Important changes in licensing regulations for engineering surveys, design and construction works were introduced by Federal Law No 148-FZ dated July 22, 2008 on “Amendments to the Russian Town-Planning Code and some legislative acts of the Russian Federation”.

As of January 1, 2010, licensing of engineering survey, design and construction activities, including developer (“zakazchik-zastroishchik”) functions will be completely abolished. Developers, engineers, designers and contractors will be allowed to continue such construction related activities under an SRO (self-regulating organization) mandate.

To explain what this means to organizations operating in the Russian Federation, an SRO mandate is a document issued by the SRO to a legal entity/individual entrepreneur in the form of a permit for a particular type or types of works (such as engineering surveys, design and construction). It is nevertheless worth noting that state regulation in the construction industry will continue by means of: the approval of design documentation by state expert assessment, technical requirements, the supervision of construction and related activities and state supervision of the SRO’s activities.

The failure to comply with the new requirements will result in an administrative fine or suspension of business for a certain period. The specifics are as follows:

– No more licenses are to be issued as of January 1, 2009 and licensing of construction related activities will be abolished from January 1, 2010.
– During the transition period (January 1, 2009 – January 1, 2010) licensed companies are allowed to carry out construction related activities either under an existing license or an SRO mandate.
– Licensing of construction related activities will be completely abolished from January 1, 2010. Thereafter, SRO certification in the form of an SRO mandate will be required to perform such activities. It is worth noting that a draft law proposing to prohibit the extension of the term of existing licenses has been passed by the RF State Duma in the first reading recently.
– Each engineering survey, design and construction (including developer functions) activities company will require an SRO mandate to be able to perform the works the SRO regulates from January 1, 2010.
– After January 1, 2010, conducting construction related activities without an SRO mandate will be illegal and will lead to the imposition of administrative fines of approximately USD 1,500, or in certain cases suspension of business for 90 days.

Given the above, engineers, designers, contractors and developers should consider either the creation of a new SRO, or joining as a member an existing SRO and obtaining the SRO mandate before January 1, 2010.

Your views and comments on how you believe this is going to affect the construction market in Russia would be welcomed. I would also be interested to hear how similar developments in different jurisdictions have played out in those markets.

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One comment

  1. Useful to know the facts; however, in my opinion, the post fails to explain the novelty of SRO i.e. the fundamental difference between the licence that had to be obtained in the past for the type of construction/engineering activities and the new mandate. Would have been interesting to know what are the implied changes. It isn’t evident what are the new burdens the parties in construction project must comply with…what are the set requirements in categories that vary so drastically from the initial order making the fact so notable.

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