ingria-park.ru | www.ingria-startup.ru Doing business in St. Petersburg172 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 173. 7.7.2. The First St. Petersburg Business Incubator The First St. Petersburg business incubator supports and facilitates the development of small innovation companies. It is a unique business, information and creative environment for successful development of innovative business of residents.The First St. Petersburg business incubator was founded in 2006 by the Administration of St.Petersburg in cooperation with the Ministry for Economic Development of the Russian Federation. Itis managed by Managing Company «REO «Service». The First St. Petersburg business incubator islocated in «Crystal» Business Center.ServicesThe St. Petersburg business incubator provides following services: Offices Renting comfortable offices equipped with furniture, computers and conditioning system at a reduced rental rate Consulting Consulting on legal issues, economy, taxation, marketing, business planning, promotion, PR, accounting, financing, loan services, HR, internationalization External accounting services Promotion of the companies Advertising, exhibitions, media, PR-support, events Education programs Seminars, trainings, master classes Internationalization Business trips, seminars, joint projects, internships, consulting Access to business incubator’s partnership networkTo find more information about the First St. Petersburg business incubator, its services and residentcompanies visit www.start-business.ru.ContactsThe First St. Petersburg Business Incubator37 Sedova St.192148 St. Petersburg, RussiaTel.: +7 812 448 56 65 | Fax: +7 812 560 97 49info@start-business.ru | www. start-business.ru Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 173
  • 174. 7.8. Educational programs and internships7.8.1. St. Petersburg State Institution “St. Petersburg Interregional Resource Center” (SPIRC) The President Management Training Program is a leading program in professional business education for managers since 1997. Nearly 3,500 managers graduated from the Program during these years. In 2005 St. Petersburg Interregional Resource Centre (SPIRC) was registered as State Institution. SPIRC represents a new format of the President Management Training Program in St. Petersburg – a state training program for managers of national economic enterprises of the Russian Federation.Services President Management Training Program State Plan for training managers of national economic organizations of the Russian Federation Postgraduate work with President Program’s alumni Supporting President Program graduates in career development, assistance in promotion graduate’s business and projects Regional University of small business Governmental support programs, educational programs, seminars Development and maintenance of international and interregional educational projects Special educational projects Trainings, Consulting, Coaching, Special Internships Wide range of partnership all over Russia Signed collaboration agreements with 18 regions of Russia, Northwest Russia consortium coordination center Event management International conferences, meetings, seminars, business meetings in St. Petersburg, exhibitions Database of business contacts Business match-making for Russian and potential foreign partners Business exchange program Russian-foreign exchange management training program for top-managers in Russia and abroadContactsSt. Petersburg State institution “St. Petersburg Interregional Resource Center"88/90 Griboedova embankment190068 St. Petersburg RussiaTel. + 7 812 326 42 75 | Fax: +7 812 326 42 74int@spbmrc.ru | www.spbmrc.ru Doing business in St. Petersburg174 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 175. 7.9. Chambers of commerce and industrySt. Petersburg Chamber of Commerce and Industry46-48 Chaikovskogo Street191123 St. Petersburg, RussiaTel.: +7 812 719 66 44 | Fax: +7 812 272 97 13spbcci@spbcci.ru | www.spbcci.ruAmerican Chamber of Commerce in Russia, St. Petersburg Chapter24 Yakubovicha Street190000 St. Petersburg, RussiaTel.: +7 812 448 16 46 | Fax: +7 812 448 16 45all@spb.amcham.ru | www.amcham.ru/spbFinnish-Russian Chamber of Commerce4-6-8 B Bolshaya Konjushennaya Street, office B301191186 St. Petersburg, RussiaTel.: +7 812 322 21 21 | Fax: +7 812 322 21 21info@spb.svkk.ru | www.svkk.ruRussian-German Chamber of Foreign Trade4A Finlyandsky prospect194044 St. Petersburg, RussiaTel.: +7 812 332 14 15 | Fax: +7 812 332 14 16info@petersburg-ahk.ru | www.petersburg.russland.ahk.deRusso-British Chamber of Commerce23A Vladimirsky prospect, office 705191002 St. Petersburg, RussiaTel.: +7 812 346 50 51 | Fax: +7 812 346 50 52infospb@rbcc.com | www.rbcc.com7.10. Business associationsUnion of Industrialists and Entrepreneurs of St. Petersburg1 Smolny proezd, Letter B191060 St. Petersburg, RussiaTel.: +7 812 576 76 81 | Fax: +7 812 576 77 92spp@spp.spb.ru | www.spp.spb.ruSt. Petersburg Union of Entrepreneurs16 Stachek prospect198095 St. Petersburg, RussiaTel.: +7 812 252 39 50, 252 43 50, 252 38 10www.spbsp.ruSt. Petersburg International Business Association (SPIBA)21 Nevsky prospekt, office 506191186 St. Petersburg, RussiaTel.: +7 812 325 90 91, 312 53 07 | Fax: +7 812 325 90 92office@spiba.ru | www.spiba.ru Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 175
  • 176. 7.11. Audit, tax and consulting firmsBANKO Audit & Consulting JuralinkTel./Fax: +7 812 702 07 03 Tel.: +7 812 606 66 24www.bankoaudit.ru Fax: + 7 812 606 66 23BDO www.juralink.ruTel.: +7 495 797 56 65 Jurconsult InternationalFax: + 7 495 797 56 60 Tel.: +7 812 324 73 24www.bankoaudit.ru Fax: + 7 812 274 68 09Deloitte www.jurconsult.spb.ruTel.: +7 812 703 71 06 Konsu SPFax: + 7 812 703 71 07 Tel.: +7 812 325 82 94, 327 38 92www.deloitte.com Fax: + 7 812 325 82 93, 321 29 96Eccona www.konsu.comTel./Fax: +7 812 622 12 13 KPMGwww.eccona.ru Tel.: +7 812 313 73 00Energy Consulting Fax: + 7 812 313 73 01Tel.: +7 812 327 55 22 www.kpmg.comFax: + 7 812 327 55 39 PKFwww.ec-group.ru Tel.: +7 812 600 91 00Ernst & Young Fax: + 7 812 600 90 50Tel.: +7 812 703 78 00 www.mcd-pkf.comFax: + 7 812 703 78 10 Moore Stephenswww.ey.com Tel.: +7 812 332 28 51G.C.E. Group Fax: + 7 812 332 14 88Tel.: +7 812 334 55 61, 334 55 62, 334 55 63 www.mscis.moorestephens.comwww.gce.ru PricewaterhouseCoopersHannes Snellman Tel.: +7 812 326 69 69Tel.: +7 812 363 33 77 Fax: + 7 812 363 66 99Fax: +7 812 363 33 88 www.pwc.ruwww.hannessnellman.com Prime AdviceIBS Tel.: +7 812 449 50 00Tel.: +7 812 333 15 44 Fax: + 7 812 449 50 01www.ibs.ru www.hlbprime.comImpex Consult PROUDTel.: +7 812 309 39 85 Tel.: +7 812 329 40 04www.impexconsult.ru www.pra.ruIntalev RBSTel./Fax: +7 812 677 90 67, 600 99 24 Tel.: +7 812 332 13 55www.intalev.spb.ru www.rbsys.ruInstitute for Enterprise Issues Russia ConsultingTel.: +7 812 703 40 41 Tel.: +7 812 458 58 00Fax: + 7 812 703 30 08 Fax: + 7 812 458 57 00www.ipp.spb.ru www.russia-consulting.euInstitute of Independent Social & Economic St. Petersburg FoundationResearch (INSEI) for SME DevelopmentTel.: +7 812 232 84 54 Tel.: +7 812 325 84 16www.insei.ru Fax: + 7 812 712 66 07InterComp www.fbd.spb.ruTel.: +7 812 740 18 60www.intercomp.ru Doing business in St. Petersburg176 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 177. 7.12. BanksCetelem PromsvyazbankTel.: 8 800 500 89 98 Tel.: +7 812 321 20 20www.cetelem.ru www.psbank.ruCitibank Raiffeisen BankTel.: +7 812 336 75 75 Tel.: +7 812 334 43 43www.citibank.ru www.raiffeisen.ruBanca Intesa RosbankTel.: +7 812 275 41 54 Tel.: +7 812 332 12 29www.bancaintesa.ru www.rosbank.ruBank of Moscow Russian Agricultural BankTel.: 8 800 200 23 26 Tel.: +7 812 335 06 30www.bm.ru Fax: + 7 812 335 06 30Bank Uralsib www.rshb.ruTel.: +7 812 334 44 33 Sberbankwww.bankuralsib.ru Tel.: 8 800 555 55 50Barclays www.sbrf.ruTel.: +7 812 747 34 30 Swedbankwww.barclays.ru/ Tel.: +7 812 313 63 63Gazprombank www.swedbank.ruTel.: +7 812 301 99 99 TransCreditBankwww.gazprombank.ru Tel.: +7 812 703 44 30GE Money Bank www.tcb.ruTel.: +7 812 320 87 56 UniCredit Bankwww.gemoney.ru Tel.: 8 800 700 73 00Nordea Bank www.unicreditbank.ruTel.: +7 812 747 34 30 VTB 24www.nordea.ru Tel.: 8 800 100 24 24 www.vtb24.ru7.13. Certification and testingCenter for Certification and Marketing Kvatro – Certification CenterTel.: +7 906 239 58 30 Tel.: +7 812 712 66 05, 972 66 30, 712 67 01www.gost-spb.ru www.kvatro-spb.ruCenter of Quality Control MezhregiontestTel.: +7 812 274 14 30 Tel.: +7 812 600 06 07Fax: + 7 812 274 14 32 www.megregiontest.ruwww.quality.spb.ru Reglamentsert – Northwestern Scientific andCenter for Testing and Certification - Technical Center for Testing and CertificationSt. Petersburg Tel.: +7 812 777 05 15, 766 19 40Tel.: +7 812 251 39 50 Fax: + 7 812 766 1940Fax: + 7 812 251 41 08 www.reglamentsert.ruwww.rustest.spb.ru RostestCenter –Test Tel.: +7 812 927 94 11Tel.: + 7 812 328 62 62, 328 62 02 Fax: + 7 812 633 05 16www.okp.ru www.i-trade.spb.ruCertificationTel.: +7 812 337 16 02, 388 12 16www.sertis.ru Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 177
  • 178. Russian Register Test St. PetersburgTel.: +7 812 600 11 67, 600 11 68 Tel./Fax: +7 812 334 02 62, 327 55 51,Fax: + 7 812 600 11 69 327 5552, 575 0093www.rusregister.ru www.en.test-spb.ruSGS Vostok LimitedTel.: +7 812 449 04 66Fax: + 7 812 449 04 67www.sgs.ru7.14. ExhibitionsExpoForum SivelTel.: + 7 812 240 40 40 Tel.: +7 812 324 64 16www.expoforum.ru Fax: +7 812 596 38 14FarExpo www.sivel.spb.ruTel.: +7 812 718 36 37 SovenconFax: +7 812 777 04 07 Tel.: +7 812 369 01 34, 369 00 16, 369 08 45www.farexpo.ru www.sovencon.ruImperia Stachek 47Tel.: +7 812 327 49 18 Tel.: +7 812 702 04 38Fax: + 7 812 327 49 18 Fax: + 7 812 784 65 30www.imperiaforum.ru www.stachek47.ruMonomax RestecTel.: +7 812 335 20 55, 335 20 39 Tel.: +7 812 320 63 63www.monomax.ru Fax: + 7 812 320 80 90PrimExpo www.restec.ruTel.: +7 812 380 60 00 Vystavka, LLCFax: +7 812 320 80 90 Tel.: +7 812 320 24 57, 320 24 55, 766 47 17www.primexpo.ru www.y-expo.ruSevernaya PalmiraTel.: +7 812 975 12 40, 448 36 55Fax: +7 812 449 52 44www.congresscity.ru7.15. Law firmsBaker & McKenzie Castren & SnellmanTel.: +7 812 303 90 00 Tel: +7 812 325 80 85Fax: + 7 812 325 60 13 Fax: +7 812 325 80 86www.bakermckenzie.com www.castren.fiBeiten Burkhardt Clyde&CoTel.: +7 812 449 60 00 Tel.: +7 812 232 22 97Fax: + 7 812 449 60 01 Fax: +7 812 233 81 09www.bblaw.com www.clydeco.comCapital Legal Services International DLA PiperTel.: +7 812 346 79 90 Tel.: +7 812 448 72 00Fax: + 7 812 346 79 91 Fax: + 7 812 448 72 01www.cls.ru www.dlapiper.com Doing business in St. Petersburg178 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 179. Duvernoix Legal Pepeliaev, Goltsblat & PartnersTel.: +7 812 702 62 00 Tel.: +7 812 640 60 10Fax: + 7 812 702 62 55 Fax: + 7 812 640 60 20www.duvernoixlegal.ru www.pgplaw.ruEgorov Puginsky Afanasiev & Partners SalansTel.: +7 812 322 96 81 Tel.: +7 812 325 84 44Fax: + 7 812 322 96 82 Fax: + 7 812 325 84 54www.epam.ru www.salans.comHellevig Klein & Usov Unicomlegal RussiaTel.: +7 812 244 75 49 Tel.: +7 812 380 16 61Fax: + 7 812 244 75 48 Fax: + 7 812 380 16 61www.hkupartners.com www.unicomlegal.ruMannheimer SwartlingTel.: +7 812 335 23 00Fax: + 7 812 335 23 01www.mannheimerswartling.se7.16. Real estateAdvecs Jones Lang LaSalleTel.: +7 812 322 52 00 Tel.: +7 812 363 32 31www.advecs.com Fax: + 7 812 363 32 30ARIN – Agency for Development and www.joneslanglasalle.ruReal Estate Research Knight FrankTel./Fax: +7 812 600 03 94 Tel.: +7 812 363 22 22www.arin.spb.ru Fax: + 7 812 363 22 23Colliers International www.spb.knightfrank.ruTel.: +7 812 718 36 18Fax: + 7 812 718 36 16www.colliers.spb.ru7.17. RecruitmentANCOR BusinessLink PersonnelTel.: +7 812 448 88 35 Tel.: +7 812 327 89 96Fax: + 7 812 448 88 36 Fax: + 7 812 327 89 93www.ancor.ru www.blp.ruAVANTA Personnel – Adecco Group Russia CASE HR solutionsTel./Fax: +7 812 329 57 70, 329 00 11, Tel.: +7 812 334 24 25329 2211 Fax: + 7 812 334 24 25www.avantapersonnel.ru www.case-hr.comAvenir Group HR SolutionsTel./Fax: +7 812 718 81 57 Tel./Fax: +7 812 702 70 99www.avenir.ru www.hrsolutions.ruBARONA Kelly ServicesTel.: +7 812 640 90 33, Tel.: +7 812 332 22 44Fax: + 7 812 640 90 34 Fax: + 7 812 332 23 35www.barona.ru www.kellyservices.ruBusiness KernelTel.: +7 812 315 55 88, 222 52 51, 222 37 58www.business-kernel.ru Doing business in St. Petersburg Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 179
  • 180. Manpower 1000 kadrovTel.: +7 812 324 46 46 Tel.: +7 812 313 93 80Fax: + 7 812 324 46 47 www.1000kadrov.ruwww.manpower.ru Ventra EmploymentMorgan Hunt Group Tel.: +7 812 635 86 16Tel.: +7 812 336 38 28 www.ventra.ruFax: + 7 812 336 38 27www.morganhunt.ruStaffwellTel.: +7 812 640 20 01www.staffwell.com7.18. Transport and logisticsAhlers IWMTel.: +7 812 332 67 00 Tel.: +7 812 393 70 54Fax: + 7 812 332 67 01 Fax: + 7 812 309 12 12www.ahlers.com www.iwm.ruDHL TNTTel.: +7 812 326 64 00 Tel.: +7 812 718 33 30www.dhl.ru Fax: + 7 812 718 34 95FedEx www.tnt.comTel.: +7 812 325 88 25 UPSFax: + 7 812 571 59 30 Tel.: +7 812 703 39 39www.fedex.com/ru Fax: + 7 812 703 16 50 www.ups.com Doing business in St. Petersburg180 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 181. Doing business in St. PetersburgEnterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 181
  • 182. 8. Authors and contributorsGuide “Doing business in St. Petersburg” was developed by and under supervision of the EnterpriseEurope Network, Gate2Rubin Consortium – Russia, Module A Branch – St. Petersburg operated bySt. Petersburg Foundation for SME Development with the kind contribution of the following legal,human resources, certification, research and real estate firms. Enterprise Europe Network - Russia, Gate2Rubin Consortium, Module A Regional Center – St. Petersburg The Enterprise Europe Network (EEN) is a key instrument to boost growth and jobs. Bringing together 570 business support organizations from 49 countries, we help small companies seize the unparalleled business opportunities on the world Market. ENN’s mission lies in helping small businesses make the most of the business opportunities in Russia and the European Union. Regional Center in St. Petersburg is co-financed by the Government of the Russian Federation and the Government of St. Petersburg and is operated by St. Petersburg Foundation for SME Development since 2008. Tel.: +7 812 325 84 16, 325 8351, 575 04 80 | Fax: +7 812 712 66 07 www.doingbusiness.ru BEITEN BURKHARDT BEITEN BURKHARDT is an international law firm, represented by 12 offices in 6 countries, with a staff of over 300 specialists providing legal and tax consulting in Western and Eastern Europe, Russia, Ukraine and China. BEITEN BURKHARDTs Russian Practice comprises offices in Moscow (since 1992) and St. Petersburg (since 1996). The firms specialists provide comprehensive legal support for investment projects in the areas of manufacturing, infrastructure, health care and real estate, render services for establishing subsidiaries, joint ventures and branches, conduct legal and tax due diligence on companies and property being acquired in Russia, consult on tax, customs, financial and other issues of activities in the Russian Federation. The working languages are English, German and Russian. T: +7 812 449 60 00 | F: +7 812 449 60 01 www.bblaw.com CASE CASE was established in April 5, 2010 on the basis of the ANCOR Survey Services with the aim of implementation of consulting projects in the field of personnel management. The major services include salary, benefits and compensation surveys, labor market research, reward system development, personnel assessment, personnel training and development, HR Projecting, outplacement, labor law consulting. CASE successfully implements projects on the territory of Russia, Ukraine and Kazakhstan. Today, CASE is represented in 5 cities in Russia, including Moscow (head office), St. Petersburg, Rostov-on-Don, Perm and Novosibirsk. T: +7 812 334 24 25 | F: + 7 812 334 24 25 www.case-hr.com Doing business in St. Petersburg182 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
  • 183. DLA Piper DLA Piper is one of the most highly rated global law firms, with branch offices in 30 countries of Europe, the Middle East, Asia and also the USA. With 39 lawyers and 4 partners, our St. Petersburg practice constitutes the largest legal and full-fledged tax services provider in Russias northwest. The firm advises on corporate law, mergers and acquisitions, taxation, real estate and infrastructure, project finance, customs and regulatory, employment, IP and IT protection, and possesses significant litigation capabilities and experience. In 2007-2011, DLA Piper was recognized as the leading legal practice in St. Petersburg according to Chambers Europe and the leading corporate practice in the North West region in the view of the Legal500 directory. T: +7 812 448 72 00 | F: +7 812 448 72 01 www.dlapiper.com Jones Lang LaSalle Jones Lang LaSalle is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 167 million square meters worldwide. In Russia and CIS Jones Lang LaSalle has offices in Moscow, St. Petersburg, Kiev and Almaty. Jones Lang LaSalle, Russia was voted Consultant of the Year in 2004, 2006, 2007, 2008, 2009, 2010 and 2011 at the Commercial Real Estate Awards, Moscow and Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg. T: +7 812 363 32 31 | F: + 7 812 363 32 30 www.joneslanglasalle.ru SGS The SGS Group is the global leader and innovator in inspection, verification, testing and certification services. Founded in 1878, SGS is recognized as the global benchmark in quality and integrity. With 70,000 employees, SGS operates a network of over 1,350 offices and laboratories around the world. Operating in Russia since January 1981, today SGS Vostok Limited, the Russian subsidiary of the SGS Group, employs a staff of 3,300 people at the Moscow headquarters and the various offices and laboratories all over the Russian Federation, including Northwest Russia. T: +7 812 449 04 66 | F: + 7 812 449 04 67 www.sgs.ru Doing business in St. PetersburgEnterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru 183
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  • 186. Legal disclaimerAll of the information included in this document is for informational purposes only, and may notreflect the most current legal developments, judgments, or settlements. This information is notoffered as legal or any other advice on any particular matter. The Enterprise Europe Network,Gate2Rubin Consortium – Russia, Module A Branch – St. Petersburg and the contributing authorsexpressly disclaim all liability to any person in respect of anything, and in respect of theconsequences of anything, done or not done wholly or partly in reliance upon the whole or any partof the contents of current brochure. No client or other reader should act or refrain from acting onthe basis of any matter contained in this document without first seeking the appropriate legal orother professional advice on the particular facts and circumstances.If you have finished with this document, please pass it on to other interested parties or recycle it.Thank you Doing business in St. Petersburg186 Enterprise Europe Network - Russia, Module A Regional Center – St. Petersburg | www.doingbusiness.ru
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