Foreign cos will have to register legal entity in Russia to get resource licenses

MOSCOW. June 7 (Interfax) - The point of the bill that will prohibit granting resource development licenses to foreign companies is that nonresidents will have to set up a legal entity in Russia and transfer the resource rights to it, Natural Resources Minister Alexander Kozlov said at a meeting of the United Russia Presidium.

"The logic is very simple. If you are a foreign resident and use our resources on Russian territory, then it would be right to not just own the license, but to own a legal entity registered in our country that is subject to Russian legislation and pays taxes here," Kozlov told reporters after the meeting.

The measure is intended to ensure the uninterrupted operation of resource companies in the event of the forced suspension of business activities on the part of foreign partners in joint projects. The bill applies to both new licenses and already issued ones.

At present, there are certain restrictions for foreign investors regarding resource properties of federal significance, but in general resource users can also be foreign. But in reality, there are very few such examples. In the whole country, the Natural Resources Ministry found only five such licenses. They are owned by a non-resident company, meaning a company registered abroad and operating in Russia through a branch.

Other than that, resource users with parent companies abroad or foreign beneficiaries already hold licenses in Russia through local subsidiaries, meaning the bill under discussion should not affect them.