From 1 January 2009 the state system of licensing in construction, engineering surveys, preparation of design documentation, reconstruction and capital repair of capital structures was replaced with a self-regulating system. All construction, design and engineering companies starting from 1 January 2010 must join a self-regulated organization (SRO) which is a non-commercial organization.
Appropriate amendments were made to the Russian Town Planning Code, Federal Law No. 128-FZ dated 8 August 2001 "On Licensing of Some Types of Activity", (in terms of cancellation of the state licensing of these activities), Administrative Offence Code (in terms of liability for performing works without a SRO certificate of membership).
However, the legal status of a SRO as specific type of a non-commercial organization was not reflected in the Russian Civil Code, which is one of the primary sources of civil law.
It is planned to eliminate this gap by one of the many proposed amendments to the Russian Civil Code, contained in Bill No. 47538-6 to introduce a Federal Law "On Amending the First, Second, Third and Fourth parts of the Civil Code of the Russian Federation and Some Legislative Acts of the Russian Federation" ("the Draft Amendments"). The Draft Amendments passed its first reading by the State Duma on 27 April 2012.
The Draft Amendments introduces a definition of a self-regulated organization and determines the status of a SRO in the system of organizational and forms of legal entities. SROs will be classified as non-commercial corporations. This is an innovation of the Draft Amendments. Non-commercial corporations function on the basis of membership and resolve management issues on a collegial basis. In practice, the activity of most Russian SROs was formed with the same structure but the amendment will establish a legislative framework for it.
Furthermore, the Draft Amendments establishes the role of SROs as a successor to state regulation in the construction sector. Thus, the specific legal capacity of a legal entity, i.e. the capacity to perform certain types of activity, is determined only after issuance of a license (for licensed types of activity) or, for the construction sector, engineering, etc, a certificate of membership in a SRO.
Currently only administrative liability for non-compliance with regulations on mandatory membership of a SRO is formalized in legislation. Thus, the Administrative Offence Code provides for the imposition of an administrative fine and administrative suspension of activity for a period up to 90 days for performing works which influence the safety of capital structures, for failure to obtain a Certificate of Membership of the appropriate SRO.
However, the Draft Amendments introduce civil law consequences for violating the regulations on SRO membership. For example:
- The absence of the mandatory membership of a SRO, will be a ground for forced liquidation of a legal entity
- The Draft Amendments formalizes the capacity of a party to a contract to cancel its obligations and claim damages if a contractor does not have a mandatory certificate for works, the subject matter of the contract. This provision creates an effective instrument for investors and developers to protect their interests
Improvement of legislation on SRO is not limited to the Draft Amendments. At the moment there are two further draft laws to amend the Russian Town Planning Code in terms of regulating SRO activity, under consideration of the State Duma.
It is proposed to change the existing procedure for admission to membership in SRO, create a binding collegial procedure for making the relevant decisions, and oblige SROs to publish the minutes of meetings of their collegial bodies, Registers of members and numbers of the issued certificates. This will ensure transparency of their activity.
Another innovation of the draft laws is to vest the supervisory body for SROs with authority to apply to court and request an order to strike a SRO off the state register if it does not comply with the stipulated requirements for issuance of competency certificates. This issue was omitted when the self-regulating system was first introduced in the construction industry.
It is also proposed to clearly formalize the procedure for appealing against SRO decisions in relation to its members, to determine the procedural time limits, and clarify the categories of persons entitled to appeal. This initiative was introduced because at present there is only a statutory special simplified procedure for appealing against similar acts of state licensing bodies.
In conclusion, the SRO of regulation is evolving with the introduction of legislation to meet the demands of SROs' development and construction business development.
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