Influencing the Client Experience – Takeaways from LMA Capital's Half Day Program Part 1

The LMA Capital group brought together a record number of legal marketers in the D.C. area on Wednesday, October 29th to discuss how best to positively influence the client experience and foster lasting relationships between their firms and clients. Tara Weintritt, partner at Wicker Park Group, kicked off the program by setting the scene for attendees. In the past, law firms focused on touting their experience and success in handling particular matters. However, Tara elaborated that smart, capable, intelligent lawyers are baseline characteristics. Clients want to know how you can help them and what it’s like to work with you. After speaking with over 1,500 in-house counsel, the folks at Wicker Park Group have been able to identify seven major areas of concern that are consistently at the forefront of these decision-makers’ minds: adding value, credit, succession planning, billing and budgets, communication, managing expectations, and responsiveness. Tara provided direct quotes from actual client interviews as an introduction to attendees, but six thought leaders in the legal marketing industry gave in-depth (but brief!) TED-style talks to really drill down to the heart of why these are concerns for clients, and what can be done to address these concerns.

Adding Value –  Creating a Culture of Strategic Business Intelligence

Gina Lynch, of Paul, Weiss, Rifkind, Wharton & Garrison, kicked off the first TED talk. Clients want to know how you can add value to the relationship that does not show up on the billing report. This is where competitive intelligence teams are valuable in influencing the client experience. Firms must go above and beyond the requisite skills required for establishing the business relationship, which are thorough writing and analysis skills. The firm counterpart must demonstrate that he or she can understand the complex research.  CI teams must fully understand the work the client does. Ms. Lynch elaborated, “they need to be able to talk like your client, act like your client”. It not enough to present a report to the client. They want to know how this is relevant to them, what their competitors are doing and what their long-term strategy might be. Ms. Lynch also advocates for the CI team to be outside of the marketing department so it can be involved in all aspects of the firm’s relationship with the client: intake/pitch, research, knowledge management and retention. This circles back to the notion that it’s critical to understand the work the client does. Finally, the relationship should be client-focused! This is a no-brainer as members of the team should be living in the client’s world so it can play offense when a problem comes up. If a CI team is strategically informed, it can spot opportunities for growth (or damage control) when a new situation arises.

Credit and Succession Planning – Creating Strong Client and Industry Teams for the Long Term

Ms. Weintritt, at the start, elaborated that a major concern clients have is not being involved in or more aware of transitions within the firm. Tara Derby, of Reed Smith LLP, in the next TED talk, discussed how to mitigate this concern, and ultimately develop a long-term, successful relationship with the client by creating strong client teams. A successful client team will be focused on leadership, collaboration, a proactive and intuitive approach, and strategic client engagement. There are two things that need to be accomplished in order to build a strong client team: 1) the right client relationship leader must be selected, and 2) he or she needs to work hand in hand with the key account manager, or client relationship driver. This leader needs to be organized, efficient, client-facing and engaging. It’s important that the correct leader and team be in place or else service provided to the client will be only mediocre. Teams are only effective when there is a high level of collaboration across the firm, but people that are part of the team need to make a positive impact on the client. Strong client teams are proactive, not reactive, and to do so requires the team to know the client’s needs, culture, and ultimately how they think. Clients will feel understood and listened too because the relationship is 100% centered around their needs.

Billing and Budgets – Doing Your Homework: Strengthening and Growing Client Relationships Through Better Scoping, Budgeting and Risk Assessment

Since the major shift if the legal industry a few years ago, clients have been more cost conscious. As Melissa Prince, of Ballard Spahr, elaborated in her TED talk, the quality of the work matters less than the value the work provides the client. In terms of cost-effectiveness, clients want transparency in the budgeting process and improved budget forecasting, more than the lowest cost. In terms of scoping, it’s important to develop the client relationship to understand the client’s goals and business objects. This means speaking to the client about their needs before the scoping process. The key thing is to put everything in writing: matter phases, tasks, expected deliverables, proposed timelines and deadlines, responsible time keepers, etc. It’s also key to identify assumptions, that is, to identify what is and what is not going to be included in the matter. In terms of budgeting, use historic financial data to identify ways to improve efficiency. The budget should also be documented in writing as specifically as possible. It should include metrics such as hours work, type of work, who will be completing the task, identifies different hourly rates, and outlines low and high estimates, as well as start and end dates. To preserve a positive client relationship, any overages that arise should be communicated as early as possible. Properly managing their expectations for the scope and budget of the representation will help improve the firm’s efficiency, but also deepen their relationship with the client.

Stay tuned for part 2 of LMA Capital’s Half Day Program.

Article By Nicole Cudiamat Minnis
The National Law Review / The National Law Forum LLC

California Political Contribution Case That 19 Law Professors Missed

Earlier this week, I wrote about an amicus curiae brief submitted by 19 law school professors Friedrichs v. Cal. Teachers Ass’n, a case now pending before the United States Supreme Court.  In particular, I questioned whether these academics properly described the holding Finley v. Superior Court, 80 Cal. App. 4th 1152 (2000).  The professors claimed that the case represented a “rare example” of a court holding that the business judgment rule is a defense to an attack on a corporate contribution.  In fact, the reported holding in the case was that the business judgment rule was a defense to the decision of a special litigation committee.

The 19 law professors also incorrectly described the holding in another California case, Barnes v. State Farm Mut. Auto. Ins. Co., 16 Cal. App. 4th 365 (1993) (“claim by policyholder of mutual insurance company seeking to stop insurer from engaging in political activities dismissed because the decision was protected by the business judgment rule . . .”).  Although the Court of Appeal did invoke the business judgment rule in Barnes, it did so in the context of the policyholder’s separate claim that the company was maintaining too large a surplus.  The policyholder’s challenge to political expenditures was made on constitutional grounds and the Court of Appeal’s analysis of that claim did not involve the business judgment rule.

Even though the law professors erroneously cited Finley and Barnes, I do believe that courts should, and do, apply the business judgment rule to director decisions to make political and other contributions.  In fact, the professors overlooked one California case in which the court expressly deferred to the business judgment of the directors. Marsili v. Pacific Gas & Elec. Co., 51 Cal. App. 3d 313 (1975) was a derivative suit challenging the propriety of a political contribution.  Here’s what the Court of Appeal had to say:

Neither the court nor minority shareholders can substitute their judgment for that of the corporation “where its board has acted in good faith and used its best business judgment in behalf of the corporation.”

Quoting Olson v. Basin Oil Co., (1955) 136 Cal.App.2d 543, 559-560 (1955).

Article By Keith Paul Bishop of Allen Matkins Leck Gamble Mallory & Natsis LLP

© 2010-2015 Allen Matkins Leck Gamble Mallory & Natsis LLP

December Visa Bulletin Shows Little Movement But Contains Projections for Future Movement

The Department of State’s (“DOS”) December 2015 Visa Bulletin showed minor movements in the employment-based visa categories.  The most significant movement was in the Indian EB-2 category which advanced  by 10 months to June 1, 2007.  All other employment-based categories showed slow advances by few weeks, except for Mainland China EB-3 and Other Worker categories that advanced by 10 weeks to April 15, 2012, and by 12 weeks to August 1, 2006, respectively.  There was no movement in the Dates for Filing in the employment-based categories.

The December Visa Bulletin contained the following additional information:

  1. The Bulletin advised about the upcoming scheduled expiration of the non-minister special immigrant program and the immigrant investor pilot program (“EB-5 Visas”) on December 11, 2015, unless Congress acts to extended these programs.

  1. The Bulletin contained a prognosis of visa movement in the coming months.  For the employment-based visa categories, possible movements are as follows:

  1. EB-2 China:  Little or no movement

  2. EB-2 India:   Up to eight months

  3. EB-3 China:  Rapid forward movement with possible “corrective” action as early as April, 2016

  4. EB-3 India:  Up to three weeks

  5. EB-3 Philippines:  Four to six weeks

  6. EB-5 China:  Slow forward movement

  1. New 9 FAM-e.  The Visa Bulletin announced that on November 18, 2015, the printed Volume 9 of the Foreign Affairs Manual will be replaced by the 9 FAM-e and as of that date the e-version will become the authoritative source for visa guidance.  The new e-version overhauls language and organization of Volume 9 of the FAM, but does not alter the substance of the old printed version.

Final Action Dates for Employment-Based Preference Cases

december visa bulletin

Dates for Filing of Employment-Based Visa Applications 

december visa bulletin

Article By Shaoul Aslan of Greenberg Traurig, LLP
©2015 Greenberg Traurig, LLP. All rights reserved.

Ford UAW Workers Defy Logic Of Ricky Bobby With New Tentative Agreement

If you ain’t first, you’re last. Not so, say the Ford UAW workers whose bargaining committee recently reached a new tentative agreement with Ford. While Ford was the last to reach a tentative agreement with the UAW, if the membership ratifies the tentative agreement, the UAW workers at Ford stand to receive a better overall deal than their counterparts at Fiat Chrysler and GM. Highlights of the tentative agreement with Ford include:

  • Investment of $9 billion in the U.S. by Ford over the life of the agreement;

  • $8,500 ratification bonus along with a $1,500 profit-sharing prepayment;

  • Entry level employees can progress to the Tier 1 wage rates within 8 years; and

  • $70,000 retirement incentive for eligible employees.

As with the ratification process for Fiat Chrysler and GM, the UAW membership at Ford will now be asked to vote in the coming days to approve the tentative agreement. The fact that the Ford tentative agreement is already better than the tentative agreements with Fiat Chrysler and GM should aid in the ratification process. Additionally, the UAW has already seen firsthand what works and what does not when it comes to seeking ratification of a tentative agreement in the current automotive climate.

While the bargaining process at Ford seems to be headed in the right direction, GM is still waiting to announce the ratification of its tentative agreement with the UAW. Despite a majority of the hourly production workers supporting the tentative agreement, a majority of the skilled-trades workers voted “no.” Based on the UAW’s constitution, the UAW is required to meet with the skilled-trades members to hear their complaints. Those meetings began this week. We will have to wait and see if the UAW attempts to go back to the bargaining table based on the issues raised by the skilled-trades workers.

Article By Michael W. Groebe of Foley & Lardner LLP

© 2015 Foley & Lardner LLP

Branding Challenges: Law Firm vs. Individual Attorneys

As a legal marketer, the challenge of marketing your law firm versus individual attorneys is an ongoing struggle. We have all been in a meeting with a firm’s “rainmaker” who wants to place an ad or produce a handout that doesn’t look like the other materials the firm has produced. Instead, he wants his piece to be different and to “stand out” from the law firm’s brand.

As a marketer, this goes against all we know about brand consistency, including the use of a firm’s logo, fonts, colors and the overall messaging of the law firm.

Which Brand Comes First?

The issues related to law firm brands versus attorney brands parallel the age-old question: “Which came first: the chicken or the egg?” After all, a law firm cannot exist without attorneys. The fact is, most firms started out with one or two attorneys who had a growing reputation that the firm was built on. As more attorneys were added, the reputation of those attorneys enabled it to continue to grow. However, without a solid brand for the firm, relying on the reputations of the firm’s founders can damage an individual attorney’s ability to attract larger clients with needs that span practice areas.

The reality is that both the firm and its attorneys need to have a symbiotic relationship that balances the individual attorney’s brand and the overall firm brand. Both the marketing professional and the attorney need to relax their egos some and come to an agreeable understanding. Some issues can be averted with pre-planning and tweaking of the firm’s brand guidelines and marketing materials to allow for more flexibility while still maintaining a degree of consistency.

Balancing Brands

Competition is fierce in today’s legal market, so it’s important to have a strong firmwide brand that represents the sum of all the law firm’s parts, including its reputation in the marketplace, its core competencies, its key differentiators, and the experience of its attorneys and the support staff that keep all the wheels in motion. But what room is left to insert visual elements that represent the brand of an individual attorney?

Some brand guidelines are overly rigid, making it impossible to balance the firm’s brand with an attorney’s brand. If this is your case, consider taking a new look at how you can adjust these guidelines to allow for some additional flexibility.

Tweaking Your Guidelines

A firm’s identity is conveyed through its branding elements, such as:

  • The firm logo

  • Brand color

  • Type font

The use of these items is a must to convey the relationship between the attorney and the firm. They create a very strong brand consistency and should be used as much as possible to create an immediate recognition of your firm and brand message. But there can and should be flexibility in their use that includes relocating the standard placement of the logo or use of a secondary color.

More flexibility can also be given to components like photo imagery and other graphic elements These will allow for more personalization of the piece while maintaining consistency across the core brand elements.

Finally, another way to add flexibility to your branding is to create a standard footer on all ads or printed materials that allow for greater personalization across the rest of the collateral.

Adding Flexibility to Your Website

The law firm’s website is an integral marketing and branding tool. It also should be flexible enough to allow attorneys and practice areas to promote themselves in a way that makes sense for their particular markets.

Can attorneys post a blog, upload video content or add photos that will market themselves or their practice areas without interfering with the law firm brand’s use across the site? If not, this is something that needs to be addressed the next time you go through a website revision.

Using Social Media for Your Personal Brand

If you’re looking to promote your personal brand, look no further than social media. Social media is the perfect brand builder for individual attorneys. Lawyers can share blog posts and post other relevant information pertinent to their practice areas.

Not all social channels may fit your personal brand, so enlist your firm’s marketing personnel to help you define what channels are the best fit for you. Remember to maintain consistency across all networks by using the same profile picture. In addition, some social channels work best if you post once or twice a week, while others may require more regular attention. And remember to know your firm’s guidelines as well as your respective state bar association’s rules on social media use. Some actions can be construed as “advertising” and thus are subject to association guidelines.

Law is a professional service. That means that a large part of the decision-making process that determines whether a client hires you or someone else is how much they connect with you as an individual. The way you shape this identity is by honing your personal brand. So attorneys and law firms need to take their brands seriously and figure out how to strike a balance between the firm’s image and that of its individual attorneys.

Article By Alan E. Singles of Jaffe

© Copyright 2008-2015, Jaffe Associates

In three weeks! Attend the 3rd Annual Bank & Capital Markets Tax Institute West – December 3-4 in San Diego

When: December 3-4, 2015
Where: The Westin San Diego, San Diego, California

Register today!

We are proud to announce that BTI West will be coming back for a third year! For 49 years the annual BTI East in Orlando has provided bank and tax professionals from financial institutions and accounting firms in-depth analysis and practical solutions to the most pressing issues facing the industry, and from now on professionals on the west coast can expect the same benefits on a regular basis.The tax landscape is continually changing; you need to know how these changes affect your organization and identify the most efficient and effective plan of action. At BTI West you will have access to the same exceptional content, networking opportunities and educational value that have made the annual BTI East the benchmark event for this industry.

In an industry that thrives on both coasts, we will continue to offer exceptional educational and networking opportunities to ALL of the hard-working banking and tax professionals across the country. Join us at the 2nd Annual Bank and Capital Markets Tax Institute WEST, where essential updates will be provided on key industry topics such as General Banking, Community Banking, GAAP, Tax and Regulatory Reporting, and much more.

The Bank Tax & Capital Markets Institute Conference – West will feature a full one-day program consisting of keynote presentation, deep-dive technical sessions, and peer exchange and networking time.

In three weeks! Attend the 3rd Annual Bank & Capital Markets Tax Institute West – December 3-4 in San Diego

When: December 3-4, 2015
Where: The Westin San Diego, San Diego, California

Register today!

We are proud to announce that BTI West will be coming back for a third year! For 49 years the annual BTI East in Orlando has provided bank and tax professionals from financial institutions and accounting firms in-depth analysis and practical solutions to the most pressing issues facing the industry, and from now on professionals on the west coast can expect the same benefits on a regular basis.The tax landscape is continually changing; you need to know how these changes affect your organization and identify the most efficient and effective plan of action. At BTI West you will have access to the same exceptional content, networking opportunities and educational value that have made the annual BTI East the benchmark event for this industry.

In an industry that thrives on both coasts, we will continue to offer exceptional educational and networking opportunities to ALL of the hard-working banking and tax professionals across the country. Join us at the 2nd Annual Bank and Capital Markets Tax Institute WEST, where essential updates will be provided on key industry topics such as General Banking, Community Banking, GAAP, Tax and Regulatory Reporting, and much more.

The Bank Tax & Capital Markets Institute Conference – West will feature a full one-day program consisting of keynote presentation, deep-dive technical sessions, and peer exchange and networking time.

Customs and Border Protection Announces Expansion of Global Entry to UK Citizens

On November 3, the US Customs and Border Protection (CBP) commissioner announced the expansion of Global Entry to UK citizens. Global Entry, a CBP Trusted Traveler program, allows for expedited clearance of preapproved, low-risk travelers. As an added benefit, Global Entry members are also eligible to participate in the TSA Pre✓ expedited screening program.

The registration process is quite straightforward. UK citizens will apply through the UK Home Office’s website and pay a £42 processing fee. Successful applicants will receive an access code to enter when applying for Global Entry through CBP’s Global Online Enrollment System. The nonrefundable application fee for a five-year Global Entry membership is $100, and applications must be made online. Once an application is approved, a CBP officer will conduct a scheduled interview with the applicant and make a final eligibility determination. Although no traveler is guaranteed expedited screening, this expansion should facilitate travel for low-risk travelers from the UK significantly.

Similarly, US citizens are eligible to apply for the UK’s trusted traveler program, Registered Traveller. Members enrolled in Registered Traveller may use e-gates at airports in the UK. The service costs £70 to apply and an additional £50 a year thereafter. If an application is unsuccessful, the applicant will receive £50 back. To qualify for Registered Traveller, a US citizen must make four trips to the UK per year.

Article By Eleanor Pelta, Eric S. Bord, A. James Vázquez-Azpiri, Lisa Stephanian Burton, Tracy Evlogidis & Roland C. Lechner of Morgan, Lewis & Bockius LLP

Copyright © 2015 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

E-Verify to Destroy Old Records

E-Verify LogoE-Verify has announced that effective Jan. 1, 2016, in compliance with the National Archives and Records Administration’s retention and disposal schedule, it will destroy all transaction records older than 10 years.  Thus, all transaction records created prior to Dec. 31, 2005 will be destroyed.  Further, E-Verify will delete, on an annual basis, all transaction records that are more than 10 years old.

E-Verify has created a new Historic Record Report that will include all transaction records over a 10-year period.  If you wish to get the Historic Record Report, it must be downloaded before Dec. 31, 2015.  To download the Report, please log into E-Verify where you will find instructions to download the Report.

It is always recommended as best practice to record the E-Verify case verification number on the related I-9 form.  It is now also recommended that employers also retain the Historic Records Report with the Forms I-9.

Article By Shaoul Aslan of Greenberg Traurig, LLP
©2015 Greenberg Traurig, LLP. All rights reserved.

Russia’s New Advanced Development Territories Law: Far East Focus

An initiative to spur investment in this underdeveloped region.

Amid the ongoing loud noise surrounding the situation in Ukraine (and in Syria) and the related sanctions and counter-sanctions, a new Russian development initiative seems to have slipped under the radar. But it is worthy of note—particularly for potential investors in Russia’s Far East. This has all the more potential importance in the context of Russia’s recent pronounced political and economic pivot toward Asia. The Law on Advanced Development Territories (the ADT Law, or the Law), enacted in December 2014 and entered into force in spring 2015 (and the related simultaneously adopted acts that make corresponding amendments to the Tax Code and some 20 other laws) set out the “rules of the road” for these ADTs.

Russian President Vladimir Putin and other top officials at the Eastern Economic Forum in Vladivostok in September spotlighted this ADT program prominently. A number of new projects were announced at that forum or earlier, and most recently at an international forum in Harbin, China.

In a separate related development, in July, a so-called “Free Port of Vladivostok” was established within Vladivostok city and a few neighboring municipalities – which provides benefits and incentives to investors similar to the ADT Law, and with an enhanced exemption regime for customs clearance and immigration. The fiscal benefits of the Vladivostok free port come into force in January 2016, but a major Korean conglomerate is reported to be eyeing this opportunity.

Background

The ADT regime is somewhat similar to Russia’s existing Special Economic Zones (SEZ), which came into being under the 2005 Law on SEZs and some earlier regulations. These programs have had only mixed success. But the central focus of the new ADT regime is different: while SEZs have been aimed primarily at spearheading various industries (such as innovative technologies, ports, or recreational complexes), the ADTs are to address the general unevenness in development across Russia’s vast territory by incentivizing investment in more depressed areas—starting with the underpopulated and relatively neglected Far East.

As initially drafted, the ADT Law was to be confined to the Far Eastern Federal District alone. This geographical limit no longer applies so generally under the Law as enacted. But for the first three years, under special transitional provisions, it will apply only in the Far East and in certain sole-core-employer cities “where the social and economic situation is particularly drastic.”

The Law further directs the government to appoint a special authorized body (AB) charged with various ADT supervisory and planning functions. So far only the new Ministry of Eastern Development (established in 2012) has been appointed as such an AB—for the Far Eastern Federal District. For all practical purposes the Law will apply essentially in the Far East, at least initially. The Ministry has already adopted various implementing regulations envisaged under the Law. Further, Deputy Prime Minister Yury Trutnev, who is also the president’s plenipotentiary in the Far Eastern Federal District, has pledged strong support for the ADT program alongside other measures for development of Russia’s Far East.

As of September, the government has already approved the establishment of nine ADTs, including Komsomolsk (in the Khabarovsky Krai), Khabarovsk (covering several districts within Khabarovsk City and elsewhere), Nadezhdinskaya (in the Primorsky Krai), and some others in Kamchatka, Yakutia, and Amurskaya Oblast. The first specific ADT projects announced at the Vladivostok Forum and on other occasions (taking into account the most recent Harbin EXPO) include the following:

  • Construction of a bitumen plant by a Chinese-owned Singapore company together with Russia’s Independent Petroleum Co. (NNK) in the Khabarovsk ADT
  • An Australian coal company’s proposed investment into the transport infrastructure of the Beringovsky ADT in Chukotka
  • Recreational infrastructure facilities (including a golf club) to be financed and constructed by a Japanese company in Vladivostok
  • A proposed major agricultural enterprise investment by Russian interests at Mikhailovsky ADT in Primorsky Krai (the precise location is not yet identified)
  • German investors’ readiness to provide some 20 billion rubles to the Kamchatka ADT
  • A planned 50 billion rubles investment for infrastructure development in the Primorsky ADT
  • A coal-loading terminal to be constructed by Sakhatrans in Khabarovsky Krai (estimated investment of 30 billion rubles)
  • A truck-building plant (and dealership and service centers) project to be undertaken together by Chinese Sinotruk and the Far-Eastern Road and Construction Company in the Komsomolsk ADT

Government Decree

Under the Law, an ADT is created by a government decree for a term of 70 years. Such decrees are based on a proposal by the Authorized Body. This proposal, in turn, is supposed to be based on preliminary agreements with one or more prospective investors into the planned ADT. A special federal government commission will also play a role in ADT selection and formation.

The relevant government decree will set out the main ADT parameters, including its territorial limits (no overlap with an SEZ is allowed), types of commercial activities eligible for benefits to ADT residents (in contrast to SEZs, there are no economic sector limits for such activities are established in the Law), minimum investment and technology requirements, and a few other aspects. These decrees presumably will take into account the preliminary agreements with prospective investors mentioned above.

Tripartite Agreement

After the base government decree is adopted, the AB (again, for practical purposes, this is the Ministry of Eastern Development for now) and the relevant regional and municipal authorities are to enter into a tri-partite agreement to regulate various obligations and procedures for the ADT in question. This includes the regional and municipal authorities’ obligations on transferring of land plots and facilities into ownership by or lease to the management company (see immediately below on this point) or granting the management company the authority to manage such land plots and facilities, financing and operation of the infrastructure facilities, the conditions for granting property and land tax holidays to ADT residents (see more on tax and other exemptions below), and other aspects.

Management Company

An important player in an ADT’s actual functioning is its management company (MC). Under the Law, an MC is a 100% federally owned joint stock company that is designated as such by the government. An MC will have a broad range of powers, authority, and functions for its ADT(s). For example, an MC will (itself or by delegation to a subsidiary) do the following:

  • Act as an infrastructure construction customer (in Russian, zastroischik)
  • Ensure or organize the functioning of the ADT infrastructure
  • Take ownership or lease of federally or municipally owned land plots, buildings, and various infrastructure facilities (on certain conditions)
  • Facilitate connection into the utilities networks for ADT residents and service providers
  • Draft proposals for relevant amendments to municipal and other zoning plans
  • Organize the construction of roads and installation of infrastructure facilities
  • Provide various services to ADT residents

The government has already appointed a joint stock company Korporatiya Razvitiya Dalnego Vostoka (in English, Far East Development Corp.) as such an MC—again, with respect to the whole Far East District.

ADT “Residents”

To become an ADT resident, a commercial company (or individual entrepreneur) needs to file an application with the MC that includes a business plan and proposal for the types of activities to be performed and the level of investments and then enter into an activities performance agreement with the MC reflecting the investment obligations as well as the MC’s obligations. The Ministry of Eastern Development in its capacity as AB has already approved a template of such agreement following the ADT Law guidelines. Per the Law, once an ADT is established and running, there are limits to the grounds for an MC to reject an application and refuse to enter into a contract with a potential resident. The main (and quite general) recognized ground is inconsistency between the applicant’s proposal and the ADT’s particular parameters. It remains to be seen how the activity agreements will be negotiated in practice, as more experience is gathered for substantial new proposed investments.

ADT residents will be incentivized by an array of fiscal and administrative measures, including the following:

  • Exemption from or reduction of taxes on corporate profit, mineral extraction, and property and land
  • Customs free zone (if approved by the decree enacting the ADT)
  • Reduction of Social Security payments
  • A system of special protections and guarantees regarding state supervision (only “joint inspections” by various authorities, to be conducted per a schedule approved by the AB, etc.)
  • Exemption from foreign employee quota (if approved by the ADT’s supervisory council)
  • Reduction of educational and medical care administrative burdens (including admission of foreign-trained doctors and use of best foreign educational methods)

Some of these incentives are fairly similar to those applied to SEZs, including tax and customs holidays and state-inspection limitations.

Conclusion

The new ADT Law appears to open real new investment opportunities, primarily in the Far East. Yet one should be mindful of various restrictions in using this Law’s benefits—including that the potential resident has to be registered within the ADT territory and, if it is a commercial company, it may not have branches or other subdivisions outside of the ADT  (sister companies are permitted). More preconditions apply to the associated tax benefits under the revised Tax Code. Time will tell how effective the ADT Law will be in attracting much-needed new investment to Russia’s Far East.

Article By Jonathan H. Hines & Alexander V. Marchenko of Morgan, Lewis & Bockius LLP
Copyright © 2015 by Morgan, Lewis & Bockius LLP. All Rights Reserved.