Russian Federation

Author(s)
Contributed by:

Pepeliaev Group 

 
Regulatory framework
Provide a brief summary of the regulatory framework surrounding the mining industry in this jurisdiction.

The Russian Constitution stipulates that the use of subsoil resources falls within the joint competence of federal and regional state authorities. However, in practice, legislation is mostly developed by the federal authorities. The key Russian laws related to mining activities are the following: 

  • Law “On Subsoil” dated February 21, 1992 (the “Subsoil Law”) 
  • Federal Law “On Precious Metals and Precious Stones” dated March 26, 1998 
  • Federal Law “On Production Sharing Agreements” dated December 30, 1995 
  • Federal Law “On the Procedure for Making Foreign Investments in Business Entities of Strategic Importance for the National Defense and Security of the Russian Federation” dated April 29, 2008 

Many procedural matters, including, for example, the procedure for the issuance of a subsoil license are regulated in different by-laws. The relevant acts typically include decrees of the Russian Government and orders of federal authorities.

 
What are the main authorities involved in regulating the mining industry in this jurisdiction?

The main regulatory authorities in the area of mining operations are the following: 

  • Ministry of Natural Resources and the Environment (Minprirody1) is a federal executive authority responsible for developing regulations on the study, use, renewal, and conservation of natural resources, including the subsoil, as well as for conducting environmental monitoring and exercising pollution control. 
  • Federal Agency for Subsoil Use (Rosnedra) is a federal executive authority responsible for conducting tenders and auctions for awarding certain subsoil licenses. It also can suspend, restrict, or terminate subsoil use rights under the Subsoil Law. 
  • Federal Supervisory Service for Nature Management (Rosprirodnadzor) is a federal executive authority exercising control and supervision of compliance with environmental protection requirements and the rational use of natural resources. It is authorized, inter alia, to conduct inspections of mining operations and to issue mandatory orders requiring the elimination of any violations of effective legislation. 
  • Federal Service for Ecological, Technological and Nuclear Supervision (Rostekhnadzor) is a federal executive authority which exercises control and supervision of compliance with industrial safety requirements in the mining sector. It is empowered to conduct inspections of mining operations and to issue mandatory orders that any violations be remedied. It is also responsible for issuing mining allotment acts that set boundaries of mining deposits, and for granting a number of operational licenses and permits required for mining operations. 
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The names of public regulatory authorities are commonly referred to using Russian abbreviations, which we state in brackets in this list after the English version of the official long name of each authority. We use the abbreviations to refer to the relevant bodies throughout the text below.

Exploration, exploitation, and production rights
What is the process for authorizing or obtaining a concession for mining activities?

To conduct mining activities, one must be issued with a license for the use of subsoil. The issued license certifies the right of its holder to use a subsoil plot within specific boundaries and over an established period in accordance with the purpose stated in the license, provided that its holder complies with the terms and conditions agreed in advance. The procedure for the issuance of different types of license depends on the particular type of license, namely: 

  • geological survey license (certifies the right to conduct searches and appraisal of mineral deposits); 
  • production license (certifies the right to explore and develop mineral deposits, as well as to process mining waste); 
  • combined license (includes several types of subsoil use: searches, exploration, and mining). 

Geological survey licenses are generally awarded by a decision of a special commission formed by Rosnedra (or its regional body). The holder of an exploration license may obtain a production license under a simplified procedure (i.e. without any tender or auction) when deposits are discovered.  

Production and combined licenses are awarded by way of either a tender or auction to be conducted by Rosnedra. The basic criteria for determining the winner of a tender is the scientific and technical level of its program aimed at geological survey and use of the subsoil, its contribution to the social and economic development of the region, the efficiency of measures aimed at the protection of the subsoil and the environment, etc. As opposed to a tender, the winner of an auction is the participant who offers the highest amount of one-time payment for the right to develop subsoil resources.  

For the purposes of the country's defense and state security, the Government of the Russian Federation may impose restrictions on the participation in certain auctions of legal entities with foreign investors among their members. 

 
Briefly describe the details required and process for an application for mining.

Application for geological survey (exploration) licenses 

A list of subsoil plots to be granted for a geological survey is prepared by Rosnedra based on proposals from its regional bodies and/or applications from business entities and is approved by Minprirody. To include a subsoil plot in the list in question, an application must be submitted to Rosnedra indicating the properties of the proposed subsoil plot. Having considered a relevant application, a Special Commission at Rosnedra may take a decision on whether or not to include the proposed subsoil plot in the list. 

Next, an application must be submitted for the right to use the subsoil plot for the purposes of geological survey, generally indicating: 

  • data concerning the applicant; 
  • data concerning the financial capabilities of the applicant necessary for the performance of works related to the intended use of the subsoil plot; 
  • documents confirming that the applicant or its contractors have the technological equipment and qualified specialists necessary for efficient and safe works on the subsoil plot; 
  • the applicant’s proposals on the terms of use of the subsoil, indicating the types, volumes, and timing of works. 

Application for production or combined licenses 

First, one of the following competent state authorities: 

  • the Government of the Russian Federation in relation to subsoil plots of the federal importance; 
  • a state authority of the relevant region of the Russian Federation in relation to subsoil plots of local importance;  
  • Rosnedra or its regional bodies in relation to other subsoil plots, 

publishes an announcement of the holding of a tender or auction for the right to use subsoil plots. The corresponding announcement must be placed on the official website of the competent authority in question at least 90 days before the date when a tender is to be held and at least 45 days before the date when an auction is to be held. To obtain a production or combined license for the use of the subsoil, one needs to submit to Rosnedra or its regional bodies an application for participation in a tender or auction indicating: 

  • data concerning the applicant; 
  • the intention to participate in a tender or auction for the right to use the subsoil plot in question; 
  • the purpose of the works on the subsoil plot, the name of the subsoil plot, and its location; 
  • details of the relevant state authority’s order for the holding of a tender or auction; 
  • the applicant’s obligation to unconditionally comply with the rules for participation in the tender or auction in accordance with the terms of the tender or auction; 
  • the applicant’s agreement with the procedure and conditions for holding a tender or auction posted on the official website. 

The overall timing for obtaining a geological survey, combined, or production license is not prescribed by law and may vary significantly depending on the circumstances.

 
What are the requirements for mining exploration?

In the course of mining exploration, a subsoil user is obliged to comply with numerous statutory regulations addressing environmental protection, industrial and fire safety, sanitary welfare, etc., and to ensure, inter alia: 

  • development, as well as compliance with the requirements of technical projects, plans, or development schemes for mining operations, and the prevention of excess losses of minerals (before the start of mining works the holder of a license is required to develop and obtain an approval from Rosnedra in relation of the project (design) documentation containing information on how the works are going to be managed); 
  • the maintenance of geological, survey, and other documentation in the process of all types of subsoil use; 
  • the regular submission of geological information about the subsoil to the competent authorities; 
  • the safety of works related to the use of the subsoil; 
  • compliance with the requirements for the rational use and protection of mineral resources, and for environmental protection; 
  • the bringing of land plots and other natural objects into a condition suitable for their further use if they have been damaged when a subsoil plot has been used; 
  • the safety of mine workings, boreholes, and other structures necessary for the use of the subsoil located within the boundaries of the subsoil plot provided; 
  • the fulfillment of the conditions specified in the license or production sharing agreement, including timely and correct payments for mining; 
  • special qualifications and experience confirmed by a state license (certificate, diploma) for carrying out the following types of activity: geological surveying, prospecting, exploration, various methods of mining, the construction and operation of underground structures, and other types of subsoil use. 
 
What are the requirements for mining exploitation/production?

For general requirements related to mining activities (including exploitation/production), please refer to the question above. 

 
Briefly describe the compensation for exploitation/production of mineral resources, if any.

Russian law provides for the following types of subsoil-use payments or fees: 

  • one-time payments for the use of subsurface resources upon the occurrence of certain events specified in the license (e.g. one-time payments paid when the boundaries of subsoil plots are changed); 
  • regular payments for the use of the subsoil; 
  • a fee for participation in a tender (auction); 
  • a specific tax on the production of mineral resources (to be paid in addition to other taxes such as profit tax, VAT, etc.). 
 
What is the process for the transfer of mining rights?

Under Russian laws, the rights granted pursuant to a subsoil license cannot be subleased, assigned, sold, or otherwise transferred except in the following limited circumstances: 

  • when a legal entity is reorganized by way of (1) a merger or consolidation with another legal entity; (2) the splitting off of another legal entity from the holder of the license, if the newly created legal entity intends to continue its mining activities; 
  • when a subsoil license is transferred from a parent company to its subsidiary and vice versa as well as if it is transferred between subsidiaries of the same parent company; 
  • when a new legal entity is founded by the holder of a license in order to continue activities on the relevant subsoil plot in accordance with the license that was granted; 
  • when property (a property complex) of a bankrupt enterprise that is a holder of a subsoil license is acquired under the procedure provided by the Federal Law “On Insolvency (Bankruptcy)”. 

Any such transfer of subsoil rights generally requires a special decision of Rosnedra taken further to an application from the interested party seeking the mining license, provided that the actual holder of the license will transfer to such interested party the assets necessary for the latter to carry out mining activities and will enter into an agreement for the corresponding transfer. 

 
Environmental and safety concerns
How is mining in specially protected areas addressed?

Generally, mining in various types of specially protected areas (e.g. state nature reserves, natural parks, natural sanctuaries) is not allowed. 

 
What are the general considerations regarding mining and environmental matters?

The main federal legislation related to environmental protection includes the Federal Law “On Environmental Protection” dated 10 January 2002 (the “Environmental Protection Law”). Recently, certain amendments were made to the Environmental Protection Law in order to provide differentiated measures of state environmental regulation applicable to business entities, depending on the degree of environmental hazard inherent in their activities.  

The applicable requirements in the field of environmental protection differ depending on the category of the facility operated with an adverse environmental impact (an “AEI Facility”). Such category is to be assigned to any given facility by way of state registration.  

Many mining production facilities are assigned to either category I or category II of an AEI Facility (facilities with a significant adverse environmental impact or facilities with a moderate adverse environmental impact, respectively). 

Activities that may have an adverse impact on the environment (including mining operations) may give rise to: 

  • a requirement to regularly submit a declaration of the adverse environmental impact and other environmental reporting; 
  • a special permission to allow a specific negative impact on the environment (for example, air pollution or water pollution); 
  • a restriction on the amount of the permitted negative impact on the environment and pollution; 
  • pay-to-pollute payments; 
  • liability in the event of a violation of environmental requirements and of damage being caused to the environment. 

In addition, the Subsoil Law and the Environmental Protection Law, both require an environmental impact assessment to be carried out before a project that may have an impact on the environment (such as a mining project) is implemented. 

After a subsoil license expires or terminates, the subsoil license holder must provide conservation or liquidation arrangements with respect to its operations.

 
What, if any, environmental licensing is required for mining projects?

Legal entities and individual entrepreneurs engaged in economic and/or other activities at category I facilities must obtain a comprehensive environmental permit issued by Rosprirodnadzor. Such permit must contain: 

  • technological standards; 
  • standards for permissible emissions, discharges of highly toxic substances, substances with carcinogenic or mutagenic properties, and discharges of pollutants; 
  • standards of permissible physical effects; 
  • waste generation standards and limits on the disposal of waste; 
  • requirements for the treatment of production and consumption waste; 
  • an agreed program of industrial environmental control. 

Operators of other categories of facilities with an adverse environmental impact (i.e. facilities of categories II, III, and IV) are not obliged to obtain environmental permits. 

 
What, if any, safety policies does your jurisdiction impose regarding dams?

The key pieces of legislation governing the safety of dams are the Water Code of the Russian Federation and the Federal Law “On Safety of Hydro-Technical Installations” dated July 21, 1997. Pursuant to these laws the main safety policies regarding dams are the following: 

  • the Russian state registry of hydraulic structures is maintained; 
  • federal state supervision is exercised over the safety of dams; 
  • declarations of the safety of dams by their owners/operators must be drawn up and submitted; 
  • mandatory third party liability insurance must be put in place by the owner/operator of a dam; 
  • mandatory certification is required for those employees of an organization who are responsible for the design, construction, operation, maintenance, and ongoing repair of dams in order to confirm such employees’ knowledge of the mandatory requirements for ensuring the safety of hydra structures. 

An owner/operator of a dam that is in violation of the above requirements may face administrative or criminal liability depending on the type and gravity of the violation. 

 
Mining developments
What do you consider to be the top recent mining development(s) in this jurisdiction?

Innovative amendments in Russian mining law were introduced on December 2, 2019, by the adoption of Federal Law No. 396-FZ “On the making of amendments to the Law of the Russian Federation “On the Subsoil” in terms of improving the legal regulation of relations in the field of geological exploration, and exploration and production of hard-to-recover minerals”. The main idea of this legal development is to stimulate geological study, as well as the exploration and production of hard-to-recover minerals.  

The law establishes a new type of subsoil usage – for the purpose of the development of technologies for geological exploration and production of hard-to-recover minerals. For this type of subsoil use, provision is made for two procedures for the allocation of a subsoil plot depending on the category of the subsoil plot: (1) by way of a tender or (2) by a decision of the relevant commission within Rosnedra. The amendments provide for subsoil users to be exempt from the one-time payment for the use of the subsoil. The new policy aims to give a boost to exploration activities and the development of production technologies in relation to hard-to-recover minerals. 

 
What do you believe will be the top mining developments in the next few years in this jurisdiction?

Recently, the Government of the Russian Federation started preparing a bill allowing private companies to conduct mining activities in the continental shelf of the Russian Federation. At present, only companies controlled by the Russian Federation (e.g. where more than 50% of the issued capital is owned by the State) may conduct such mining activities. Although no official documents have yet been made publicly available, it is expected that the draft of the law will be presented to the legal community in the early part of 2020. 

 

This guide contains summaries of general principles of law. It is not a substitute for specific legal advice and should not be relied upon in relation to the application of the law or subject matter covered.

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