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42JURIDICAL SCIENCES
ENSURING THE RULE OF LAW IN THE IMPLEMENTATION OF ENERY INVESTMENTS
Shpinev Iu.
PhD in Law, Senior Researcher in the Sector of Business and Corporate Law, Institute of State and Law of
the Russian Academy of Sciences, Moscow, Russian Federation
Abstract
This article examines the investment component of the Russian energy sector, as well as the role of prosecutor's supervision in the industry under consideration. The author concludes that despite one of the leading positions of our country in the global energy market, in the near future this industry may face a significant shortage of investment. This is due both to the general investment risks of the industry, and to the negative political and economic attitude of the leading world powers to our country. A significant factor that can negatively affect the investment attractiveness of the industry is the growing desire of developed countries to develop a "green economy". Under such circumstances, the role of the prosecutor's supervision of compliance with investment legislation in the economy is significantly increased, based on the positive experience of the prosecutor's supervision in the field of investment activities in the territories of advanced socio-economic development in the Far Eastern Federal District, including the creation of an interdepartmental working group on investor protection.
Keywords: economy, prosecutor's office, prosecutor's supervision, energy, investment, coal industry, oil industry.
Given the importance of the energy sector for the country's economy, the issues of legal regulation of legal relations in this area are still of significant interest and an area of active scientific research. Thus, the work of G. V. Vypkhanova and N. G. Zhavoronkova is devoted to organizational and legal issues of innovations in the energy sector [26], the issues of integration in the EAEU in the field of electric power industry are reflected in the work of L. I. Cherkesova [4], the article of O. V. Glikman is devoted to temporary applications of international treaties in the field of energy [7]. It should be noted that due to its relevance, the direction of «Energy Law» continues to be actively developed at the Institute of State and Law of the Russian Academy of Sciences [27].
As for the legal regulation of certain areas of the energy sector, we can note the work of M. S. Lizikova on the prospects of nuclear energy [12], as well as the article by Yu. Malyshev, A. Kovalchuk and A. Rozh-kov on the prospects of the coal industry [14]
The issues of legal regulation of investments in the energy sector, reflected in particular in the work of O. A. Inevatova and E. F. Matushkina, do not remain without the attention of scientists [9]
Given the importance of the activities of the Prosecutor's Office of the Russian Federation for the economy and security of the country, the issues of prosecutor's supervision and the activities of its structural divisions remain in the field of view of legal scholars. Thus, the actual problems in the activities of the environmental prosecutor's office are reflected in the work of E. A. Kunitsina [11], the activities of the military prosecutor's office are described in detail in two works by A. N. Sav-enkov [19; 20], and the work of A. D. Ilyakov is devoted to improving the prosecutor's supervision over the implementation of anti-corruption laws [8]
The article by N. D. Bout and M. N. Kuznetsov [1] is devoted to the issues of prosecutor's supervision of investment activities, but it focuses on the issues of
venture capital investments. As for the general issues of the prosecutor's office in the field of investment relations, and even more so in the field of energy, these topics in the last few years, despite the presence of many theoretical and practical issues, have not been the subject of legal research, which is why the study of this topic is quite relevant.
Currently, the Russian Federation occupies a prominent place in the global energy sector.
On the one hand, our country has the largest deposits of practically all hydrocarbon minerals, which makes it one of the world's largest suppliers of these resources, on the other hand, Russia is one of the recognized leaders in the production of nuclear energy, as well as in hydropower. At the same time, the economic and political changes taking place all over the world cannot but affect the energy sector of the world economy in general, and the Russian energy industry in particular.
In our country, the fuel and energy complex is one of the most important components of the economy, which not only plays a leading role in filling the domestic budget, but also contributes to the development of all other sectors of the economy, primarily industry, transport, and processing industries.
The most important goals facing the Russian energy sector are the further development of the foreign economic potential of the industry, and the support of the overall economic progress.
To meet these challenges in a changing economy, the energy sector must become sufficiently modified and overcome the challenges it faces. Among the primary tasks that need to be solved, we can distinguish:
- expanding the range of energy at the expense of non-carbon, and not only well-known well-developed, such as hydropower and nuclear power, but also other types, primarily renewable energy;
- gradual replacement of the export of hydrocarbons with the export of domestic goods and technologies, as well as the development of the export of energy services;
- expansion of the field of application of electric energy and energy obtained using natural gas;
- development of the digital direction in the economy of enterprises and management in all the main branches of the fuel and energy complex;
- creation and development of modern fuel and energy and petrochemical complexes in Eastern Siberia, the Far East and the Arctic;
- development of transport infrastructure, linking single complexes with terminals and ports, in order to develop the export component in the Asia-Pacific region, and the European part of Russia;
- reducing the negative impact on the environment as a result of the activities of the fuel and energy complex. reducing the negative impact of the fuel and energy complex industries.
Based on the above, the main objectives of the state policy of Russia in the field of energy can be noted:
- creating conditions for ensuring the economic security of Russia in general, and at the level of its subjects in particular;
- ensuring domestic demand in the electric power industry;
- gradual transition to less harmful to the environment and more resource-saving energy;
- increased competition in the domestic market;
- development of a sustainable attitude to the careful use of natural resources in the society;
- continuing work on energy efficiency;
- implementation of systematic work for the purpose of import substitution of equipment and technologies for the enterprises of the industry;
- increasing the quality of management decisions at the enterprises of the fuel and energy complex; maximizing the benefits of centralized energy supply systems [16].
Taking into account the above-mentioned goals, one of the most important areas of their implementation is the high-quality supply of all sectors of the economy with the necessary amount of energy, as well as the preservation and increase of the export component of the fuel and economic sector.
First of all, it is necessary to focus on the full provision of domestic demand, which should include, in addition to current consumption, long-term calculations, taking into account the national programs and other global projects outlined by President of the Russian Federation Vladimir Putin. This task should be solved taking into account the need for energy for the consumer and its availability on the one hand, and the highly efficient creation of energy products and related services. A necessary component of the process is the change and further development of the energy and related infrastructure, taking into account the social, economic and political changes taking place both in the energy sector and in the entire world economy.
An important issue on the way to achieving these goals is the gradual creation of a reliable technology industry based mainly on domestic developments and technologies. An important role in this issue should be played by the mechanism of import substitution, together with active investments in the latest digital technologies, including the use of artificial intelligence.
Energy plays a significant role in the economic development of any state, as well as in the system of its national security. The domestic fuel and energy complex includes the oil, gas, coal and peat industries, as well as electric power and heat supply. The share of investments in fixed assets of these enterprises is more than one third of all investments in fixed assets in Russia. Almost 40 percent of the federal budget consists of deductions made by enterprises of the fuel and energy complex. The share of employees employed at the enterprises of the complex is only 4 percent of the working-age population of Russia, while the export revenue of the enterprises of the fuel and energy complex is more than half of the total export revenue. Thus, the role of Russian energy in the economy is difficult to overestimate. Russia is one of the recognized favorites both in terms of hydrocarbon reserves and in terms of the sale of various energy resources on the foreign market. It should be noted that the Russian Federation is also one of the world leaders in the development and use of nuclear energy.
Recently, the fight for the environment and the prevention of climate change have become one of the most important issues on the international agenda. In this context, it is fair to note that Russia's fuel and energy balance is one of the most environmentally friendly among the other major world economies. More than half of all electrical energy is generated using natural gas, and more than a third is generated using nuclear and hydro power, as well as other renewable energy sources.
An important component of the fuel and energy complex is its infrastructure, which includes a single energy and gas supply system, as well as a system of oil trunk pipelines. The Russian oil trunk pipelines represent the longest system in the world for the transportation of oil products, running in almost all climatic zones. Thus, the Russian fuel and energy complex occupies one of the most important places among the energy industries of all countries.
At the same time, as for most world economies, the fuel and energy complex of the Russian Federation faces problems that are common to many countries. One of these challenges is the slowdown in the growth of the global economy, and as a result - a decrease in the demand for products of the fuel and energy complex, as a result of which prices for its products remain at an extremely low level. The decline in demand leads to an outflow of strategic investors, which, in turn, leads to a shortage of capital needed for innovative development and digital transformation of the industry.
An important problem, as already noted, is the strong dependence of Russian energy companies on imported components and technologies. Serious dependence on imported technologies is dangerous not only, and not so much by additional costs for its acquisition,
but also by the method of economic restraint of Russia's development that has gained momentum in recent years through the use of far-fetched political and economic sanctions that prohibit the supply of advanced technologies to our country, including those related to the fuel and energy complex.
The real challenge for the industry is the lack of serious long-term investors in the market, which is associated with several problems, one of which is the artificial containment of domestic tariffs in the energy sector. Another factor that has a significant impact on the lack of investment in the industry is the presence of certain legislative restrictions on attracting foreign investors to the fuel and energy complex of Russia on long-term terms. It is also possible to note the lack of development of the mechanism of venture investment, which, in our opinion, is more affected by the lack of funding for innovative developments, the introduction of digital technologies, including the use of artificial intelligence.
Another problem of the industry is the fact that in parallel with market relations in the industry, there are also non-market relations, including those related to cross-subsidies. As an important external factor that negatively affects the energy sector, we can note the unpredictability of the development of existing and the emergence of new factors that can significantly affect the energy industry. First of all, we are talking about possible scientific discoveries, international relations, global economic crises, etc.
Noting the possible problems associated with the spatial development of Russia, it is necessary to note the current and increasingly increasing imbalance between the centers of production and processing of energy, and primarily hydrocarbon resources, and the centers of their consumption. Indeed, the most developed industrial and socio-economic clusters are located mainly in the European part of Russia, while the production areas are gradually shifting to the regions of Eastern Siberia, the Far East and the Far North. The current situation creates a difficult situation in the field of rail transport, which is not the cheapest mode of transport.
The further development of global energy consumption directly depends on both population growth and the economic development of all different countries and regions. The biggest increase in energy consumption, according to economists, is expected in the near future in China and India. At the same time, it is predicted that the parts that make up the fuel and energy complexes will change: a systematic decline in coal and oil, and a gradual increase in the share of gas and other types of energy. Most experts in the field of energy tend to predict a significant increase in the share of electric energy. The share of electric energy in the final consumption will increase.
The most important direction of the state in the field of energy policy is the development of its spatial priorities.
Implementation of the spatial priorities of the state energy policy, which includes several aspects, one of which is the adoption of a coordinated decision, taking into account the general state tasks for the competent
placement of production forces, as well as the general further development of the territories of the Far North, the Far East and Eastern Siberia in order to ensure national security in full. An important point in this regard is the implementation of common decisions on economic and social integration within the Eurasian Economic Union [3], as well as participation in other international organizations and unions.
As noted above, one of the key issues for the further development of the entire energy industry is the problem of attracting investment.
At the same time, despite some common problems of attracting investment in the energy sector, in each individual direction of the energy complex there are features of attracting investment, which are closely related to the distinctive features of different areas of energy.
The difference between investment projects in the oil industry and other sectors is primarily that such projects significantly depend on the overall economic situation, which affects both the size of the industry's profit and its overall economic efficiency [2, 66]. The risks associated with such projects are characterized by increased ranges relative to other industries, which very often have a significant impact on the economic characteristics of investment transactions. The most serious risk of the industry under consideration is the financial risk associated with the lack of financing of the industry in the required amount. One of the reasons for this chronic underfunding is the acute shortage of foreign direct investment, as well as the incessant export of capital from the country. Due to the lack of investment, many promising projects in the oil industry are currently closed or suspended. So, due to the fact that the project was abandoned by foreign companies, Rosneft was forced to temporarily suspend the exploration of fields on the Arctic shelf.
A negative role in the oil sector is also played by politically motivated economic sanctions that prevent the arrival of foreign investors and innovative technologies, as well as our country's participation in OPEC+ [21].
According to the State Report of the Ministry of Natural Resources and Ecology of the Russian Federation, another serious problem of the development of the raw material base is the deterioration of its structure, which leads to an increase in the part of hard-to-recover oil, as well as an overall increase in its cost, while the share of such hard-to-recover oil will only increase in the future [24].
To successfully solve these problems, it is necessary to actively continue exploration in new regions in order to find new fields, and this, in turn, requires attracting significant additional investments, which are significantly lacking in the oil industry. In addition to the reasons described above for the lack of investment in the oil industry, there are other reasons. Thus, E. P. Menshikova identifies the following reasons why foreign investors are in no hurry to invest their capital in the domestic oil industry:
- poor enforcement of laws;
- inconsistency of tax legislation, creeping in on a lot of mandatory by-laws;
- Federal Law № 57-FZ of April 29, 2008 «On the Procedure for making Foreign Investments in Economic Companies of Strategic Importance for ensuring the Country's Defense and State Security» [6];
- lack of certainty in the distribution of powers between state authorities and local self-government bodies;
- the problem of financial and legal guarantees;
- low level of infrastructure;
- uncertainty in the eligibility to enter into investment contracts, etc. [15, 83].
The coal industry may find itself in an even more difficult economic situation in the coming years. In addition to the investment risks common to the energy industry, the decline in long-term investment in the coal industry may be caused by the activation of the "green economy" agenda, which is actively declared by economically developed countries. Moreover, the decline in coal consumption as a fuel, which is clearly seen in the developed countries of Western Europe, can have a negative impact, as well as a decrease in interest in this industry on the part of large global investors who have recently focused on ESG investments. Indeed, if earlier investments were focused solely on making a profit, then under the ESG investment policy, investments in coal mining enterprises may be considered environmentally and socially questionable, and investors will prefer not to participate in the development of the coal industry, as incompatible with environmental principles [23].
In connection with the above, it is quite important to study the foreign experience of the latest mechanisms for attracting investment, including in the energy sector, and each such innovation should be analyzed properly, in order to avoid situations in the 90s of the XX century, when not only international legal norms, but also international legal institutions penetrated into the domestic legal system [18, 167].
Thus, with an acute shortage of finance in the energy sector, it is extremely important to properly exercise prosecutor's supervision when investing in this sector of the economy.
The importance of prosecutor's supervision over the implementation of investment activities in the Far East, mainly related to investments in the energy sector, is regularly emphasized by the Prosecutor General of Russia, I. V. Krasnov [17]. At the same time, it seems that the prosecutor's supervision over the implementation of investment activities in the energy sector is, in principle, important in all regions of Russia.
First of all, this concerns the promising energy-producing regions of the Far East, Eastern Siberia and the Arctic, where it is planned to create large modern energy clusters that solve complex issues of production, processing and transportation of hydrocarbons and their processed products.
To create such clusters, in addition to attracting large general contracting organizations, a large number of smaller subcontractors will participate in investment legal relations, since such a system is designed to ensure well-coordinated work and obtain the necessary result [29].
Violation of its obligations on the part of investors in relation to the general contractor may lead to a further chain of violations of the rights of subcontractors, causing losses and general violation of construction deadlines in the territories of potential energy clusters, which, in turn, may have a negative impact on the entire energy industry.
According to the civil law doctrine, compensation for damages is a universal method of protecting civil rights [5, 38], and can be considered as a special mechanism of contractual relations between entrepreneurs [3]. At the same time, the current legislation provides for the possibility of exemption from obligations under certain circumstances [28, 55-56]. It should be noted that in legal relations for the compensation of damage caused by a crime, the presence of high-quality prosecutor's supervision over the activities of interrogators and investigators is of particular importance [10].
All violations in investment legal relations in the energy sector can be divided into two types-these are violations of the current legislation by economic entities, and violations committed by state bodies and municipal authorities.
The main violations on the part of corporations in the field of investment relations in the energy sector include violation of the terms stipulated in investment contracts, as well as improper quality of work.
As for violations of investment legislation by state bodies, these include:
- violation of deadlines for making changes to various regulations;
- violations in the provision of public services in the field of urban development;
- shortcomings of strategic planning;
- requesting excessive documentation that is not provided for by law from entrepreneurs;
- various bureaucratic barriers in the provision of land plots;
- lack of a proper state real estate cadastre;
- unjustified increase in the cost of equipment imported for investment purposes by the customs authorities [25].
In conclusion, it should be noted that in recent years, the Prosecutor General's Office has gained invaluable positive experience in the implementation of prosecutor's supervision in the field of investment activities in the territories of advanced socio-economic development in the Far Eastern Federal District, including the creation of an interdepartmental working group on investor protection [22], which can certainly be positively used to improve the investment attractiveness of the region.
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