Investigation on legal questions of the Russian forests utilization

The project "Investigation on legal questions of the Russian forests utilization" started in 2003 and will be continued in 2005. The focus of the project is the legal regulation of business and investments in the field of forestry in the Russian Federation. It concentrates on the development of the legal framework of the forest economy, which is the topic of general interest of Finnish forest industry, including both importers from Russia and investors in Russia.

The question of ownership of the forest has been defined as the most important issue for investigation. Directly connected with the ownership is the question about the right to use the forest. In the context of the forest economy, administrative regulation of the forests use is relevant. In the Russian case, all those three activities: ownership, economical utilization and administrative control, are concentrated in one hands: that of the state.

The most controversial elements of state forest administration are the mixture of public-law and private-law functions within one state authority. An obvious conflict of interest arises when legislative and administrative decisions on forests are taken by the agency that also has the authority to represent the interests of the owner of the state property.

Even if in the late 1990s the state monopoly over landownership was dissolved and private landownership instituted, the reform does not concern forest ownership. Government policy has aimed to introduce private ownership into the forest sector, and the central part of the ongoing discussion on the draft for the new Forest Code is the issue of private ownership of forest. At the moment it seems that the Russian government has to avoid the issue of development of forest land market in the new Forest Code by stating that this will be dealt with through separate legislation, similar to that connected with the agricultural land. The private ownership of land was accepted in the Law on the Transfer of Agricultural Land. Meanwhile the Land Code was passed by the State Duma without determination of private land ownership in the agricultural sector.

The second hot topic in the ongoing discussion on how to establish a viable forest economy sector in the Russian Federation is the issue of centralization versus decentralization. The present policy certainly requires a strong federal presence in the forest sector. Fresh amendments in the Forest Code from August 2004 have defined that the only state authority for actions in the name of the state as the owner of the forest is the Federal Forest Agency. The role of regional state organs as representatives of the state owner of forest has been eliminated.

The attitude of regional representatives and specialists to the strong centralisation in the forest economy will be studied in the project, e.g. during the next visit in Karelia in October 2004. The connection between the federal level and the regional level of the legislative powers and the state administration in the field of forest economy was discussed already during the first visit in Karelia in December 2003.

One of the methods for studying the Russian forest law is to analyse court practices in the field. This will be done based on the court decisions made in the Arbitration Court of the Republic of Karelia. The work has been started already in 2003. The second important method is to study business practices. The project has already started to analyse forest rent agreements, based on which Finnish companies or Russian firms owned by Finnish ones have leased forest parcels for utilisation.

The question of which state organs - federal, regional or municipal - have right to rent forest parcels, is very relevant, but not at all clear. Another unclear question is which forest land can be owned by private persons. This concerns e.g. agricultural land. Before the reform, all forests within the boundaries of collective farms were used by those farms. The workers of the former collective farms have got shares and they are owners of the agricultural land. However, it is not clear whether and to which extent agricultural land with forest can be owned by those workers or by enterprises created on the base of those shares, or whether these forests belong to the state. In any case, in practise even if the agricultural forest is owned by the state, it is still used by the people living in rural areas.

The purpose of the project is to clarify the question of ownership of forest in Russia. It is clear that within the project it is not possible to give a full answer on this question, due to difficulty of the issue and the continuously changing legislation and administrative organization. Nevertheless, some more understanding and information will be reported during the project and in the final report.

Text by:
Leena Lehtinen
Lex Leena Lehtinen Law Firm
e-mail: lexll@sci.fi

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