i OVERVIEW OF M&A ACTIVITY2

Views as to the state of the current Russian M&A market vary. On the one hand, generally business activity is not very high due to a number of reasons (international sanctions, the average quality of the investment climate, lack of a high number of well-developed industries). On the other, every week information about this and notable deals appears in the mass media or becomes known through other sources. Thus, in 2018 and early 2019, the following transactions caught a substantial amount of the business community's attention:

  1. the acquisition by VTB Bank of a 29 per cent share in major food and drinks retailer Magnit from its founder Sergey Galitskiy for approximately US$2.2 billion. Subsequently, 11.82 per cent of Magnit's shares were disposed of by VTB to Alexander Vinokurov's Marathon Group for approximately US$1 billion;
  2. the acquisition by consumer electronics retailer M.Video of the Russian business of its German competitor Media Markt. That deal was part of a larger transaction involving an acquisition by Media Markt of a 15 per cent share in M.Video for US$470 million comprising US$300 million in cash, and of Media Markt's Russian business valued at US$170 million. This is important, since from that perspective the deal looks not like a foreign party leaving the Russian market, but rather vice versa, as it investing into Russian economy;
  3. the merger of Uber's business in Russia, Armenia, Azerbaijan, Belarus, Georgia and Kazakhstan with its Russian analogue; Yandex Taxi;
  4. the acquisition by the largest Russian insurance company SOGAZ of VTB's insurance business. The united company's net assets are estimated at about US$10 billion to US$11 billion;
  5. the acquisition by Alexey Mordashov's Severgroup of 41.9 per cent of the shares in Lenta, one of the largest Russian food and drinks retailers, from EBRD and TPG private equity fund for approximately US$730 million. As of the date of writing, a tender offer to minority shareholders is open. The deal is notable due to the attempt of certain minority shareholders to reverse the sale. Their main argument was that Lenta's board of directors did not properly assess other possible sale options, as there was a competing proposal from Magnit whose terms, it is reported, were better; and
  6. another resonant matter is the merger between two alcohol retailers, Krasnoye & Beloye and Bristol, and food retailer Dixy. The united company is expected to become third-largest food and drinks retailer in Russia.

Thus, the retail sector (whether food and drinks, taxi services or other retail activities) remains very active, and more deals may be expected during the second and fourth quarters of 2019 and early 2020.

At the same time, oil and gas industry is traditionally hot in Russia, albeit the oil price declining in recent years. Some recent deals worth emphasising are as follows:

  1. the acquisition of three 10 per cent shares in Novatek's Arctic LNG-2 by, respectively, Total and Chinese CNODC (CNPC's subsidiary) and CNOOC. Each 10 per cent share is valued at about US$2.5 billion. It is notable that, in order to meet the tight deadlines involved, Novatek and Total managed to arrange with the antimonopoly and foreign investment authorities in Russia a way to avoid the immediate prior regulatory clearing of the deal. This was achieved by way of pledging the respective 10 per cent share to Sberbank. Thus, Total having to obtain specified governmental consents has been postponed until the end of that pledge; and
  2. the dissolution of the joint venture (JV) between Glencore and Qatar Investment Authority (QIA), formed to obtain a 19.5 per cent share in Rosneft for €10.2 billion in early 2017. As a result, QIA will hold a 18.93 per cent share and Glencore will hold a 0.57 per cent share in Rosneft.

Further, there were some more large deals in the hi-tech, digital and TMT areas:

  1. the formation of the JV between Mail.Ru, Megafon, Alibaba and Russian Direct Investment Fund (RDIF) aimed at the further promotion of e-commerce in Russia;
  2. the formation of the JV between Megafon, Gazprombank, Rostec and Alisher Usmanov's USM aimed at the development of the IT and digital economy;
  3. the acquisition by Sberbank of a 46.5 per cent share in one of the leading internet holdings, Rambler, for approximately US$150 million, which may be viewed as a conversion into equity of Sberbank's loan to Rambler's principal shareholder, Alexander Mamut; and
  4. the acquisition by VTB (which may be seen as one of the most active players of Russian M&A market) of the following TV assets:
    • a 75 per cent share in STS Media from Ivan Tavrin. The acquisition was made through VTB's JV with Yuri Kovalchuk's and Alexey Mordashov's National Media Group (NMG); and
    • a 20 per cent share in First Channel from Roman Abramovich. This asset is also owned by VTB together with NMG (but each holds its share directly, not through their JV).

In addition, the possible acquisition by Sberbank of not less than 30 per cent of the shares of Yandex (considered the Russian Google) was announced in October 2018. From stock exchange quotations, it appears that this piece of news was perceived negatively by the market. Further information on the potential deal is not available.

It must be added that the digital sector is one of the few sectors in Russia today that is demonstrating sustained growth. However, a substantial part of such deals are early stage (pre-seed) investments. Transaction values in most cases are between US$1 million and US$10 million. It should be noted that a substantial part of the relevant information and data are not available to the public. However, it venture capital (VC) is one of the most attractive spheres for M&A lawyers in Russia in 2019.

The same, unfortunately, cannot be said about the Russian private equity (PE) sector. Most of the information on PE deals is also not available to the public; therefore, again, there may be various facts and indicators known only to the market participants. However, we possess information such that it may be estimated that there has been low to medium PE activity in Russia as of May 2019.

Finally, it is important to note that some of the deals are being made in quite distressed surroundings, as, for example, the following:

  1. the invalidation by the High Court (UK) of the application of UC Rusal for the US$770 million sale of a 2.1 per cent share in Norilsk Nickel by Roman Abramovich to Vladimir Potanin. The Court held that such sale violates the shareholders' agreement made between the said parties in relation to Norilsk Nickel;
  2. the acquisition by Transneft of a 25 per cent share in Novorossiysk Commercial Sea Port for US$750 million from Summa Group. The deal was negotiated alongside the arrest of and criminal investigation against Summa's principal ultimate beneficial owners (UBOs), brothers Ziyavudin and Magomed Magomedov; and
  3. the recent arrest of Michael Calvey, founder and managing partner of Baring Vostok Capital Partners PE fund, as well as of some of his colleagues and business partners, is also linked to alleged violations and breaches within the framework of corporate transactions.

ii GENERAL INTRODUCTION TO THE LEGAL FRAMEWORK FOR M&A

The principal laws regulating M&A in Russia are:

  1. the Civil Code;
  2. the Federal Law 'On Joint Stock Companies';
  3. the Federal Law 'On Limited Liability Companies';
  4. the Federal Law 'On State Registration of Legal Entities and Private Entrepreneurs';
  5. the Federal Law 'On Securities Market'; and
  6. the Federal Law 'On Competition Protection'.

Foreign investments and their governmental approval are governed by the Federal Law 'On Foreign Investments' and the Federal Law 'On Foreign Investments into Industries Important for State Defence and Security'.

Other laws regulating various industries should always be considered and scrutinised, and in particular the following laws: the Federal Law 'On Banks and Banking Activity', the Federal Law 'On Central Bank' and the Law of the Russian Federation 'On Insurance Business Organization in Russian Federation'.

There is plenty of subordinate legislation and explanations by the courts of ways to interpret the law. Among them are the following:

  1. the Federal Antimonopoly Service's 'Explanations of the Order and Methodology of the Analysis of the Joint Venture Agreements' dated 8 August 2013;
  2. a Ministry of Labour and Social Protection letter dated 19 October 2017 concerning the validity of non-compete clauses within the framework of labour relations;
  3. the Supreme Court's Plenary Session's Resolutions:
    • on basic rules of civil law dated 23 June 2015;
    • on contractual liability dated 24 March 2016;
    • on contractual performance dated 22 November 2016;
    • on challenging major and interested party transactions dated 26 June 2018;
    • on entering into contracts and their interpretation dated 25 December 2018; and
  4. the High Commercial Court (which was subsequently merged into the Supreme Court) Plenary Session Resolution on directors' liability dated 30 July 2013.

Certain aspects of holding general shareholders' meetings, information disclosure, notarial certification of transactions (where necessary), performance of share transfers by registrars and depositories are governed by the below sub-laws:

  1. Central Bank of Russia (Bank of Russia) recommendations on preparing and holding general shareholders' meetings dated 19 December 2017;
  2. Bank of Russia mandatory rules on general shareholders' meetings dated 16 November 2018;
  3. Bank of Russia information disclosure standards for issuers dated 30 December 2014;
  4. Bank of Russia rules on maintaining a securities register dated 11 September 2014;
  5. Depository Business Committee's basic standards dated 16 November 2017; and
  6. Ministry of Justice rules on notarial records management dated 16 April 2014.

In addition, and especially for listed companies4 (companies publicly traded on the stock exchange5), the Bank of Russia Code of Corporate Governance dated 10 April 2014 is non-compulsory but highly persuasive.

Generally, Russian company law is a quite a highly regulated sphere, especially when it comes to listed companies. Therefore the above laws as well as other applicable rules (e.g., company charters, by-laws) should be carefully scrutinised each time it comes to performing a share transfer, calling and holding shareholders' and board meetings, and disclosing information. Less attractive is the fact that Russian contract law is still not so dynamic and liberal as, for example, English law, although it has made great progress in the past four to five years.6 That may make deal structuring and principal agreement drafting cumbersome in some cases. Other archaic limitations may also preclude implementing some traditional M&A mechanisms. For example, it was discovered recently that it is practically impossible to give effect to a buy-back call option in relation to the shares in a limited liability company (LLC)7 when the seller signs a share purchase agreement simultaneously or after signing the said option in order to be able to return the sold share on certain occasions. That limitation is due to notaries' inability, in accordance with the applicable notarial legal rules, to certify an option whereunder the purchaser agrees to sell a share back where that share does not belong to him or her at the date of such option; the notary may only certify a disposal of assets belonging to the party on the day of relevant deal.

In addition, as previously mentioned, regulatory clearings should always be subject to thorough scrutiny, and each deal must, among other aspects, be assessed with a view as to whether it is necessary to obtain a respective regulatory approval or consent. Absent such approval a deal is either void, or voidable, or the new shareholder may not vote on his or her shares. Sometimes regulatory consents act as deal-breakers: thus, as was widely covered in the media, the contemplated acquisition by global oil industry services giant Schlumberger of a 51 per cent share in its Russian competitor Eurasia Drilling Company (EDC) for approximately US$1.9 billion8 was cancelled earlier this year after about four years of the buyer's unsuccessful negotiations with the Russian authorities on its approval.9 Sometimes such regulatory issues may arise even where less expected. As such, it may be surprising for less experienced lawyers that acquisitions of even a 0.1 per cent share in an insurance company requires cooperation with the Bank of Russia in the form of a written notification.

English law10 is frequently utilised by parties to Russia-related deals. However, foreign law may hardly be relied on at least in the following two cases:

  1. in the case of making a shareholders' agreement in relation to Russian company due to the generally accepted way of interpreting the relevant article of the relevant civil code; and
  2. in the case of a sale purchase or other deal with an LLC's shares, albeit no direct prohibition is set forth, no notary may in fact certify such deal, with the deal being void absent such certification.

Notwithstanding the above aspects, Russian law generally allows the structuring of M&A, JV, PE and VC deals in accordance with the best UK and US practices, even though many specific issues must be taken into account.

iii DEVELOPMENTS IN CORPORATE AND TAKEOVER LAW AND
THEIR IMPACT

Among the most interesting developments affecting corporate deals seen in the period running from 2017 to 2019 are as follows:

  1. new rules on major and interested party transactions. The mandatory approval of interested party transactions by a company's board of directors or meeting of shareholders has been superseded by an approval at the request of a director or shareholder. Major transactions now do not need approval if a company regularly enters into such transactions. Of particular note in the framework of the interpretation of that rule is the currently pending11 OVK Corporation case. Among other things, it is contested by the parties that after certain transactions were approved as being major, the company's CEO filed a claim asking to hold them as being non-major to avoid the necessity for the company to buy back its shares from the shareholders who voted against the transaction;
  2. new rules on foreign investment approval. The head of the government was vested with the authority to put any acquisition by a foreign party of a share in a Russian company under the necessity of a review by the Governmental Commission on Foreign Investments. Certain concepts relating to ways to treat offshore (non-disclosing) companies by the Commission were also clarified (see Section IX);
  3. a new class of preferred shares was introduced: preferred shares with the attached priority right of receiving dividends. That class of shares was unofficially called 'super-preferred shares'. Relevant anti-dilution provisions were also adopted;
  4. new rules establishing non-listed JSCs: no state registration of share issuances and no preparation of a prospectus (offering memorandum) is needed now in certain cases; and
  5. the above-mentioned amendments allow certain listed companies12 targeted by international sanctions to omit information disclosure partly or in full subject to the provision of that information to the Bank of Russia.13

As mentioned in footnote 13, some of those novelties were adopted as part of a significant reform of the securities law: approximately half of the new rules are to take effect from 2020, while the other part is already in force. Although a detailed overview of that topic is rather the business of capital markets lawyers, many of the new rules have direct relevance to M&A deals. Some of them are described above.

iv FOREIGN INVOLVEMENT IN M&A TRANSACTIONS

As previously discussed, foreign involvement in M&A transactions in Russia is subject to regulatory review in a number of cases, including, without limitation, cases when the target company (the company whose shares are being acquired) is of strategic importance for state security and defence, or when it is a bank or insurance company.

Undoubtedly, US and EU sanctions implemented in 2014 and gradually developed to date, including the famous US Countering America's Adversaries Through Sanctions Act, are a key factor in the reduction of the amount of inbound Russian foreign investment. Among other things, in June 2019 Morgan Stanley announced the substantial reduction of its Russian business. A number of international law firms have also left Russia in recent years. All the other famous global investment houses and international law firms have substantially reduced their Russian presence.

A change of orientation from the West to the East as declared by Russian authorities in 2014 and 2015 is not obvious, despite certain case-by-case episodes of inbound deals by Chinese and other eastern companies (see Section I). Among others, however, the Russia-Chinese Investment Fund was formed by Russian (RDIF) and Chinese (CIC) sovereign funds.

These factors also negatively affect Russian outbound M&A activity, including those activities not directly targeted by the sanctions. Thus, Alisher Usmanov has sold his share in Arsenal Football Club, while Roman Abramovich is exploring options to sell Chelsea Football Club. In early 2019 it was announced that US Committee on Foreign Investment had ordered one of Mikhail Fridman's companies to dispose of its share in a US cybersecurity company.

There are also positive episodes. Thus, while this chapter was being prepared, Mikhail Fridman (with his allies German Khan and Alexey Kuzmicvhev) has obtained a 33 per cent share in Wintershall DEA, the largest oil and gas producer in Europe formed after the merger of BASF's Wintershall and LetterOne's DEA. LetterOne is Fridman's, Khan's and Kuzmichev's investment house with a notable presence throughout the world, including by holding shares in the UK healthy food retailer Holland & Barrett. It must be noted that several years ago, LetterOne also faced demands by UK authorities to sell some of its assets in the UK.

Although this deal rather sits in the capital markets sphere, and not the M&A sphere, it is worth highlighting the significantly successful IPO on NASDAQ of HeadHunter, a Russian web resource for employers and candidates listing job and hiring opportunities.

Returning to inbound M&A in Russia, another negative factor is the passing of the period of primary accumulation of wealth and capital that took place in Russia in the 1990s up to 2000. The economy has now entered a more mature phase: in addition to the effect of the imposed sanctions, no strong growth was seen in the first two decades of the new era of the market economy in Russia. Accordingly, there are no further super-incomes, which used to be the main factor attracting many foreign investors. Along with certain legal and regulatory risks (again, other than sanctions), Russia has become a less attractive investment destination than it was before 2008 and before 2014. Thus, among other things, EBRD froze its Russian investment programme in 2014 and later disposed of its share in Promsvyazbank and some other Russian banks. A similar entity, IFC, has done the same; among other things, it has sold its share in Asian-Pacific Bank. Both of the mentioned Russian banks have subsequently been bailed out by the Bank of Russia due to insufficient assets and inadequate liquidity.

v SIGNIFICANT TRANSACTIONS, KEY TRENDS AND HOT INDUSTRIES

See Section I.

vi FINANCING OF M&A: MAIN SOURCES AND DEVELOPMENTS

M&A deals are made by purchasers with their own funds or by way of raising debt finance. Loans may be provided by single banks or by syndicates. The Federal Law on Syndicated Loans, which entered into force in 2018, made it possible to structure syndicates and lend respective loans under Russian law. However, to the best of our knowledge there are few legal teams in Russia who have managed to practically apply the Law in the less-than-one-and a-half years since its adoption. Therefore, more details of its mechanics are yet to be seen.

As regards private equity aspects, see Section I.

vii EMPLOYMENT LAW

The principal issues of employment and labour law in the context of M&A deals are:

  1. due diligence of employment-related aspects such as contracts with key employees, internal policies, compliance with other mandatory rules (relating, among other things, to trade unions, collective agreements). In VC transactions in particular (although they may also be applicable in other types of corporate deals), invention clauses in labour contracts, whereunder the rights to key intellectual assets created by employees shall belong to the target company, are common;
  2. enforcement of non-competition and non-solicitation provisions, whereunder, respectively, key employees waive their right to apply to be hired by the target company's competitors, while the seller waives its right to hire such key employees of the target company. Russian law views such arrangements as ineffective, as they limit the freedom of labour and employment guaranteed and secured by the Constitution; and
  3. labour law aspects of the termination of the employment of CEOs and other senior executives. Among other things, a Supreme Court Plenary Session Resolution dated 2 June 2015 must be considered.

viii TAX LAW

In the past few years, the Russian economy has been experiencing de-offshorisation changes, which, of course also has certain impacts on cross-border M&A transactions. Foreign investors willing to enter the Russian market should understand several aspects that are monitored closely by the Russian tax authorities.

When considering a sale or purchase of a Russian-based business, foreign investors should analyse whether the assets of a Russian entity consist of Russian real estate. The rule of Subparagraph 5, Paragraph 1, Article 309 of the Tax Code states that if more than 50 per cent of the assets of a Russian entity (or a foreign subsidiary) are real estate, then a 20 per cent withholding tax should be paid in Russia. The rule is not modern, but compliance with it is currently strictly supervised by the Russian Tax Authorities, and non-compliance will be regarded as tax avoidance or as an unjustified tax benefit.

Foreign investors should also consider their exit strategies beforehand. Starting from the end of 2018, Paragraph 1, Article 250 of the Tax Code was amended in a way that income in the form of liquidation proceeds is regarded as dividends, which means that the rules for the taxation of dividends (including withholding taxes in accordance with double taxation treaties (DTTs)) should apply when a foreign parent company receives liquidation proceeds from its Russian subsidiary. On the other hand, the same bill introduced new Subparagraph 11.1. Paragraph 1, Article 251 and Paragraph 2.3, Article 309 of the Code relate to the taxation of contributions to a company's assets in monetary form and its gratuitous return. Now, the income of a parent company received in monetary form as a gratuitous return of a contribution to the assets of a subsidiary is not subject to corporate income tax or withholding tax.

Another very important issue is the development of the concept of the beneficial owner of passive income (dividends, interest, royalties) paid by a Russian company to a foreign company. The rule on beneficial ownership was introduced into Article 7 of the Tax Code and came into force in 2015. Since then, there has been plenty of negative court practice stating that Russian companies cannot use benefits and lower tax rates under DTTs when making payments to foreign parent companies or counterparties unless the foreign recipient of the passive income is a beneficial owner of such income.14

In addition, the look-through approach (Paragraph 4, Article 7) was modified in late 2018. Now, when distributing profits from Russia to a foreign jurisdiction, it is possible not to prove the existence of the beneficial ownership of such income of the first recipient, but to claim a look-through approach and use the advantages of the DTT between Russia and the country of residence of the final (real) recipient of the income, notwithstanding who the intermediary recipients are.

When working on Russian market, Russian controlled foreign company (CFC) rules applicable since 2015 should also be considered. Namely, if a Russian entity belonging to a foreign investor holds shares in the capital of another foreign entity, such Russian entity should submit to the tax authorities the following documents: a notification on participation in a foreign entity if the Russian entity holds more than 10 per cent of the share capital of a foreign company; or a notification on the CFC if the Russian entity holds more than 25 per cent of the share capital of a foreign company (or, if the Russian entity holds more than 10 per cent, while all Russian residents in total hold more than 50 per cent of the share capital of the foreign company in question).

As a general rule, if the Russian company is regarded as a controlling person, it should include the undistributed profits of a foreign subsidiary in its taxable base under corporate income tax.

Finally, in 2018 international companies were introduced to the Russian legal system. To benefit from this new regime, prescribed by Federal Law 'On international companies', foreign companies should be redomiciled to the special administrative regions of the Kalinigrad region and Primorskiy territory of Russia.15 In brief, the status of international holding companies provides for the tax-free receipt of dividends or income from a sale of shares from Russian-based or foreign companies if an international holding company holds 15 per cent or more in a subsidiary.

ix COMPETITION LAW

At the end of 2018, the government adopted the rules for providing information to the regulator in the case of making foreign investments in Russian economic entities. An important point thereof is the fact that foreign investors shall now provide not only information about their controlling persons, but also information about their UBOs. So, control over the foreign investors is increased. It must also be noted that foreign inbound M&A deals in Russia are becoming target of particular attention by the regulators.

In particular, one draft law provides for civil liability when a foreign investor does not clear a transaction regarding a strategic entity with the regulator. In this case, if the consequences of the invalidity of the transaction cannot be applied, the regulator will be able to go to court with a demand to deprive the investor of his or her right to vote and with a claim of forced sale of the investor's shares in such strategic entity at an auction.

As far as financial organisations are concerned, the Federal Antimonopoly Service of Russia (FAS) recently clarified that merger control in relation to foreign banks is carried out in accordance with the rules of the product market. Thus, the rules relating to financial organisations do not apply, because foreign banks are not financial organisations in the sense of the Federal Law 'On Competition Protection'.

In addition, the enactment of the Fifth Antimonopoly Package, a set of substantial amendments to the Federal Law 'On Competition Protection', is expected soon. Most likely, the following concepts in the field of M&A transactions will appear in the legislation and will have to be assessed by FAS within the framework of merger control:

  1. the value of a transaction. If the value of a transaction exceeds 7 billion roubles, it is subject to approval regardless of the amount of assets in the perimeter of the deal;
  2. face-to-face consideration: the parties to the transaction will be able to hold negotiations with FAS in person in the process of merger control. The procedure is now more bureaucratic, and is conducted rather through the exchange of the applicant's filing and the regulator's resolutions;
  3. the regulator's memorandum or opinion on the substantial aspect of a deal: before making a decision, FAS will issue an opinion on a transaction. This allows the parties to provide additional information or to suggest new transactional terms;
  4. commitments, undertakings and covenants: the parties may at their initiative suggest to the regulator certain terms and conditions of the negotiated deal;
  5. trustees: parties and regulators will have an option to appoint an independent person (as a rule, an expert in a particular field) responsible for monitoring the terms of a transaction and its performance, as well as parties' compliance with the relevant FAS ruling on the deal. Detailed instructions on, inter alia, requirements as to the candidature of such trustee, and the procedure of his or her appointment, are to be adopted by FAS; and
  6. new conditions: the time limit for the approval of cross-border transactions may be extended for several years.

One of the largest deals approved by FAS in the past year was the merger between Bayer and Monsanto, global chemical industry leaders. The deal was subject to review by the Russian regulator because the merger affects, among others, the Russian market. The relevant FAS ruling included an obligation on Bayer to transfer some of its intellectual property to its Russian competitors (on the base of licences), as well as to ensure their non-discriminatory access to information in the field of precision agriculture. Control over compliance with the ruling was entrusted to the Center for Technological Transfer at the Higher School of Economics, a specialised and independent organisation.

x OUTLOOK

It is expected that the hottest sphere in the next few years will be VC transactions. It also appears that the mid-market segment will be more active than the high-end division. Sanction risks will be one of the points requiring the most careful attention.


Footnotes

1 Alexander Vaneev is a partner, Denis Durashkin is a senior associate and Anton Patkin is an associate at BGP Litigation.

2 Hereinafter any statements, data, facts, forecasts, estimates, etc., are made as of May 2019.

3 Resolutions' names are not quoted due to their massiveness – rather, a description of their content is provided.

4 It must also be noted that recent legal amendments allow companies targeted by international economic sanctions to ignore certain information disclosure rules. Those amendments' effect on the securities market and investment climate is viewed by certain experts as controversial.

5 Formally, a company's shares do not necessarily need to be listed at the stock exchange in order for the company to be public. It may have such status provided it complies with legal rules on information disclosure, and even absent such listing. However, about the date hereof the Bank of Russia suggested amending the legislation so that only listed companies could have public status. Hereinafter, therefore, references to listed and non-listed companies shall be read as references to public and non-public ones.

6 Many reviews of the extensive reform of Russian contract law in 2015 are available in the public domain. Briefly, the principal English law instruments were implemented then, such as representations and warranties, indemnities and option agreements. Since four years have passed since that reform, we do not view those amendments as recent developments.

7 Russian law provides for many types of commercial legal entities, however vehicles of vast majority of deals are listed and non-listed joint-stock companies (JSCs) and LLCs, which are similar in many aspects to non-listed JSCs; however, their shares may not be listed (and are not securities as opposed to stocks), and most disposals with such shares (sale-purchase, pledging, etc.) shall be notarised.

8 The deal's parameters, including the size of share to be acquired and the purchase price, were subject to several reviews in the course of negotiations.

9 Among other conditions discussed with the regulators then by Schlumberger was the appointment of Russian directors to EDC, the transfer of certain technologies into Russia, and the mitigation of international sanctions-related risks related to its possible forced sale of its share in EDC due to sanction limitations.

10 And less often, other foreign law (e.g., Cypriot, Swiss or German law).

11 After an initial decision and several applications for review, the case is to be heard before the Supreme Court later this year.

12 Or non-listed companies whose debt securities are listed.

13 The latter three amendments are part of a recent significant set of amendments to the Federal Law on the Securities Market.

14 See the most recent cases of 2019: decision of the Supreme Court of the Russian Federation dated 18 January 2019 No. 304-KG18-22775 case No. A27-331/2017 of Krasnobrodsky Yuzhniy LLC; decision of the Supreme Court of the Russian Federation dated 18 February 2019 No. 304-KG18-25280 case No. A03 21974/2017 OJSC Melnik; decision of the Supreme Court of the Russian Federation dated 25 April 2019 No. 301-ES19-2319 case No. A11-9880 / 2016 of Rusjam Steklotara Holding LLC.

15 Federal Law of 3 August 2018 N 291-FZ (as amended by 25 December 2018) 'On Special Administrative Regions in the Territories of the Kaliningrad Region and Primorsky Territory'.