In July 2018, the special administrative regions (hereinafter “SAR”) were established on Russky Island in Vladivostok and Oktyabrsky Island in Kaliningrad.

Foreign companies can register in SAR if a number of conditions are fulfilled. They must be established before January 1, 2018, invest over 50 million RUB in Russia in six months, be registered in countries adhering to the rules of The Financial Action Task Force (FATF) or be a member of the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL).
Foreign companies redomiciled in Russia are allowed not to disclose information on beneficiaries, not to pay tax profits from the sale of assets (shares) and tax on dividends from subsidiaries. Rate from dividends paid will be 5%.

Russia tried to create domestic offshores aimed at protection and support of companies under sanctions.

Since 2019, offshore zones, popular with the Russian business (British Virgin Islands, Islands of Bermuda, Cayman Islands and the Republic of Seychelles), started to adopt the laws requiring the companies to be engaged in real activities on their territories: companies have to open an office, move out offshore zone or provide proofs of paying taxes in transparent jurisdiction.

According to the data on August 2019, Cyprus is the most popular jurisdiction to register business of Russian origin. Formally not being an offshore, Cyprus attracts with minimum taxes, simple registration and reporting procedures. Over a half (53%) of the Russian companies with shareholders from offshores or low-tax countries are controlled through Cyprus. Seychelles rank the second: shareholders from these islands control 14% of companies (see Picture 1).

Picture 1. The most popular offshores and low-tax jurisdictions for the Russian business, % from total number of companies controlled by offshore shareholders

On July 9, 2019, En+ (controlling JSC Rusal), the world leader in the production of aluminum, was redomiciled on Oktyabrsky Island, Kaliningras. Previously, the company was controlled by Oleg Deripaska. The articles of association that were in force when the company was registered in Jersey, were replaced by the new one, and the company was given a name on Russian language - «Международная компания «Публичное акционерное общество «Эн+ Груп».

However, offshore companies still control many large Russian enterprises, such as Novolipetsk and Magnitogorsk iron and steel works (see Table 1).

The return of the Russian capital will have a beneficial effect on the domestic economy, as additional investments will follow. Enterprises with Russian roots are under constant suspicion. Foreign regulators, banks, auditors and law firms introduce new additional procedures for them to confirm reliability and good faith.

Since tax authorities of Russia and foreign jurisdictions, primarily offshore, began to exchange with information, the business had another good reason to move. If a company makes money in Russia and pays taxes in another country (controlled by a foreign company), then the Federal Tax Service may file claims for tax evasion at the place of actual activity.

Another reason to return to Russia is continued political pressure. On the one hand, companies can indirectly or directly be under American or European sanctions and lose assets if they are registered abroad. On the other hand, offshore companies themselves are becoming less and less loyal to structures that do not conduct real economic activity, but exist solely to distribute cash flows between shareholders.

A new chapter 22.2 «Investigation of cases on Protection of Rights and Legal Interests of group of people», was entered to the Civil Procedural Code of the RF by the Federal Law as of 18.07.2019 №191-FL. That makes it possible for individuals and companies to apply to the court for protection of rights and legal interests of group of persons. This application should be complied by set of conditions:

• common defendant for every member of a group;
• the same rights and legal interests should be judicial matter for members of a group;
• rights of members of the group and obligations of a defendant are determined by identical factual situation;
• all members of the group apply united method of the rights protection;
• joining the application of more than 20 persons on the beginning of court hearing.

Besides, amendments were made to the Arbitration Procedural Code of the RF. In particular, to the article 225.10, that regulates class action lawsuits in arbitration proceedings.

It is provided by the amendments, that joining class action lawsuit can be arranged by written application to corresponding party or application to the court, if integration is carried out after start of proceeding on class action lawsuit. It is possible to access to group action lawsuit before the beginning of court hearing. It can be done via completion of the corresponding form on the web site of arbitration court or with the use of service «My arbitrator».

Person performing interests of the group and joined to the claim on protection of group interests, has right to sign notarized agreement, defining rules of incurring legal expenses. It concerns both civil and arbitration proceedings. Matter of change or termination of such group agreements is regarded only through court proceedings at the place of class action lawsuit proceeding.

Amendments will come into force since October 1.