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DeHeng Won the China Business Law Journal's Deals

of the Year Award for its Advice to China Gold

on Acquiring Controlling Rights of Russia's Strategic Resources

2019-2-01


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Recently, China Business Law Journal released its list of the "Deals of the Year 2018." Chen Wei, a member of the Management Committee of DeHeng Law Offices and the head of the cross-border committee, took the lead in representing China Gold to make a breakthrough in law — "completing the acquisition of controlling shares in strategic investment project for the first time through legislation in the field of solid mineral resources." This project won the Deal of the Year award.


Project Highlights


Faced with the obstacle of being explicitly prohibited by Russian law, this project navigated the restrictions of Russian law on the holding of Russia's strategic resources by foreign state-owned enterprises through the signing of an intergovernmental agreement. This blazed a trail in terms of cooperation on mining development among China, Russia and India under the framework of the BRICS, and realized the holding of Russia's strategic resources by China's state-owned enterprise for the first time.


The Russian Strategic Investment Law explicitly prohibits foreign state-owned enterprises from obtaining more than 25 percent of the shares or voting rights of strategic companies that use Russian underground resources through deals. At the beginning of the project, China Gold Project Team and the DeHeng lawyer team proposed several alternative solutions from a legal perspective, but in-depth discussion showed that even a complex architectural design was impossible to navigate the more rigorous restrictions of Russian Strategic Investment Law over state-owned enterprises (compared to private investors), and some alternatives might be difficult to meet compliance requirements of state-owned enterprises.


In the face of the almost impenetrable legal obstacles, the project teams of both DeHeng and China Gold carefully studied the relevant laws of Russia and conducted in-depth discussions on the Russian mining law and the Strategic Investment Law. They discovered that the strict control of Strategic Investment Law over foreign investment is contradictory to the willingness of China and Russia to foster cooperation and encourage investment. Finally, they creatively proposed the completion of the project deal through an intergovernmental agreement. DeHeng's lawyers assisted China Gold in communicating with the government. Finally, China and Russia negotiated the Agreement between the Government of the People's Republic of China and the Government of the Russian Federation on Cooperation to Implement the Project to Develop the Klyuchevskoye Gold Deposit. The agreement was approved by the Russian State Duma, the Federation Council and Russian President Vladimir Putin. Through the creation of a legal exception to the Russian Strategic Investment Law, this project was made possible under Russian law.


As the leading legal counsel for China Gold's acquisition deal, DeHeng fully considered the project's characteristics and client needs during the project to provide forward-looking insights, advice on adequate legal risk avoidance and creative legal barrier solution. DeHeng assisted this project in achieving breakthrough progress.


Team Members


The project is led by Chen Wei, a member of the Management Committee of DeHeng Law Offices and the head of the cross-border committee. The leading lawyers include partners, Wan Shiyao and Wang Yuan, and associate, She Wei. Assistant lawyers include: Dong Jie, Wu Ge, Diao Yongxin and Li Yiming.

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