This summer, the AWARA Group together with Hellevig Klein Usov Llc and Awara eduhouse brought together 300 lawyers and business people from around the world at the Baltschug Kempinski. The majority of participants were lawyers and investors, however there were a variety of other people present including Moscow-based CEOs and senior company personnel, many of whom stayed on for the AWARA Executive evening which was held on the first evening of the two day event.
Seminars were held throughout the two days, and covered a variety of themes from anti-corruption legislation in Russia, business and investment law in the Nordic and Baltic regions, to transfer pricingâ¨ in a global context; to list only two of the eleven seminars. As with all events organised by the AWARA group, an open-minded stance was taken towards Russia, and revealing comparisons were made between the situation in Russia and that in other countries. Reporting in full the content of all the seminars would fill a book, however a short resume of those of interest to the author of this short article follows.
The seminar: âGeneral Director (Executive) Powers and Liability in Russiaâ was of particular interest to me as it reflected the way that Russia is moving forward to align itself to western European financial regulatory norms. Conducted by Vladimir Kramer, AIG Russia, Elena Somov AIG CISC Russia, Leonid Zubarev, CMS Legal and Anton Kabakov, Hellevig Klein & Usov, the seminar addressed new responsibilities which are now being placed directly on company directorsâ shoulders as result of new legislation. Vladimir Kremer pointed out that directors are now liable for any claims made against their company, including those of any shareholder owning more than 1% of the shares. Even the company which the director is directing can issue a claim against its director. Directors and officers are now responsible for âirresponsibleâ behaviour of their companies on stock markets, and can be held personally responsible in case of bankruptcy. All of this placesâ¨ any director in Russia in a difficult situation as he is forced to serve â¨two masters: the shareholders and the company. This dichotomy of interests is familiar to the situations faced by the majority of their western counterparts. At the present time, fines of up to R. I mln can be imposed, and prison sentences can, and are being handed out. Since 2005, Vladimir Kremer mentioned that there have been 22 judgements against Russian directors of banks alone, holding them liable to pay R. 5.5 bln in damages. Over 1,000 directors and officers of Russian companies have been disqualified.
The good news is that Directors and Officersâ Insurance Packages are now available in Russia, as Elena Somov pointed out. She mentioned that directorsâ liabilities are not yet anything like as great as in other countries such as Australia, but nevertheless, the risks are there, and anybody becoming a director of a Russian company would âif they are in their right mindâ take outâ¨ an insurance package, as western directors do.
Leonard Zubarev pointed out that during IPOs, under the law on securities, and the law on shareholding, responsibility is placed primarily on those who sign the company prospectus, whichâ¨ is not as far as corresponding legislation goes in the UK, where anybody who is mentioned in the prospectus is liable. The liability for Russian directors in an IPO is now unlimited, and can include claims against loss of profit, which can be huge, and also difficult to prove. Directors can be disqualified for providing misleading information, as they can be in the UK. Claims have to be made within three years in Russia, against 6 years in the UK and 6 months in Germany.
The seminar âHow to Structure Russian Inbound and Outbound Business through the Asian Financial Hubsâ contained so much information that it would be possible to fill this whole magazine with transcripts. The session started off with a presentation on Indonesia by His Excellency the Ambassador of the Republic of Indonesia.
Mikhail Kuritsyn, Executive Director of the Russian-Indonesian Business Council, pointed out the importance of Indonesiaâs mineral wealth. Indonesia contains 23%â¨ of the worldâs known bauxite, and there are vast reserves of nickel and other non-ferrous metals. Mikhail emphasised that despite its rich mineral wealth, Indonesia is trying â¨to diversify, and this was reflected in its decision to leave OPEC, which is perhaps a lesson for Russia. Mikhail also pointed out that Indonesia has been much more effective in curbing corruption than Russia. Whilst much criticism aimed at previous President Suharto can be justified, Indonesia has benefitted from 30 years of economic growth. Above all, Mikhail emphasised, when understanding Indonesia, it is important to understand local difficulties.
Perhaps the most interesting part of this seminar was that given by Hanly Chen, the Commercial Secretary of the Embassy of Singapore. She gave a factualâ¨ yet fascinating description of the economic advantages of being based in Singapore which is âmuch more than just being a country of âlemons, bananas and teaâ as the Russian song goes.â Hanly listed â¨the key advantages of basing â¨oneâs business in Singapore, which included Singaporeâs present importance as a banking centre, with most international banks already there. âLibor rates are actually lower over the long term in Singapore than in many world capitals, and Singapore is the fourth most active foreign exchange market in the world, she said, and added that the Singapore stock exchange differs from London, New York and Hong Kong stock exchanges in that they depend to a large extent on local companies, meaning that there are little differences in terms of preferential treatment for foreign companies and Singapore companies.
In reply to a question from the audience on the sometimes negative attitude of Singaporeans to investing in Russia, Hanly gave an honest reply: âI think language is one very valid problem, but not the only reason.â¨ For Singaporeans who come here, like me for example; I came on my first business trip in March 2008. I remember it well, it was one of the coldest days in my whole life. If you compare Japan to Russia, Japan â¨tries to adopt a very foreigner- friendly approach, the signs are all translated into English for example. But even applying and getting a visa to come here can be very difficultâ¨ for Singaporean business people.â¨ In a country where there is a lot of sunshine and smiling faces, to go into the Russian embassy where â¨one sometimes feels not exactly comfortable, is rather scary. Thenâ¨ we come to Russia and find that we canât even find the English wordâ¨ for toilet, and we are aware that there is some discrimination against Asians in Russia. We try not to recognise this, but we kind of suspect there is. I think it is very challenging for Singaporean businesses when they come here. Singapore is in the middle of an area of rapid growth, and there are a lot of very promising opportunities closeâ¨ at hand. So Singaporean business people think twice about going to a country where they are perhaps not very welcome, where the weatherâ¨ is scary, and the food is, well, not familiar. On the other hand, we have been successfully organising the Russian Singapore Business Forum for eight years now. Two hundred people attended in the first year, the second year we had double, this year we will have seven or eight hundred delegates, about half of who are from Russia and the rest from Singapore and other Asian countries. There are many challenges for us to overcome, such as seemingly simple things like translation of documents. But that does not mean we are not interested.
In the evening, AWARA group organised its successful regular Executive Business Evening to which 200 people came. Despite Jon Hellevigâs comment thatâ¨ there were too many lawyers there (joke), the food, drinks, musical accompaniment and great networking meant that delegates were there until late evening.