CHINESE FIRM BOUGHT A STRATEGIC COMPANY WITHOUT AN APPROVAL BY THE GOVERNMENT COMMISSION
FAS Presidium recognized this case on invalidating the deal as one of the best in 2018
FAS found that “Jinin” commercial-and economic company with limited liability (Heihe, China), which is a foreign investor, established control over “Amurmed” Ltd. in breach of No. 57-FZ Federal Law – without preapproval by the Government Commission for control over foreign investments in the Russian Federation.
“Amurmed” Ltd. is involved in geological surveying of federal subsoil area and is of strategic importance for national defence and state security.
FAS filed a claim to the Arbitration Court of the Amur region to invalidate the transaction and apply the consequences of its invalidity. The Court ruled that the deals had been concluded in breach of the law, but did not invalidate it.
The 6th Arbitration Appeal Court supported FAS appeal, reversed the ruling of the Court of First Instance, and pronounced the contract for buying-and-selling 100% share in the authorized capital of “Amurmed” Ltd. invalid.
Deputy Head of FAS Andrey Tsarikovskiy commented: “The case and Court decision are important for restoring public interests concerning national defence and state security, which were infringed by unfair foreign investor and restored through judicial proceedings. The case is also no less importance for establishing FAS law enforcement practice in control over foreign investments”.
“During judicial hearings, “Jinin” wished to avoid liability and return to this purpose a portion of shares of “Amurmed” Ltd. to a Russian citizen from whom the company had earlier bought the shares, thus allegedly eliminating adverse consequences of the committed violation. The Appeal Court, however, supported FAS position and recognized that the contract for buying-and-selling “Amurmed” Ltd. invalid. This circumstance incurs invalidity of all other transactions completed during the period when the Chinese firm unlawfully controlled the Russian strategic company”, informed Head of FAS Department for Control over Foreign Investments, Olesya Milchakova.
She added: “Therefore, FAS able to suppress the practice of unfair foreign investors evading liability under the Law on Foreign Investments”.