EEC2016. «The law and competitive advantage for the Far East in the Asia-Pacific Region». on the most important issues of the discussion

13 September 2016


The issue of the development of the Far East is discussed not only by economists, government officials and businessmen, but also by lawyers. Russian majors and international companies have taken part in the Eastern Economic Forum (EEF) session called "The Law and Competitive Advantage for the Far East in the Asia-Pacific Region”. features the main issues of the discussion.

Law is one of the most important instruments of economic development: it is a set of legal methods and mechanisms used by businesses and governmental bodies. The development of the legal environment will become a basis for fundamental changes in the economy of the Far East, it will enhance the competitiveness in the Asia-Pacific region. But this environment should be modern, it should work in the realities of Russia's partners in the Asia-Pacific region. The lawyers participating in the session have discussed the ways to form this new legal reality.

The hosts of the session were David Goldberg, partner at White & Case, and Alexander Molotnikov, chairman of Russia-China Law Society.

Investments and the Far East

Andrey Zelenin, partner at Lidings Law Firm, discussed the peculiarities of regulation of special investment contracts: guarantees of investors, tax and duty discounts, grandfathering clauses. He has especially stressed upon the preference of an exclusive supplier status provided for a party to a special investment contract. This instrument, he said, is on the most interesting one for a number of industries, including pharmaceuticals. According to Zelenin, this preference could be even more interesting than financial and tax privileges.

Alexander Yermolenko, partner at FBK Pravo Law Firm, analysed the so-called top priority development areas of the Far-Eastern Region and the factors that impede investment flows. Yermolenko thinks that the legal framework that has been in force for already one and a half years is fairly accepable. “There are thing to work on, to clarify, but in general the legal framework is more or less fine”, - he noted. The real problems, in his opinion, are in the field of administration of the law and in the general distrust between the state and the business.

Alexander Yermolenko of FBK Pravo and Andrey Zelenin of Lidings (from left to right) during the key session called “The Law and Competitive Advantage for the Far East in the Asia-Pacific Region” within the II Eastern Economic Forum hosted by The Fart-Eastern Federal University on Russky Island. 3 September 2016.

But top priority development areas are developing very fast. Kirill Stepanov, Deputy Minister for the Far East, who also participated in the session, noted as to how quickly has been everything arranged since the introduction of the law on top priority development areas. For example, in Bolshoy Kamen area with its shipbuilding cluster under construction, the ministry has organized the provision of a land plot within 3 weeks.

Dispute resolution

It is recognized in the legal community, that the issue as to where and how to resolve disputes between Russia and its Asia-Pacific partners is currently of highest importance. The session's host David Goldberg has emphasized that Russian dispute resolution laws are good. But the problem with legal administration and application of the law is present here, too.

Sergey Slagoda, managing partner of S&K Vertical, notes that there is a number of treaties in which the Asia-Pacific states either take part or not. China, for example, is not a party to the so-called Apostille Convention apolishing the requirement of legalization of foreign legal documents. This creates certain difficulties for transnational contacts, since the time needed to process any document increases.

Another instrument that poses certain concerns is the Protocol on the general terms of supply of goods from the USSR to China and from China to the USSR, adopted in 1990. According to Sergey Slagoda, this treaty has become obsolete and provides impediments for the development of trade between the countires. Here, Slagoda received support from foreign parties: Michael Liu, senior partner at the largest Chinese law firm called DHH, has also stated that Russia-China bilateral instruments on dispute settlement should be revised.

Anton Aleksandrov, partner at Monastyrsky, Zyuba, Stepanov & Partners, stressed that the dipsute settlement, which is fast, effective and fair, serves as the most important foundation for business climate. According to him, now it is a perfect time to establish an international arbitration center in the Far East. The situation became ideal after the recent reform that was designed that drastically change the culture of commercial arbitration, to eradicate “pocket tribunals” and to make arbitration a really handy instrument to resolve disputes.

The new arbitration center in the Far East shall consider both internal and transnational commercial cases, Alexandrov says. And it is necessary to take into account the best foreign practices when setting it up, he adds.

In the beginning, the Far-Eastern arbitral tribunal should concentrate on engaging Russian, rather than foreign investors, since the latter ones will anyways opt for more popular arbitration centers, decided the discussion participants. But the Far East has far-reaching perspectives: it is possible that in a few years the Russian center will be able to challenge Singapore arbitration, or Hong Kong arbitration, or even London arbitration.

The participants of the session have added in conclusion that they are ready to prepare a draft law and an explanatory note with their recommendations as to how to improve the procedures in the Far East. And they agreed that the trend to discuss legal issues at economic forums should be proceeded further.

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