|
Server : Apache/2.4.62 System : FreeBSD fbsdweb2.web.rcn.net 14.1-RELEASE FreeBSD 14.1-RELEASE releng/14.1-n267679-10e31f0946d8 GENERIC amd64 User : www ( 80) PHP Version : 8.3.8 Disable Function : NONE Directory : /domains/russinvecchi/pub/ |
Upload File : |
<html>
<head>
<title>Russin & Vecchi - attorneys</title>
<meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1">
<meta name="keywords" content="Russia, Russian, attorney, attorneys, lawyer, lawyers, law, counselors, counsellors, firm, legal, international, Moscow, Vladivostok, Sakhalin, Bangkok, Hanoi, Ho Chi Minh City, New York, Puerto Plata, Taipei, Santo Domingo, and Washington, D.C., DC, Yangon, Yuzhno-Sakhalinsk, Vietnam, Thailand, United States, US, USA, Dominican Republic, Taiwan, Myanmar, Burma, far east, maritime, shipping, trade, oil, gas, petroleum, Russin, Vecchi, business, commercial, bilingual, local, global, banking, finance, litigation, arbitration, securities, recovery, taxation, minerals, energy, trademark, patent, copyright, contract, real estate, insurance, labor, technology, transportation, e-commerce, internet
">
<meta name="description" content="Russin & Vecchi is an international law firm with eleven independent offices spanning the globe and offers many business and commercial legal services.
">
</head>
<body bgcolor="#FFFFCC" onLoad="" leftmargin="0" topmargin="0" marginwidth="0" marginheight="0" text="#000000" link="#660000" vlink="#660000" alink="#FF3333">
<table width="100%" border="0" cellspacing="0" cellpadding="0">
<tr align="center" bgcolor="#003366">
<td>
<table width="392" border="0" cellspacing="0" cellpadding="0">
<tr>
<td><a href="../index.html"><img src="../graphics/hdr_logo.gif" width="118" height="111" alt="Home" border="0"></a></td>
<td><img src="../graphics/hdr_logotype.gif" width="266" height="111" alt="Russin & Vecchi L.L.P."></td>
<td><img src="../graphics/shim.gif" width="126" height="10"></td>
<td> </td>
</tr>
</table>
</td>
</tr>
<tr align="center">
<td height="1" background="../graphics/bgnd.gif">
<table width="392" border="0" cellspacing="0" cellpadding="0">
<tr>
<td background="../graphics/bgnd.gif" valign="top"><img src="../graphics/office_nav010405.jpg" width="750" height="37" border="0" usemap="#MapMapMapMap" align="top">
<map name="MapMapMapMap">
<area shape="rect" coords="2,7,48,26" href="../subpage/bangkok.html">
<area shape="rect" coords="52,9,83,27" href="../subpage/hanoi.html">
<area shape="rect" coords="84,8,170,29" href="../subpage/hcm.html">
<area shape="rect" coords="218,8,270,25" href="../subpage/newyork.html">
<area shape="rect" coords="171,8,216,26" href="../subpage/moscow.html">
<area shape="rect" coords="272,8,338,27" href="../subpage/plata.html">
<area shape="rect" coords="339,10,421,26" href="../subpage/santo.html">
<area shape="rect" coords="424,7,455,28" href="../subpage/taipei.html">
<area shape="rect" coords="457,10,521,25" href="../subpage/vladivostock.html">
<area shape="rect" coords="606,6,647,28" href="../subpage/yangon.html">
<area shape="rect" coords="649,5,746,28" href="../subpage/yuzhno.htm">
<area shape="rect" coords="524,9,603,26" href="../subpage/wash.html">
</map>
<map name="MapMapMap">
<area shape="rect" coords="4,9,43,28" href="../subpage/bangkok.html">
<area shape="rect" coords="46,10,77,28" href="../subpage/hanoi.html">
<area shape="rect" coords="78,9,144,29" href="../subpage/hcm.html">
<area shape="rect" coords="188,9,227,27" href="../subpage/newyork.html">
<area shape="rect" coords="148,8,186,27" href="../subpage/moscow.html">
<area shape="rect" coords="233,9,285,26" href="../subpage/plata.html">
<area shape="rect" coords="288,10,353,26" href="../subpage/santo.html">
<area shape="rect" coords="355,8,386,29" href="../subpage/taipei.html">
<area shape="rect" coords="387,9,441,26" href="../subpage/vladivostock.html">
<area shape="rect" coords="506,6,547,28" href="../subpage/yangon.html">
<area shape="rect" coords="548,9,628,29" href="../subpage/yuzhno.htm">
<area shape="rect" coords="441,8,505,25" href="../subpage/wash.html">
</map>
<map name="MapMap"><area shape="rect" coords="4,9,43,28" href="../subpage/bangkok.html"><area shape="rect" coords="46,10,77,28" href="../subpage/hanoi.html"><area shape="rect" coords="82,9,161,28" href="../subpage/hcm.html"><area shape="rect" coords="207,10,255,29" href="../subpage/newyork.html"><area shape="rect" coords="166,8,205,29" href="../subpage/moscow.html"><area shape="rect" coords="259,8,322,28" href="../subpage/plata.html"><area shape="rect" coords="329,9,400,28" href="../subpage/santo.html"><area shape="rect" coords="404,8,435,29" href="../subpage/taipei.html"><area shape="rect" coords="438,9,502,29" href="../subpage/vladivostock.html"><area shape="rect" coords="585,7,626,29" href="../subpage/yangon.html"><area shape="rect" coords="512,7,583,27" href="../subpage/wash.html"></map></td>
</tr></table></td></tr>
<tr align="center" bgcolor="#000000">
<td height="1"><img src="file:///L|/new%20site/graphics/footer_holder.gif" width="1" height="1"></td>
</tr>
</table>
<table width="598" border="0" cellspacing="0" cellpadding="0" align="center">
<tr>
<td width="12" height="1358" valign="top">
<P><img src="../graphics/footer_holder.gif" width="11" height="76"></p>
</td>
<td width="495" valign="top">
<P> </p>
<P align="center"><font color="#660000"><b><font face="Arial, Helvetica, sans-serif" size="4" color="#990000">Frequent
Legal Issues for Contractors on <br>
Sakhalin Oil and Gas Projects<br>
</font></b></font><font size="2" face="Arial, Helvetica, sans-serif">(Appearing soon in the Russian Energy Law Journal)</font></p>
<p align="center"><font color="#990033" size="2" face="Arial, Helvetica, sans-serif"><strong>III.
Meeting Russian Content Requirements</strong></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><em>Presented
by <a href="../subpage/attorneys.html#jjr">Jonathan Russin</a>, Managing Partner of the firm’s Russian Practice Group. </em></font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif"><strong>Sources of the Rules</strong></font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif">There are at least
three legal sources that have a bearing on this question: the Production
Sharing
Agreement for Sakhalin II signed by Sakhalin Energy
in 1994, the PSA for Sakhalin I signed by Exxon Neftegas and its partners
in 1995, and the Law on Production Sharing Agreements and its amendments,
originally signed into law by President Yeltsin on December 30, 1995.
Although the two PSAs antedate the passing of the PSA law, and are therefore “grandfathered,” it
is clear that Russian authorities also look to the definitions in the
PSA law as setting the standards they wish to achieve. In addition to
the Sakhalin II PSA, SEIC’s Russian Content rules stem from its
Supervisory Board Resolutions and Agreed Procedures.</font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif"><strong>Defining a Russian Enterprise</strong></font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif">There are two distinct
and often confused aspects of Russian Content. The PSAs for both Sakhalin
I and II and the PSA law itself provide that
the operators (ENL and SEIC) will grant “Russian Enterprises” a “priority
right” or “preference” over non-Russian enterprises
in awarding contracts. </font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif">What then is a “Russian
Enterprise?” The PSA Law defines
it as a “Russian legal entity,” which appears to mean that
any company incorporated in Russia, even if all of its shares are owned
by non-Russians, will be recognized as a Russian Enterprise. As stated
above, however, for the purposes of the Sakhalin I and II projects, the
PSA law does not apply as they have grandfathered PSAs, which control.
Although ENL has interpreted Russian Content in the same manner as the
PSA Law, its PSA defines a Russian Enterprise in the following manner: “If
Russian natural persons, legal entities or government organizations own
at least fifty percent of the stock of such organization.” <font size="1">(10)</font></font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif">Similarly, the SEIC
PSA provides that a Russian Enterprise is defined as a company in which “at least fifty percent of its equity is
held directly or indirectly by Russian natural or juridical persons or
by any [Russian] governmental authority.” SEIC does not require
that the bidding entity be formed at the time of its bid, but the founders
must commit to form a compliant entity thereafter. The entity, once formed,
must provide proof of compliance in the form of a certificate of incorporation
and a list of its major shareholders evidencing at least 50% Russian
ownership. If Russian Content is lost post-award, the company must notify
SEIC and may be at risk for loss of its contract.</font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif"><strong>Measuring Russian Labor and Russian Materials</strong></font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif">Although the Sakhalin I PSA does not contain specific percentage requirements,
ENL requires its contractors to meet specific requirements similar to
the 70% targets employed by SEIC. </font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif">SEIC’s requirements
are specific and state that the company is to make its best efforts
to maximize Russian Content each year with a
target of reaching 70% Russian labor, materials, equipment, and services
over the project life. SEIC considers materials and equipment to be Russian
if they are procured by a Russian entity or individual, or by an entity
otherwise compliant with Russian Content ownership requirements. Contractors
must report on both Russian and Non-Russian material volume and man-hours.
SEIC must track the number and US Dollar value of contracts awarded to
Russian Enterprises.</font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif">Although it is relatively
clear that Russian Labor means the employment of Russian citizens,
which can be tracked by man-hours, the definition
of Russian Materials is not as self-evident. For SEIC, the determining
factor is the legal status of the source of procurement, without specific
express regard to the country of manufacture. The PSA Law requires operators
on an annual basis, to procure at least 70 percent of the total value
of specified types of materials in the form of goods of “Russian
origin.” <font size="1">(11) </font>Pursuant to the PSA Law, the
Russian origin requirement is satisfied where materials are produced
by Russian legal entities and/or
Russian citizens on the territory of the Russian Federation, from parts
that are at least 50% (based on total value) produced in Russia by Russian
legal entities and/or Russian citizens.<font size="1">(12)</font> The
70% also only applies to materials, the expenses for the procurement
and use of which are recoverable
to the operator through its production share.<font size="1">(13)</font> Thus,
the PSA Law’s
definition for Russian materials actually requires that a percentage
of procured goods be manufactured in Russia, using Russian-manufactured
parts. As stated above, however, this is not a requirement for the Sakhalin
I and II projects as these PSAs enjoy grandfathered status.<br>
</font><font face="Arial, Helvetica, sans-serif"> </font> </p>
<p><font size="2" face="Arial, Helvetica, sans-serif"> <font size="2" face="Arial, Helvetica, sans-serif"><font size="2" face="Arial, Helvetica, sans-serif"><cite><font size="1">(10)</font></cite></font></font> <font size="1">Although
the ENL PSA is a confidential document, the Russian Content provisions
have
been discussed publicly in order to assist contractors in meeting these
requirements. <br>
<font size="2" face="Arial, Helvetica, sans-serif"><font size="2" face="Arial, Helvetica, sans-serif"><cite>(<font size="1">11</font>)</cite></font></font></font> <font size="1">Federal
Law No. 225-FZ “On Production Sharing,” December 30, 1995,
as amended by Federal law No 19-FZ , as amended June 6, 2003 (“Law on Production
Sharing”), Article 7(2).<br>
<font size="2" face="Arial, Helvetica, sans-serif"><font size="2" face="Arial, Helvetica, sans-serif"><cite>(<font size="1">12</font>)</cite></font></font></font> <font size="1">Law
on Production Sharing, Article 7(2).<br>
<font size="2" face="Arial, Helvetica, sans-serif"><font size="2" face="Arial, Helvetica, sans-serif"><cite>(<font size="1">13</font>)</cite></font></font></font> <font size="1">Law
on Production Sharing, Article 7(2).</font></font></p> <table width="100%" border="0">
<tr>
<td width="29%"><div align="center"><strong><font size="2" face="Arial, Helvetica, sans-serif"><a href="chapter_IV.html">Next</a></font></strong></div></td>
<td width="36%"><div align="center"><strong><font size="2" face="Arial, Helvetica, sans-serif"><a href="chapter_II.html">Previous</a></font></strong></div></td>
<td width="35%"><div align="center"><strong><font size="2" face="Arial, Helvetica, sans-serif"><a href="RusEnergyLaw_index.html">Table of Contents</a></font></strong></div></td>
</tr>
</table>
</td>
</tr>
<tr>
<td colspan="2">
<p><img src="../graphics/bottom_navbar.gif" width="598" height="23" usemap="#Map2" border="0"><map name="Map2">
<area shape="rect" coords="280,3,367,19" href="mailto:[email protected]">
<area shape="rect" coords="412,4,466,19" href="../subpage/links.html">
<area shape="rect" coords="512,3,561,20" href="../index.html">
<area shape="rect" coords="169,3,224,20" href="../subpage/offices.html">
<area shape="rect" coords="37,4,119,20" href="../subpage/attorneys.html"></map></p>
</td>
</tr>
<tr>
<td width="12" height="210"> </td>
<td width="495">
<table width="284" border="0" cellspacing="0" cellpadding="0">
<tr>
<td> </td>
<td><img src="../graphics/footer_logo_rv.gif" width="143" height="76"></td>
</tr>
<tr>
<td> </td>
<td>
<p><font face="Arial, Helvetica, sans-serif" size="2"> </font><font face="Arial, Helvetica, sans-serif" size="2">815
Connecticut Ave, N.W.<br>
Suite 650 <br>
Washington, D.C. 20006-4047<br>
T: (202) 822-6100<br>
F: (202) 822-6101<br>
<a href="mailto:[email protected]">[email protected]</a></font></p>
<p> </p>
</td>
</tr>
</table>
</td>
</tr>
</table>
</body>
</html>