November 10, 2017 at the MARRIOTT hotel in Moscow hosted the 9th Annual IBA conference “Mergers and acquisitions in Russia and CIS countries”.
The conference was opened by Christian Herbst, Former co-chair of the Committee on corporate law, mergers and acquisitions of the International Bar Association (IBA), partner of the Law firm Schoenherr (Vienna, Austria).
There many speakers from reputable Russian and foreign organizations. On of the comments included that 2017 had seen large transactions with companies such as Rosneft, Voentorg, SIBUR, ChinaGold, Beijing Gas, etc. and that deals with investors from China, Japan and Korea are on the rise.
Intersting comments were how Gett is conducting M&A transactions, what they were focused on and what is important to the company. As well as Mountview UK deal with Saturn in Russia and Juna in the United States.
Comments were stressed that it is necessary to divide M&A transactions, which are conducted according to international standards and transactions that are conducted on the basis of the Russian legislation.
The key speaker was Jacomijn van Haertle-van Hof, Director General, International Court of Arbitration in London (LCIA), London (UK).
Ms. Jacomijn highlighted position of the LCIA (London court of international arbitration) in the light of reforms in the regulation of arbitration courts of Russia. Jacomijn stressed that since 2000, the LCIA (London court of international arbitration) there was not a single case where the place of dispute resolution was Russia, also LCIA had seen quite a few cases where the parties were only Russian companies. Jacomijn also commented that a very limited number of cases on corporate disputes involving Russian parties is considered in the LCIA.
Also important information was the fact that the London court of international arbitration will not at this stage apply to the Ministry of Justice for registration as PAI (Permanent Arbitration Institutions), but the LCIA will continue to serve as the designated place for dispute resolution for Russian companies and participants, and continue to provide all available opportunities for Russian parties. Jacomijn expressed the position that many provisions of the new law on arbitration courts in Russia are very controversial from the point of view of the principles of international arbitration. Jacomijn also commented on the position of the law on corporate disputes in the arbitration proceedings, which obliges to disclose information on the website about the fact that this provision is inconsistent with fundamental principles of arbitral proceedings, confidentiality is an important principle in international arbitral proceedings.
Today transactions are simplified maximally, and change in structure. Letters of Intent play key role for the parties, the parties first agree on all the nuances and key points and then come to a deal. Russian law and the use of the civil code has at this stage a priority especially in the process of integration and reorganization. The Russian law on strategic investments is somewhat ambiguous, there is still no clear judicial practice, and in this regard the contract is the most important legal tool.
Peculiarities of M&A deals in Kazakhstan were stressed as there are limitations to M&A transactions in the Kazakhstan law. Companies are required to use law of Kazakhstan, and use local disputes arbitration (local arbitration courts).
Emphasized fact is that international investors prefer to use English law, and Russian investors rely on Russian law. Regardless of jurisdicion it is necessary to examine target companies carefully and check all documents.
Use of new technologies in law were covered. PJSC “Sberbank” is using robots for writing responses to claims, also discussed were major trend is crypto currencies and their role, startups are also raising money through ICO projects.
Deal conversion in the field of direct investment, the growing role of sovereign wealth funds were discussed. Russia has a huge potential for investors, the credibility of Russian law increases.
Russian law becomes better. If previously foreign investors were against the use of Russian law now, after rounds of negotiations it is possible to use even in large investment transactions.
Sovereign wealth funds become more active and many of them create their own teams, and have engaged in direct investments themselves. China is a major investor, there are several areas for investment is logistics and infrastructure – development of concept of the silk road, also investments aimed at growth in consumer demand, as well as e-Commerce.
Large investors are more focused on a small but technological transactions. Investors are more interested in projects that can give foreign currency earnings. High-technology sector is important, but also such spheres as agriculture are also relevant, for example, grain export in the United Arab Emirates or import substitution in the pharmaceutical industry, etc.
There is a process of rejuvenation of projects, and the conservative timeline for the completion of projects within 4-7 years is changing already. Investors are willing to consider different options for the timing of implementation of investment projects, and also loking into short-term projects, there is a tendency to strengthen the role of “exit-strategy” for the investor. Investor wants to clearly understand how/when he comes out of the project and with what conditions.
At this stage only two arbitration proceedings institutions failed to register with the Ministry of Justice as a PAI. MKAS and the Chamber of Commerce and Industry of the Russian Federation corporate dispute resolution regulations were discussed.
Recommendations on the application of the agreement on the settlement of disputes regarding shareholders’ agreements and agreements on purchase of shares and other corporate agreements in terms of the reform of corporate disputes were covered. Also cited were statistics of the Russia’s rating in world Bank’s report (World Bank), in which Russia ranks 35th out of 190 in category “doing business”, New Zealand and Singapore share the first two places of the ranking.
The event ended with a reception where participants could share personal experiences and ideas.