RESTRICTEDWORLD TRADE
ORGANIZATIONWT/ACC/RUS/30/Add.1
9 December 1998
(98-4943)
Working Party on the
Accession of the Russian FederationOriginal:  English
ACCESSION OF THE RUSSIAN FEDERATION
Additional Questions and Replies
Addendum
The Permanent Mission of the Russian Federation has submitted additional replies to
questions concerning services raised after the eighth meeting of the Working Party held on 29-
30 July 1998, with the request that they be circulated to members of the Working Party.
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ServicesQuestion 44.Can Russia provide an indication as to when its schedule of commitments for services will be
circulated to WTO Members?
Answer:
Pending.
Question 45.
In its replies to Questions 113, 117, and 118 of WT/ACC/RUS/13/Add.1.  Russia indicated that
market access in the banking sector provides fo r the possibility of reciprocal agreements with
other countries.
Could Russia, please, provide details?  We should like to emphasise that to meet WTO
requirements, Russia must give full consideration to the MFN principle, and not discriminate
between service suppliers from different countries.  We would expect any reciprocity
arrangements in banking to be removed.
Answer:
With respect to financial services Russia will be ready to consider the possibility of the MFN
principle implementation taking into account the commitments and practices of other WTO Members
as well as the provisions of the Annex on Article II (MFN) exemptions.WT/ACC/RUS/30/Add.1
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Question 46.
In its reply to Question 114 of WT/ACC/RUS/13/Add.1, Russia indicated that there is no plan
for a staged liberalization of the 12 per cent ceiling on foreign capital participation in the
banking sector, as the limit has not yet been reached .  This is not sufficient reason to retain the
ceiling, which violates market access rules, and could potentially benefit countries with which
Russia has reciprocity agreements.
When will Russia remove the ceiling?Answer:
Market access rules pursuant to the GATS Article XVI do not impede a possibility to
establish quota or ceilings for foreign service providers, subject to the relevant measure is scheduled.
Russia intends to include such a ceiling into its draft Schedule of Commitments.
Question 47.
Russia has indicated that in addition to the overall 12 per cent ceiling on foreign capital
participation in the Russian banking system, the following restrictions apply to newly
established lending institutions whose authorized capital consists of more than 50 per cent of the
funds contributed by non-residents:  (i) the authorized capital of such institutions must be equalto at least 10 billion Rubles;  and (ii) the contribution made to the authorized capital by at least
one participant must be equal to at least 10 billion Rubles (replies to Question 168 of
WT/ACC/RUS/9/Add.3 and to Question 115 of WT/ACC/RUS/13/Add.1).
Answer:
See the answer to question 48 herein.
Question 48.
Do domestic banking suppliers have to meet these criteria?  If not, this would be inconsistent
with the principle of national treatment under Article XVII of the GATS and we would request
their elimination.
Answer:
National treatment rules pursuant to the GATS Article XVII do not impede possible
exemptions from national treatment, provided that the relevant measure is scheduled.  Russia intends
to include all national treatment exemptions into its draft Schedule of Commitments.
Question 49.
Russia has indicated a number of areas in which payment and transfers are limited when
services are supplied by non-residents.  It will be necessary for Russia to demonstrate that
restrictions do not contravene the provisions of GATS Article XI.
- For example, no limitations are made on  current account currency transfers made by
residents (reply to Question 206 of WT/ACC/RUS/9/Add.2).  Could the implications of
the distinction between ‘resident’ and ‘non-resident’ be explained in more detail?  Can
foreign nationals be considered resident under any circumstances?WT/ACC/RUS/30/Add.1
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- Russia has indicated that hard currency settlements for “certain services” supplied by
non-resident individuals are prohibited without a Central Bank licence (reply to
Question 206 of WT/ACC/RUS/9/Add.2).  Could Russia please detail which services are
affected by this legislation, along with reasons why their supply requires a licence?
- Russia has indicated that Ruble proceeds from the supply by a non-resident individual
of services on the territory, of the Russian Federation must be entered on his or her
account with an authorized bank (reply to Question 206 of WT/ACC/RUS/9/Add.2).
Why is this the case?
- It is also prohibited to purchase foreign cu rrency, on the Russian domestic market using
funds from non-resident individuals’ rouble -denominated accounts (reply to Question
206 of WT/ACC/RUS/9/Add.2).  Could Russia please explain the reason for this
restriction?
- Are these regulations removed by the foreign trade legislation passed on
30 September 1997 which permits “any Russian individual” to transfer abroad “up toUS$2,000 daily without opening a current fore ign-currency account or obtaining any
additional permits” (WT/ACC/RUS/16/Rev.3)?  Does this mean that procedures for-
opening and maintenance of cu rrent foreign-currency denominated accounts by resident
no longer remain to be “settled” (as ment ioned in Russia’s reply to Question 214 of
WT/ACC/RUS/9/Add.2)?
- Foreign exchange settlements between non-residents and residents for services provided
by, the former, are carried out in acco rdance with the “licensing procedures”
established by the Central Bank (reply to Question 206 of WT/ACC/RUS/9/Add.2).  Are
there any other restrictions in  addition to those mentioned above?  (Russia’s reply to
Question 216 of WT/ACC/RUS/9/Add.2 mentions only the prohibition of the purchase of
foreign exchange on the domestic currency, market using funds from non-resident’s
rouble-denominated accounts noted above.)
Answer:
The concepts "resident" and "non-resident" are defined in paragraphs 5 and 6, Article 1 of
Russian Federation Law No. 3615-1 "On Currency  Regulation and Currency Control", dated
9 October 1992, which was submitted earlier.  Natural persons are considered residents, if they meet
the requirements of paragraph 5(a), Article 1 of the said Law.
Instruction No. 11 of the Central Bank of the Russian Federation mentioned in question 206
was invalidated pursuant to Directive No. 25-U of the Bank of Russia "On Amendments and
Additions to the Bank of Russia's Regulations No. 503 of 15 August 1997", dated 19 November 1997.
All payments in foreign currency for services purc hased by individuals within the territory of the
Russian Federation may be made only in the presence of a Central Bank licence which is issued on a
case-by-case basis to service providers and consumers irrespectively of the service sector or sub-sector.
Please specify the question.There currently exist no restrictions on purchases of foreign currency in the domestic
currency market of the Russian Federation using funds of non-resident individuals' rouble-
denominated accounts.WT/ACC/RUS/30/Add.1
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As concerns the first sentence, please specify what regulations and legislation are mentioned
in the first sentence.
As concerns the second sentence, no, it does not mean that.
Taking into account the reference to the reply to question 206, see the reply to paragraph 3 of
question 49.
Question 50.
Russia’s reply to Question 207 of WT/ACC/RUS/9 given in answer to Question 94 of
WT/ACC/RUS/9 indicates that there are no quantitative restrictions on transactions effected byresidents involving capital accounts.  However it has previously been indicated that foreign
exchange transfers from the Russian Federation by residents under transactions related to
movement of capital only be effected with the “permission of the Bank of Russia” (reply to
Question 214 of WT/ACC/RUS/9/Add.2), if the “required documents” have been submitted
(reply to Question 215 of WT/ACC/RUS/9/Add.2).
- Could Russia please indicate precisely what  restrictions (quantitative or other) apply to
restrictions and non-residents on transfers involving the capital account?
In addition, we seek clarification of any diffe rences in the way that residents and nonresidents
are treated.
- What is meant by the statement “non-residents enjoy more favourable treatment
compared with residents as far as curren cy transactions are concerned” (reply to
Question 215 of WT/ACC/RUS/9/Add.2)?  What additional benefits do non-residentsgain?
- Russia indicated that “Non-residents may transfer dividends and other income derived
from investment activities from the Russian Federation” (reply to Question 215 of
WT/ACC/RUS/9/Add.2).  Are there restrictions on other transfers of capital, either by
currency regulations or other means?
- We are uncertain what Russia intends by allowing non-residents the right to freely
transfer foreign exchange from the Russia n Federation “if these foreign exchange
valuables were previously transferred, import ed or sent into the Russian Federation”
(reply to Question 214 of WT/ACC/RUS/9/Add.2). Can Russia clarify what is intended?
Answer:
Remark to paragraph 1 of the question :  Mentioned answer to question 94 has no relation to
the subject of currency regulation.
Please specify the question.
Remark to paragraph 3 of the question:   With respect to the differences in residents and non-
residents treatment, see the legislative acts governing currency regulations which were provided
earlier.
Non-residents are not restricted in the use of  the foreign currency owned by them, while
residents are restricted.WT/ACC/RUS/30/Add.1
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Please specify what is meant by "transfers of capital" and "capital".
The purpose of this measure is to guarantee to non-resident holders of foreign currency assets
their rights of ownership towards such assets.
Question 51.
Are there plans to allow branches of foreig n insurance companies to  carry out insurance
business, rather than merely services ‘auxilia ry’ to insurance services?  Is such legislation
incorporated into the Law on Insurance vetoed by, the President and currently undergoing
review?  (replies to Question 107 of WT/ACC/RUS/13/Add.1 and Question 273 of
WT/ACC/RUS/9 refer).
Answer:
In accordance with currently applicable legislation, foreign legal entities and foreign
individuals may engage in insurance business in the Russian Federation only if they have obtained alicence for conducting insurance activities on Russian territory.  Such licences may only be granted to
a legal person registered in the Russian Federation.
Question 52.
Russia’s reply to Question 274 of WT/ACC/RUS/9 indicated that a 49 per cent limit applies to
foreign investors’ aggregate ownership interests in  the charter capital of joint-venture insurance
companies.  It also stated that foreign legal entities and individuals only leave the right to
participate in the establishment of limited liability or joint-stock companies.
- Does Russia have plans to eliminate these re strictions which are inconsistent with GATS
Article XVI(f)?
- Is the commitment to lift quantitative restrictions on foreign involvement in the charter
capital of insurance companies within 5 years (under the Partnership and Cooperation
Agreement (1994) between the Russian Federation and the European Communities) to
be extended to other countries on an MFN basis?
Answer:
The Russian Federation intends to implement a plan for gradual liberalization of access to the
national insurance market, taking into account GATS requirements.
Russia’s obligations under the Agreement on Partnership and Cooperation with the
European Communities concerning the maximum interest that may be held by foreign investors in the
charter capital of insurance organizations will be fulfilled as scheduled.
As concerns the extension of these obligations to other countries, this is a matter for
negotiations between such countries and the Russian Federation.
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