Best Project Finance Lawyers in Russia

About Project Finance Law in Russia

Project finance is a method of funding large-scale infrastructure or industrial projects where the project's cash flows and assets are used as the primary means of repayment and security. In Russia, project finance is widely used in sectors such as energy, oil and gas, transportation, utilities, and social infrastructure. Due to the significant capital requirements and long timelines, project finance structures in Russia often involve a network of stakeholders, including sponsors, lenders, contractors, and government agencies. Russian project finance law encompasses a combination of civil law, contract law, banking regulations, investment law, and sector-specific regulations. It aims to allocate risks appropriately, ensure investor protection, and provide reliable mechanisms for project implementation and financing.

Why You May Need a Lawyer

Project finance transactions in Russia are complex and require careful legal planning and execution. There are numerous situations where legal assistance is crucial:

• Structuring the project and selecting the appropriate legal framework
• Drafting and negotiating finance agreements, shareholder agreements, and construction contracts
• Ensuring compliance with Russian legislation on foreign investment, currency control, and banking
• Navigating public-private partnership (PPP) regulations and government approvals
• Conducting thorough due diligence on ownership, permits, environmental impact, and regulatory issues
• Managing risk allocation among various project participants
• Securing and perfecting collateral and security interests under Russian law
• Addressing cross-border legal issues, including tax, customs, and international financing standards
• Resolving disputes in Russian courts or through international arbitration mechanisms

Working with a qualified lawyer helps protect your financial interests, ensures compliance with local laws, and mitigates risks throughout the project's life cycle.

Local Laws Overview

Project finance in Russia is governed by a combination of federal laws, regulations, and standards, including civil, banking, investment, and public procurement legislation. Some key aspects include:

• Security Structures: Russian law provides for various types of collateral, including pledge of shares, mortgage of property, and assignment of rights. Some forms of security require registration with specific authorities.
• Foreign Investment: Russia imposes restrictions and approval requirements on foreign investment in strategic sectors, including energy and natural resources.
• Public-Private Partnerships (PPP): PPP projects are regulated by Federal Law No. 224-FZ and sector-specific legislation. These rules cover concessions, build-operate-transfer, and similar models.
• Banking and Currency Control: The Central Bank of Russia has oversight over currency operations and financial market activities. Contractors, lenders, and sponsors must comply with foreign exchange and anti-money laundering regulations.
• Procurement: Public projects must usually comply with procurement laws, ensuring transparency and competition among contractors.
• Taxation: Tax benefits may be available to certain qualifying projects, while cross-border transactions could trigger additional withholding taxes or reporting duties.

Each project requires a tailored approach to navigate the overlapping regulatory regimes and ensure all legal risks are addressed.

Frequently Asked Questions

What is project finance and how is it different from traditional lending in Russia?

Project finance relies on the future cash flow and assets of a specific project as the primary sources of repayment, rather than the balance sheet of project sponsors. This structure typically isolates the project from the sponsors' other activities and allocates risks among the parties involved.

Which sectors in Russia commonly use project finance?

Common sectors include energy, oil and gas, mining, transportation infrastructure (roads, railways, airports), utilities, and social facilities such as hospitals and schools.

What are the main risks associated with project finance in Russia?

Key risks include legal and regulatory changes, currency and exchange rate fluctuations, political risks, environmental compliance, delays in construction, and defaults by contractors or offtakers.

Can foreign investors participate in Russian project finance deals?

Yes, but foreign investment is subject to sector-specific regulations, currency control laws, and sometimes restrictions or approval requirements in strategic sectors like energy, natural resources, and defense.

What forms of security or collateral are most commonly used?

Common forms include pledge of shares, assignment of rights under contracts, mortgage of real estate or equipment, and bank guarantees. The choice depends on the project's structure and financing agreements.

Do I need Russian government approval for a project finance transaction?

Some projects, especially those in strategic sectors or involving public assets, require governmental or regulatory approval. Public-private partnerships also involve tender and consent procedures.

How are project disputes usually resolved?

Disputes can be resolved in Russian courts or through arbitration, both domestic and international, depending on contract terms. Arbitration is often favored for cross-border or complex projects.

What are the typical steps in structuring a project finance deal in Russia?

Major steps include feasibility studies, negotiating and drafting contracts, obtaining permits and regulatory approvals, arranging financing, and completing financial close. Legal due diligence is required at each stage.

Are there tax incentives for project finance in Russia?

Some types of infrastructure and investment projects may enjoy tax benefits, but eligibility and extent depend on federal and regional laws. Tax advisors should be consulted early in the process.

How long does it take to complete a project finance transaction in Russia?

The timeline varies widely based on project size, sector, regulatory requirements, and stakeholder cooperation. From initial structuring to financial close, the process can take several months to over a year.

Additional Resources

• Ministry of Economic Development of the Russian Federation - key regulator for investment and PPP projects
• Central Bank of Russia - regulatory body for banking and financial institutions
• Russian Direct Investment Fund (RDIF) - co-investment opportunities and guidance for foreign investors
• Federal Antimonopoly Service - responsible for procurement and competition compliance
• Russian Public-Private Partnership Center - expertise and methodology for PPP projects
• Major commercial banks specializing in project finance deals
• Legal and consulting firms with project finance and infrastructure practice groups

Next Steps

If you are considering involvement in a project finance transaction in Russia, consider the following steps:

• Define your project goals, stakeholders, and funding needs
• Gather all relevant project documentation, including feasibility studies, permits, and contracts
• Seek legal advice from a lawyer specialized in Russian project finance and infrastructure law
• Engage with relevant governmental bodies and regulatory authorities early in the process
• Conduct thorough legal and financial due diligence
• Negotiate risk allocation and contract terms with counterparties
• Address any issues of compliance, procurement, security interests, and tax
• Draft and execute all agreements necessary for project implementation and financing

Early legal involvement is vital to ensure smooth project progress, compliance with Russian law, and effective risk management throughout the project’s lifecycle.