1.1. Government Restricts Procurement of Certain Foreign-Sourced Weapons for State and Municipal Needs.

Resolution of the Government of the Russian Federation No. 1119 Dated September 20, 2018 “On Restrictions on the Admission of Foreign-Sourced Rifled Sporting Firearms, Ammunition, Cartridges, and Parts Thereof for Procurement to Meet State and Municipal Needs”

 The Resolution establishes that when procuring rifled sporting firearms, ammunition, cartridges, and parts thereof, the contracting authority shall reject all bids originating from foreign states (excluding member states of the Eurasian Economic Union [EAEU]). This restriction applies provided that participants submit at least two bids to participate in the supplier selection process that propose the supply of sporting weapons, ammunition, cartridges, and parts thereof originating from EAEU member states. Furthermore, these bids must not contain proposals to supply goods from the same manufacturer or from manufacturers belonging to the same group of persons. To confirm the country of origin of the sporting weapons, ammunition, cartridges, and parts thereof, participants may submit an opinion issued by the Ministry of Industry and Trade of the Russian Federation or a certificate of origin issued by the authorized body (organization) of an EAEU member state.

1.2.        FAS of Russia, in Coordination with the Ministry of Finance, to Establish the Procedure for Determining the Initial (Maximum) Contract Price for Motor Fuel and Gasoline Supplies

Resolution of the Government of the Russian Federation No. 1074 Dated September 8, 2018

The Government of the Russian Federation has authorized the Federal Antimonopoly Service (FAS) of Russia, in coordination with the Ministry of Finance, to establish the procedure for determining the initial (maximum) contract price, as well as the price of a contract concluded with a sole supplier, when procuring motor fuel and automotive gasoline.

According to certain industry sources, these regulatory innovations aim to prevent cartelization within this market segment.

1.3.        Government Imposes Fee Caps on Bank Support Services for Procurement Contracts.

Resolution of the Government of the Russian Federation No. 1117 Dated September 20, 2018 “On Amending Resolution of the Government of the Russian Federation No. 963 Dated September 20, 2014”

The Government has capped the fees for extended bank support services: for contract prices between RUB 500 million and RUB 1 billion, the fee is capped at 1.15% of the specified price; for contract prices between RUB 1 billion and RUB 5 billion, the cap is set at 1.12% of the specified price. Furthermore, the regulation mandates bank support for contracts executed with suppliers subject to foreign restrictive measures (sanctions).

1.4.        Legislature Exempts Public Easement Valuations from Federal Law No. 223-FZ.

Federal Law No. 341-FZ Dated August 3, 2018 “On Amending the Land Code of the Russian Federation and Certain Legislative Acts of the Russian Federation Regarding the Simplification of the Placement of Linear Facilities”

Effective September 1, 2018, contracting authorities conducting procurement under Federal Law No. 223-FZ “On Procurement of Goods, Works, and Services by Certain Types of Legal Entities” may enter into contracts for evaluating public easement fees without applying the procurement procedures mandated by Law No. 223-FZ.

2. Draft Regulations and Legislative Proposals

2.1.        Ministry Approves Draft Standard Terms for Software Development Contracts.

Draft Order of the Ministry of Digital Development, Communications and Mass Media of the Russian Federation “On Approving the Standard Contract Terms for the Performance of Works on the Creation (Development) of Computer Programs and Related Software Documentation”

These standard terms govern contracts involving the performance of work that results in the creation or modernization of computer programs and their software documentation. The specified terms incorporate all requirements set forth by Federal Law No. 44-FZ “On the Contract System in the Field of Procurement of Goods, Works, and Services for State and Municipal Needs.”

Clauses 4.1 and 4.4 of the draft standard terms state that if either party breaches its contractual obligations, the breaching party shall incur late payment penalties. The draft standard terms set the penalty rate at one-three-hundredth of the Central Bank of the Russian Federation’s refinancing rate applicable on the date of payment. However, given that amendments to Law No. 44-FZ entered into force on July 1, replacing the term "refinancing rate" with "key rate," the Ministry will likely incorporate corresponding changes into the final draft of the standard contract terms for software creation and development.

2.2.        FAS of Russia to Issue Opinions on Modifying OKVED Codes for State-Owned Enterprises.

Draft Federal Law “On Amending Certain Legislative Acts of the Russian Federation (Regarding the Prohibition on the Creation and Activity of Unitary Enterprises).”

On September 17, 2018, the Commission on Legislative Activities approved a bill requiring state or municipal unitary enterprises to submit an antimonopoly authority's compliance opinion to the registration body when modifying their All-Russian Classification of Economic Activities (OKVED) codes. Furthermore, the bill restricts the creation of new unitary enterprises to cases explicitly provided for by federal laws, acts of the President or Government of the Russian Federation, federal executive bodies responsible for defense policy, or when operating within natural monopolies.

Implementing this regulatory change will reduce instances where state or municipal unitary enterprises circumvent the procurement rules of Law No. 44-FZ by utilizing Federal Law No. 223-FZ through procurement subsidies granted by contracting authorities otherwise bound by Law No. 44-FZ. Regulators anticipate that the approval of this draft will enhance the overall state of market competition.

2.3.        Ministry Commences Public Consultations Regarding Reporting Forms for Engineering Product Procurement

Draft Order of the Ministry of Industry and Trade of the Russian Federation “On Approving the Form for Submitting Information on the Procurement of Engineering Products Included in the Lists of Long-term Procurement Needs for Engineering Products in Accordance with Clause 2 of Part 6 of Article 3ˡ of the Federal Law 'On Procurement of Goods, Works, and Services by Certain Types of Legal Entities' Required for the Implementation of Investment Projects, Including Information on the Procurement of Engineering Products Which, by Decision of the Government Commission on Import Substitution and in Accordance with Clause 3 of Part 8 of Article 3ˡ of the Said Federal Law, Are Not Subject to Publication in the Unified Information System in the Field of Procurement of Goods, Works, and Services for State and Municipal Needs, and the Form of Notification on the Inclusion of an Investment Project into the Registry of Investment Projects.”

This document proposes the approval of a standard notification form for the inclusion of an investment project into the official registry of investment projects.

2.4.        Government Proposes Procurement Restrictions on Specific Wine Categories.

Draft Resolution of the Government of the Russian Federation “On Amending the List of Certain Types of Food Products Originating from Foreign States, Subject to Admission Restrictions for Procurement to Meet State and Municipal Needs”

This draft proposal expands the existing list of foreign-sourced food products subject to procurement restrictions for state and municipal needs, approved by Government Resolution No. 832 dated August 22, 2016. The proposed amendment incorporates specific wine products, including still wines, sparkling wines, liqueur wines, and fruit wines.

3. Judicial and Enforcement Landscape

3.1.        FAS of Russia Rules That Granting Contracting Authorities Discretionary Rights to Clarify Bids Creates Unequal Conditions for Bidders under Law No. 223-FZ.

Decision of the FAS of Russia No. 223FZ-642/18 Dated September 3, 2018

The antimonopoly authority concluded that procurement documentation terms must not make bidders dependent on the sole discretion of the contracting authority. Specifically, the procurement documentation allowed the contracting authority to request clarifications from bidders. However, the FAS of Russia found that such a condition makes a bidder’s participation contingent on the contracting authority's arbitrary preference, as the authority may apply its right to request additional information and documents unequally among participants.

Furthermore, the procurement documentation failed to establish a transparent procedure for preparing and sending such requests for additional information, thereby leaving requests regarding specific bidders entirely dependent on the contracting authority's decision, which could vary across different participants.

Consequently, the FAS of Russia deemed the contracting authority's actions unlawful, ruling that the inclusion of such requirements inappropriately restricts competition and limits the number of potential bidders.

3.2.        FAS Rules That Contracting Authorities May Only Require Bidders to Submit Documents Reasonably Within Their Possession.

Decision of the FAS of Russia No. 223FZ-668/18 Dated September 12, 2018

A contracting authority may not demand product compliance documentation that a procurement participant cannot realistically possess prior to purchasing the actual goods, such as product passports, operating instructions, certificates of conformity, or technical specifications. Consequently, the antimonopoly authority deemed the contracting authority's requirement to include product certificates and test reports within the initial bid proposal improper and unlawful.

3.3.        FAS Deems Bidder Eligibility Criteria Regarding Prior Contractual Breaches with Corporate Affiliates Unlawful.

Decision of the FAS of Russia No. 223FZ-683/18 Dated September 17, 2018

According to the tender documentation, bidders had to prove the absence of any documented instances of default or non-compliance over the past two years within procurement procedures conducted by the State Atomic Energy Corporation 'Rosatom' and its subsidiaries:

• Evading contract execution following a procurement award, or failing to sign a draft contract within the prescribed timeframes;

• Failing to submit mandatory documentation prior to contract execution;

• Refusal by a foreign participant to sign a contract under the proposed terms specified on the electronic trading platform;

• Termination of a contract by court order or mutual agreement due to a material breach of contractual terms.

The FAS of Russia concluded that this requirement cannot apply equally to all procurement participants. A bidder involved in litigation with an unrelated commercial entity would face no barriers to entry, whereas a participant engaged in a legal dispute with the contracting authority or its affiliates would face mandatory disqualification.

3.4.        Supreme Court Rules Corporate Authorization Requirements Unlawful for Sole-Shareholder LLCs.

Ruling of the Supreme Court of the Russian Federation No. 305-KG18-13595 Dated September 11, 2018

The Supreme Court upheld the lower commercial court judgments in Case No. A40-86574/2017, which deemed the rejection of a bid for failure to provide corporate approval for a major transaction unlawful. The courts ruled that statutory provisions governing interested-party transactions and major transactions do not apply to a bidder organized as a single-member limited liability company whose sole participant simultaneously serves as the sole executive body (General Director). Consequently, the court concluded that no separate corporate authorization for the transaction was required.

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