SPIC 1.0. Investors Are Given Back The Proven Mechanism And The Right To Extend Contracts Due To The Sanctions

• Published date: 02 May 2022
• Subject Matter: Corporate/Commercial Law, International Law, Tax, Contracts and Commercial Law, International Trade & Investment, Sales Taxes: VAT, GST
• Law Firm: VEGAS LEX
• Author: Mr Alexander Sitnikov, Maxim Grigoryev, Alexandra Vasyukhnova, Natalia Abtseshko and Artem Gasparyan

On 14 March 2022, a law came into force reviving the SPIC 1.0 mechanism for new investment projects, and allowing extending the terms of contracts already concluded due to foreign sanctions1. The amendments were developed by the Government as part of a package of anti-crisis measures.

As part of the development of this law, the Government has also clarifi ed the rules for concluding SPIC 1.02. The updated rules came into effect on 1 April 2022.

Under SPIC 1.0, an investor has the right to receive preferences similar to those provided for under SPIC 2.0: guarantees of stability of tax and regulatory conditions; tax benefi ts; simplifi ed acquisition of the "Made in Russia" status; the possibility of applying accelerated depreciation; special conditions for leasing public land; industry subsidies, etc.

In this review, we will take a closer look at the new regulation and pay attention to the key differences between SPIC 1.0 and SPIC 2.0.

I. The right to conclude new contracts under the clarifi ed rules

The SPIC 1.0 format has been unavailable to investors since August 2019, after the Ministry of Industry and Trade carried out a radical reform of this mechanism by offering SPIC 2.03 to investors.

The amendments exclude the blocking of SPIC 1.0. It is expected that the former SPIC structure is a tool that will help stimulate the implementation of new investment projects on creating and modernizing industrial activities in Russia in the face of foreign sanctions.

The rules for concluding SPIC 1.0 have been simplifi ed. Thus, to conclude a contract, it will no longer be necessary to provide information about the planned indicators of international competitiveness (diversifi cation of supply coeffi cient).

Changes in the rules have affected also the form of the SPIC 1.0. In particular, the grounds for changing or terminating the SPIC at the request of one of the parties have been clarifi ed, and the occurrence of force majeure circumstances that are connected with international sanctions4 preventing the implementation of the project may serve as a basis.

II. Conditions required for the extension of existing contracts

By default, the new law allows to extend the SPIC if the following conditions are met:

1) The SPIC was in effect on the date the law entered into force ' 14 March 2022.

2) The contract was concluded with the participation of the Russian Federation, that is, the law does not provide for the possibility of extending regional SPIC.

3) International...