RESOLUTION OF INTER-PARLIAMENTARY ASSEMBLY OF EURASIAN ECONOMIC COMMUNITY

of May 26, 2006 No. 7-15

About Recommendations about harmonization of the legislation of state members of EurAsEC in the field of privatization (on the basis of the comparative and legal analysis of national legal systems)

The inter-parliamentary Assembly decides:

1. Approve the Recommendations about harmonization of the legislation of state members of EurAsEC provided by the Permanent commission of MPA on economic policy in the field of privatization (are applied), prepared on the basis of the comparative and legal analysis of national legal systems.

2. Submit Recommendations in parliaments, the Secretariat of Integration Committee of EurAsEC for use in work on harmonization of national legal systems and enhancement of the legal base of Community.

Appendix

to the Resolution MPA of EurAsEC of May 26, 2006 No. 7-15

Recommendations about harmonization of the legislation of state members of EurAsEC in the field of privatization (on the basis of the comparative and legal analysis of national legal systems)

These Recommendations determine the main directions of harmonization (rapprochement, unification) national legal systems in the field of regulation of privatization are formulated on the basis of the comparative and legal analysis of legislations taking into account international experience and the conventional international standards.

The carried-out comparative and legal analysis showed that in the states of Community the corresponding legal base is created and there are necessary constitutional and institutional bases for regulation of privatization of the state-owned and municipal property, and also conditions for further work on standardization of the legislation in the specified sphere are created.

I. For the purpose of development of provisions of the Priority directions of development of EurAsEC on 2003 - 2006 and the next years approved by the decision of Interstate Council of EurAsEC of February 9, 2004 No. 152, regarding transition to coordinated policy in the field of privatization it is advisable to draft the relevant Agreement directed to harmonization of procedure for participation of nonresidents in privatization, methods of privatization and evaluation procedure of cost of subjects to privatization with preserving withdrawals in certain sectors of economy.

In basis of such Agreement it is recommended to underlie the following principles:

- transparency of carrying out privatization transactions;

- maximization of privatization sales proceeds of state-owned property;

- ensuring social orientation of privatization;

- guarantee of protection of the property rights;

- guarantee of protection of public and state interests in case of privatization of the strategic companies, objects of cultural heritage, objects welfare, household and domestic.

The main criteria of carrying out state policy in the field of privatization shall become:

1. The differentiated approach to privatization of the companies depending on their liquidity.

The highly liquid companies are privatized proceeding from need of respect for balance between the amount of investments, the companies aimed at the development, and the size of the means arriving in the government budget from sale of the companies taking into account their real assessment as close as possible to world level.

Privatization of the low-liquid companies shall be performed generally by involvement of the effective owners who confirmed the readiness and capability to perform real investments and in full to fulfill investment and social obligations to the company and the state (preserving or additional creation of workplaces, the solution of ecological tasks). Sale of the low-liquid companies to such owners can be performed at minimum price on condition of the careful analysis of the provided business plan and implementation of measures of control of system of indicators of activities of the privatized company.

2. Expansion of tools of privatization in the way:

a) release of the derivative securities provided with state-owned property, allowing to place them in the foreign markets of securities;

b) sale of state-owned property by results of direct negotiations with investors, including in case of recognition of auction (tender) by cancelled. The price of this property when carrying out direct sale shall be established, proceeding from the market value determined by the independent appraiser;

c) sale of state-owned property with payment payment by installments under guarantees of banks.

3. Accounting of international experience of privatization, including on pre-sale preparation of the companies with involvement of the financial consultant, auditor, appraiser.

4. Privatization shall be considered as structural element of the single state policy on management of state-owned property directed to obtaining in the short-term, medium and long term of return from privatization in the form of expansion of taxable basis, creation of additional workplaces.

5. Strengthening of social orientation of privatization.

II. For the purpose of ensuring integrity of the legislation it is advisable to combine the regulations reflecting features of privatization of separate types of state-owned property within one law that in turn will allow to provide transparency of the legislation.

III. In questions of evaluation procedure of cost of subjects to privatization it is recommended to consider not only balance sheet data, but also also following factors:

- assessment of the company executed two independent from each other and from the company by the estimative companies;

- reference information about the cost of similar assets in the market if those are available;

- reference information about the cost of similar assets in the markets of neighboring countries.

IV. It is necessary to determine more accurately the list of obligations which the state can impose on owners of the privatized property. As shows experience of carrying out privatization in the countries of Central and Eastern Europe, and not implementable investment requirements, the requirement of jobs preservation and, often, profile of the company, especially production volume, etc. are inefficient. Therefore establishment of obligations regarding preserving appointment and profile of subject to privatization in case of realization of the companies, first of all, in the field of natural monopolies (the gas transmission sphere, the railroad, telecommunication, mining companies, power, water supply, heat supply, oil processing and oil transportation), and also objects which are historical and cultural value is reasonable.

V. Regulation of participation of nonresidents in privatization can be realized by establishment of restrictions on regulation of foreign participation in share capital of the privatized state companies; or it is necessary to concretize its maximum value; or to stipulate the level which is not granting to the nonresident the control rights. So, in Great Britain the share of foreign participation shall not exceed 15%, in France - 20% of voting shares of the privatized state companies.

Participation of foreign investors can make a reservation also such special conditions as preserving behind the state special or "golden share".

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