At this moment, for companies with Western participation, coordination of transactions with the subcommittee of the Government Commission for Control of Foreign Investments in the Russian Federation remains of great relevance. The subcommittee has the right to make decisions on the issuance by the Government Commission of permits for residents of the Russian Federation to carry out transactions with foreign persons from unfriendly countries, as well as currency transactions.

We would like to remind you that unfriendly countries, in accordance with the order of the Government of the Russian Federation dated 05.03.2022 No. 430-р, include, among others, Australia, Great Britain, Canada, the Republic of Korea, the USA, Ukraine, Switzerland, Japan and all member states of the European Union.

In particular, in the Decree of the President of the Russian Federation dated 08.09.2022 No. 618 restrictions were established for the execution of transactions that directly and/or indirectly entail the establishment, change or termination of the rights of ownership, use and/or disposal of shares in the authorized capital of limited liability companies or other rights that make it possible to determine the conditions for management of such companies. First of all, these are transactions for disposal of shares in the authorized capital of limited liability companies, which have become relevant due to the desire of a number of Western companies to temporarily or permanently leave the Russian market due to the political situation.

Such transactions can only be carried out on the basis of permits issued by the Government Commission for Control of Foreign Investments in the Russian Federation, which, if necessary, contain the conditions for carrying out these transactions. The procedure and criteria for issuing permits are constantly updated with a tendency to become stricter, which is aimed at complicating the exit of Western businesses from the Russian market and maintaining their presence in the Russian Federation.

In addition to the requirements for documents that must be drawn up and submitted for approval, from the end of 2022, in order to alienate the share of an “unfriendly” participant of a limited liability company, it is necessary to pay a voluntary contribution to the budget of the Russian Federation (see our previous review on changes in this area), as well as to carry out the transaction with a mandatory discount.

At the end of October 2024, the Ministry of Finance of Russia published an updated regulation (Extract from the minutes of the meeting of the subcommittee of the Government Commission for Control of Foreign Investments in the Russian Federation dated 15.10.2024 No. 268/1). The new procedure includes the following:

1. The amount of the voluntary contribution to be paid to the budget when Russian companies are disposed of by “unfriendly” participants has increased. Now it is 35% of the market value of the asset based on the results of its independent assessment (previously it was necessary to pay 15%).
   
   An installment plan was introduced for payment of the contribution. 25% of the asset value must now be transferred to the Russian Federation budget within a month from the date of the transaction, 5% within a year, and another 5% within two years from that date.
   
   
2. In addition, the size of the mandatory discount to the market value of the asset upon alienation of an LLC has been changed. Now it must be a minimum of 60%, whereas previously the company could be sold for 50% of its market value.

Also, if the market value of the alienated assets is more than 50 billion rubles, the consent of the President of the Russian Federation will be required to complete the transaction.

The new conditions should apply both to future applications for approval of transactions, and to those already submitted, but not considered by the Government Commission.

Other news includes amendments to the Decree of the President of the Russian Federation dated 04.05.2022 No. 254 regarding the payment of profit of Russian resident companies to their foreign participants.

Let us remind you that in order to pay “unfriendly” participants profit in an amount exceeding 10 million rubles per calendar month or the equivalent of this amount in foreign currency, it is necessary to follow the procedure established by the Decree of the President of the Russian Federation dated 05.03.2022 No. 95. This procedure involves opening a special account of type “C” in a Russian credit institution in the name of a foreign creditor, through which the corresponding settlements are made. At the same time, the Ministry of Finance of the Russian Federation was given the authority to determine a different procedure for payment of residents’ profits to foreign creditors, which meant the need to obtain permissions from the Ministry of Finance for this procedure.

From 09.09.2024, the authority to issue permits for the payment of dividends by Russian companies to persons from unfriendly countries was granted to the Government Commission for Control of Foreign Investments in the Russian Federation. Such permits may contain conditions for the payment of profits.

The Government of the Russian Federation will additionally develop and approve the procedure for issuing such permits by the Government Commission. After the adoption of the changes, the procedure and terms for approving the payment of dividends may become milder.

We will keep you updated on the news of the relevant regulation, and are also ready to provide legal support when interacting with authorized bodies on issues of approving transactions and paying dividends to “unfriendly” foreign persons.

We would like to draw your attention to the screening possibilities of foreign counterparties in the Republic of Kazakhstan.

To reduce risks and check the reliability, solvency and security of your foreign counterparty, you should take the following steps:

• Legal check;
• Financial check;
• Check valid licences, if applicable;
• Check other factors such as publicly available information / business reputation: customer reviews, relationships with partners or contractors.

As part of the legal review of an LLP (Limited Liability Partnership or “TOO”), which acts as a separate legal entity based on its own Charter, you should request the following legal documents:

• Charter;
• Memorandum of Association (however, the counterparty may refuse to provide this as the provisions may be confidential);
• Resolution/protocol on the appointment of the directors;
• State registration certificate – certificate of registration. What to check: Consistency of the information in the certificate with other incorporation documents;
• Business Identification Number (BIN) – a unique number created for a legal entity (branch and representative office) and self-employed persons;
• Registration number of the VAT payer’s certificate.

Also pay attention to the company’s legal address for local authorities. It must be specified in the Charter and other documents when registering the LLP and can be either a commercial premises or a private address (e.g. the founder’s flat).

There are following risk factors:

• “mass registration address”;
• mismatch between the legal and actual addresses (when submitting to the tax office), which is especially relevant for VAT payer counterparties.

The charter capital of an LLP must be at least 100 times the monthly calculate on index (MCI) at the time of submitting the formation documents for state registration. Fr om January 1, 2024, the MCI will be 3,692 tenge, i.e. the minimum capital must be 369,700 tenge (approx. RUB 73,000). The charter capital must be fully paid within one year from the date of registration. For small companies (up to 100 employees, income up to 300,000 MCI/year) there is no minimum capital (it can therefore be 0 tenge).

The executive body can be collective (directorate) or individual (director). An LLP can have several directors who act independently of each other (but only natural persons). 

In addition, we would like to draw your attention to the official regime of “suspension of activity” in the Republic of Kazakhstan (the official analogue of “sleep mode” in the Russian Federation). During suspension, a company cannot conduct any profitable activities, but it is not liquidated and can be reinstated. Information on companies whose activities have been suspended can be obtained from the website of the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan (SRC).

Further, in case the signatory of the contract is a director acting on the basis of the Charter, you should check the following aspects:

• Timeliness of the authorization (the data in the decision / protocol of appointment should coincide with the data in the state registers);
• Duration of the authorization;
• Existence of possible restrictions (e.g. transactions above a certain amount may require the approval of the participants, this may be specified in the Charter);
• Delimitation of powers if there are several directors.

If the signatory of the contract is acting on the basis of a power of attorney, be sure to request and scrutinize it for:

• The authority of the person issuing the power of attorney. If it is not signed by a director, but by another person based on the power of attorney with the right of overriding power of attorney, you should also request and check the original power of attorney;
• Description of the powers of the person acting on the basis of the power of attorney.

Wh ere to get data (open sources):

• Portal of the Bureau of National Statistics of the Agency for Strategic Planning and Reforms of the Republic Kazakhstan (RK).

Here you can find basic information about the company.

• Portal of the State Revenue Committee of the Ministry of Finance of the RK (www.kgd.gov.kz).

Here you can find:

• Details on suspension / non-suspension of activities;
• Information on the absence (presence) of tax arrears;
• Total amount of taxes paid;
• Presence of the counterparty in the List of unreliable taxpayers;
• Information about being / not being in the process of liquidation.

• Portal of the Supreme Court of the RK, Portal of the Ministry of Justice of the RK.

Here you can find the availability of open and past court cases.

• Public procurement portal.

Here you can see if the counterparty is on the list of unfair participants in public procurement.

• Portal of the Electronic Government of the Republic of Kazakhstan Egov.kz.

Here you can find:

• Information about the registered legal entity as of a given date;
• Details of the latest amendments to the constituent documents;
• Information about participation of the legal entity in other legal entities;
• Information on the presence of branches and representative offices of the legal entity;
• Information on the category of the subject of entrepreneurship;
• Data on encumbrances (seizure) on the legal entity’s share;
• Information on recognition of the legal entity as an inactive legal entity or involvement of its participants in inactive legal entities.

Unfortunately, as in many other jurisdictions, to obtain full data from public official sources, in most cases verification or authorization may be required, which requires a local phone number or IIN / BIN (analogue to the Russian TIN). In this regard, it may be necessary to engage a local partner to carry out a full-fledged verification.

For bigger or more significant deals, of course, the financial condition of the counterparty should be checked. For this purpose, it is necessary to request and analyze financial and tax statements for the last reporting periods:

• Balance sheet,
• Profit and Loss Statement,
• Cash flow statement.

Analyzing the financial statements will help to understand how successful and sustainable the company is, and to identify problems / risk factors.

We would also advise you to look at:

• review of financial ratios,
• analysis of current assets and total debt,
• profit and loss analysis,
• and get information about the bank details of the counterparty in advance – not all banks in Kazakhstan accept and send payments to Russia or do so with restrictions on the type of currency / banks from the Russian Federation.

We will be happy to answer your questions and, if necessary, carry out a counterparty check at your request.

Exclusively for the Russian Business Guide magazine, Daria Pogodina, Managing Director of swilar presented a review article “International payment practices in the current environment”.

You can read the article online in Russian or English, or download two-language article in pdf-format by clicking the “Download en” button below the message.

We bring to your attention a review of the latest changes in the procedure for transactions with shares of OOOs with participants from unfriendly countries.

We would like to remind you that any transactions or groups of transactions with securities of Russian legal entities and/or shares constituting the share capital of Russian legal entities require obtaining permits from the Government Commission and performing a number of procedures (obtaining an independent assessment, establishing KPIs, etc.).

On 23.01.2024, Decree of the Government of the Russian Federation dated 22.01.2024 No. 40 “On amendments to the Decree of the Government of the Russian Federation dated 06.03.2022 No. 295” (hereinafter – the “Decree No. 40”) was published, which contains some clarifications of the procedure.

Decree No. 40 established the need to comply with certain previously formulated conditions for obtaining permits (see Extract from the decision of the subcommission dated 07.07.2023 No. 171/5) and made some additions.

In particular, it is now established at the regulatory level (clause 5 (1) of the Rules approved by the Decree of the Government of the Russian Federation dated 06.03.2022 No. 295, hereinafter – the “Rules”) that the following information must be additionally included in the application for a permit:

• report on an independent assessment of the market value of the relevant securities of Russian legal entities and/or shares constituting the share capital of Russian legal entities.

This assessment must be carried out by an appraiser engaged in private practice and included in the list of appraisers (appraisal organizations) recommended by the subcommission to carry out such an assessment, or by an appraiser who has entered into an employment contract with a legal entity included in such a list (paragraph 3 of clause 1 of Decree No. 40). The right to determine the specified list is granted to the subcommission (clause 8 of Decree No. 40).

• key performance indicators and their target values for buyers, proposed as conditions for the implementation of transactions or a group of transactions.

Decree No. 40 also details the procedure for monitoring the achievement of key performance indicators.

In particular, Decree No. 40 clarifies who will monitor the implementation of the set KPIs (performance indicators). Monitoring of achievement of indicators and their target values will be carried out by:

• federal executive authorities (in each case, the authority will be determined depending on the scope of activity of the legal entity or party to the transaction), and (or)
• the Central Bank of the Russian Federation,

on the basis of documents confirming the achievement of these indicators and their target values, submitted within the time limits established in the decisions of the subcommission (clause 8 of Decree No. 40).

Please note that, in accordance with the clause 5 (2) of the Rules, the requirement to include additional information in the application in the form of an independent assessment report, as well as KPIs, does not apply to transactions and operations:

• between persons included in the same group of persons in accordance with competition law,
• between persons associated with unfriendly countries.

Additionally, you can read our previously published reviews on the topic: on the procedure for issuing permits for transactions with shares in the share capital of OOOs, on the conditions for obtaining permits for transactions with shares in OOOs, as well as on changes to these conditions.

We will be happy to answer your questions!

Please note that all representative offices and branches of foreign companies are required to submit information about the members and beneficiaries of their parent structures to the tax authority by 28.03.2024.

According to the clause 3.2 of the article 23 of the Tax Code of the Russian Federation, foreign organizations (FO), as well as foreign structures without formation of a legal entity (FSWFLE), are obliged annually no later than March 28:

• to submit information about the members of such a FO (for FSWFLE – information about its founders, beneficiaries and managers) as of December 31 of the year preceding the year of submission of the specified information to the tax authority at the place of their registration, as well as
• to disclose the procedure for indirect participation (if any) of an individual or public company in the event that the share of their direct and/or indirect participation in the FO (FSWFLE) exceeds 5%.

This obligation does not apply to foreign companies that are registered with the Russian tax authorities only because of the provision of services in electronic form, as well as to subsidiaries (OOO) with foreign participation.

The form of communication about the members of a FO (for a FSWFLE – about its founders, beneficiaries and managers), the format of its submission in electronic form, as well as the procedure for filling in the form are approved by the Order of the Federal Tax Service of Russia dated 01.12.2021 No. ED-7-13/1046@.

Wrongful failure to submit (untimely submission) by a foreign organization (foreign structure without formation of a legal entity) of the above information to the tax authority entails a fine of 50,000 RUB (clause 2.1 of the article 129.1 of the Tax Code of the Russian Federation).

You can find information previously published by us on this topic here.

We will be happy to answer your questions and offer our assistance in creating the report.

Exclusively for the Russian Business Guide magazine, Daria Pogodina, Managing Director of swilar presented a review article “CHANGES IN 2024: Double Taxation Agreements (DTAs), Transfer Pricing, Offshoring and other news” providing detailed step-by-step analysis of the changes and their consequences.

You can read the article online in Russian or English, or download two-language article in pdf-format by clicking the “Download ru” button below the message.

Since Russia has been closely interacting with China in various fields over the past decades, many Russian representatives of small and medium-sized businesses are beginning to actively cooperate with Chinese partners. Russian businessmen who are not aware of the peculiarities of the Chinese mentality may encounter serious difficulties when signing contracts with Asian partners.

In this review we would like to draw your attention to the important features of concluding contracts between partners from Russia and China, which will help you to avoid a number of mistakes:

1. The only official language in China is Chinese. Thus, it is advisable to sign the text of the contract not in Russian and English, but in Russian and Chinese (the official languages of Russia and China).

If the Chinese partners do not insist on this, this can only mean that they do not intend to register the contract with the Chinese government authorities.

2. The name of a Chinese company registered in China can only be in Chinese, and the English name of the company is not legally valid to the full extent Chinese, as well as Russian, courts do not consider claims if the documents do not indicate the real (registered) company names.

3. It is necessary to check the registration of the Chinese company by requesting from the partner a certificate of registration of a legal entity, and also make sure that its representative has the appropriate authority.

It should be kept in mind that only the legal representative of the company has the right to sign a contract without a power of attorney. This may not always be the CEO of the company. The legal representative must be indicated in the certificate of registration of a legal entity.

If someone else signs the contract on the Chinese side, they are required to present a power of attorney. Therefore, when concluding a contract with a Chinese company, it is worth asking the future partner for a power of attorney confirming the authority of the signatory.

4. It is important to check the registration (legal status) of the Chinese seal.

Each Chinese company generally has one main seal, which is strictly controlled. However, to support various types of activities, companies often produce additional types of seals, including “contract seals.” Having produced such seals, Chinese companies often do not amend the registration documents accordingly or otherwise register their legal status.

In this regard, it is recommended to check whether the Chinese partner’s seal is registered by requesting a certificate from the State Commerce and Industry Administration of the government at the place of registration of the Chinese company. It is quite easy to obtain such a certificate, and falsifying it is dangerous for a Chinese partner.

5. To protect yourself, it is recommended to check the company’s website. The site must have a Chinese version, otherwise there is a high chance of encountering scammers. You should check the domain name registration date and ownership.

6. In order to avoid difficulties with the recognition and enforcement of decisions of Russian courts in China, it is recommended to introduce an arbitration clause and include in it one of the well-known institutional arbitration centers in China, for example, the China International Economic and Trade Arbitration Commission (CIETAC), the Beijing Arbitration Commission (BAC), etc.

On the one hand, this will require additional costs for contacting Chinese lawyers or Russian specialists with experience in representing the interests of parties in Chinese arbitration. On the other hand, this will simplify the issue of recognition and enforcement of the decision under the New York Convention of 1958.

If the Chinese partners do not want to resolve the dispute in arbitration due to the high cost of the procedure, then, in order to avoid difficulties with the recognition and execution of decisions of Russian courts in China, it is better to establish a clause for those disputes, for which this is possible, regarding their resolution in a Chinese state court, since Russian courts readily recognize decisions of Chinese courts.

On 28.11.2023 a so called “Big Tax Law” Federal Law No. 539-FZ of 27.11.2023 was published, which makes revolutionary changes in transfer pricing already fr om 01.01.2024.

We have compiled a detailed overview of the planned changes.

What will be changed:

1. A 15% withholding tax has been introduced on intragroup services provided by foreign related parties;
2. The list of related parties will expand;
3. More transactions will be recognized as controlled;
4. The amount of additional tax charges will increase;
5. Penalties for failure to comply with transfer pricing rules will increase;
6. The list of information submitted in transfer pricing reporting will be expanded;
7. New “safe” intervals for interest rates.

Below we will consider each of these significant changes separately.

    1. Withholding tax on services of foreign related parties

According to the new rules, a withholding tax of 15% will obligatory be withheld from the services of foreign related parties with residence in a country with which the DTT has been suspended.

For transactions with other countries, it is necessary to read the terms of the DTT agreement.

    2. Expansion of the list of related parties

The list of related parties will be added to:

• the related party and its controlled foreign company (CFC)
• CFC’s of the same related parties,  «sister’s» CFC
• foreign structures without the formation of a legal entity registered in an offshore jurisdiction (or if at least one of the participants in such a structure is registered in an offshore jurisdiction)

    3. Expansion of the definition of a controlled transaction

Transactions, one of the parties to which is a person whose place of registration (place of residence, place of tax residence) is a so-called offshore jurisdiction, are considered controlled.

Since the list of offshore jurisdictions was expanded from 01.07.2023, all international transactions with these jurisdictions, even with independent partners, will be considered controlled from 01.01.2024.

Reporting on such transactions must be submitted after exceeding the threshold of 120 million rubles per year.

At the same time, transactions will not be recognized as controlled if the following conditions are met:

• transactions were concluded before March 1, 2022
• the procedure for determining prices and (or) pricing methods (formulas) used in such transactions did not change after March 1, 2022,
• transactions are not recognized as controlled in accordance with transfer pricing legislation as of March 1, 2022.

    4. Possible additional tax charges

When a tax audit is carried out and it is discovered that prices other than market prices have been used for a controlled transaction, the tax base will be adjusted to the median value (and not to the maximum-minimum value of the corridor, as it was previously).

If tax authorities make a transfer pricing adjustment to the tax base in the Russian Federation for foreign trade transactions, these adjustments will be qualified as hidden dividends from sources in the Russian Federation (the so-called “secondary adjustment”), and will be subject to withholding tax at a rate of 15% (in addition to the penalty).

If the taxpayer independently carries out a transfer pricing adjustment before the start of control measures and the corresponding funds are transferred by a foreign partner to an account in a Russian bank, this transfer pricing adjustment would not qualified as hidden dividends.

Thus, the total possible amount of additional tax charges can be up to 35% of the price adjustment amount:

20% additional profit tax + 15% withholding tax

    5. New levels of penalties

For non-payment or incomplete payment of tax as a result of the application of prices that do not correspond to market prices:

• in relation to foreign trade transactions – 100% of the amount of unpaid tax on the profit of the foreign counterparty, equal to the amount of the transfer pricing adjustment (but not less than 500 000 rubles)
• in relation to domestic Russian transactions – 40% of the amount of unpaid tax (but not less than 30 000 rubles)

For failure to submit within the prescribed period or provision of a notification of controlled transactions containing misinformation – 100 000 rubles

For failure to submit documents within the prescribed period – documentation regarding a specific transaction (group of transactions), notification about participation in an international group of companies (for each fact of violation) – 500 000 rubles.

For failure to submit within the prescribed period or provision of documents containing misinformation – country report, global documentation, local documentation, accounting (financial) statements of a member of an international group of companies (for each fact of violation) – 1 000 000 rubles.

    6. More information to submission to tax authority

Expanded information required to be submitted to the Federal Tax Service from 01.01.2024

Notification of controlled transactions

(compulsory annually no later than 20.05.)

· terms of the transaction (details are established only for goods transactions)

· methods and sources of information used in the transfer pricing (previously not required to be disclosed)

· value creation chain for transactions in the field of foreign trade in raw materials (according to the list of the Ministry of Industry and Trade, clauses 5-6 of Article 105.14 of the Tax Code of the Russian Federation) only with related parties.

Documentation on transfer pricing
(upon request of the Federal Tax Service within 30 days)

· information on income and expenses, number of employees, amount of profit (loss), value of fixed assets and intangible assets of a foreign counterparty that is a party to a controlled transaction (including the attachment of relevant supporting documents)

· description of the terms of the transaction

· financial statements of a foreign counterparty.

The refusal of an independent counterparty to provide the requested information must be reported to the Federal Tax Service of Russia.

In transactions with related counterparties, the taxpayer does not have the right to refer to a refusal to disclose information.

Disclosure of information will require the taxpayer to collect a significant amount of additional information, as well as its systematization and storage in the accounting system.

      7. New “safe” interest intervals for loans

From 01.01.2024, the lower lim it of the basic “safe” intervals for loan transactions is reduced:

• for loans in RUB: min – 10% of the key rate of the Central Bank of the Russian Federation (but not less than 2%), max -150% of the key rate of the Central Bank of the Russian Federation;
• for loans in CHF and JPY: min – 1%, max – corresponding rate plus 5%;
• for loans in EUR, CNY, GBP and other currencies: min – 1%, max – corresponding rate plus 7%.

The first reporting period under the amended rules is 2024, notification of controlled transactions must be submitted before 20.05.2025, but an audit of contracts that are subject to changes and possible adjustments to international transactions must be carried out now.

There are many changes in transfer pricing, and the risks of additional charges for transfer pricing are increasing.

High-quality documentation remains a tool for protecting the taxpayer’s position regarding approaches and methods for justifying market prices

We have been working with transfer pricing and preparing documentation for our clients for many years.

We will gladly support you in preparing a reasoned tax position.

Since Russia has been closely interacting with China in various fields over the past decades, many Russian representatives of small and medium-sized businesses are beginning to actively cooperate with Chinese partners. Russian businessmen who are not aware of the peculiarities of the Chinese mentality may encounter serious difficulties when signing contracts with Asian partners.

In this review we would like to draw your attention to the important features of concluding contracts between partners from Russia and China, which will help you to avoid a number of mistakes:

1. The only official language in China is Chinese. Thus, it is advisable to sign the text of the contract not in Russian and English, but in Russian and Chinese (the official languages of Russia and China).

If the Chinese partners do not insist on this, this can only mean that they do not intend to register the contract with the Chinese government authorities.

2. The name of a Chinese company registered in China can only be in Chinese, and the English name of the company is not legally valid to the full extent Chinese, as well as Russian, courts do not consider claims if the documents do not indicate the real (registered) company names.

3. It is necessary to check the registration of the Chinese company by requesting from the partner a certificate of registration of a legal entity, and also make sure that its representative has the appropriate authority.

It should be kept in mind that only the legal representative of the company has the right to sign a contract without a power of attorney. This may not always be the CEO of the company. The legal representative must be indicated in the certificate of registration of a legal entity.

If someone else signs the contract on the Chinese side, they are required to present a power of attorney. Therefore, when concluding a contract with a Chinese company, it is worth asking the future partner for a power of attorney confirming the authority of the signatory.

4. It is important to check the registration (legal status) of the Chinese seal.

Each Chinese company generally has one main seal, which is strictly controlled. However, to support various types of activities, companies often produce additional types of seals, including “contract seals.” Having produced such seals, Chinese companies often do not amend the registration documents accordingly or otherwise register their legal status.

In this regard, it is recommended to check whether the Chinese partner’s seal is registered by requesting a certificate from the State Commerce and Industry Administration of the government at the place of registration of the Chinese company. It is quite easy to obtain such a certificate, and falsifying it is dangerous for a Chinese partner.

5. To protect yourself, it is recommended to check the company’s website. The site must have a Chinese version, otherwise there is a high chance of encountering scammers. You should check the domain name registration date and ownership.

6. In order to avoid difficulties with the recognition and enforcement of decisions of Russian courts in China, it is recommended to introduce an arbitration clause and include in it one of the well-known institutional arbitration centers in China, for example, the China International Economic and Trade Arbitration Commission (CIETAC), the Beijing Arbitration Commission (BAC), etc.

On the one hand, this will require additional costs for contacting Chinese lawyers or Russian specialists with experience in representing the interests of parties in Chinese arbitration. On the other hand, this will simplify the issue of recognition and enforcement of the decision under the New York Convention of 1958.

If the Chinese partners do not want to resolve the dispute in arbitration due to the high cost of the procedure, then, in order to avoid difficulties with the recognition and execution of decisions of Russian courts in China, it is better to establish a clause for those disputes, for which this is possible, regarding their resolution in a Chinese state court, since Russian courts readily recognize decisions of Chinese courts.