Today, the Strategic Sectors Law (SSL) Amendments were submitted for their second reading. The SSL Amendments will also likely undergo a third reading, and the assumption is that the changes between the second and third readings will be more substantial than between the first and second.
The SSL Amendments did not undergo many changes between the first and second readings. You can look at a track changes version here. The only “significant” change was the addition of the following language:
“This federal law does not apply to transactions … between organizations under the control of the Russian Federation or citizens of the Russian Federation, who are tax residents of the Russian Federation (except for citizens of the Russian Federation who have dual-citizenship).”
This new language – which was proposed by the Russian Government – appears to be an implementation of one of Pres. Medvedev’s “ten steps” to improve the investment climate in Russia (#8). Namely, the change would exempt from coverage any transactions involving offshore entities that are controlled by Russian companies. When Vedomosti wrote that this was the change Medvedev was proposing, I wrote that it must be some mistake. After all, the new language seems to encourage the common Russian practice of holding capital offshore. Indeed, this change does limit the application of the law, but only to the benefit of large Russian enterprises, not foreign investors.
In any case, this is by far the most significant change to the SSL proposed so far, as it would drastically reduce the number of cases within the Foreign Investment Commission’s jurisdiction, both legally and practically (most of the applications have involved Russian offshore entity transactions).