Kamil Karibov
Lawyer, Ph.D.
Beiten Burkhardt
Within the framework of the ‘second package of antimonopoly laws,’ amendments were made to Federal law No.135-FZ “On Protection of Competition”, dated 26 July, 2006, that liberalized the Federal Anti-Monopoly Service’s control over deals with stocks/shares, company property and rights relating to companies.
According to the applied amendments, prior consent or subsequent notification of the FAS is no longer required for deals where the subject is transfer into ownership, use or possession by a business unit of fixed production-related assets in the form of land plots and buildings, structures, constructions, premises and parts of premises which do not have an industrial purpose, as well as buildings under construction. Does this perhaps mean that the state has granted the marketplace for commercial nonindustrial real estate to the free market’s ‘invisible hand’?
The answer is no, taking into consideration that a significant number of deals aimed at purchasing commercial real estate are concluded in the form of a share deal, which remain, albeit with some relaxation of restrictions subject to FAS’s control. It is unlikely that the applied amendments to the Law on Protection of Competition will alter this practice.
Thus, the controlled status of real estate deals by the FAS now depends to an even greater degree than before on whether a deal is a share or asset deal. In the event of a share deal, classification of a real estate has no significance, with the deciding factors instead being asset and turnover related indicators specified in articles 28 and 30 of the Law on Protection of Competition. Conversely, in the event of an asset deal, it must primarily be checked whether the subject of transaction is a land plot, a building under construction or facility without an industrial purpose.
The buildings that FAS considers properties without an industrial purpose are office complexes and premises, business centers, leisure centers, and wholesale and retail properties, including shopping and entertainment malls and shopping centers.
In turn, a far greater problem is the question of precisely what criteria the real estate must fulfill to be classed as a property with an industrial purpose.
Proceeding on a range of explanations given by the FAS, such properties must be used ‘in the process of producing industrial products in industrial enterprises, agricultural industry and other manufacturing sectors’, e.g. premises where products are manufactured, including warehouse premises for such products, communal infrastructure facilities, and petrol stations.
Moreover, the actual use of a property must be considered. For instance, if a warehouse building is used to manufacture any product, then the property has an industrial purpose. Similarly, there is the question of whether an inoperative industrial facility acquisition deal aimed at subsequent conversion of the facility into a nonindustrial property still requires FAS’s consent.
Going on the explanations given, the conclusion can be drawn that classing a real estate property as a property with an industrial purpose depends on its function in the overall structure of the industrial enterprise or its equipment suitable for manufacture of industrial products. On the other hand, it is not clear under what criteria industrial properties such as, for instance, petrol stations are classed. After an inquiry by us, the FAS qualified as industrial facility the service buildings where maintenance of agricultural machinery is performed. Also ambiguous is the precise category that a whole range of facilities not named by the FAS fall under, such as transport infrastructure facilities. The chances are that any property which could, from the standpoint of the FAS, have an industrial value, potentially will fall into the category of industrial facilities.
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