Abolishing Licensing in Russia

Roman Dzhaparidze
Head Lawyer
Tenzor Consulting Group

Since Jan. 1 2009 there have been no new licenses allowing construction activity in Russia issued. Companies dealing with engineering investigations, architectural constructional projection, construction or capital repair and still hold a valid license, can continue as before, but only until the Jan. 1, 2010, because thereafter, licenses in this area of activity will no longer be valid. The companies will have to join the Self Regulating Organization (SRO) in order to receive permission for construction.

No matter what we think of it, the SRO has entered our lives and started its work, which need to be reckoned with. For now, it is enough to enter the website of Rostechnadzor, where the register is being refilled with new registered non-commercial partnerships. The SRO is growing rapidly, but many of the participants are concerned about the future of the organization. The majority of companies are joining SRO not of their own will, but because they have no other choice.

Essentially, there are two sides in this. One side criticize the idea of the mechanism in the construction sphere, preferring to act according to the old scheme, while the others count on SRO. Both groups are sure their point of view is the correct one.

The first side wants to save the old practice of getting a license, which made it easy to establish a new company. But now it is rather more difficult for the newcomers to begin business-making in the construction market, especially without a starting capital.  

It is necessary to remember that the procedure was much easier before: it was enough to collect the documents, apply to the appropriate body and acquire a license. The only reason for refusal was non-conformity of the founding documents. What is going on now? For instance a person can acquire the necessary sum for the entrance fee, collect all the certificates, fill in the forms, make applications, receive all the issues etc, but still have no guarantee to get a place in the sun in SRO, moreover, he will have to fight for the rights and prove the solvency.

Another unpleasant point is that other members of SRO do not want to pay for other’s intentional or accidental faults or teach them to work properly. So how close are the members of the SRO?

The other side, however, is optimistic and hopes that the SRO is the first step towards the growth of the quality of installations, a possibility for worthy companies to be capable to work competently in the market. Furthermore, in view of a bitter experience of the licensing system, bureaucratization of the economy in construction area will be changed by a new professional team that is able to both control and be responsible for each other – in short “One for all, all for one”

Anyway, time will tell who is right and who is wrong. Meanwhile there are two positives of first SRO activity in the construction sphere, there is a huge number of vacancies for management staff, which is especially important during the global economic crisis, and the strict and fair approach in choosing the candidates to be members of SRO will definitely reflect on the quality of the construction sphere.