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Policies affecting trade in services
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POLICIES AFFECTING TRADE IN SERVICES
  1. The representative of the Russian Federation noted that the market for services of the Russian Federation began to develop only in the first part of the 1990s, following the domestic process of economic reforms, privatization, and liberalization of the entire economy of the Russian Federation.
  2. He further stated that the reform of the economy of the Russian Federation since then had created new services sectors and contributed to the development of existing ones.
  3. He noted that economic development in services was supported by the legislative process of the Russian Federation. Many laws and regulations were adopted to establish a legal framework for provision of services in general or in specific sectors. However, the domestic regulatory system had not kept up with the dynamism of the services markets of the Russian Federation. As an example, the banking crisis in August 1998 of the Russian Federation was particularly associated with inadequate approaches to, and lack of effective prudential requirements for banking activities that were established and which resulted in extreme dependence of the domestic financial system on short-term foreign capital markets. For the purposes of creating a favourable economic and investment climate, including in the sphere of services, the Russian Federation had embarked on a series of actions to reduce restraints on the economy, involving streamlining of procedures for company registration, downsizing the list of types of activities subject to licensing, and reduction of the frequency of inspections of enterprises. It could be expected that the regulatory framework of the Russian Federation governing the services sector would be continuously subject to frequent adaptations and improvement in light of experience and of progress made in building domestic capacity to supply services on a competitive basis.
  4. Responding to the concerns of Members, the representative of the Russian Federation clarified that all normative legal acts of general application pertaining to or affecting trade in services, including those that established or implemented procedures and requirements for licensing of service activities, were published in a number of official sources. When published, such normative legal acts contained information on their effective date and scope of application. When a normative legal act did not contain any information on its effective date, the date was determined by another normative legal act establishing rules for entry into force of specific types of normative legal acts. For example, according to Federal Law No. 5-FZ of 14 June 1994 "On the Order of Publishing and Coming into Effect of Federal Constitutional Laws, Federal Laws, Acts of the Chambers of the Federal Assembly", Federal Constitutional Laws, Federal Laws and Acts of the Chambers of the Federal Assembly became effective after ten days of their official publication, unless the law or act stated a different date. Similarly, according to the Presidential Decree No. 763 of 23 May 1996 "On the Order of Publishing and Coming Into Force of the Acts of the President of the Russian Federation, the Government of the Russian Federation and of the Normative Legal Acts of the Federal Executive Bodies", Presidential Decrees and Acts became effective after seven days following the day of their first official publication, unless the relevant decree or act included a date. He also explained that Federal Laws were published in the Official Gazette, "Rossiiskaya Gazeta". In addition, most of these normative legal acts were available on the respective websites of the regulatory bodies or of the Government of the Russian Federation (ссылка скрыта). Competent authorities, responsible for regulation of key service sectors, had the following websites: ссылка скрыта (Ministry of Finance of the Russian Federation), ссылка скрыта (Central Bank of Russia), ссылка скрыта (Federal Service on Financial Markets), ссылка скрыта (Ministry of Communications of the Russian Federation), ссылка скрыта (Ministry of Transport of the Russian Federation), ссылка скрыта (the MIT).
  5. In response to questions from Members on the system of licensing in the sphere of services, the representative of the Russian Federation informed Members that, according to the existing legislation, some types of services were subject to licensing. The fundamentals of the regulation of licensing in the area of services were provided for in Federal Law No. 128-FZ of 8 August 2001 "On Licensing of Specific Types of Activity" (hereafter: Federal Law No. 128-FZ), and a limited number of other Federal Laws, regulating individual service sectors. Federal Law No. 128-FZ had been adopted in the context of the governmental programme of "debureaucratization" of the economy and established a unified and transparent licensing regime aimed at the removal of excessive administrative regulation and barriers to market access. The representative of the Russian Federation informed Members of the basic provisions of that Law. One of the basic licensing principles was ensuring the existence of a single economic space in the territory of the Russian Federation. For that purpose, the Government of the Russian Federation designated the Federal Executive bodies responsible for licensing specific types of activity, and also determined the types of activity to be licensed by the executive bodies of the regions of the Russian Federation. If an enterprise wanted to pursue an activity that required a licence under Federal Law No. 128-FZ and received a licence from the Federal Executive body or the executive body of a region of the Russian Federation it could pursue the licensed activity throughout the territory of the Russian Federation. If authorities of a region of the Russian Federation issued a licence to an enterprise to engage in an activity, the enterprise could engage in the licensed activity in other regions, only if it notified the licensing authorities in the other regions of its intent to engage in the licensed activity in their respective regions before engaging in the activity. Federal Law No. 128-FZ also defined the powers of licensing bodies, established the procedure for consideration of an application for a licence, as well as for issuance of a licence, and set-out the list of documents to be provided by an applicant. A fee of RUB 300 charged for the consideration of a licence application by a licensor was abolished, in accordance with the Federal Law No. 374-FZ of 27 December 2009. A licence fee of RUB 2,600 was charged for the issuance of a licence to engage in activities listed in Article 17 of Federal Law No. 128-FZ, except for activities connected with the gambling industry, for which a fee for issuance of a licence amounted to RUB 10,000. For those services that were not governed by Federal Law No. 128-FZ the amount of fees was different. The list of such services was the following: telecommunication services; financial services other than insurance; distribution of ethyl spirit, alcoholic and alcohol-containing products; the use of frequencies for tele- and radio broadcasting; and the use of natural resources and services in the field of the use of nuclear energy (e.g. designing, construction and operation of nuclear plant, treatment of radioactive wastes). The volume of the licensing fees applied for the licensing of these services was governed by the Tax Code and the respective sectoral legislation. In response to a specific question, the representative of the Russian Federation explained that in respect to services auxiliary to all modes of transport, Federal Law No. 128-FZ provided for licensing in respect to cargo-handling services of dangerous cargos in maritime, railway and internal waterways transport.
  6. The Representative of the Russian Federation stated that the governmental policy with respect to the establishment of the licensing fees reflected in Federal Law No. 128-FZ>
  7. The representative of the Russian Federation clarified that, according to the Civil Code of the Russian Federation, a juridical person of the Russian Federation was an entity that had separate property under its ownership, economic management, or operative administration and was liable for its obligations with respect to that property and that might, in its own name, obtain and exercise property and non-property personal rights, bear duties, and be a plaintiff and defendant in Court. Juridical persons must have an independent balance sheet or budget. Branches were not considered to be juridical persons of the Russian Federation, but were a separate subdivision of a juridical person and could conduct all of the functions of a juridical person or part of them. Representative offices were also not considered to be juridical persons, but were a separate subdivision of a juridical person, which represented the interests of the juridical person and exercised its protection. In response to a specific question of a Member, the representative of the Russian Federation clarified that the notion of juridical person referred to in this paragraph covered also juridical persons of the Russian Federation, owned or controlled by natural or juridical persons of other Members.
  8. In accordance with the Civil Code of the Russian Federation, a juridical person of the Russian Federation could be organized as a commercial organization, which had making profits as the chief goal of its activity, or as a non-profit organization. Juridical persons that were non-profit organizations, could be set-up in the form of State-corporations, non-commercial partnerships, institutions, autonomous non-profit organizations, consumer cooperatives, public or religious organizations (associations), charity or other funds, associations that were a group of juridical persons (associations and unions).
  9. The representative of the Russian Federation explained that juridical persons of the Russian Federation, including those that were service suppliers of a Member established in the territory of the Russian Federation, could, in accordance with Russian legislation, exercise their rights and bear responsibilities freely and in their own interest, inter alia, on a contractual basis. The terms and conditions of the contracts were to be defined by the parties to such contracts and could not contradict the legislation of the Russian Federation.
  10. Regarding the energy sector, some Members noted that the Russian Federation had made rather weak commitments on services incidental to mining and no commitments for pipeline transport services. In this regard, these Members requested details of the relationship, if any, between the relative weakness of commitments for these services and the exercise of the sovereign rights of the Russian Federation over its subsoil and mineral and energy resources. They further asked for a clarification on the intentions of the Russian Federation with respect to the development of a market environment for the provision of services incidental to mining and pipeline transport services, and whether these would be consistent with the role that the Russian Federation saw for the conclusion of production sharing agreements and concession arrangements.
  11. In response, the representative of the Russian Federation noted that all natural resources of the Russian Federation including subsoil domain as well as mineral, energy and other resources contained therein were subject to sovereign rights of the Russian Federation exercised with the regions of the Russian Federation jointly and constituted State property. Subsoil areas could not be subject to purchase, sale, gift, inheritance, deposit, pledge or any other form of alienation. He referred Members to the Section on Trade-related Investment Measures (TRIMs) of the Working Party Report and Investment for information on PSA, including services related obligations of such production sharing agreements.
  12. The representative of the Russian Federation explained that, under the legislation of the Russian Federation, State support for juridical persons could be subject to criteria or conditions such as, inter alia, employment of/or provision of services to persons suffering from an unfavourable social and economic position, entities considered to be of social importance, or small businesses. Criteria in the legislation were applied on a non-discriminatory basis independent of foreign participation in the juridical person.

Under current legislation:
    • persons suffering from an unfavourable social and economic position included persons of limited abilities due to illness or age, jobless persons, orphans, persons suffering from low income, natural and other disasters, war or social conflict and other circumstances, which denied common conduct of life and could not be solved by these persons themselves;
    • entities of social importance included entities providing services of mutual social use and/or services consumption of which could be of principal importance to any juridical persons and/or individuals, and/or entities being of key importance as a source of employment, within a respective region or economy, in general, and entities providing services, which were closely connected to the production of above-mentioned services, for example, as part of the technological process of such production or as a condition of production; and
    • small businesses were those commercial organizations in which the average number of workers did not exceed, in the reporting period, the following maximum levels: 100 in industry and construction; 80 in agriculture; 60 in the scientific and cultural sphere; 30 in retail trade and domestic services; and 50 in wholesale trade and in other activities or branches of activity, as well as in the case of investment from juridical persons not being small businesses accounted for less than 25 per cent of a business' capital.
  1. Several Members of the Working Party stressed the need for more information on the progress of the Russian Federation towards establishing the required enquiry point and other transparency and procedural requirements for complying with the WTO GATS Agreement. These Members requested confirmation that, in service sectors requiring licensing, foreign natural and juridical persons, needing licences, could obtain them on the same terms as Russian natural and juridical persons. Some Members also noted that the Russian Federation had used the "infant industry" argument to justify a certain level of protection of its service sectors and asked how the Russian Federation would implement measures in this regard, considering that the WTO GATS Agreement did not contemplate any safeguard mechanism.
  2. In response to these questions from Members, the representative of the Russian Federation informed the Working Party of the adoption of the Presidential Decree No. 314 of 9 March 2004 "On the System and Structure of Federal Executive Bodies". In accordance with the Presidential Decree, "administrative reform" was realized. The purpose of this reform was to divide the legal regulation functions and control/supervision of activities between different Federal Executive bodies, as well as to guarantee the independence of the Federal Executive bodies from service suppliers. The function of elaboration of State policy and legal regulation, in the respective spheres, was assigned to the ministries in accordance with their competence. The function of control/supervision was assigned to the Federal services.
  3. Currently, there were certain sectors where the Federal Executive bodies responsible for the regulation of the respective service sectors had their designated representatives using a special right ("golden share") in the participation of the Russian Federation and the subjects of the Russian Federation in the management of Joint-Stock Companies supplying services in such sectors, as telecommunications, transport and energy. In addition, the Central Bank of the Russian Federation (hereafter: Bank of Russia or CBR) responsible for the registration of credit organizations, the supervision of activities of credit organizations and the establishment of rules for activities of credit organizations, currently participated in the capital of Sberbank.
  4. A Member noted that the Russian Federation had not addressed questions from Members in paragraph about the establishment of an enquiry point, as required by Article III:4 of the WTO GATS Agreement. This Member believed that this information should be included in the Section "Policies Affecting Trade in Services" of this Report, unless the commitment on an enquiry point was to be specifically addressed in the Section "Transparency" of this Report. In response, the representative of the Russian Federation referred to paragraph , which contained the information on the enquiry point.
  5. Regarding the banking sector, some Members expressed concern that one of the largest commercial banks in the Russian Federation (Sberbank) was currently owned by the CBR. This bank held a dominant position in the market of the Russian Federation, and its ownership by the CBR created a clear potential conflict of interest with the oversight functions and other responsibilities of the CBR. While welcoming the information on plans to divest the CBR holdings in commercial banks, these Members invited the Russian Federation to indicate a firm date by which the ownership of these banks and their commercial activities would be legally and, in practice, separated from the CBR. In addition, these Members expressed further concern about the distortions of competition created by the unlimited (i.e. 100 per cent) State guarantee given to deposits in accounts held with Sberbank. No State guarantee at all existed for deposits held in accounts with other banks, whether Russian or foreign. In order to foster equal conditions of competition in the banking sector of the Russian Federation and help improve the solidity and functioning of the financial sector, more generally, these Members expected that the Russian Federation would commit, by an agreed time-frame, to divest or bring under the responsibility of another public authority the commercial activities of the CBR and to ensure that there was no discrimination between established banks as regards to the guarantee of deposits.
  6. Some Members expressed concerns with respect to the potential conflict of interest arising from role of the Bank of Russia, as a supervisory body, and its equity participation in some commercial banks, as well as the possible distortions of competition created by the unlimited State guarantee given to deposits in accounts held with Sberbank.
  7. In response the representative of the Russian Federation noted that, the Bank of Russia held a 58 per cent stake in Sberbank. The remaining shares were owned by non-governmental investors, including foreign investors.
  8. In the Bank of Russia, the functions with respect to control over Sberbank were strictly divided. Management of Sberbank, as an object of ownership, was performed by those divisions of the Bank of Russia that did not exercise banking supervision authority. At the same time, banking supervision divisions applied to Sberbank the same supervision rules and norms, as those applied to any other bank.
  9. Sberbank maintained a historically leading role in the personal deposits' market (at present, about 51.5 per cent), although its share of individual deposits had been gradually decreasing (in early 2002, for example, it constituted almost 75 per cent). Sberbank remained a socially significant bank, since the majority of its depositors were individuals with low-income, primarily pensioners (retired people). It was impossible to indicate a firm date by when the Bank of Russia would withdraw from participating as an investor in Sberbank.
  10. He further noted, that the issue of the participation of Sberbank in the deposit guarantee system had already been resolved in Article 49 of Federal Law No. 177-FZ of 23 December 2003 "On Insurance of Deposits of Physical Persons in Banks of the Russian Federation", which had eliminated preferences for banks with participation of the CBR in the deposits guaranteeing system from 1 January 2007.
  11. In light of the limitations in the financial services sector on foreign participation in the capital of an enterprise, some Members requested information on the definitions of various forms of capital in the Russian Federation and the practical implications of these definitions.
  12. In response to questions from Members about the definition of various forms of capital in the legislation of the Russian Federation, the representative of the Russian Federation explained that, charter capital11 was defined as the par value of the shares of a company that were issued, pursuant to: (i) Articles 66, 90, 96 and 99 of Part 1 of the Civil Code of the Russian Federation; (ii) Articles 2 and 25 of Part 1 of Federal Law No. 208-FZ of 25 December 1995 "On Joint Stock Companies"; (iii) Articles 2 and 14 of Part 1 of Federal Law No. 14-FZ of 8 February 1998 "On Limited Liabilities Companies"; (iv) Articles 11 and 18 of Federal Law No. 395-1 of 2 December 1990 "On Banks and Banking Activity"; and (v) provisions of the Law of the Russian Federation No. 4015-1 of 27 November 1992 "On Organization of Insurance Activity in the Russian Federation". He further explained that this included shares re-purchased by the company for re-sale or for retirement that were issued, but not outstanding. For the insurance sector, operational capital was comprised of charter capital, reserve capital, additional capital and undistributed profits. He also explained that for the banking sector, operational capital was comprised of charter capital, emissive income12, funds of credit organizations confirmed by the audit (including reserves) and drawn from profits of previous years, profits of the current and previous years confirmed by the audit, and other sources of operational capital (but not including subordinated debt). Thus, limits on charter capital did not necessarily constrain total operational capital, but could do so depending on the other resources of a particular bank.
  13. In response to questions from Members regarding regulatory limits on various components of capital, the representative of the Russian Federation clarified that, in the banking sector, the sum of subordinated debt of each individual bank could not exceed 50 per cent of total operational capital. He explained that this limit did not apply to the insurance sector.
  14. A Member of the Working Party asked whether pension funds and annuities were considered insurance products. The representative of the Russian Federation explained that pension funds were established as juridical persons regulated separately from insurance by a different regulatory body. He further confirmed that investments in charter capital of companies that were licensed as pension funds would not be subject to the foreign charter capital ratio for insurance. Annuities were considered as insurance products and were provided by insurance companies that were subject to insurance regulations.
  15. In response to a specific question of a Member, the representative of the Russian Federation said that the activity of self-regulatory organizations of professional participants in the securities market was subject to Federal Law No. 39-FZ of 22 April 1996 "On Securities Market". The Federal Law did not establish restrictions with respect to participation of Russian juridical persons with foreign investments in the activity of such self-regulatory organizations. The representative of the Russian Federation further noted that Federal Law No. 39-FZ did not establish restrictions with respect to participation of Russian juridical persons with foreign investments in trading at stock exchanges or in clearing activity, provided that such juridical persons met the respective domestic regulations requirements, or those applied by stock exchanges or clearing companies to all market participants. Answering further questions of that Member, the representative of the Russian Federation explained that, so far, there were no measures taken by the relevant financial authorities of the Russian Federation to prevent transfers of financial information to the banks and other companies operating in the financial market of the Russian Federation, or to prevent processing of financial information transferred from abroad, by such banks and companies.
  16. One Member of the Working Party expressed deep concern over the maintenance of a discriminatory regime in the Russian Federation with regard to the supply of services on the Russian services market by nationals of its country, residing in different regions of its country, under the mode of supply "commercial presence" and "movement of natural persons". This Member requested the Russian Federation to make the necessary adjustments in order to avoid discriminatory treatment and to allow all his nationals to provide services on the Russian market on an equal footing.
  17. In response, the representative of the Russian Federation stated that the nature and origin of this situation was due to complicated historical factors. The Russian Federation felt that the settlement of those problems which, were outside the WTO, could be achieved through bilateral negotiations and was prepared to take all reasonable steps in this regard.
  18. Another Member requested confirmation regarding the intention of the Russian Federation to introduce International Accounting Standards (IAS), adopted by the International Accounting Standards Board (IASB) for banks on 1 January 2004 and for all listed companies on 1 January 2005. This Member asked the Russian Federation to confirm this information and indicate the steps by which it intended to achieve this objective. He also requested the Russian Federation to provide information on the actual application of IAS by Russian companies. Another Member asked whether the financial measures described by the Russian Federation, in relation to currency regulations and controls, were not already covered by Article XII of the WTO GATS Agreement and paragraph 2 of the Annex on Financial Services of the WTO GATS Agreement.
  19. The representative of the Russian Federation replied that it was the plan of the Government of the Russian Federation to introduce IAS. He noted that Federal Law No. 208-FZ of 27 September 2010 "On Consolidated Financial Accounting in the Russian Federation" had been adopted. This Federal Law established the general requirements on drawing up, offering, and publishing of the consolidated financial accounting of the company. The company had to be a juridical person of the Russian Federation. The provisions of the Law were applied to credit organizations, insurance organizations and other organizations listed in a stock exchange, or securities market arrangers. In accordance with the provisions of the Law, the consolidated financial accounting would be drawn up under the International Financial Reporting Standards. He also stated that, in the service sectors inscribed in the Schedule of Specific Commitments of the Russian Federation, service suppliers of WTO Members would be accorded treatment no less favourable than that provided for under the terms, limitations and conditions and subject to qualifications specified in the Schedule of Specific Commitments on Services. He noted that the requirement for establishing a WTO GATS Agreement enquiry point was being addressed, and that the enquiry point would be established and operational upon accession. He further noted that the Russian Federation had a limited number of bilateral Agreements related to debt settlements and technical assistance measures resulting from Agreements on legal assistance, which contained some preferential provisions, and Agreements on conditions for activities on the territory of the Russian Federation of Severniy Investitsionniy Bank (North Investment Bank) and Tchernomorskiy Bank Torgovliy i Rasvitiya (Tchernomorskiy Bank of Trade and Development).
  20. One Member suggested that the Working Party Report be updated and include language to clarify plans with respect to accountancy standards (e.g. scope of those plans, manner in which the standards would be implemented and time-frame being considered). Where international standards had been partially adopted, further details would be required. This Member noted that most recent discussions suggested that the accountancy standards applied to companies listed on the stock market. This Member further noted that he remained concerned that the lack of compatibility of accounting systems would impede service providers from obtaining the market access that the Russian Federation had agreed to offer. In response, the representative of the Russian Federation explained that information on the introduction of IAS in the Russian Federation provided for in paragraph above constituted the quintessence of all new developments, at this stage.
  21. Concerning horizontal measures of regulation, the representative of the Russian Federation explained that services, considered to be public utilities and referred to in the Horizontal Part of the Schedule of Specific Commitments on Services of the Russian Federation, could be subject to public monopolies or exclusive rights granted to private operators. Exclusive rights to provide such services could be granted to private operators, for instance, operators with concessions from bodies of State power and local self-governmental bodies, subject to the specific services obligations of the Russian Federation. Services considered as public utilities were supplied on the basis of public contracts. In service sectors, included the Schedule of Specific Commitments on Services of the Russian Federation, Russian juridical persons with 100 per cent foreign equity participation were allowed to apply for these exclusive rights on equal terms with national services suppliers.
  22. He stated that the policy of the Russian Federation in preserving, developing, and disseminating culture, required an authorization with respect to the acquisition of control over a Russian juridical person related to the cultural heritage of the Russian Federation and/or being a cultural property of the peoples of the Russian Federation. Also the number of service suppliers and scope of their operation could be limited on a non-discriminatory basis in specially protected territories.
  23. He noted that for the purpose of the protection and preservation of indigenous persons and exiguous ethnic communities, measures directed at the protection and preservation of the territories of the traditional habitation of these groups could be applied, and preferences to these groups could be granted with respect to their traditional economic activity in the territory of their traditional habitation. For the purpose of the protection and preservation of indigenous persons and exiguous ethnic communities, a special regime had been established for the use of land where they traditionally resided and exercised economic activity. According to that regime, such persons and communities had, inter alia, a priority right to the use of wild life and other natural resources in that land, and they had to give their consent to any use of natural resources in that land.
  24. For national security reasons the Russian Federation could also use measures to limit or prohibit economic and entrepreneurial activities with respect to trade in services, including possession, use and disposal of land, natural resources and immovable property, entry and/or permanent stay of natural persons, within the border zones and closed administrative areas.
  25. Responding to the concerns of some Members, the representative of the Russian Federation confirmed that commitments on "tour operator and tour agency services, CPC 7471" included services rendered for passenger travel by: (i) tour agencies, tour operators, and similar services; (ii) travel information, advice and planning services; (iii) services related to arrangement of tours, accommodation, passenger and baggage transportation; and (iv) ticket issuance services.
  26. A Member noted that the Russian Federation had listed in its Schedule of Specific Commitments on Services discretionary authority to impose temporary limits on foreign investment in the banking and insurance sectors, if foreign investment in those sectors exceeded a specified charter capital ratio. This ratio was calculated annually and, if foreign investment exceeded this ratio, the relevant regulatory authority had the discretion to take certain actions to temporarily limit further foreign investment. This Member asked, if all banks and insurance enterprises had to meet the same charter capital requirements and requested detailed information from the Russian Federation on how the ratio would be calculated and administered. Noting that in the case of the banking sector, the regulator (the CBR) was also a stakeholder in some commercial banks, this Member sought assurances that for any sector subject to this limitation, any decisions relating to charter capital, including decisions on whether to act, if foreign investment in the banking or insurance sector exceeded the ratio, would be made on prudential grounds and not influenced by the participation of the regulator in the sector.
  27. In response to these questions, the representative of the Russian Federation confirmed that, with respect to the banking sector, the same charter capital requirements applied to all banks in the Russian Federation, except the CBR, including State-owned banks and private banks, and that charter capital requirements would be applied on a non-discriminatory basis. He further confirmed that the CBR had the discretion to take certain limited actions, if foreign investments in the banking sector of the Russian Federation exceeded the 50 per cent ratio calculated according to the following formula:

(i) The numerator would consist of the total amount of foreign (non-resident) investments in the charter capital of banks in the Russian Federation, excluding all foreign investments in banks:

(a) made prior to 1 January 2007;

(b) privatized after the date of accession of the Russian Federation to the WTO; and

(c) that accounted for 51 per cent or more of charter capital of any individual bank, and made after 1 January 2007, and had been in place for a period of 12 years or more, unless thereafter annually, the CBR determined that it was necessary to continue to include such foreign investments in the calculation of the 50 per cent ratio and made such determination public.

(ii) The denominator would consist of the aggregated amount of total charter capital of banks in the Russian Federation (including all foreign investments, prior to 1 January 2007, all foreign investments in banks privatized after the date of accession of the Russian Federation to the WTO, and any foreign investment made after 1 January 2007, including that in place for a period of 12 years or more, that accounted for 51 per cent or more of the charter capital of any individual bank).

The representative of the Russian Federation confirmed that the ratio would be calculated in January of each year on the basis of the capital in existence at the end of the prior year, and that the ratio and supporting calculations would be made publicly available. He further confirmed that Federal financial authorities had the discretion to take certain temporary actions affecting foreign investments in the banking sector, if foreign investments exceeded the 50 per cent ratio. Any such action would follow notice and consultations with interested persons, and would require that a determination that the ratio had been exceeded due to new foreign investments, rather than due to a contraction of total capital or adjustments in charter capital, was made public. In such circumstances, the only actions authorities could take would be to: (i) stop issuance of licenses for new foreign invested banks; (ii) prohibit the increase of charter capital of existing Russian banks contributed by foreign investors (non-residents); and (iii) prohibit the alienation (sale) of shares of existing Russian banks to foreign investors (non-residents). He confirmed that only where the institution involved conducted commercial banking as its principal line of business, would it be subject to these adverse actions. For example, a Russian juridical person with a commercial banking licence whose principal line of business was as a broker dealer would not be subject to these adverse actions. The representative of the Russian Federation further confirmed that the Federal financial authorities would not be able to apply measures that would, for example: (i) prevent increases in the operational capital of existing foreign-invested banks; (ii) prevent expansion of the scope or volume of business of such foreign-invested banks; or (iii) prevent foreign-invested banks from opening internal branches (as distinct from direct branches from abroad) within the Russian Federation. Should the Russian Federation choose to exercise its discretion and, subsequently, the ratio fell below 50 per cent, the Russian Federation would withdraw the temporary action. The Working Party took note of these commitments.
  1. With respect to the insurance sector of the Russian Federation, the representative of the Russian Federation confirmed that charter capital requirements would be applied on a non discriminatory basis. He further confirmed that the Federal regulatory authorities had the discretion to take certain limited temporary actions, if foreign investments in the insurance sector of the Russian Federation exceeded the 50 per cent ratio calculated according to the following formula:

(i) The numerator would consist of the total amount of foreign (non-resident) investments in the charter capital of insurers/re-insurers in the Russian Federation, excluding all foreign investments in insurers/re-insurers:

(a) made prior to 1 January 2007;

(b) privatized after the date of accession of the Russian Federation to the WTO; and

(c) that accounted for 51 per cent or more of charter capital of any individual insurer/ re insurer, made after 1 January 2007, and had been in place for a period of 12 years or more, unless thereafter, annually, the Federal financial authority determined that it was necessary to continue to include such foreign investments in the calculation of the 50 per cent ratio and made such a determination public.

(ii) The denominator would consist of the aggregated amount of the total charter capital of insurers/re-insurers in the Russian Federation, including all foreign investments, prior to 1 January 2007, foreign investments in insurers/re-insurers privatized after the date of accession of the Russian Federation to the WTO, all foreign investment in internal branches, and foreign investment made after 1 January 2007, that had been in place for a period of 12 years or more and that accounted for 51 per cent or more of the charter capital of any individual insurance/re-insurance company.

The representative of the Russian Federation also confirmed that, after nine years from the date of accession of the Russian Federation to the WTO, capitalization of branches of foreign insurers/re-insurers would be factored into the total amount of foreign investments in the insurance sector of the Russian Federation and thus would be included in the calculation of the ratio referred to above. He also confirmed that, at least six months prior to the expiration of the nine year transition period, the Russian Federation would consult with interested WTO Members on the methodology and amount of branch capital to be included in the calculation of the ratio.

The representative of the Russian Federation confirmed that, the ratio would be calculated in January of each year on the basis of the capital in existence at the end of the prior year, and that the ratio and supporting calculations would be made publicly available. He further confirmed that Federal financial authorities had the discretion to take certain temporary actions affecting foreign investments in the insurance sector, if foreign investments exceeded the 50 per cent ratio. Any such action would follow notice and consultations with interested persons, and would require that a determination that the ratio had been exceeded, due to new foreign investments, rather than a contraction of total capital or adjustments in charter capital, was made public. In such circumstances, the only actions authorities could take would be to: (i) stop issuance of licenses for new foreign invested insurers/re-insurers; (ii) prohibit the increase of the charter capital of existing insurers/re insurers contributed by foreign investors (non-residents); and (iii) prohibit the alienation (sale) of shares of existing Russian insurers/re-insurers to foreign investors (non-residents). Only institutions involved in commercial insurance as their principal line of business could be subject to these adverse actions. The representative of the Russian Federation further confirmed that the Federal financial authorities of the Russian Federation would not have the right to apply measures that would, for example: (i) prevent increases in the operational capital of existing foreign-invested insurers/re-insurers in the Russian Federation; (ii) prevent expansion of the scope or volume of such foreign-invested or wholly foreign-owned businesses; or (iii) prevent foreign-invested Russian insurers/re-insurers from opening branches of juridical persons of the Russian Federation within the Russian Federation. Should the Russian Federation choose to exercise its discretion and, subsequently, the ratio fell below 50 per cent, the Russian Federation would withdraw the temporary action. The Working Party took note of these commitments.
  1. In response to a question from Members about a possible review and elimination of the 50 per cent charter capital ratio, the representative of the Russian Federation confirmed that, it would review the operation and necessity for the ratio and implementation of temporary discretionary measures in the banking and insurance sectors within five years of the date of accession of the Russian Federation to the WTO.
  2. In response to a question from a Member, the representative of the Russian Federation confirmed that an increase in charter capital of a foreign-invested Russian bank or foreign-invested Russian insurance company that was financed by its profits earned in the Russian Federation or repatriated to the Russian Federation from abroad would constitute domestic investments and only be included in the denominator of the respective ratios. He further confirmed that all investments by foreign-invested Russian juridical persons in subsidiaries and internal branches in the Russian Federation were domestic, not foreign, investments. The Working Party took note of this commitment.
  3. Several Members of the Working Party noted that, the Schedule of Specific Commitments in Services of the Russian Federation did not include any commitment for branching in non-insurance financial services, and inquired when the Russian Federation planned to allow this common form of establishment. In addition, several Members, who were also members of the Organization for Economic Co-operation and Development (OECD) noted that commitments for direct-branching in financial services were standard in that organization and that they would expect the Russian Federation to make full commitments to allow direct-branching in financial services as part of its accession to the OECD.
  4. However, the representative of the Russian Federation confirmed that the Russian Federation would come back to consideration of granting market access to direct branches of foreign banks and companies which were professional participants of the securities markets in the context of future negotiations on the accession of the Russian Federation to the OECD or within the framework of the next round of WTO multilateral trade negotiations whichever comes earlier. The Working Party took note of this commitment.
  5. In response to a question from a Member, the representative of the Russian Federation confirmed that the 20 per cent limit on equity ownership of "stock exchanges" would not apply to other kinds of trade arrangers. Companies that were trade arrangers other than stock exchanges that use such means of organizing trade on the securities market as, for example, via alternative trading systems (ATSs), such as electronic communications networks (ECNs), crossing networks or global agency brokers, or via internalized trades (i.e., matching trades internally between customers and/or between customers and proprietary positions) could be up to 100 per cent owned by a single investor, domestic or foreign. He further confirmed that, where the 20 per cent limit on equity ownership of "stock exchanges" applied, it would do so equally to foreign and domestic investors, as would any subsequent amendment to this limit. The Working Party took note of these commitments.
  6. Some Members expressed concerns about the restrictions in the offer of the Russian Federation on Telecommunication Services for Mode 1, cross-border supply, of satellite services. While Members noted that the concerns of the Russian Federation with respect to these services were related to security, frequency allocation and universal service fund contributions, these concerns were important to all Members. In their view, none of these concerns should prevent a Member from allowing market access for foreign satellite services. In the view of these Members, these issues could be more appropriately addressed in ways consistent with international practice, such as through the earth station licensee or through coordination at the International Telecommunications Union (ITU).
  7. The representative of the Russian Federation explained that any foreign-licensed fixed satellite operator could access the market of the Russian Federation by providing capacity to a juridical person of the Russian Federation that possessed a licence for telecommunications services issued in accordance with Chapter 6 of Federal Law No. 126-FZ of 7 July 2003 "On Communications". Thus, the foreign-licensed fixed satellite operator would not need to be both the operator and the licensee in the Russian Federation in order to provide services to juridical persons of the Russian Federation, as described above. The Working Party took note of this commitment.
  8. The representative of the Russian Federation further confirmed that certain measures adopted or maintained by the Russian Federation would be applied in a manner that would ensure the market access described above. For example, the Government Resolution No. 88 of 1 February 2000 "On the Procedures of the Admission of Foreign Satellite Systems to the Russian Market" would be administered in a manner consistent with the market access commitments of the Russian Federation. The Working Party took note of this commitment.
  9. Some Members raised other concerns about new requirements established in the Russian Federation under an Order titled "On Approval of Requirements for PSTN Development" in particular, the requirement that (Public Switched Telephone Network) PSTN traffic might be connected via communications satellites controlled from the territory of the Russian Federation. The representative of the Russian Federation confirmed that, consistent with its market access commitments, foreign fixed satellite operators would not be required to establish commercial presence in the territory of the Russian Federation for the purposes of providing capacity to a juridical person of the Russian Federation that possesses a licence for telecommunications services issued in accordance with Chapter 6 of Federal Law No. 126-FZ of 7 July 2003 "On Communications". The Working Party took note of this commitment.
  10. Members of the Working Party stated that they expected the Russian Federation to make a commitment to guarantee transparency of licensing requirements and procedures, qualification requirements and procedures, as well as of other authorization requirements, in particular with respect to obtaining, extending, renewing, denying and terminating licenses and other approvals required to provide services in the market of the Russian Federation, and appeals of such actions. The licensing procedures and conditions of the Russian Federation should not in themselves act as a barrier to market access and should not be more trade restrictive than necessary. The Russian Federation should publish a list of authorities responsible for authorizing, approving or regulating those service sectors in which the Russian Federation had made specific commitments, as well as the licensing procedures and conditions of the Russian Federation. Members also expected the Russian Federation to make a commitment to guarantee that, for those services that would be included in the Schedule of Specific Commitments of the Russian Federation, the relevant regulatory authorities would be separated from, and not accountable to, any of the service suppliers they regulated. Members further expected the Russian Federation to make a commitment to guarantee that foreign service suppliers remain free to choose their partners.
  11. In response, the representative of the Russian Federation confirmed that, upon accession, the Russian Federation would ensure that all normative legal acts of general application pertaining to or affecting trade in services, as well as information on their effective date and scope of application, were published or made otherwise publicly available. He further confirmed that the Russian Federation would ensure that the names of competent authorities that were responsible for issuing licenses (authorizations) for service activities were published or made otherwise publicly available. The Working Party took note of these commitments.
  12. Without prejudice to the right of the Russian Federation to establish and apply licensing procedures and requirements, the representative of the Russian Federation confirmed that, in sectors in which the Russian Federation had undertaken specific commitments, it would ensure that its licensing procedures were not in themselves a restriction on the supply of the service, and that its licensing requirements directly related to eligibility to supply a service were not in themselves an unjustified barrier to the supply of the service. He further confirmed that for those services sectors in which specific commitments were undertaken by the Russian Federation in its Schedule of Specific Commitments, the Russian Federation would ensure that:
    1. All licensing procedures and requirements were set-out in normative legal acts and that any law establishing or implementing licensing procedures or requirements would be published no later than its effective date and that any other normative legal act that establishes and implements licensing procedures or requirements would be published prior to its effective date;
    2. Relevant authorities make a decision on granting/denial of a licence within the period specified in the relevant normative legal act or, if no time period was specified in the relevant normative legal act, without undue delay;
    3. Any fees charged in connection with the filing and review of an application for a licence would not in themselves be a restriction on the supply of the service;
    4. Once any period established in a normative legal act for review of an application for a licence had lapsed, and on the request of an applicant, the relevant regulatory authority of the Russian Federation would inform the applicant of the status of its application and whether it was considered complete. If the authority required additional information from the applicant, it would notify the applicant without delay and specify the additional information required to complete the application. Applicants would have the opportunity to provide the additional information requested and to make technical corrections in the application. An application would not be considered complete until all information and documents specified in the relevant laws and regulations were received;
    5. The relevant regulatory authority of the Russian Federation would make an administrative decision on a completed application for issuance of a licence for the supply of a financial service, and, as appropriate, approval of new products and rate changes, within a reasonable period of time and would promptly notify the applicant of the decision. An application would not be considered complete until all information specified in the relevant normative legal act was received. Where it>


(i) On an application to supply banking services within 180 days; and

(ii) On an application to supply other financial services within 60 days.
    • The relevant regulatory authority would notify the applicant without delay;



    1. On the written request of an unsuccessful applicant, a regulatory authority that has denied an application would, inform the applicant in writing of the reasons for denial of the application; however, this provision shall not be construed to require a regulatory authority to disclose information, where that disclosure would impede law enforcement or otherwise be contrary to the public interest or essential security interests;
    2. Where an application had been denied, an applicant might submit a new application that attempts to address any prior problems for licensing;
    3. Where approval was required, once the application had been approved, the applicant would be informed in writing and in the time period provided for by the relevant normative legal act or, if no time period was specified in the relevant normative legal act, without undue delay; and
    4. Where an examination was required to licence professionals, such examinations would be scheduled at reasonable intervals. That would not apply to qualifying examinations administered or offered by financial service regulators or self-regulatory bodies or organizations.

The Working Party took note of these commitments.
  1. The representative of the Russian Federation further confirmed that, in those sectors where the Russian Federation had undertaken specific commitments, relevant regulatory authorities would not be accountable to any service suppliers they regulated. Further, the representative of the Russian Federation confirmed that in sectors in which the Russian Federation had undertaken specific commitments it would ensure, where practicable, that:
    • drafts of regulations of general application that it proposed to adopt were published in advance;
    • an opportunity to comment on such proposed regulation was provided to interested persons and other Members; and
    • reasonable time between publication of the adopted regulation and its effective date was allowed.

The Working Party took note of these commitments.
  1. The Russian Federation undertook market access negotiations in services with Members of the Working Party. The commitments of the Russian Federation in services were contained in the Schedule of Specific Commitments, reproduced in Annex I to the Protocol of Accession.