New Legal Requirements: Government Amendments

On March 04, 2022, the Council of Federation has approved and sent to the President the Federal Law “On Amending Certain Legislative Regulations of the Russian Federation” (the “Law”). This Law provides for a number of changes in the regulation of procurement and circulation of medical products (“MP”) and medical devices (“MD”), corporate and financial relations, and even social matters.

SOCIAL BLOCK

According to the Law, the following novelties are proposed in terms of public procurement:

1. The Government of the Russian Federation will be entitled to change the terms of tender documents in the course of MD procurement, including by increase of the initial (maximum) price of the contract and the annual volume of procurement ¹;
2. The Government of the Russian Federation will be entitled to establish the cases and procedure for cancellation sanctions from supplier under the state contract for violation of its terms ²;
3. Additional terms of procurement will be established. Thus, in relation to the sole supplier, which applied no restrictive measures of an economic nature in relation to the Russian Federation, is allowed the procurement³:

   a. of MP, consumables and MD, in the course of electronic procurement, which is authorized by the decision of the founder of the medical organization, however, the procurement shall not exceed RUB 50 million for MP or consumables, and RUB 250 million for MD;

   b. of assistive technology and services by the Social Insurance Fund of the Russian Federation, if such procurement is carried out in electronic form;

   c. of MD and MD without Russian analogues, provided the supplier is included in the register of the sole suppliers of such MP and MD.

4. The parties will be able to change the material terms of the state contract made before January 1, 2023, if, for reasons beyond the control of the parties, circumstances have arisen that entail the impossibility of its performance ⁴;
5. The Government of the Russian Federation will be entitled to promptly provide for additional cases of procurement from a sole supplier, and the procedure for such procurement ⁵. Till December 31, 2022, the supreme executive body of state power of a constituent entity of the Russian Federation shall be provided with the similar powers to meet the needs of the relevant constituent entity of the Russian Federation ⁶.

The law supplements the procedure for registration of MP and MD with some specific provisions. Thus, in the event of the inventory shortage or the risk thereof due to the restrictive measures of an economic nature in relation to the Russian Federation, the following shall apply:

1. Option for MP registration ⁷ and MD circulation ⁸ subject to special purpose terms stipulated by individual resolutions of the Government of the Russian Federation ⁸;
2. Provisions by the Government of the Russian Federation for special procedure to amend documents contained in the registration dossier for a registered Medicinal Product for human ⁹.

It is noteworthy that another suggested change to the Medicinal Products registration comprises the option to revise prices for Vital and Essential Pharmaceuticals (“VEPs”) due to change in the exchange rate of foreign currency ¹⁰. Additionally, it is suggested that in connection with the introduction of economic restrictive measures in relation to the Russian Federation, the Government of the Russian Federation should be entitled to establish restrictions on the export of MD that were previously imported into the territory of the Russian Federation from countries that have taken such measures ¹¹, and establish the peculiarities of circulation, including state registration of biomedical cell products ¹².

These amendments affect, among other things, the issues of “compulsory” licensing: in order to stimulate the production in the Russian Federation of MP for human use and MD without Russian analogues, it is proposed that the Government of the Russian Federation will be entitled to establish the specifics of licensing the relevant types of activities ¹³. Besides, in relation to certain categories of products manufactured in the Russian Federation, the Government of the Russian Federation will be entitled to establish the specifics of their assessment in accordance with the requirements of technical regulations and other mandatory requirements ¹⁴.

Additionally, it is proposed to cancel for a period from March 1, 2022 to March 1, 2023, inclusive, the requirement for the entry into force of new laws regulating the circulation of MP for human use, MD and biomedical cell products ¹⁵.

In addition to the abovementioned amendments, the Law also provides for other social matters. Thus, the possibility of multiple indexation of pensions, of the fixed payment to the insurance pension, the establishment by the Government of the Russian Federation of an increased amount of social allowance to pension, an increase in the cost of one pension score is indicated ¹⁶.

The law provides for the special procedure governing the corporate relations. The main changes comprise:

Should at the end of 2022 the net assets of the joint-stock company (“JSC”) are less than its authorized capital, no specific disclosure shall be made at the annual general meeting of shareholders ¹. Therefore, the omission of the section on the state of net assets in the annual report shall not entail liability in accordance with Article 15.20 of the Administrative Code.

The Law entitles not to reduce the authorized capital or liquidate a JSC or a limited liability company in the event of net assets are less than the authorized capital at the end of 2022 ¹⁸.

For the purposes of the annual general meeting in 2022, the Board of Directors (Supervisory Board) of the JSC shall notify shareholders of the agenda submissions deadline at least 35 days before the date of the annual general meeting ¹⁹.

Submissions to the agenda and to nominations for election to the Board of Directors (Supervisory Board) and other bodies of JSCs in accordance with Clause 1, Article 53 of the Federal Law “On Joint-Stock Companies” shall be received no later than 27 days before the date of the Annual General Meeting.

The law suggest to entitled the PJSCs to acquire shares issued before December 31, 2022, inclusive, subject to the conditions specified by the Law. Provided, however, the acquisition of outstanding shares to reduce their total number shall not be allowed ²⁰.

It is noteworthy that PJSC has the right not to disclose information on the acquisition of its own shares subject to the relevant decision. Provided, however, the PJSC's obligation to notify the Bank of Russia of such a transaction shall remain.

FINANCIAL BLOCK

The law proposes to establish “repayment holiday” for borrowers who entered into a loan agreement before March 1, 2022 and applied for amending the terms of the agreement before September 30, 2022 with an extension option ²¹.

Additionally, it is proposed to entitle the borrower to re-apply for change the terms of the agreement before September 30, 2020 ²².

In the event of a significant change in market conditions affecting the full cost of a consumer loan in percent per annum, it is proposed to cancel the current restrictions on the maximum permissible cost of such a loan (depending on the category of consumer loans and the type of lender) ²³.

Until the end of the current year, the Bank of Russia may extend the terms for disclosure of information in the form of the issuer's report, accounting (financial) statements of the issuer, lists of affiliates, and the deadlines for the preparation and submission of reports and other information by credit and non-bank financial institutions ²⁴.

It is also proposed to entitle the Bank of Russia to set requirements for the activities of credit institutions other than those established by federal laws and regulations of the Bank of Russia. Specifically, the Bank of Russia may be delegated with the authority to set the values of ratios and indicators, requirements to the composition and structure of assets, the procedure for calculating and the amount of equity (capital) ²⁵.

Besides, to ensure the financial stability of the financial system, the Bank of Russia is entitled to suspend or restrict the performance of operations and transactions by credit and non-bank financial institutions, to set standards limiting risks on an individual basis, and to introduce other indicators of the activities of these organizations, including on an individual basis, for a period not exceeding 6 months ²⁶.

It is proposed to consider the option ²⁷ to entitle credit institutions to open bank accounts (deposits) in foreign currency for customers (individuals) without the personal presence of such persons, if the customer transfers its funds in foreign currency from a credit institution “exposed to hostile actions of foreign states”. Such a transfer entails the transfer by one credit institution to another credit institution of the information established during customer identification. The written consent of the client for the transfer and use of information about it shall be also required.

The law also covers insurance issues. The Law on the Insurance Business²⁸ is proposed to be amended with terms providing for the fivefold (up to 50%) increase of liabilities for insurance payment to be accepted by national reinsurance company from the insurer ²⁹.

Besides, it is proposed not to apply the provisions on the validity period of insurance tariffs (limit values of the base rates of insurance tariffs) established by the Bank of Russia with respect to the Laws “On compulsory insurance for civil liability of owners of motor vehicles” ³⁰ and “On compulsory insurance for civil liability of owners of hazardous facilities for causing harm as a result of accidents at hazardous facilities” ³⁰.

ADDITIONAL POWERS OF THE GOVERNMENT

In 2022, in addition to these changes, the Government of the Russian Federation shall be entitled with broad powers to make decisions governing various areas of legal relations ³¹, specifically:

• amending the terms for classifying business entities as small and medium-sized businesses;
• peculiarities of conformity assessment of products put into circulation in the territory of the Russian Federation, peculiarities of relation in shared construction;
• establishing the specifics of the legal regulation of labor relations, including the calculation and establishment of the minimum wage, the implementation of compulsory social insurance against industrial accidents and occupational diseases;
• establishing the lists of goods exempt of certain provisions of the Civil Code of the Russian Federation on the protection of exclusive intellectual property rights attached thereto and means of individualization applied to label thereof.

¹ Clause 1 of Article 8 of the Law.
²Clause 2 of Article 8 of the Law.
³Clause 3 of Article 8 of the Law.
⁴Clause 4 of Article 8 of the Law.
⁵Clause 1 of Article 15 of the Law.
⁶Clause 2 of Article 15 of the Law.
⁷Decree of the Government of the Russian Federation No. 441 “On the peculiarities of the circulation of medicinal products for human use, which are intended for use in conditions of a threat of the emergence, occurrence and elimination of an emergency situation and for organizing the provision of medical assistance to persons affected by emergencies, preventing emergencies, preventing and treating diseases that pose a danger to others, diseases and injuries resulting from exposure to adverse chemical, biological, radiation factors” dated April 03, 2020.
⁸Decree of the Government of the Russian Federation No. 430 “On the peculiarities of circulation of medical devices, including state registration of a series (batch) of a medical device” dated April 03, 2020
⁹Clause 1 of Article 6 of the Law; Clause 1 of Article 7 of the Law.
¹⁰Clause 2 of Article 6 of the Law.
¹¹Clause 3 of Article 6 of the Law.
¹²Clause 2 of Article 7 of the Law.
¹³Article 12 of the Law.
¹⁴Clause 1 of Article 16 of the Law.
¹⁵Clause 1 of Article 14 of the Law.
¹⁶Clause 1 of Article 14 of the Law.
¹⁷Articles 2, 3, 10 of the Law.
¹⁸ Clause 1 of Article 17 of the Law.
¹⁹Clause 2 of Article 17 of the Law.
²⁰Clause 3 of Article 17 of the Law.
²¹Clause 1 of Article 21 of the Law.
²²Subclause a) of Clause 1 of Article 13 of the Law.
²³Subclause b) of Clause 1 of Article 13 of the Law.
²⁴Article 9 of the Law
²⁵Clause 1 of Article 20 of the Law.
²⁶Clause 2 of Article 20 of the Law.
²⁷Clause 5 of Article 20 of the Law.
²⁸Clause 4 of Article 21 of the Law.
²⁹Law of the Russian Federation No. 4015-1 “On insurance business in the Russian Federation” dated November 27, 1992.
³⁰Article 1 of the Law.
³¹Federal Law No. 40-FZ “On compulsory insurance for civil liability of owners of motor vehicles” dated April 25, 2002.
³²Federal Law No. 225-FZ “On compulsory insurance for civil liability of owners of hazardous facilities for causing harm as a result of accidents at hazardous facilities” dated July 27, 2010.
³³Article 18 of the Law.