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Investment and Business Prospects of the Crimea

Date of publication: 3 April 2014

Mikhail Ilyashev, Attorney at Law, Managing Partner

Source: Investgazeta

1. Autonomous Crimea
Legal status of the unrecognized state actually puts an end to investment in the region. Theoretically, some Russian and Ukrainian investors may invest in Crimea, but only those who understand the situation and can make forecasts. However, high risks and inevitable legal collisions will reduce such investments to a minimum.

2. Crimea as part of Russia
If the Crimea accedes to Russia, the legislation of the Russian Federation will become effective on the peninsula, certainly with some exceptions and after a transition period.
Property and liabilities

Private property rights are very likely to remain effective. However, confusion and chaos are inevitable during transitional period. There is no procedure for transferring data from the Ukrainian to the Russian registry, and considering differences between the laws and regulations of two states it will be difficult to develop. Moreover the Ukrainian system of property rights registration is far ahead of the Russian one.

Network business
Availability of legal grounds improves prospects for network business, but in this case intermediate options are excluded. The companies willing to preserve their networks in the Crimea will be forced to register new legal entities in the agencies of the Russian Federation. The procedure may be complicated, but in some cases it makes sense.

From a legal viewpoint, investments in the Crimea will be much more protected if Russia finalizes annexation of the peninsula. You may argue about the sanctions, which may be applied to Russia and entail decrease of the state’s investment attractiveness, but considering the legal rules, the effective legislation and practices of its application are much more preferable for the investor than the laws of the unrecognized state.