Federal law NO. 114-FZ of July 19, 1998 ON THE MILITARY-TECHNICAL COOPERATION

Federal law NO. 114-FZ of July 19, 1998 ON THE MILITARY-TECHNICAL COOPERATION OF THE RUSSIAN FEDERATION WITH FOREIGN STATES Adopted by the State Duma Approved by the Federation Council

July 3,1998 on July 9, 1998

Summary: This federal law regulates military-technical cooperation between Russian manufacturers and foreign states and specifies the managerial responsibilities of government and executive bodies. The law specifies the aims of military-technical cooperation from the state’s perspective, addressing economic interests but also specifying the restrictions on trade including observance of international treaties, domestic law, and domestic security interests. The means for ensuring a state monopoly for activities in this sphere are described, including the details of the export control structure. The president’s power to prohibit trade activity, the role of the government, and the right to pursue foreign trade activities are also discussed. The present Federal Law establishes the principles of the state policy in the sphere of military-technical cooperation of the Russian Federation with foreign states, the legal and organizational fundamentals for the activities of the bodies of state power of the Russian Federation, the state regulation and financing of works in the sphere of military-technical cooperation, sets out a procedure for the participation in the implementation of military-technical cooperation of developers, manufacturers of military-purpose products and other entities operating in the sphere of the militarytechnical cooperation and defines the rights thereof in this sphere. Article 1. Basic Terms

The following terms are used for the purposes of the present Federal Law: "military-technical cooperation" are the activities in the sphere of international relations relating to the exports and imports including delivery or purchase of militarypurpose products as well as to the manufacturing of military-purpose products; "military-purpose products" are weaponry, materiel, works, services, the results of intellectual activities including exclusive rights to them (intellectual property) and military-technical information; the following are deemed to be military-purpose products: "weaponry and materiel" are the complexes of various kinds of weapons and the combat support thereof including carriers, guidance, launch, control systems and other special technical means intended for equipping the armed forces, ammunition and components thereof, spare parts, instruments and components thereof, training weapons (mock-ups, training equipment, simulators of the various kinds of weaponry and materiel); communications systems and systems of controlling troops, weapons and materiel; explosives, explosion objects and devices, powder (excluding hunting powder), combat missile fuels, special-purpose materials and special equipment for the manufacture thereof; engineering structures, equipment for combat use of weaponry and materiel; special equipment and know-how for the manufacturing, repairing, upgrading and/or demolition (disposal) of weaponry and materiel; manufacturing, operating, repairing, upgrading and/or demolishing (disposing) facilities for weaponry and materiel; armed forces personnel support systems, special equipment and materials for the manufacturing thereof; collective and individual protection means against mass destruction weapons, means for preventing and treating the consequences of mass destruction weapon application; special logistic equipment, military uniforms and attributed parts;

technical documentation (regulatory technical, engineering, design, technological, operating, program, instructive/methodological) governing the creation, manufacturing, operation, combat use, upgrading, repair and demolition (disposal) of military-purpose products; scientific and technological (regulatory technical) documentation governing safety including environmental safety of the manufacturing of military-purpose products; safety standards for the human being and environment; the results of research and development works for the creation, upgrading and/or demolition (disposal) of weaponry and materiel; scientific and technological information on material carriers as well as inventions, useful models and industrial design and other results of intellectual activities having military, military-technical purpose; special software/mathematical support for automated systems intended for controlling troops, weapons and materials, military-purpose research and development works; training in the development, manufacturing, operation, combat use, repair, upgrading and maintenance of weaponry and materiel; the creation, additional equipment and upgrading of the facilities intended for the manufacturing, deployment, repair, operation and combat use and/or demolition (disposal) of weaponry and materiel as well as providing for the functioning of these facilities; training and educating of military and military-technical cadres of foreign states; the transfer (sales) of licenses, design, engineering and research and development documentation for the creation, manufacturing, upgrading, operation, combat use, repair and/or demolition (disposal) of weaponry and materiel and providing technical assistance in the organization of these works; conducting and/or taking part in research and development works intended for the creation, upgrading and/or demolition (disposal) of military-purpose products, means and techniques for protection against mass destruction and conventional weaponry; providing means of transportation including military ones for the delivery and

carriage of military-purpose products; the transfer of military-purpose products to foreign states under lease (leasing) or for the purpose of testing; conducting on the request of foreign states of exercises, shooting range exercises, weaponry and materiel testing on a testing ground in the Russian Federation; demonstration and exhibitions of military-purpose product prototypes on the territory of the Russian Federation and abroad; the services of investment, marketing, advertising and other nature in the sphere of military-technical cooperation; setting up organizations with foreign investments for the purpose of developing and manufacturing products, conducting works and providing services intended for military purposes; research and testing, certification, the prolongation of the operation term of weaponry and materiel, calibration against a primary standard of monitoring and metering instruments; the repair of weaponry and materiel; consultations on the issues of armed forces organization and buildup, the combat use of weaponry and materiel as well as on other military and military-technical matters; other activities in the sphere of military-technical cooperation as not being in conflict with the legislation of the Russian Federation; "the exports of military-purpose products" is the carriage of military-purpose products out of the territory of the Russian Federation; "the imports of military-purpose products" is the carriage of military-purpose products to the territory of the Russian Federation; "military-technical assistance" is providing military-purpose products to foreign states free of charge or on other privileged terms under the international obligations of the Russian Federation, that require payment out of the federal budget resources; "the entities engaged in military-technical cooperation" is Russian organizations that have obtained the right to pursue foreign trade activities in respect to military-

purpose products; "the manufacturers of military-purpose products" is Russian legal entities that have manufacturing facilities required to manufacture military-purpose products (perform military-purpose works, services) and that have obtained licenses for the pursuance of the kind of activities specified in the licenses; "the developers of military-purpose products" is Russian legal entities (scientific research organizations) carrying on the elaboration and upgrading weaponry and materiel prototypes, having appropriate scientific research personnel and experimental facilities required for such a purpose and having obtained licenses for the pursuance of the kinds of activities specified in the licenses; "the foreign entities engaged in military-technical cooperation" is foreign legal entities and natural persons having the right to implement military-technical cooperation under the legislation of their states. Article 2. Legal Regulation in the Sphere of Military-Technical Cooperation The military-technical cooperation of the Russian Federation with foreign states is governed by the present Federal Law, other federal laws, other regulatory legal acts of the Russian Federation as well as international treaties of the Russian Federation. All issues connected with the military-technical cooperation of the Russian Federation with foreign states are within the exclusive competence of the bodies of state power of the Russian Federation. Article 3. The Goals of the Military-Technical Cooperation of the Russian Federation with Foreign States The main goals of the military-technical cooperation of the Russian Federation with foreign states are as follows: strengthening the military and political position of the Russian Federation in the various regions of the world;

upkeeping the export potential of the Russian Federation on the necessary level in the sphere of conventional weaponry and materiel; developing scientific and technological as well as experimental base of the defense branches of the industry, their research and development institutions and organizations; obtaining foreign currency resources for state needs, development of military production, conversion, demolition (disposal) of weaponry and materiel and restructuring defense manufacturing enterprises; providing social protection for the personnel of the organizations developing and manufacturing weaponry, military and special materiel and articles. Article 4. The Principles of the State Policy in the Sphere of the Military-Technical Cooperation of the Russian Federation with Foreign States 1. The basic principles of the state policy in the pursuance of military-technical cooperation with foreign states are as follows: the priority of the interests of the Russian Federation in the pursuance of militarytechnical cooperation; state monopoly for activities in the sphere of military-technical cooperation; the observance of the international treaties on the non-proliferation of nuclear weapons, reduction of weapons and disarmament, prohibition and destruction of chemical, biological and other kinds of mass destruction weapons; the observance of the international obligations of the Russian Federation in the sphere of control over the exports or military-purpose products, dual-purpose goods and know-how; the state protection of the rights and lawful interests of the legal entities connected with the development, manufacturing and sales of military-purpose products; the state protectionism in the sphere of military-technical cooperation; the inadmissibility of a loss being inflicted to the defensive capability and security of the Russian Federation in the course of implementation of military-technical

cooperation; the safeguarding and maintaining of the political, economic and military interests of the Russian Federation; the observance of mutually beneficial military-political and economic interests in the sphere of military-technical cooperation with foreign states on the terms acceptable for the Russian Federation; providing equal conditions for participation in the implementation of militarytechnical cooperation to military-technical cooperation entities; the monitorability and accountability of the federal bodies of executive power and all the Russian legal entities taking part in military-technical cooperation. 2. The state monopoly for activities in the sphere of military-technical cooperation shall be ensured through: administering exclusive powers of the bodies of state power of the Russian Federation in the sphere of military-technical cooperation; introducing a permission procedure for the exports and imports of military-purpose products; regulating military-technical cooperation in accordance with the military and political as well as economic interests of the Russian Federation; pursuing a uniform state policy in the sphere of shaping up foreign trade prices for military-purpose products; providing budget financing for the exports and imports of military-purpose products carried on as the fulfillment of the international obligations of the Russian Federation. Article 5. The Methods of State Regulation and the Implementation of State Monopoly in the Sphere of Military-Technical Cooperation The basic methods of state regulation and the implementation of state monopoly in the sphere of military-technical cooperation are as follows: the methods being in compliance with the principles of state monopoly in the sphere of military-technical cooperation and based on the licensing of the

development, manufacturing of military-purpose products, setting out a procedure for the exports and imports, sales and/or purchases of military-purpose products, a permission procedure for activities in the sphere of military-economic cooperation, the legal and organizational regulation of the activities; an exports control system applicable in foreign trade activities in respect to military-purpose products as aimed at ensuring defense, security and economic stability of the Russian Federation, protecting its domestic market, maintaining and strengthening its political and strategic positions, observing the international obligations concerning the reduction and destruction of weapons as well as the nonproliferation of mass destruction weapons; the determination of a procedure for granting the right to pursue foreign economic activities in respect to military-purpose products to Russian organizations; the licensing of the imports and exports of military-purpose products; the prevention of the monopoly of a military-technical cooperation entity in the Russian Federation; the prevention of the participation of Russian organizations not holding the rights to pursue foreign trade activities in respect of military-purpose products in militarytechnical cooperation; the prevention of the competition of several Russian military-technical cooperation entities in foreign market by means of separating the spheres of activities thereof; the customs regulation of the imports and exports of military-purpose products including exports/imports transactions in the sphere of military-technical cooperation; the coordination of activities in the sphere of military-technical cooperation and proper monitoring of these activities by the bodies of state power of the Russian Federation. Article 6. Limitations on the Implementation of Military-Technical Cooperation of the Russian Federation with Foreign States 1. On the proposal of the Government of the Russian Federation the President of

the Russian Federation shall endorse a list of military-purpose products permitted to be transferred to foreign customers. The exports of military-purpose products not included in the said list may be effected exclusively pursuant to decisions of the President of the Russian Federation. 2. On the proposal of the Government of the Russian Federation the President of the Russian Federation shall endorse a list of the states to which it is permitted to transfer the military-purpose products specified in the list of military-purpose products permitted to be transferred to foreign customers. The transfer of specific kinds of military-purpose products to the specific states included in the said list may be limited by decisions of the President of the Russian Federation. The exports of military-purpose products to the states not included in the said list may be effected exclusively pursuant to decisions of the President of the Russian Federation. 3. Decisions of the President of the Russian Federation shall prohibit or limit the exports of military-purpose products to specific states for the purpose of ensuring the fulfillment of decisions of the Security Council of the United Nations Organization on the measures aimed at maintaining or restoring international peace and security as well as for the purpose of protecting the national interests of the Russian Federation. 4. Foreign trade activities in respect to military-purpose products are prohibited to the Russian organizations not holding in due course the right to pursue such activities as well as Russian natural persons. Article 7. State Control over the Implementation of Military-technical Cooperation 1. State control over activities in the sphere of military-technical cooperation shall be exercised by the bodies of state power of the Russian Federation within the competence thereof provided in the Constitution of the Russian Federation and federal laws for the purposes of ensuring the observance of the provisions of the present Federal Law.

2. State control shall be exercised in respect of: the compliance of the activities of the federal bodies of executive power in charge of the issues of the military-technical cooperation of the Russian Federation with foreign states and of the entities engaged in military-technical cooperation with the legislation of the Russian Federation, the goals and principles of the state policy of the Russian Federation in the sphere of military-technical cooperation; the effectiveness of the system of state regulation in the sphere of militarytechnical cooperation; the observance of the international obligations of the Russian Federation in the sphere of military-technical cooperation; the effectiveness of the use of the budget resources allocated to finance the military-technical cooperation of the Russian Federation with foreign states; the effectiveness of the use of federal property by the entities engaged in militarytechnical cooperation; the pricing for military-purpose exported products with due regard to the economic interests of the Russian Federation; the receipt, flow and use of the earnings from the exports of military-purpose products; the use of the regulatory legal acts governing military-technical cooperation. Article 8. The Military-Technical Accompaniment of the Deliveries of Military-Purpose Products For the purpose of preventing a loss being inflicted on the defensive capability of the Russian Federation the federal bodies of executive power shall perform the military-technical accompaniment of the deliveries of military-purpose products intended to be transferred to foreign customers. In the course of the military-technical accompaniment of the deliveries of militarypurpose products the federal bodies of executive power shall monitor the development, manufacturing and deliveries of military-purpose products in accordance with the procedure defined by the Government of the Russian Federation.

Article 9. The Powers of the President of the Russian Federation in the Sphere of Military-Technical Cooperation The President of the Russian Federation shall: carry on the leadership of the state policy in the sphere of the military-technical cooperation of the Russian Federation with foreign states; define in the annual address to the Federal Assembly the major guidelines for activities in the sphere of military-technical cooperation; make decisions on establishing military-technical cooperation with foreign states as well as decisions on the suspension, termination, and resumption of such cooperation; establish limitations and restrictions in the sphere of military-technical cooperation; designate the federal bodies of executive power in charge of coordinating, monitoring in the sphere of military-technical cooperation and resolving other tasks of the state regulation in this sphere as well as set up, if necessary, consultative bodies for the issues of military-technical cooperation; set out a procedure for implementing the military-technical cooperation of the Russian Federation with foreign states precluding the infliction of a loss on the defensive capability and security of the Russian Federation as well as unjustified interference of the state bodies in the foreign trade activities of the Russian entities engaged in military-technical cooperation whereby their competitive abilities in respect to foreign military-purpose product manufacturers might be limited; make decisions as to the setting up in due course of specialized federal state unitary enterprises base on the right of economic control which are acting as state intermediaries in the implementation of foreign trade activities in respect to militarypurpose products; establish a procedure for granting the right to pursue foreign economic activities in respect to military-purpose products to Russian organizations; define a procedure for the licensing in the Russian Federation of the imports and

exports of the military-purpose products of which the exports and imports are subject to control and are performed under a license. The said licensing procedure provides for applications being considered and decisions being made in respect to them within one month; make decision on the issue of providing military-technical aid to foreign states; make decisions on the issues concerning cooperation with foreign states in the sphere of military-purpose product development; make decision as to the transfer of licenses for the manufacturing of militarypurpose products to foreign customers; make other decisions within his competence. Article 10. The Powers of the Government of the Russian Federation in the Sphere of Military-Technical Cooperation The Government of the Russian Federation shall: ensure the implementation of the state policy in the sphere of the military-technical cooperation of the Russian Federation with foreign states and shall issue within its competence regulatory legal acts on the matters relating to the development, manufacturing, imports and exports of military-purpose products; conclude international treaties on the issues of the military-technical cooperation of the Russian Federation with foreign states; set up bi-lateral and multi-lateral intergovernmental commissions for military technical cooperation; initiate the adoption of legislative acts establishing tax, customs and other privileges as well as the adoption of measures aimed at providing state incentives for the activities of Russian legal entities in the sphere of military-technical cooperation; perform the state regulation of domestic and foreign pricing in respect to militarypurpose products; define a procedure for settlements between the manufacturers and developers of military-purpose products when they are delivered for export;

define a procedure for indemnifying the entities engaged in military-technical cooperation for possible losses (compensation payments) in the event that a decision is taken in due course to suspend or terminate military-technical cooperation with foreign states; designate a state customer in the sphere of military-technical cooperation; administer other powers in the sphere of the state regulation of military-technical cooperation in accordance with the legislation of the Russian Federation.

Article 11. The Powers of the Federal Bodies of Executive Power in the Sphere of Military-Technical Cooperation The federal bodies of executive power in charge of the issues of the militarytechnical cooperation of the Russian Federation with foreign states shall effect the implementation of the decisions of the President of the Russian Federation, the Government of the Russian Federation concerning the issues of regulating and monitoring activities in the sphere of military-technical cooperation and the implementation of the provisions in the sphere of military-technical cooperation. Аrticle 12. The Right to Participate in Military-Technical Cooperation 1. Organizations participating in the implementation of military–technical cooperation are state intermediaries being specialized federal state unitary enterprises set up pursuant to a decision of the President of the Russian Federation as well as Russian organizations being the developers and manufacturers of military-purpose products that have acquired in due course the right to pursue foreign trade activities in respect to military-purpose products. 2. The right to pursue foreign trade activities in respect of military-purpose products shall have organizations being the developer and manufacturers of militarypurpose products, provided at least 51 per cent of the shares (stakes) thereof are under federal ownership with the rest of the shares (stakes) being placed among Russian legal entities and natural persons. The sale and other means of alienating the shares (stakes) of such organizations as well as pledging thereof or transfer thereof in trust to foreign states, international organizations, foreign natural persons, foreign legal entities and equally to the Russian natural persons and Russian legal entities in relation to which the aforesaid persons/entities are affiliated bodies is prohibited. 3. The procedure for granting the right to pursue foreign trade activities in respect to military-purpose products to Russian organizations shall be determined by the President of the Russian Federation with due regard to an opportunity of their

implementing the goals and principles of military-technical cooperation. Article 13. The Fundamentals of the Financial Policy Pursued in the Implementation of Military-Technical Cooperation 1. Financing of the activities in the sphere of military-technical cooperation shall be provided in keeping with the following provisions: the inadmissibility of an economic loss being inflicted to the Russian Federation and decline in the federal budget expenditures towards the national defense; the mandatory way and pro rata terms of profit distribution among all the organizations participating in the implementation of military-technical cooperation with due regard to their contribution in the development, manufacturing and sale of the military-technical products; the observance of the state pricing policy applicable to military-purpose products whereby a possibility of an export price for the military-purpose products being set below the price effective for a Russian consumer; a rational use of the earnings received from military-technical cooperation, through their being allocated to cover the expenses towards the elaboration, manufacturing of the military-purpose products, upgrading and improving weaponry and materiel as well as social welfare of the employees of the organizations being the developers and manufacturers of the military-purpose products. 2. Financing shall be provided for activities in the sphere of military-technical cooperation out of the federal budget resources and also at the expense of nonbudget funding. 3. Financing shall be provided for settlements in the sphere of military-technical cooperation in compliance with the legislation of the Russian Federation and it shall not be to the detriment of the interests of the developers and manufacturers of the military-purpose products.

Article 14. On the International Treaties of the Russian Federation in the Sphere of Military-Technical Cooperation 1. The President of the Russian Federation shall make decisions on holding negotiations for the conclusion of international treaties of the Russian Federation in the sphere of military-technical cooperation on the proposal of the Government of the Russian Federation. Decisions to sign the international treaties of the Russian Federation in the sphere of military-technical cooperation shall be adopted by the Government of the Russian Federation. 2. The international treaties of the Russian Federation in the sphere of militarytechnical cooperation shall be subject to ratification in accordance with the procedure established by the legislation of the Russian Federation. 3. The military-technical cooperation of the Russian Federation with foreign states shall also be implemented pursuant to the international treaties to which the Russian Federation is a party a the successor state to the USSR. 4. International agreements of departmental nature concerning the issues of military-technical cooperation shall be signed as aimed at implementing the international treaties of the Russian Federation in the sphere of military-technical cooperation if a possibility of concluding such agreements is provided in the international treaties of the Russian Federation in the sphere of military-technical cooperation. Decisions on holding negotiations and signing international agreements of interdepartmental nature on the issues of military-technical cooperation shall be made by the Government of the Russian Federation.

Article 15. Accountability for Violation of the Legislation of the Russian Federation on Military-Technical Cooperation Persons who have violated the legislation of the Russian Federation on militarytechnical cooperation shall be accountable under civil, administrative and criminal law in accordance with the legislation of the Russian Federation. Article 16. On Bringing Into Force the Present Federal Law The present Federal Law shall come into force from the date of the official publication thereof. President of the Russian Federation Moscow, The Kremlin

B. Yeltsin