From 1 January 2009 the state system of licensing in
construction, engineering surveys, preparation of design
documentation, reconstruction and capital repair of capital
structures was replaced with a self-regulating system. All
construction, design and engineering companies starting from 1
January 2010 must join a self-regulated organization (SRO) which is
a non-commercial organization.
Appropriate amendments were made to the Russian Town Planning
Code, Federal Law No. 128-FZ dated 8 August 2001 "On Licensing
of Some Types of Activity", (in terms of cancellation of the
state licensing of these activities), Administrative Offence Code
(in terms of liability for performing works without a SRO
certificate of membership).
However, the legal status of a SRO as specific type of a
non-commercial organization was not reflected in the Russian Civil
Code, which is one of the primary sources of civil law.
It is planned to eliminate this gap by one of the many proposed
amendments to the Russian Civil Code, contained in Bill No. 47538-6
to introduce a Federal Law "On Amending the First, Second,
Third and Fourth parts of the Civil Code of the Russian Federation
and Some Legislative Acts of the Russian Federation"
("the Draft Amendments"). The Draft
Amendments passed its first reading by the State Duma on 27 April
The Draft Amendments introduces a definition of a self-regulated
organization and determines the status of a SRO in the system of
organizational and forms of legal entities. SROs will be classified
as non-commercial corporations. This is an innovation of the Draft
Amendments. Non-commercial corporations function on the basis of
membership and resolve management issues on a collegial basis. In
practice, the activity of most Russian SROs was formed with the
same structure but the amendment will establish a legislative
framework for it.
Furthermore, the Draft Amendments establishes the role of SROs
as a successor to state regulation in the construction sector.
Thus, the specific legal capacity of a legal entity, i.e. the
capacity to perform certain types of activity, is determined only
after issuance of a license (for licensed types of activity) or,
for the construction sector, engineering, etc, a certificate of
membership in a SRO.
Currently only administrative liability for non-compliance with
regulations on mandatory membership of a SRO is formalized in
legislation. Thus, the Administrative Offence Code provides for the
imposition of an administrative fine and administrative suspension
of activity for a period up to 90 days for performing works which
influence the safety of capital structures, for failure to obtain a
Certificate of Membership of the appropriate SRO.
However, the Draft Amendments introduce civil law consequences
for violating the regulations on SRO membership. For example:
The absence of the mandatory membership of a SRO, will be a
ground for forced liquidation of a legal entity
The Draft Amendments formalizes the capacity of a party to a
contract to cancel its obligations and claim damages if a
contractor does not have a mandatory certificate for works, the
subject matter of the contract. This provision creates an effective
instrument for investors and developers to protect their
Improvement of legislation on SRO is not limited to the Draft
Amendments. At the moment there are two further draft laws to amend
the Russian Town Planning Code in terms of regulating SRO activity,
under consideration of the State Duma.
It is proposed to change the existing procedure for admission to
membership in SRO, create a binding collegial procedure for making
the relevant decisions, and oblige SROs to publish the minutes of
meetings of their collegial bodies, Registers of members and
numbers of the issued certificates. This will ensure transparency
of their activity.
Another innovation of the draft laws is to vest the supervisory
body for SROs with authority to apply to court and request an order
to strike a SRO off the state register if it does not comply with
the stipulated requirements for issuance of competency
certificates. This issue was omitted when the self-regulating
system was first introduced in the construction industry.
It is also proposed to clearly formalize the procedure for
appealing against SRO decisions in relation to its members, to
determine the procedural time limits, and clarify the categories of
persons entitled to appeal. This initiative was introduced because
at present there is only a statutory special simplified procedure
for appealing against similar acts of state licensing bodies.
In conclusion, the SRO of regulation is evolving with the
introduction of legislation to meet the demands of SROs'
development and construction business development.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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