Test Run for Strategic Sector Law

ReutersPutin walking past a model of the Sukhoi Superjet at an air show last year. Aviation is one of the strategic sectors.
Svetlana Levchenko said she found it enjoyable but exhausting to be at the forefront of Russia's efforts to apply new rules for foreign investment in strategic companies.

Under a recent law, the government must formally approve such deals, and Levchenko's newly created department at the Federal Anti-Monopoly Service is the first port of call for would-be investors. The first request from a foreign investor arrived at the department July 21, about a month after her appointment, she said in an interview. In the latest filing, a third request came in Aug. 7, she said.

But only two of them are currently under review, said Levchenko, who heads the department for control of foreign investment. Her office asked the third potential investor to file a Russian-language copy of the request, which was originally filed in English, and provide some missing information, she said. "These [numbers of requests] are modest, but they show that the law has begun operating," she said.

She declined to discuss other details about the requests, saying they were confidential.

Once her department, the Federal Security Service and several other agencies conclude their studies of these potential deals, a government committee chaired by Prime Minister Vladimir Putin will convene to pass judgment on the deals.

The government has three months to consider requests and can extend that time to six months, but Levchenko said the committee could gather for its maiden session as early as mid-September.

Foreign investors are waiting for the first decisions as a gauge of the law's impact on doing business in Russia. Under the law, permission is required for foreign investment in 42 sectors, including oil, gas, mining, nuclear and military-related industries.

Effective since May, the law is still young, and Levchenko appears to have born the brunt in clarifying technicalities for investors' legal counsels. She said she had given scores of consultations by telephone, has handled most of the 20 letters with inquiries and conducted a handful of meetings in person since taking office in June.

Most questions, she said, were about how long the authorities would take to make a decision, exactly what a request for permission should look like and how investors should report existing stakes in natural resources companies.

"This interaction is also very important for us," she said. "It's very interesting for us what is not clear about this law to foreign investors."

A dialog between the Federal Anti-Monopoly Service and would-be investors is essential in making the review procedure transparent and helping applicants react to any further inquiries that may arise on a short notice, said Alex Stoljarskij, a lawyer with Beiten Burkhardt in Moscow. The government must also respect confidentiality, he said.

"It would be very much welcomed by foreign investors to see a service-oriented approach by the Federal Anti-Monopoly Service [that] will raise trust and confidence in the time-intensive approval procedures," Stoljarskij, who is also deputy chairman of the legal committee at the Association of European Businesses in Russia, said in an e-mailed response to questions.

To help investors file the required paperwork properly, Levchenko and her colleagues have been trying to write specific instructions that are now pending approval by the Cabinet, she said.

"We had three weeks of round-the-clock work," she said, recalling her first days in the job.

With 12 years of experience as an anti-monopoly official, Levchenko said she enjoyed the challenge of setting the law into motion.

"I am very happy that it fell to me," she said, smiling broadly. "I think I am lucky, and with my colleagues I will of course try to get this department going as well as a mechanism for the implementation of this law."

Taking care to be precise in her answers, Levchenko often flipped through her personal printout of the law and supported her statements by pointing out passages on well-worn pages marked with a color highlighter and handwritten notes in the margins. Levchenko, 56, has held various government jobs since 1990.

Paperwork filing instructions may be important, but some investors are more concerned about a better definition of a strategic company, a senior executive at a Western law firm said. Several deals were put on ice because bottling companies use radioactive substance in their equipment, a technological feature that matches the description for strategic companies in the law, he said.

"We have been sitting and waiting for three months for someone to come out and explain whether one has to seek permission in borderline cases like this," he said, speaking on condition of anonymity because he was not authorized to speak to the media without clearance from the company's head office.

Levchenko said her department would simply send a permission request back if a deal does not fall under the law. The responsibilities of the department, now numbering nine staffers, also include studying the accuracy of the paperwork filed by investors and looking into the strategic company in question to see whether the government needs to set any conditions for the deal. When fully staffed, the department will have 17 employees, Levchenko said.

Levchenko moved to Moscow in September 2007 from Perm, where she was head of the regional anti-monopoly service. In Perm, she at one point served as a city administration official under then-Governor Yury Trutnev, who is now the natural resources and environment minister.

Trutnev did not play any role in her transfer to Moscow, she said.