Over the last few years, Russia has been expanding restrictions
on government procurement of software and hardware from foreign
The initial restrictions were introduced in December 2013 when
the Russian government issued Decree No. 1224, which contained
prohibitions and restrictions on government procurement of foreign
goods and services for the defense and security purposes. The
restrictions did not apply to goods and services that were not
available from Russian vendors.
Following events in Ukraine and the imposition of U.S. and EU
sanctions, Russia declared import substitution as a major
government policy. In July 2014, the Russian government issued
Decree No. 656, which prohibited governmental and municipal
entities from acquiring a wide range of machinery. IT hardware was
not included in the list of prohibited items.
In November 2015, the Russian government issued Decree No. 1236,
which prohibited government entities from acquiring foreign
software effective January 1, 2016. It restricted government
procurement to "domestic software" developed by Russian
companies meeting specific criteria and listed in the State
Register maintained by the Russian Ministry of Telecommunications.
Decree No. 1236 allows procurement of foreign software only if a
government purchaser can demonstrate that there is no domestic
alternative in the State Register, in accordance with the
procedures specified in Decree No. 1236.
Although prohibitions and restrictions contained in Decree No.
1236 expressly apply only to federal, regional, and municipal
entities and organizations, there are indications that a number of
state-owned companies have been implementing these restrictions as
a matter of policy or have suspended procurement of foreign
software pending further clarification from government authorities.
In April 2016, the Russian government issued a ruling requiring
governmental representatives appointed to the boards of state-owned
enterprises ("SOEs") to "implement local sourcing
requirements. In July 2016, the Russian government issued mandatory
directives to the representatives on the boards of SOEs instructing
them to call board meetings and vote for new procurement procedures
requiring SOEs to purchase domestic software listed in the State
Foreign vendors that may be able to sell software to Russian
governmental entities and SOEs based on a "no adequate local
alternative" exception may face yet another challenge in the
form of Order No. 155, issued by the Russian Ministry of Economic
Development and Trade in March 2014. Order No. 155, which deals
with government procurement of foreign goods, requires contract
prices for any foreign goods purchased pursuant to a government
tender to reflect 15 percent discount from the winning bid price.
Although by its terms Order No. 155 applies to government
procurement of food, machinery, parts, and materials, in July 2016,
the Russian General Prosecutor's Office took the position that
the 15 percent discount must apply to procurement of foreign IT
hardware, software, and related services as well.
These developments are likely to have a significant impact on
foreign software and hardware vendors operating in the Russian
market. While at this point, restrictions related to the
procurement of foreign software and hardware apply only to state
entities and likely SOEs, such entities comprise a very substantial
share of the Russian software and hardware market. Furthermore,
there is no assurance that such restrictions may not be extended
eventually to the private sector.
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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