Russian Legal Update - Third Quarter 2011

New licensing regulations are intended to make the licensing regime more systematized and transparent, significantly reducing the number of licensable activities and clearly outlining the process of acquiring a license and licensing control.

Licensing regulations have undergone major changes. New Federal Law No.99-FZ "On the Licensing of Certain Activities" was adopted on May 4, 2011 ("New Licensing Law").

Certain provisions of the New Licensing Law entered into force on May 6, 2011 (i.e., the definition of licensing requirements and the cancellation of a license as grounds for refusal to grant a new license). Licensing control provisions came into effect on July 1, 2011, but the majority of the provisions of the New Licensing Law will come into force on November 3, 2011.

When all of the provisions of the New Licensing Law enter into force, it will supplant the current Federal Law No.128-FZ "On the Licensing of Certain Activities," dated August 8, 2001 (as amended) ("Current Licensing Law"), and licensing regulations will change significantly as a result of the amendments outlined below.

Reducing the Number of Licenses

Certain types of activities will no longer require a license, in particular:

  • manufacturing prosthetic and orthopedic equipment;
  • production and sale of special gaming equipment;
  • ensuring aviation security; and
  • manufacturing, repairing, measuring, exhibiting or collecting weapons.

Other activities will be covered by a single license, in particular:

  • developing, producing, testing or repairing aircraft; and
  • developing, producing, testing, installing, mounting, maintaining, repairing, recovering or selling weapons and military equipment.

At the same time, certain types of licenses for activities will be gradually phased out, in particular:

  • producing and maintaining medical equipment will no longer require a license as of the effective date of the special technical regulations;
  • industrial safety equipment will no longer require a license as of the introduction of accreditation and/or self-policing mechanisms; and
  • licensing of inland water and overseas transportation of dangerous cargo, loading, and unloading of dangerous cargo on inland water, marine, and railway transport will no longer be required once the law establishing compulsory insurance of civil liability takes effect.

The New Licensing Law establishes a perpetual licensing regime, whereas the Current Licensing Law sets out a five-year term for licenses. In terms of licenses issued before the New Licensing Law came into effect, a new license will be issued to the licensee after it expires if the description of the licensed activity has changed. Other licenses issued before the effective date of the New Licensing Law shall be deemed issued without a fixed term (assuming that licenses can be suspended or terminated in the event of uncovered violations based on the grounds provided by Russian law).

Uniform Procedure for Issuing Licenses

The New Licensing Law sets out one standard procedure instead of the two procedures used under the Current Licensing Law: standard and simplified.

Currently, obtaining a license via the simplified procedure is open to companies that engage in high risk activities including a high degree of potential liability, e.g., cargo transportation, loading, and unloading.

The applicant must insure its own civil liability or obtain a certificate stating that its activity complies with international standards in order to obtain a license via the simplified procedure. In return, license holders receive certain preferential treatment, such as exemption from being examined for compliance with licensing requirements and scheduled inspections.

Under the New Licensing Law, the simplified procedure will no longer apply.

Licensing Control

The procedures of licensing control are described in the New Licensing Law more clearly and in greater detail. The new rules of control came into force July 1, 2011. Licensing authorities must comply with licensing control policies outlined in both the New Licensing Law and Federal Law No.294-FZ "On the Protection of Legal Entities' and Individual Entrepreneurs' Rights During Conducting State and Municipal Control (Supervision)," dated December 26, 2008.

The New Licensing Law allows for inspections of license and relicensing applicants, as well as license holders. In the case of applicants for new or renewal of licenses, authorities are permitted to conduct documentary and unscheduled onsite inspections without the consent of prosecutors in order to check the information provided to the licensing authorities.

Once a license has been issued, the licensing authorities have the right to carry out documentary, scheduled and unscheduled onsite inspections.

Scheduled inspections are to be conducted one year after licensing, and every three years thereafter.

Unscheduled onsite inspections can be conducted solely on the following grounds:

  • expiration of the term of the prescription for amending licensing violations, issued by the licensing authority;
  • if the licensing authority receives information from a reliable outside source on gross violations of the licensing requirements by the license holder (the list of such grounds is to be set forth in regulations on licensing of the specific activity);
  • expiration of the term of a license suspension;
  • at the request of the licensee for the licensing authority, in case of early fulfillment of the prescription for amending licensing violations, issued by the licensing authority; or
  • at the request of the RF President or the RF Government for the licensing authority to carry out an inspection.

Unscheduled onsite inspections can be conducted without the consent of prosecution authorities, but with advance notice to the licensee. This rule has only one exception—if the licensing authority receives information from an outside source on gross violations of the licensing requirements by the license holder. Such an inspection can be conducted only with the approval of the prosecutors, but without notification of the licensee.

It should also be noted that as of July 1, 2012, licensing authorities will have the right to use information from the Internet for the purpose of licensing control.

* Elvira Danilova assisted in writing this article

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