Participation Of Foreign Companies In Russian Public Procurements

Features of Foreign Companies’ Participation in Procurements

Federal Law No. 44-FZ contains a number of exceptions and peculiarities regarding the participation of foreign participants in procurement:

• A participant in procurement cannot be a legal entity registered in a state or territory included in the list of offshore zones approved in accordance with subparagraph 1 of paragraph 3 of article 284 of the Tax Code of the Russian Federation.
• It is impossible for them to participate in tenders conducted exclusively for SMEs (small and medium-sized enterprises) and SONOs (socially oriented non-profit organizations) since the total share of participation of foreign legal entities should not exceed 49%.
• As part of the documents, a foreign participant provides a properly certified translation into Russian of documents on the state registration of a legal entity or individual entrepreneur in accordance with the legislation of the relevant state.
• Instead of the taxpayer identification number, the application specifies an equivalent to the TIN in accordance with the legislation of the respective foreign state.

In all other respects, the information and documents provided by foreign participants correspond to the general list.

Moreover, in commercial procurements, specific features and limitations may be established in the document regulating the procurement activities of a specific customer (procurement regulations).

Privileges for Eurasian Union Countries

The policy of the Russian Federation is aimed at developing the economy in conditions of fair competition. The development of international relations in the post-Soviet space is one of the main priorities of the Russian Federation, which is reflected in the provision of privileges for Belarus, Kazakhstan, Armenia, and Kyrgyzstan – the member states of the Eurasian Economic Union (EAEU).

Member countries of the EAEU must ensure mutual unhindered access for potential suppliers and suppliers from member states to participate in procurements conducted in electronic format, through the mutual recognition of electronic digital signatures made in accordance with the legislation of one member state by another member state (Section XXII of the EAEU Treaty, Article 88).

Preferences of 15% apply to suppliers from the EAEU for:

• Pharmaceuticals,
• Food products,
• Light industry products,
• Medical devices,
• Metal products and heavy machinery,
• Vegetables,
• Porcelain products,
• Fish products.

As a result, the cost of contracts that state enterprises conclude with foreign suppliers for a range of goods is 15% lower than with Russian, Kazakh, Kyrgyz, and Armenian companies.

The list of goods for which the mentioned foreign manufacturers can receive preferences is approved by Order of the Ministry of Economic Development of the Russian Federation (Ministry of Economic Development of Russia) dated March 25, 2014, No. 155 “On the conditions for admitting goods originating from foreign states for the purposes of procurement of goods, works, services for the needs of the state and municipalities.”

Thus, some foreign legal entities have a special status when participating in Russian tenders.

Restrictions for Foreign Companies

Participation in government procurement for foreign entities is effectively limited by issues related to the protection of the country’s defense capabilities and the domestic market of the Russian Federation, as expressed in Article 14, Clause 3 of Federal Law No. 44 and several Government Resolutions of the Russian Federation:

• Government Resolution No. 1224 of December 24, 2013, concerns the prohibition of foreign goods and services specialists in the defense sector;
• Government Resolution No. 656 of July 14, 2014, describes prohibitions on certain types of engineering products;
• Government Resolution No. 791 of August 11, 2014, pertains to light industry products;
• Government Resolution No. 1236 of November 16, 2015, prohibits the government procurement of foreign software;
• Government Resolution No. 102 of February 5, 2015, describes the application of measures provided for in Clause 3 of Article 14 to certain types of medical devices. Another Resolution, No. 1289 of November 30, 2015, describes the restrictions and conditions for admission applied to foreign-origin pharmaceuticals included in the list of essential medicines.

Legal entities registered in territories with preferential taxation and in offshore zones (Clause 1 of Article 284 of the Tax Code of the Russian Federation) are also subject to restrictions.

A further limitation will be auctions held only for small and medium-sized businesses and socially oriented non-profit organizations, as the total share of participation of foreign legal entities must not exceed 49%.

What is required to participate

1. Obtain an electronic signature: To do this, you will need to open a branch or representative office in the territory of the Russian Federation. Otherwise, you will not be able to participate in electronic procedures because you will simply be unable to obtain an electronic digital signature (EDS) and accredit yourself on electronic trading platforms (Federal Law “On Electronic Signature” dated April 6, 2011, No. 63-FZ).
2. Register in the Unified Information System (UIS): Registration is done using an electronic signature.
3. Open a special account in the bank: A special account is opened for participation in government procurement under Federal Law No. 44 and No. 223. It is needed to secure the bid: the supplier transfers the required amount to the special account, and the bank freezes it until the bid review is completed. When the tender is over, the funds will be unfrozen.
4. Choose procedures to participate in: The choice of government procurement is made on one of the 9 available platforms. Commercial procurements are often placed on company websites or platforms – aggregators of private procurements.

For detailed consultations, call us or leave a request on our website or request a call back. We will help your company become a participant in government procurement of the Russian Federation!