The article analyses the two main changes in direction in the regulation of subsoil use and management evident in Russia over the past twelve months. The first set of changes—effective as of 1 January 2005—significantly alter the relative authority of federal and regional executive bodies with regards to both the development of licensing programs and the procedures established for issuing the licenses themselves. The author asks whether the transfer of authority to federal executive bodies is realizable in practice, and whether or not the provisions of the Draft Law on subsoil—published by the government in March 2005—suggest that the federal authorities will establish a framework for licensing and the management of use that provides the predictability required by investors. This material was presented at a seminar "Law, Judicial Practice and the Russian Petroleum Sector" held at the Royal Institute of International Affairs in June 2005.The author then goes on to discuss the legal nature and potential effect of a subsoil use contract, the new instrument for regulating subsoil use relations as envisaged by the draft Law "On Subsoil" use, focusing on the security and transferability of the property right that is created. To illustrate what he perceives to be a general reluctance of the state to allow the transfer of forms of use right to be free from administrative control, comparisons are made with the uneasy balance of civil and administrative law regulations in product sharing agreements, and the problems in enacting the civil law transfer of other natural resources such as agricultural land.The article concludes by discussing the potential applicability of the provisions of the Draft Law on subsoil, the possible consequences of the failure of the Draft Law to define the grounds upon which executive bodies may develop criteria to restrict or terminate the rights of the user, and the general absence of a clear definition of the function and competence of different state bodies.
This article is based on an analysis which the author produced for a working group of the RF Ministry of Economic Development established to draft a model concession agreement, a result of the new Law on Concession Agreements which entered into force on 21 July 2005. The work entailed identifying the necessary amendments to key areas of legislation that would enable such concession agreements—which the RF government has proclaimed its intention to grant for the operation and development of both infrastructure and networks in the water supply and wastewater sectors—to be workable in practice.With regards to the new Law on Concession Agreements itself, the present article highlights its failure, in the view of the author, to clearly identify the nature of the obligations and rights assumed by the parties of a concession agreement vis-à-vis one another, and to include provisions—typically found in other jurisdictions—that ensure a balance of interests and allow for the effective transfer and mitigation of risk. This analysis is located within a framework which recognizes that—as a result of the current circumstances, where unclear regulations, a lack of transparency about the financial status of utilities, and a lack of commercial tariffs, predominate—the nature of the reform which is required is all-encompassing. As a consequence, the author maintains that the erection of a framework for the development of concession agreements demands the integrated development: of the fiscal relationship between national and municipal government; of social policy, i.e., tariffs and subsidies, and, of access and right of usage rules.Finally, when identifying such problems, the author illustrates how and why the practical experience gained in other countries should be incorporated, emphasizing how this experience reveals both the difficulty and necessity of concluding balanced agreements for what are long-term projects the performance of which is vulnerable to changes in market conditions, and which involve the operation and development of assets of social significance.