In 1996, on January 11, the Federal Law "On Production Sharing" began to operate in Russia. This normative act was the first adopted by the Federation Council after the parliamentary elections. The instructions contained in it should have a significant impact on commercial law in general and the prospects for the development of the domestic economy. Next, we consider the content of the normative act. 
Clarification of the concept
Some difficulties are caused by the perception of one of the terms that the law in question uses. A "production sharing agreement" is a literal translation of the concept of production sharing agreement. This term is used abroad to define the relations that are formed during the exploration and subsequent exploitation of deposits of certain minerals, with the participation of the state in the territory of which these measures are carried out, and investors, mainly foreign, who finance and carry out these works.
To determine a new form of regulation of economic legal relations, the legislator chose the terminology and legal constructions that are closest and most understandable to foreign entities. This approach reflects the desire to bring Russian regulations closer to the standards that are accepted in world practice.
general characteristics
The Law "On Production Sharing" is aimed at creating favorable conditions for the most effective attraction of foreign investors in the subsoil use sector. The regulatory act provides for certain state guarantees. They primarily apply to commercial law. This, in particular, is about ensuring the stability of the conditions of economic activity throughout the entire period of the contract. 
The essence of the normative act
A production sharing agreement is a specific contract. It is between foreign investors and the state. According to its terms, the Russian Federation grants for a specific period of time, on a reimbursable basis, the exclusive right to explore, search and develop certain mineral deposits and carry out work related thereto.
For its part, the investor assumes obligations that he will carry out these measures at his own risk and at his own expense. The production sharing agreement establishes all the conditions associated with subsoil use. These include, among others, the distribution of the produced raw materials between the parties to the contract.
Thus, we can conclude that the normative act regulates relations that are associated with the largest investments in the domestic economic sphere. The law provides for settlement with investors through part of the produced raw materials - compensatory products. From the moment the commencement of work on the industrial extraction of mineral materials, the investor receives the right to reimburse his own expenses incurred in the course of the activity. The balance after compensation is considered profitable. It, under the terms of the agreement, is subject to distribution between the parties. Along with this, a tax system is in place. When sharing production, the investor is obliged to make the corresponding deductions from his income. 
Investment forms
Over the past decades, there has been a fairly clear trend in the development of contract forms of foreign direct investment on an especially large scale. These include, in particular, investments such as contracts for:
- Management and service.
- Long-term target loan.
- Franchise.
- Leasing.
- Product Section.
In all these contracts, a common circumstance is that the investor’s profit will directly depend on the company's performance. In Russia today, a production sharing agreement and a leasing contract (on a financial lease) are used.
Main areas
At the present stage of economic development, Russia needs investments in the petrochemical, oil refining and mining industries, as well as construction. However, in the field of mining today there is no successful experience in applying the production sharing agreement. According to many experts, this model is unsuitable for this industry. The production sharing agreement works effectively in the oil industry because it is characterized by high profitability.
Specific features
Parties to production sharing agreements enter into relationships on certain conditions. Their specificity lies in the fact that the ability to use subsoil cannot be called ordinary, applicable to common things or goods. Considering the features of the production sharing agreement, one cannot but mention a qualitatively new base for building the economy of investment projects. So, in accordance with the terms of the contract, only a part of the produced raw materials becomes the property of the investor. The remainder goes to the state. One of the most important characteristics of such relations is the fact that the Law itself has departed from the principle of "separation." This means that uniform rules have been established for both foreign and national investments. 
Organization of work
All estimates, projects and programs, on the basis of which the investor will operate, must be approved in the manner prescribed by the agreement. All operations and activities under the contract are carried out in accordance with Russian legal acts, domestic standards and technical standards. International parameters must be approved by the authorities of the Russian Federation. The contract determines the procedure, terms and conditions for the return of territories that were transferred to the investor and in which he completed the search and exploration of mineral material. All data must be submitted for state examination. Organization of work also includes reporting and accounting (taxation). The production sharing agreement provides for the involvement of operators, which may be a legal entity. faces. At the same time, the investor bears property liability for the actions of these specialists as if it were their own.
Conditions
The law sets them clearly enough. In particular, the normative act stipulates conditions for:
- Duration of the contract.
- Subsoil use.
- The procedure for concluding a contract.
- Product Section.
- Carrying out work on the territory.
- Investor property rights.
- State guarantees.
- Providing control over the execution of the contract.
- The stability of the opportunities provided to the investor.
- Responsibility of the parties.
- Dispute Resolution Procedure.
Subjects
As mentioned above, a production sharing agreement is concluded between investors and the state (Russia in this case). On behalf of the latter may be the executive body of the entity in whose territory the territory provided for use is located, and the Government. The following may act as an investor:
- Foreign and Russian citizens.
- Legal entities and associations formed on the basis of an agreement on collective activity and not possessing the status of legal entities.persons making investments of borrowed or own borrowed funds in the exploration, search and extraction of mineral materials.
The specificity of the subject composition consists not only in the fact that contracts are concluded between fundamentally different parties: the state, on the one hand, and the private investor, on the other, which can serve not only as an organization, but also an individual. An agreement may also be signed with an association that does not act as a single legal entity. Interactions between the parties are regulated in Art. 3 chapters of the first.
Property rights
Article 9 of Chapter Two establishes that he owns a part of the product, which by agreement is considered the share of the investor. Mineral raw materials, which under the terms of the contract come into the ownership of this party, may be exported from the customs territory of the country in accordance with the established procedure. In this case, no restriction on the amount of export is determined. The exception is cases provided for in the Law on State Regulation of Foreign Trade.
The compensation and profitable part, which falls to the share of the investor, may be exported. The last one is the balance after income tax. Among the main benefits of the investor, which are provided by the Law, there is an unlimited opportunity to export the products that belong to him by ownership. It can go to the state from the moment the full reimbursement of the property is established, either from the day the contract expires, or from another other stipulated in the conditions.
Moreover, during the validity period of the agreement, the investor receives the exclusive right to use this property free of charge for the purpose of carrying out work under the contract. He bears the burden of its content, the risk of accidental damage or death. Upon the transfer of ownership from an investor to the state, this property becomes federal property. The procedure for subsequent use will be determined by the Government of the country.
In addition, all primary geophysical, geological and other information, information on its interpretation, derivative data, samples of minerals, including reservoir fluids, core samples obtained by the investor during the performance of the contract, belong to the state on the basis of ownership. The government provides the other party with certain guarantees. In particular, this concerns the protection of property and other rights that were acquired by the investor and exercised by him under the terms of the contract. It is not subject to the action of normative acts of executive bodies of federal significance, prescriptions and provisions of the subjects of the country, local self-government, if they limit its capabilities.
Contracting procedure
It is regulated by Art. Chapter 6, second. The conclusion of the agreement is carried out in accordance with Russian law. In this regard, the ability to apply other rules is missing. The contract is signed with the investor - the winner in a tender or auction on the terms of these events. The latter are binding on the parties. The development of the initial conditions for events is carried out on the basis of technical and economic calculations carried out in accordance with the instructions of the state bodies that are responsible for conducting auctions and tenders. All work related to preparation is financed at the expense of the share of funds received from the implementation of the contract. The law provides for the conclusion of agreements out of competition.
Draft contract
A sample agreement for each subsoil use object is prepared by the Commission. It is formed by the Government in coordination with the executive body of state power of the corresponding region of the country. The Commission includes representatives of these institutions, as well as consultants and experts.The investor is not included in the list of members.
When compiling a model agreement, the parties must provide that at least 70% of the technological equipment in value terms used for the extraction of mineral raw materials, their transportation, as well as processing (if this condition is present in the contract), or (and) acquired by the investor for work, must be produced in Russia. The effect of this requirement does not apply to the use of trunk pipeline facilities, the acquisition and construction of which are not expected under the terms of the contract. 
Distribution stages
Features and novelty, as well as directly the essence of the agreement, are concentrated in the used settlement mechanism, and more precisely in the section of products produced during activities under the contract. In Russia, the Indonesian model is used. This scheme is implemented in the vast majority of oil-producing states. The section deals with the profitable part of the product. It should be understood as raw materials minus the share of compensation and that which is used to pay tax for subsoil use. The procedure and conditions for the product separation process are established in the agreement of the investor with the state.
This event involves two stages. During the first, all manufactured products are divided into 2 parts. One of them is sent to the state in favor of payments for subsoil use. Another part relies on the investor. He, in turn, shares his own share in another 2: profitable and compensatory. Next, the second stage is performed. During it, profitable products are divided into gross investment in terms of revenue and state in profit.
This is done in the proportion determined by the contract. An investor pays taxes from his share. The remaining part is its net part in the income section. The state share in accordance with the terms of the production sharing contract is redistributed additionally between the budgets: the federal and the subject where the work was carried out. The proportions in the division of products in this case are established by separate agreements between the relevant state and local authorities. The investor is not involved in this process. 
Conclusion
Thanks to the adoption of the Law considered in the article, the contracts for the division of products under the Sakhalin projects (1 and 2) entered into force. They envisage the development of 5 large oil condensate deposits on the island shelf. According to technical and economic calculations, the estimated investment is about $ 27 billion. Net profit of Russia at the same time is 35-40 billion dollars. Along with this, the implementation of the agreement provides for the creation of new jobs, providing the Far Eastern District with its own oil products and fuel.
