«Strategic business company» in the understanding of the Law on Foreign Investments

Milchakova Olesya Vladimirovna PhD in Law Associate Professor; Department of Competition Law; O.E. Kutafin Moscow State Law University (MGUA) 9 Sadovaya Kudrinskaya str., Moscow, 123995, Russia millov@yandex.ru Other publications by this author

Introduction. Problem statement

In the scientific literature, special attention is paid to the issues of the positive effect of foreign investment on the state economy, the need to take into account the interests of state security when attracting foreign capital, as well as legislative restrictions on foreign investment in strategic industrial sectors ^{[2, 5, 9, 11, 13]}.

"The use of foreign investments is considered an objective need predetermined by the system of participation of the state economy in the international division of labor and the transfer of funds to areas free for entrepreneurship" ^{[3, p. 21]}. One cannot but agree that in the case of "a shortage of domestic sources of financing for long-term investments, it is important to provide regulatory macroeconomic support for the inflow of foreign direct investment into the Russian economy" ^{[6, p. 116]}.

At the same time, "attracting foreign investment implies increased competition in the domestic market, creates threats of loss of economic independence and seizure of the domestic market by representatives of foreign, not always friendly states" ^{[4, p. 48]}.

Significant foreign participation in the national economy of the state, especially in strategic industries, carries risks of a potential threat to the country's defense and state security. It is necessary to take into account the current geopolitical situation, the need to achieve a balance between possible risks for Russian enterprises under the control of foreign investors, when unfriendly foreign states and international organizations impose economic sanctions against Russian individuals and legal entities, compliance with which creates restrictions on the activities of foreign investors, and the unconditional positive effects on the economy that accompany the influx of foreign investments (including the transfer of advanced technologies and know-how, the creation of new jobs, an increase in state revenues in the form of tax revenues from the activities of new and the development of existing enterprises).

In Russia, as in many foreign countries ^{[7, 12]}, a special legal regime for foreign investments in certain areas of economic activity has been introduced, which are of fundamental importance for ensuring national military, economic, energy and other types of security.

According to I. Kvashnina, "the current system of regulating the admission of foreigners is cumbersome, opaque and takes both investors and regulators time to review and draft applications that do not need approval" ^{[8, p. 93]}.

At the same time, strengthening control over foreign investments in strategically important sectors of the Russian economy is one of the tasks to achieve the goals of ensuring the economic security of the state provided for by the National Security Strategy of the Russian Federation (subp. 33 p. 57), which for the current regular period was approved by Decree of the President of the Russian Federation No. 400 (hereinafter also referred to as the Strategy).

In this regard, it seems necessary to determine which organizations operate in the sectors of the economy that are recognized as strategically important for achieving the goals of the Strategy defined by the head of state. The characteristics of these organizations directly affect the level of administrative barriers established in order to prevent uncontrolled acquisition of assets of such organizations by foreign persons.

Types of organizations of strategic importance to the State, provided for by law

Russian legislation uses several similar concepts of organizations of strategic importance to the state: "strategic enterprises and joint-stock companies" (Article 6 of Federal Law No. 178-FZ dated 12/21/2001 "On Privatization of State and Municipal Property"); "strategic enterprises and organizations" (Article 190 of Federal Law No. 127 dated 10/26/2002- Federal Law "On Insolvency (Bankruptcy)"); "business entities of strategic importance for the military-industrial complex and security of the Russian Federation" (Part 6 of Article 1 of Federal Law No. 213-FZ dated 07/21/2014 "On Opening Bank Accounts and Letters of Credit, on Concluding Bank Deposit Agreements, an agreement to maintain a register of owners securities by business entities of strategic importance for the military-industrial complex and Security of the Russian Federation, and Amendments to Certain Legislative Acts of the Russian Federation"); "Economically Significant Organizations" (Article 2 of Federal Law No. 470-FZ dated 08/04/2023 "On the Specifics of Regulating Corporate Relations in Business Entities that are economically Significant Organizations").

The lists of these enterprises (joint-stock companies, business entities) in accordance with the established procedure and powers are approved by the President of the Russian Federation or the Government of the Russian Federation. Special legal regimes are applied to such enterprises with their participation in legal relations, the content of which logically follows from the names of the federal laws listed above.

In turn, Federal Law No. 57-FZ dated 04/29/2008 "On the Procedure for Making Foreign Investments in Business Entities of Strategic Importance for Ensuring National Defense and State Security" (hereinafter referred to as the Law on Foreign Investment) provides for the concept of "a business entity of strategic importance for ensuring national defense and State security" (hereinafter referred to as the Law on Foreign Investment). also – a strategic business company). This law (Articles 2.7) introduced exemptions from the generally established regime on the territory of the Russian Federation for foreign investors (a group of persons that includes a foreign investor) when making investments in the form of acquiring shares (shares), property of strategic business companies, rights that allow them to determine the conditions for their entrepreneurial activity.

Restrictions on foreign investments in strategic business entities

Based on the norms of the Law on Foreign Investments, the legal regulation of foreign investments in strategic business entities is carried out in the following forms:

1) prohibition of certain transactions, for example, transactions, other actions entailing the establishment of control over the company by an organization under the control of a foreign state or an international organization;

2) restrictions in the form of a requirement to obtain preliminary regulatory approvals for the transaction by the Government Commission for the Control of Foreign Investments in the Russian Federation or the Federal Antimonopoly Service authorized by the Government of the Russian Federation to perform functions for the control of foreign investments;

3) permission, for example, the possibility of making a transaction without obtaining regulatory approvals if the foreign organization – buyer is under the control of a Russian citizen who does not have foreign citizenship and residence permit in a foreign country, while information about these facts is disclosed in due course to the Federal Antimonopoly Service.

The normative definition of a "strategic business company" for the purposes of controlling foreign investments

The Law on Foreign Investments (paragraph 2 of Part 1 of art. 3) a strategic business company is defined as a business company that is established on the territory of Russia and carries out any of the types of activities provided for in Article 6 of this law that are of strategic importance for ensuring the defense of the country and the security of the state.

The list of activities of strategic importance for ensuring the country's defense and state security, specified in Article 6 of the said law, includes 51 items (including paragraph 10.1), which combine more than 100 different types of activities in various sectors of the economy and industries. At the same time, there is no single list of organizations approved by the authorities that are recognized as having strategic importance for the purposes of applying the law in question (the total number of such organizations, according to expert estimates, is about 50 thousand).

Not all of the organizations related to strategic business companies within the meaning of the Law on Foreign Investment are included in the above-mentioned lists of enterprises (joint-stock companies, business companies) and, in turn, not all of these enterprises are strategic companies within the meaning of this law.

Based on the normative definition given earlier, the first qualifying feature of a strategic business company for the purposes of the Law on Foreign Investment is the creation of such a company on the territory of the Russian Federation.

With regard to the second qualifying feature – the status of a business company – it should be noted that in accordance with paragraph 4 of Article 66 of the Civil Code of the Russian Federation, business companies can be created in the organizational and legal form of a joint-stock company or a limited liability company. At the same time, for example, state and municipal unitary enterprises do not belong to business entities, however, the property (located, including on the right of economic management) of these enterprises, providing, for example, water supply services, may be the object of a concession agreement, under which a foreign investor may act as a concessionaire.

At the same time, the Law on Foreign Investments does not contain direct references or indications that the concept of "business entity of strategic importance" used in it should be applied in accordance with the Civil Code of the Russian Federation.

In addition, when designating a number of activities related to those of strategic importance, the Law on Foreign Investment (pp. 36, 37, 41, 42, 46, 48 Article 6) uses the wording "business entity", under which, for example, Federal Law No. 135-FZ dated 07/26/2006 "On Protection of Competition"(clause 5 of Article 4) implies, among other things, any commercial organization, as well as a non-profit organization engaged in activities that bring it income.

Due to the fact that the Law on Foreign Investments attributes the implementation of specific types of activities specified in Article 6 of this law to the characteristics of a strategic company, state and municipal unitary enterprises engaged in any of these types of activities may also be classified as strategic business companies for the purposes of applying this law.

The third qualifying feature of the considered category of business entities is the implementation by them of one or more types of activities of strategic importance for ensuring the defense of the country and the security of the state, which are specified in Article 6 of the Law on Foreign Investments. To carry out many of these types of activities, obtaining appropriate licenses and other permits is required.

The importance of "strategic business entities" for the implementation of the national strategic priorities of the Russian Federation

It seems that the importance of business entities recognized as strategic for the purposes of applying restrictions on the acquisition of their assets by foreign investors is predetermined by the important, essential importance of such companies for fulfilling the goals and objectives provided for by the Strategy.

According to paragraph 5 of the Strategy, the national security of the Russian Federation is a state of protection of the national interests of the Russian Federation from external and internal threats, which ensures the realization of constitutional rights and freedoms of citizens, decent quality and standard of living, civil peace and harmony in the country, protection of the sovereignty of the Russian Federation, its independence and state integrity, socio-economic the development of the country. Ensuring national security in the Strategy refers to the implementation by public authorities in cooperation with civil society institutions and organizations of political, legal, military, socio-economic, informational, organizational and other measures aimed at countering threats to national security – a set of conditions and factors that create a direct or indirect possibility of harming Russia's national interests.

The national interests of the Russian Federation are objectively significant needs of the individual, society and the state for security and sustainable development. The Strategy defines national interests at the present stage, the provision and protection of which should be carried out by concentrating the efforts and resources of public authorities, organizations and institutions of civil society on the implementation of strategic national priorities – the most important areas of ensuring national security and sustainable development of the Russian Federation.

Taking into account the types of activities identified as being of strategic importance for ensuring national defense and state security, business entities recognized as strategic for the purposes of the Law on Foreign Investment are directly essential for the implementation of strategic national priorities defined in paragraph 26 of the Strategy, the tasks within which are detailed in other provisions of the Strategy.

For example, companies that carry out:

● performance of works on active impact on hydrometeorological, geophysical processes and phenomena (paragraphs 1, 2 of Article 6 of the Law on Foreign Investments) are important in terms of ensuring environmental safety and rational use of natural resources (sub-paragraph 7, paragraph 26, sub-paragraph 6, paragraph 83 of the Strategy);

● activities related to the use of pathogens of infectious diseases (paragraph 3 of Article 6 of the Law on Foreign Investment) – in terms of saving the people of Russia, state and public safety, environmental safety (sub-paragraphs 1, 7, paragraph 26, sub-paragraphs 6, 8, 9, paragraph 33, sub-paragraphs 20 p. 47 of the Strategy);

● placement, construction, operation, decommissioning of nuclear installations, radiation sources, handling of nuclear materials and radioactive waste and other activities in this area (paragraphs 4-10.1 of Article 6 of the Law on Foreign Investment), – in terms of national defense, state and environmental safety (sub-paragraphs 2-3, 7 p. 26, p. 40, sub-item 19, p. 47, sub-item 15, p. 83 of the Strategy);

● activities in the field of information encryption, development, production, distribution of encryption (cryptographic) tools, activities to identify electronic devices intended for covert receipt of information, development, production, sale and purchase for the purpose of sale of special technical means intended for covert receipt of information (paragraphs 11-16 of Article 6 of the Law on Foreign Investments)- in terms of ensuring information security (sub-paragraphs 4, p. 26, p. 57 of the Strategy);

● development, production, repair, disposal of weapons, military equipment, weapons, ammunition, trade in them, production and distribution of explosive materials, production and sale of metals, alloys, raw materials and materials used in the production of weapons and military equipment (paragraphs 17-27, 38 of Article 6 of the Law on Foreign Investment), – in parts of ensuring the country's defense, state and public security, strategic stability and mutually beneficial cooperation (sub-paragraphs 2, 3, 9, paragraph 26, paragraph 40, sub-paragraph 15, paragraph 47, sub-paragraph 4, paragraph 101 of the Strategy);

● space activities, development, production, repair, testing of aviation equipment (paragraphs 29-33 of Article 6 of the Law on Foreign Investment), – in terms of national defense, state, public, economic security, strategic stability and mutually beneficial cooperation (sub-paragraphs 2, 3, 5, 9, paragraphs 26, paragraph 40, sub-paragraphs. 6 p. 47, sub-item 8 p. 67, sub-item 29 p. 101 of the Strategy);

● ensuring aviation security, assessing the vulnerability of transport infrastructure facilities and vehicles, protecting them from acts of unlawful interference, certifying transport security forces (paragraphs 28, 43-45 of Article 6 of the Law on Foreign Investment), – in terms of ensuring state, public, and economic security (sub-paragraphs 3, 5, paragraph 26, sub-paragraph. 6, 7 p. 47, subp. 20 p. 67 of the Strategy);

● development, creation of an automated information system for registration of air transportation, databases included in it, an information and telecommunications network that ensures the operation of the specified system, performing the functions of the operator of this system (paragraph 48 of Article 6 of the Law on Foreign Investments), - in terms of ensuring state, public, information security (sub-item 3, 4, paragraph 26, sub-paragraph 11, paragraph 47, paragraph 57 of the Strategy);

● television broadcasting, radio broadcasting, the activities of the editorial office, publisher, founder of a periodical, printing activities (paragraphs 34, 35, 41, 42 of Article 6 of the Law on Foreign Investment), – in terms of saving the people of Russia and human development, information security, protection of traditional Russian spiritual and moral values, culture and historical memory (sub-items 1, 4, 8, p. 26, sub-items 14, 15, p. 33, p. 57, 93 Strategies);

● provision of services in the fields of activity of natural monopolies, provision of communication services or in ports by an economic entity occupying a dominant position in the commodity market, transportation of goods by sea and inland waterway (paragraphs 36, 37, 47 of Article 6 of the Law on Foreign Investment), – in terms of saving the people of Russia and human development, ensuring state, public, and economic security (sub-paragraphs 3, 5, paragraph 26, sub-paragraphs 16, 17, paragraph 33, sub-paragraph 19, paragraph 47, sub-paragraph 9, paragraph 67 of the Strategy);

● geological exploration, exploration, extraction of minerals in subsurface areas of federal significance, fishing (paragraphs 39, 40 of Article 6 of the Law on Foreign Investment), – in terms of economic, environmental safety and rational use of natural resources (sub-paragraphs 5, 7 of paragraph 26, sub-paragraphs 9, 14 of paragraph 67, sub-paragraphs 9-11 Paragraph 83 of the Strategy);

● the operator of the electronic platform in accordance with the legislation on the contract system in the field of procurement of goods, works, services for state and municipal needs (paragraph 46 of Article 6 of the Law on Foreign Investment), – in terms of ensuring information and economic security (sub-paragraphs 4, 5, paragraph 26, paragraph 57 of the Strategy);

● to conduct vulnerability assessment, physical protection systems and ensure such protection of fuel and energy complex facilities from acts of unlawful interference at such facilities (paragraphs 49, 50 of Article 6 of the Law on Foreign Investments), - in terms of ensuring state and public security (sub-paragraph 3 of paragraph 26, sub-paragraphs 6, 7 47 of the Strategy).

The changes that are periodically made to Article 6 of the Law on Foreign Investments in terms of adjusting the types of activities that are of strategic importance for ensuring national defense and state security (additions, exclusions of certain types of activities) may reflect changes in the national priorities of the Russian Federation at a certain stage of development, fixed in the Strategy for the next period.

The concept of a "strategic business company" in the application of the Law on Foreign Investments

The analysis of judicial practice allows us to conclude that the law enforcement officer has gone beyond the boundaries of the literal interpretation of the definition of a strategic business company given in paragraph 2 of part 1 of Article 3 of the Law on Foreign Investments, since:

1) in order to recognize a business company as having strategic importance for ensuring the defense of the country and the state, it is important not only to actually carry out any of the activities specified in Article 6 of the said law, but also to have the potential to carry out such activities on the basis of a license available to the company, but not used, or other permissive document. It is recognized that the company has sufficient material, technical, production and economic capabilities (resources) to carry out a strategic type of activity as a whole.

"The fact of the implementation or non-implementation of the specified type of activity has no legal significance, since, having received a license for an activity of a strategic nature for the state, the specified company, by virtue of paragraph 2 of part 1 of Article 3 of the Law on Foreign Investment, becomes a strategic company"; "the actual implementation of strategic activities, if licensed, can be carried out at any time during the validity period of the license"; "the company did not terminate the license, therefore, it intended to engage in a strategic activity, which does not exclude the possibility of applying the provisions of the said law to it" (see judicial acts in case no. A45-26808/2020);

2) a company that has temporarily transferred to another person for use its own basic production facilities necessary for the implementation of a strategic type of activity, nevertheless, is recognized as a strategic business company, since, being the owner of these basic production facilities, such a company has the potential to return to the implementation of a strategic type of activity at any time (after the expiration of the contract, in case of early termination of the contract, etc.).

For example, a commercial port that leased its main production facilities to another person and did not actually directly carry out its main activity was recognized by the court as a strategic business company, motivating the position that "the activity of merchant shipping, including the provision of services, is a complex interconnected technological process, the implementation of which is possible exclusively with the help of facilities seaport infrastructure"; the company "owns infrastructure facilities (fixed assets) intended for loading and unloading cargo (berths)"; "the fact of ownership of seaport infrastructure facilities, the importance of which is predetermined by the possibility of using them to carry out a strategically important type of activity for the defense and security of the state", "the presence of the company ... a set of powers belonging to it as the owner of this property determines the qualification of the specified entity as a business entity of strategic importance" (see judicial acts in case No. A53-16168/2021);

3) a strategic business company may be recognized as an organization that performs only part of the work (provision of services) necessary to carry out a complex type of activity classified as strategic, or participates in a cooperative supply chain of products necessary for another organization to carry out a strategic type of activity.

In order to understand whether a business company carries out (has the opportunity to carry out) a strategic type of activity, including performing a separate job, providing a separate service or supplying a specific product, in some cases it is necessary to refer to industry legislation regulating in detail the process of carrying out a specific type of activity, the complex, generalized name of which is reflected in Article 6 of the Law about foreign investments.

According to the remark of the Constitutional Court of the Russian Federation, based on the objectives of the Law on Foreign Investments, "the attribution of the activities of a business company to activities covered by the special procedure for transactions by a foreign investor provided for by this federal law ... is carried out taking into account the provisions of other normative acts that are part of the system of sectoral regulation" in the relevant sphere of economic relations" and constitutes the prerogative of law enforcement bodies, including arbitration courts, which are obliged to take into account all legally significant circumstances of a particular case when resolving relevant issues" (ruling of the Constitutional Court of the Russian Federation dated 06/18/2020 No. 1106-O).

In this regard, for example, a company that does not have a license for geological exploration of subsurface and mining in subsurface areas of federal significance, but provides services on the basis of a contract for lowering casing strings into a well to organizations with such a license, is recognized by the courts as a strategic business company, since the performance of relevant work (when providing these services) It is a necessary component of an integrated type of activity for exploration and extraction of minerals (see judicial acts on cases no. A40-72889/2018, A40-53454/2018).

Some researchers, referring to this example from judicial practice and drawing attention to the fact that organizations performing work related to strategic activities and providing such services can be recognized as strategic, believe that legal uncertainty in identifying related strategic activities creates the need for detailed specification of the provisions of the Law on Foreign Investment in terms of types of economic activities that can be classified as strategic ^{[1, p. 94]}.

However, law enforcement still proceeds from a fairly definite position regarding the need to refer to sectoral legislation, which regulates in detail, from the point of view of legal possibilities, the organizational and technical process of carrying out a specific type of activity. At the same time, the courts pay attention not to the strategic nature of the types of activities, but to the fact that certain works and services form an integral part of a complex type of activity. In addition, the transfer, for example, of the All-Russian Classifier of Types of Economic Activity (OKVED), which defines in detail classes, subclasses, groups, subgroups of activities that are part of a more general type of economic activity, to the Law on Foreign Investment seems ineffective and inexpedient from the point of view of legal technique.

Conclusions

As a result of the analysis, it should be concluded that the restrictions on foreign participation in strategic business entities established by law are predetermined by the importance of such companies for achieving the goals of the National Security Strategy of the Russian Federation at a certain stage of development.

An appeal to the practice of applying the Law on Foreign Investments allows us to state an expansive interpretation of the concept of a "strategic business company", corresponding to the spirit and objectives of this law (Article 1), which establishes restrictive exemptions for foreign investors, a group of persons that includes a foreign investor, to prevent the uncontrolled acquisition of assets of such business companies and the implementation of strategic activities of importance for ensuring the country's defense and the security of the Russian Federation.

It seems that the law enforcement officer's approach to the concept of a "strategic business company" for the purposes of controlling foreign investments requires defining it as "a legal entity established on the territory of the Russian Federation, actually carrying out and (or) having the opportunity to carry out on the basis of a license, other authorization document or contract, or in connection with the availability of the necessary material andtechnical and production and economic resources of any of the activities of strategic importance for ensuring the country's defense and state security and the implementation of national priorities provided for by the National Security Strategy of the Russian Federation (including performing work, providing services, and supplying products necessary for another legal entity to carry out this type of activity)."

Conclusion

In conclusion, it should be noted that in order to ensure legal certainty and create a positive investment climate, the above definition should be provided directly in the Law on Foreign Investment.