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By John Helmer, Moscow

Deep inside the Russian government there is a chamber of secrets where officials have gathered just eight times since April 29, 2008, the day when then-President Vladimir Putin signed the law that created the chamber. The law was entitled “On Procedures for Foreign Investments in Business Entities of Strategic Importance for National Defence and State Security”; for short, Law № 57-FZ. The chamber is called the Government Commission for Control of Foreign Investment in the Russian Federation, the Control Commission for short (aka the Government Commission).

Sitting around the table in the chamber are ministers of state, plus heads of several state agencies and the Federal Security Service (FSB) chief. The chairman is Prime Minister Putin. Staffing and paperwork are administered by a special section of the Federal Antimonopoly Service (FAS). The head of this secretariat for the Control Commission is Svetlana Levchenko; the spokesman for the Control Commission is Sergei Karaulov. The spokesman for the FAS is Maria Chernova.

According to government notices, these are the members of the Chamber of Secrets, I mean Control Commission:

Chairman of the Commission

PutinVladimir Vladimirovich

Prime Minister of Russia

Deputy Chairman

Shuvalov Igor Ivanovich

First Deputy Prime Minister of Russia

Executive secretary

Artemyev Igor Yurievich

Head of FAS of Russia


Bortnikov Alexander Vasilyevich

Director of FSB of Russia


Volodin Vyacheslav Viktorovich

Deputy Prime Minister of Russia, Head of Prime Minister’s Administration


Grigorov Sergei Ivanovich

Director of Federal Technical and Export Control (FSTEC) of Russia


Ivanov Sergei Borisovich

Deputy Prime Minister of Russia


Kirienko Sergei Vladilenovich

CEO of Rosatom


Konovalov Alexander Vladimirovich

Minister of Justice of Russia


Nabiullina Elvira Sakhipzadovna

Minister of Economic Development of Russia


Novak Alexander Valentinovich

Deputy Finance Minister of Russia


Perminov Anatoly Nikolayevich

Head of Roskosmos


Serdyukov Anatoly Eduardovich

Minister of Defence of Russia


Sechin Igor Ivanovich

Deputy Prime Minister of Russia


Trutnev Yuri Petrovich

Minister of Natural Resources of Russia


Khristenko Viktor Borisovich

Minister of Industry and Trade of Russia


Shmatko Sergei Ivanovich

Minister of Energy of Russia


Shchyogolev Igor Olegovich

Minister of Communications of Russia

There is nothing exceptional in international practice about Russia’s Control Commission. In the US, a similar body, called the Committee on Foreign Investment in the US (CFIUS), is chaired by the US Treasury, and holds its sessions behind closed doors. So does Australia’s Foreign Investment Review Board (FIRB). The Director of Investments for Industry Canada does for that country what the others do for theirs, fixing money thresholds at which an application by a foreign investor for an official review is required. The Australian government, for example, raises the threshold as a special favour to US investors.

Each government sets out in its own statute-book what sectors of investment are especially sensitive for the national security or state economic interest. Everywhere, the bigger the value of the deal, the more sensitive.
In addition, according to the Australian law, for example, the sectors most especially sensitive to foreign investment or foreign takeover are media; telecommunications; land, air and shipping transportation; defence production; and encryption technology. The only mineable resources listed in the Australian statute for their sensitivity to foreign investors are “the extraction of (or the holding of rights to extract) uranium or plutonium or the operation of nuclear facilities.”

In form, the Russian investment control legislation isn’t very different. Instead of a money or value threshold fixing when a proposed foreign investor must apply for permission, the Russian law sets out a long list of sectors of strategic importance. Article 6 of 57-FZ lists 42 strategic sectors. This looks like a great many more than are similarly designated by the Australian or other statutes. But the Russian list includes many activities which overlap each other. Nuclear operations, for instance, take up 7 strategic sectors; encryption 6; and defence industry, 12.

Number 39 on the Russian strategic sector list identifies “exploration and mining resources in the subsurface areas of federal significance.” For mineable resources, 58-FZ also sets a physical limit of what may be acquired for mining by a foreigner, above which an application to the Control Commission is obligatory. The limit for oil is 70 million tonnes (490 million barrels); gas, 50 billion cubic metres; gold, 50 tonnes (1.6 million ounces); and copper, 500,000 tonnes. A zero threshold has been fixed for the mining of uranium, diamonds, quartz, cobalt, nickel, platinum group metals, beryllium, and lithium. This means that any project for mining of these minerals, no matter how small the reserves, must be reviewed by the Control Commission. An additional list, which has been published as part of the law and is regularly updated, designates by name and region every subsoil resource of strategic significance. As of August of this year, the list runs to 987 deposits.

All governments with foreign investment control mechanisms preserve the confidentiality of the application and review proceedings. But this doesn’t mean that the other governments keep secret what the outcomes of their reviews are. On the contrary, only Russia keeps secret the applicants for review, and the outcome of the applications.

For the past four weeks, the FAS and the Control Commission secretariat have been asked the following questions about the Control Commission: what have been the dates of the meetings held so far by the Control Commission for Foreign Investment? what is the list of projects or transactions which have been reviewed at these meetings, those approved; those not approved or sent for further study?

Speaking for FAS, Chernova has responded: “We can provide only general information at your request”. Here is the FAS report:

An overview of the practice of control over foreign investment in the business entities of strategic importance to national defense and security of the state from 2008 to present.

FAS Russia has received numerous requests asking for statistical information about the practice of monitoring the implementation of foreign investment in strategic economic entities in the manner prescribed by the Federal Law of 29.04.2008 № 57-FZ “On Procedures for Foreign Investments in the Business Entities of Strategic Importance for National Defense and State Security “(hereinafter – the Law № 57-FZ).

In order to inform foreign investors, businesses, organizations and entrepreneurs of the emerging practice of control over foreign investments, FAS Russia established competence in the reports:

1. Since the Law № 57-FZ came into force, foreign investors have applied for the consideration of the FAS with 174 applications, of which 136 were in accordance with the Law № 57-FZ, and 38 in accordance with the requirements of the Federal Law of 09.07. 1999 № 160-FZ “On Foreign Investments in the Russian Federation”. Of these totals, 56% of applications relate to transactions planned in the sphere of subsoil use; 19% in the field of encryption (cryptography); 11% in the sphere of natural monopolies; 9% in the field of broadcasting and publishing, and 5% in other strategic activities.

Among the applicants filing requests were as follows: 10 international organizations, 24 organizations under the control of a foreign state or international organization; 131 private foreign companies.

The jurisdiction of foreign investors who have filed petitions in relatgion to business entities of strategic importance is limited to 29 foreign countries.

Of those admitted the examination of applications, 99 were considered directly by FAS Russia in the framework established by the Law № 57-FZ of office, including:
– 17 applications for credit institutions which were considered in a simplified manner. In accordance with the decision of the Government Commission for Control of Foreign Investment in the Russian Federation dated 10 October 2008., Part 3 Article 11 of the Law № 57-FZ;
– 57 petitions FAS Russia decided to return to the applicants on the basis of failure to identify the fact of control over the strategic business entity in accordance with the requirements of paragraph 2 of Article 9 of Law № 57-FZ, as preliminary approval of deals announced in these petitions are not required;
– 4 applications were refunded to the applicants without review by reason of providing incomplete set of documents or failure to submit the statutory period of missing data;
– 21 applications were withdrawn by the applicants for reasons of refusal to implement the intent of the proposed transaction or the need to refine the materials on the application.

No cases of decisions taken by FAS Russia have gone to court review.

In the two years of Law № 57-FZ of FAS Russia, as the authorized agency for making foreign investments, has provided information and analytical support of eight meetings of the Government Commission for Control of Foreign Investment in the Russian Federation (hereinafter – the Government Commission).

In the totality of these meetings the commission considered 47 applications for foreign investors, among them: 38 were approved; 2 were disapproved; and 7 carried approval of the transaction with an agreement with the applicant to ensure compliance with the obligations established by the Governmental Commission in accordance withrequirements of Part 1 of Article 12 of the Law № 57-FZ (in pursuance of these decisions, FAS Russia has concluded five agreements with foreign investors, in two cases, the agreements were not concluded, because investors have changed plans for the commission announced transactions).

It should be noted that currently under consideration by FAS Russia, there are 28 applications from foreign investors, of which 10 applications have been submitted to the Government Commission.

2. FAS Russia since the entry of the Law № 57-FZ of force is currently in compliance with the requirements of Part 3. 16 and Article 14 of the Law № 57-FZ received 413 notifications. Of those examined 405 (others are pending).

In addition, during the same period FAS Russia has considered the request of foreign investors, received in accordance with Part 6 of Article 8 of the Law № 57-FZ, 230 different addresses on the application of the Law № 57-FZ, from foreign investors, strategic business entities and the federal executive bodies; 33 addresses with the request of the Federal Agency for Subsoil Use on receiving and transferring the licenses to use the subsoil of federal significance.

Thus, in the emerging practice of using all legal mechanisms to control foreign investment in strategic economic entities defined by the Law № 57-FZ, there has been consistent application. The control regime in effect is quite liberal, since over the two years of application of the Law № 57-FZ , of the 174 applications received for consideration, the decision to refuse approval of the deal was taken in only two cases. Enforcement and improvement of the legislation are the subject of public discussion.

The FAS and Control Commission were then asked to amplify on this report by identifying the foreign investment companies or projects which have been approved in the mining sector since April of 2008. De Beers, for example, went before the Control Commission on October 10, 2008, with an application for approval of a joint diamond-mining venture with LUKoil. The Commission decision was delayed, and conditions attached to the approval never disclosed in public, before De Beers announced it was pulling out of the project altogether.

The FAS has refused to identify the mining names, responding as follows:

The powers of the Government Commission for Control of Foreign Investment in the Russian Federation (hereinafter – the Government Commission) and FAS of Russia are determined by the federal law dated 29 April, 2008 № 57-FZ “On Procedures for Foreign Investments in the Business Entities of Strategic Importance for National Defense and state security” (hereinafter – the Law № 57-FZ) and the Government Decree dated July 6, 2008 № 510. These regulations do not confer on the Government Commission and FAS of Russia the right to inform individual persons or legal bodies at their request of the decisions taken regarding the applications by foreign investors.

In accordance with the Law № 57-FZ FAS of Russia is obliged to execute the decisions of the Government Commission, to direct corresponding decisions to the applicant, and inform the Government Commission about that.

However, we report that information regarding the activities of the Government Commission, except for the restricted information, is posted on the official website of the Government of the Russian Federation. In addition, the Federal Antimonopoly Service within its established authority, explores the issue of posting the information on its website on the evolving practice of control over foreign investments in the Russian Federation.

As a matter of fact, we find that we cannot provide statistics on decisions of the government commission on foreign investments you are interested in, because of the fact that the decisions (meeting minutes) of the Government Commission on Foreign Investments sent to us are classified and are not subject to disclosure.

The response appears to suggest that there is no directive in law or regulation requiring the Control Commission and FAS to keep secret the names of applicants, or the outcomes of applications which have been reviewed. Instead, officials have decided that since they haven’t been ordered to disclose, they won’t.

This restriction also applies to the Russian parliament. The Committee on Natural Resources of the State Duma says that they do not receive any reports or documents from the Control Commission on resource policy or project decisions that are under review, or have been decided. As for the legality of the Control Commission’s secrecy, the Duma committee source said there would be no comment.

Svetlana Levchenko, head of the Control Commission secretariat, was asked to say why the names of approved foreign investment ventures in Russia should be kept secret when the ventures themselves are not secret, and when the foreign investor is usually a public shareholding company reporting publicly on operations and investments in Russia? Levchenko was also asked to say how many of the approved foreign investors are companies registered abroad, but in fact are owned or controlled by Russian nationals?

Levchenko replied: “The statistics are the following. Out of the 174 applications the Government Commission has decided on 47 cases, and the FAS decided on 74 cases. 28 are pending. 21 were rejected, 4 were returned.”

“The FAS has clearly specified rights and responsibilities which are all stated in the Law on the FAS. We have no responsibility to inform the mass media on the details of the [Control Commission] decisions. Neither do we hold the list of companies that were granted foreign investments rights. We only formalize the decisions. You put us in an inconvenient position by asking for the company names.”

“The documents we receive from the government and the foreign applicants are usually labeled as restricted, not classified. So it is the government and the foreign companies which are responsible for the labeling, and we [FAS] have no right or responsibility to question the labels and the secrecy of documents. However, I cannot tell you what exactly are the laws that regulate labeling. Maybe it is the law on information protection, but I’m not sure.”

“Give me an example of any other country’s state bodies [on foreign investment control] which openly publish information about their decisions. There isn’t any, and FAS of Russia is no exception, so it is incorrect to say that FAS blocks transparency.”

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