Priority of public interests in the regulation of foreign participation
in strategic sectors of the economy

Milchakova Olesya PhD in Law Associate Professor of the Department of Competition Law at Kutafin Moscow State Law University 123995, Russia, Moscow, Sadovaya Kudrinskaya str., 9 millov@yandex.ru Other publications by this author

Discussions on the content content of the concepts of "private interest" and "public interest" are constantly being held in the scientific legal literature.", ^{[1] [5] [6]} on a fair and reasonable balance of private and public interests in law, the presence or possibility of establishing the priority of a particular interest in the regulation of individual public relations. ^{[3] [4]}

Taking into account the developing conditions of the economic and political life of the state, it seems very interesting to study the dynamics of the balance of private interest in the form of property ownership and public interest in the form of national defense and state security in the framework of legal regulation of the participation of foreign individuals and legal entities in strategic sectors of the economy.

The peculiarity of the legal regime of foreign investments in these industries is a more significant interference by the state in the entrepreneurial activities of economic entities, compared with other sectors of the economy. Such regulation is expressed in the establishment of prohibitions and restrictions on the participation of foreign capital in the activities of enterprises of strategic importance for ensuring the defense of the country and the security of the state, the introduction of a permissive procedure for transactions involving the acquisition by foreign persons of shares (shares) in the authorized capitals and property of these companies.

In 2022-2023, the state policy in the field of foreign investment control is generally characterized by the introduction of additional restrictions in order to ensure national security. At the same time, comprehensive improvement of the legislation on foreign investment was carried out in the following areas.

1. Expansion of the spheres of economic activity classified as strategically important for ensuring the defense of the country and the security of the state.

First of all, the number of activities has been significantly increased (up to 51), in the implementation of which a business company is recognized as strategic and, accordingly, the acquisition of assets of such companies by foreign investors is subject to restrictions established by Federal Law No. 57-FZ of 29.04.2008 "On the Procedure for Foreign Investments in Business Companies of Strategic Importance for ensuring the Defense of the Country and the security of the state" (hereinafter – Law No. 57-FZ). The types of activities of strategic importance included fishing, cargo transportation by sea, development and creation of automated information systems for air transportation registration, activities for vulnerability analysis and physical protection of fuel and energy complex facilities.

The Government Commission for the Control of Foreign Investments in the Russian Federation (hereinafter referred to as the Government Commission) is also required to approve the receipt by a company under the control of a foreign investor of the right to extract (catch) aquatic biological resources, a license or other permissive document for the implementation of a strategic activity.

At the same time, the number of cases of foreign transactions submitted for consideration by the Government Commission by its chairman, which are not subject to the requirements of Law No. 57-FZ on their mandatory approval, has been increased. Such a decision is made on the proposal of the FAS of Russia, submitted on the basis of Article 6 of Federal Law No. 160-FZ dated 09.07.1999 "On Foreign Investments in the Russian Federation" (hereinafter – Law No. 160-FZ), on transactions of foreign investors in relation to: participants of the national project; city-forming organizations; companies occupying a dominant position in the commodity market. on the market; the only producers or suppliers of goods (works, services) on the territory of the Russian Federation that are not under the control of foreign persons; guaranteeing suppliers of electric energy; companies engaged in the creation and (or) reconstruction of a sea or river port; etc.

2. Increasing the number of persons acquiring strategic assets whose transactions are subject to control in accordance with Law No. 57-FZ.

Thus, the number of foreign investors includes citizens of the Russian Federation who do not have another citizenship, but also have a residence permit in a foreign country, foreign agents. Accordingly, transactions on their acquisition of assets of strategic companies are now also subject to approval in accordance with Law No. 57-FZ.

The provisions of Law No. 57-FZ are extended to transactions of foreign investors for the acquisition of "minority stakes" of shares (stakes) of a strategic company, if as a result of such transactions, the so-called aggregate control (more than 50% in total) of several foreign investors not belonging to the same group of persons is established.

3. Increasing the transparency of the presence of foreign capital in strategic sectors of the economy.

In 2022, the list of information required for mandatory submission as part of a request for preliminary approval of a transaction under the control of economic concentration in accordance with Federal Law No. 135-FZ of 26.07.2006 "On Protection of Competition" (hereinafter – Law No. 135-FZ) has been expanded in cases where the applicant for the transaction is a foreign investor or an object An economic concentration is a strategic company or a company that owns more than 5% of the shares (shares) in the authorized capital of a strategic company: detailed information about each of the beneficiaries, beneficial owners, controlling persons of the applicant must be provided.

The analysis of this information during the antimonopoly control of economic concentration is carried out to ensure simultaneous control of foreign investments, since, based on the provisions of Law No. 135-FZ in the amended version, the FAS of Russia has no right to make a decision on a transaction that is subject to the provisions of Law No. 57-FZ or Article 6 of Law No. 160-FZ, prior to the approval of such a transaction The Government Commission or, accordingly, before making a decision on the absence of the need to inform the chairman of the Government Commission about the transaction planned by a foreign investor on the basis of Article 6 of Law No. 160-FZ.

Amendments to Law No. 57-FZ introduced obligations to inform the FAS of Russia about the acquisition of a residence permit in a foreign country by a citizen of the Russian Federation, as well as additional disclosure of information about the ownership structure of foreign organizations.

4. Increasing the number of regulatory approvals for the purchase and sale of strategic assets.

The President of the Russian Federation in 2022-2023 on the basis of Federal Law No. 127–FZ dated 04.06.2018 "On measures to influence (counteract) unfriendly actions of the United States of America and other foreign States" (hereinafter - Law No. 127–FZ) approved a number of decrees on the application of temporary special economic measures to ensure the financial stability of the Russian Federation, prevention of uncontrolled withdrawal of assets and financial resources, which may cause damage to the economy, the state and the population.

These decrees of the President of the Russian Federation provide for categories of transactions (financial transactions) with shares (shares) of organizations, real estate between residents of the Russian Federation and foreign persons associated with foreign states who commit unfriendly actions against Russian legal entities and individuals, and persons under their control, which can be carried out only on condition of prior obtaining a permit from a Government commission issued by its sub-commission (whose work is provided by the Ministry of Finance of the Russian Federation), or the Central Bank of the Russian Federation (in agreement with the Ministry of Finance of the Russian Federation) or a special decision of the President of the Russian Federation.

Thus, when a foreign investor makes a transaction with respect to a strategic company that simultaneously falls under the criteria established by Laws No. 135-FZ, 57-FZ, 160-FZ and decrees of the President of the Russian Federation on temporary special economic measures, it is necessary to obtain regulatory approvals from all bodies authorized by these regulatory legal acts (FAS of Russia; Government Commission, operating in full force, information and analytical support of which, within the framework of Laws No. 57-FZ, 160-FZ, is carried out by the FAS of Russia; the Government Commission represented by its subcommission) and (or) the Central Bank of the Russian Federation (except in cases where the transaction is subject to approval by the President of the Russian Federation).

5. Transfer of authority to coordinate individual transactions with foreign persons to the highest level of government.

In the period up to 31.12.2023, transactions with foreign persons associated with unfriendly states (and persons under their control) in respect of certain categories of Russian organizations provided for by Presidential Decree No. 520 of 05.08.2022 may be made only on the basis of a special decision of the President of the Russian Federation. At the same time, if such a transaction is simultaneously subject to the provisions of Laws No. 57-FZ, 160-FZ, 135-FZ or other decrees of the President of the Russian Federation, then in the presence of a special decision of the President of the Russian Federation, it is not required to obtain any other approvals or permits.

Since these powers are exercised on the basis of Law No. 127-FZ, in fact, by a special decision on approval or refusal to approve a transaction, the President of the Russian Federation actually evaluates and recognizes the transaction or, accordingly, the refusal to commit it as a measure aimed at protecting public interests and ensuring the security of the state.

6. Determination of financial terms of transactions for the purchase and sale of assets and other rights in relation to Russian companies.

The above-mentioned decrees of the President of the Russian Federation provide for restrictions on conducting currency transactions and mandatory preliminary approval not only of the implementation of transactions directly, but also of financial transactions that ensure their execution.

When considering transactions by a Government Commission (represented by its sub-commission) the market value of the asset being sold, formed based on the results of an independent assessment, is analyzed, requirements are made for the sale of the asset at a discount, transfer of funds to the federal budget in the amount calculated from the market value of the asset, installment payment, a list of banks for mutual settlements is determined.

7. Strengthening measures of civil liability for the acquisition by foreign persons of assets of strategic companies in violation of the restrictions established by law.

In 2023, the consequences of the invalidity of insignificant transactions made by an unscrupulous foreign person in violation of Law No. 57-FZ were clarified, in the form of the right of the court to recover shares (shares), the main production facilities of the strategic company, income received by a foreign person during the illegal possession of assets of the strategic company to the state income. Also, the right of a strategic company to recover losses from a foreign investor in court, including lost profits, damage caused to the company's property, in connection with unfair actions against a strategic company by a foreign investor or a group of persons that includes a foreign investor.

Legal consequences in the form of nullity of transactions are also introduced in Article 6 of Law No. 160-FZ and are provided for by Decree No. 520 for cases of transactions in violation of the legal norms of these acts.

In general, analyzing the trends of changes in legislation in the sphere of economic activity under consideration, one cannot help but think about strengthening the priority of public interest over private. At the same time, it seems that with such a predominance of public interest over private interest, the latter is not denied as such: economic entities retain the right to choose a certain behavior - to refrain from making transactions for the purchase and sale of strategic assets or to make them, but subject to legal restrictions.

As S.A. Yadrikhinsky notes, "the elevation of human rights to the highest level of the pedestal as a target suggests that any public expediency, any public values, goals and means of achieving them should be consistent with the rights and legitimate interests of an individual, that is, with private interest." ^{[8, p. 66]}

The establishment of strict rules for controlling transactions with assets of Russian companies and the shift of the equilibrium point in the balance of private and public interests in this area of legal relations is currently predetermined by the state's obligation to ensure the economic sovereignty of the state, the defense of the country, the security of the state and is based on Part 3 of Article 55 of the Constitution of the Russian Federation. At the same time, the Constitutional Court of the Russian Federation has repeatedly stressed in its decisions that the rights to own, use and dispose of property, as well as the freedom of entrepreneurial activity, while not absolute, can be limited. At the same time, such restrictions must meet the requirements of justice, be adequate, proportionate and necessary to protect constitutionally significant values. The realization of economic freedom should not contradict the public interests of society and the state related to the preservation of economic sovereignty, ensuring the defense of the country and the security of the state, and the federal legislator, guided by the goals of protecting such interests, has the right to establish certain conditions for the exercise and restriction of economic rights (see, for example: ruling of the Constitutional Court of the Russian Federation dated 06/18/2020 No. 1106-O).

Considering the question of the ratio of private and public interest in the regulation of economic activity in strategic sectors of the economy, attention should be paid to the opinion of O.Y. Bakaeva and N.A. Pogodina, who note that the interests of the state expressed in its policy, as a rule, are conditioned by the interests of citizens and their associations; the variety of interrelations between the state and the individual predetermine and the diversity of the correlation of their interests; their optimal ratio is possible with respect for each other's interests, with their mutual responsibility and only in a state with highly developed democratic institutions, a stable economy, and an established political system. ^{[2, p. 36]}

At the same time, the opinion of I.I. Shuvalov seems justified, noting that, depending on a number of circumstances, one or another interest may prevail, while during the socio-economic crisis, in order to ensure private interests in the legal regulation of entrepreneurial activity, it is the public legal foundations that should be strengthened, and the restrictions imposed are due to the need to protect public interests., which ultimately provides a private interest. ^{[7, p. 27, 29]}

It is obvious that in the current economic and political conditions, public interest in matters of foreign participation in the economy is becoming so significant that in order to achieve its balance with private interest, it is necessary to introduce strict and non-alternative state intervention, expressed in the legal regulation measures outlined above. The priority of public interest here lies in the fact that it is, and above all, based on the measures necessary and sufficient to satisfy the public interest, the state determines the nature and degree of restriction of the economic freedom of the carriers of private interest.

At the same time, by satisfying the public interest, which aims to ensure national economic stability and security of the state, ultimately ensures the satisfaction of such other interests and needs of an indefinite range of subjects that are part of society and the state, which cannot be satisfied only in conditions of financial stability of the state, its military and economic security.

According to V.F. Yakovlev, public interests are not so much the interests of the state as the aggregate interests of the citizens of this state. ^{[9, p. 167]} In this regard, it also seems that the measures taken by the state are motivated by the need to eliminate conditions and factors that pose a threat to the vital interests of the individual, society, and the state in order to organize the stable functioning of the economic system of the Russian Federation in order to ensure the common interests of the people.

With this in mind, the fairness of the restrictions imposed by the state on foreign participation in strategic sectors of the economy seems constitutionally justified, while the priority of public interest over private is necessarily due to current economic and political factors, since such a priority will most effectively meet the needs of citizens in an appropriate level of state protection of their security interests.