Dmitry Magonya, the managing partner of ART DE LEX, commented on Rosneft’s case against the Ministry of Energy and Rosnedr

Interfax reported that Verkhnechonskneftegaz (VCNG), a subsidiary of Rosneft, filed a lawsuit against the Ministry of Energy and Rosnedr. VCNG is challenging the decision not to accept the documents granting export incentives for the Verkhnechonskoye (VC) oil field for 2011-2013. VCNG filed the documents retroactively in January 2015.

Rosneft and RN-holding filed a similar lawsuit, and neither the Ministry of Energy nor Rosnedr has responded to requests for comments. The representative of Rosneft confirmed filing the claim but did not mention the amount. Interfax reports that a representative of the Ministry of Energy stated in court that “the applicant is abusing the law and is using specific mechanisms <...> to receive confirmation and then get customs payments from the budget in the amount of RUB 60 billion.”

Since 2008, oil extraction has taken place at the VC oil field in the Irkutsk Region. In 2013, it produced 7.7 million tons of oil, and exports accounted for 3.8 million tons. The field came into the possession of Rosneft, after its purchase of TNK-BP in March 2013. According to Interfax, a source in one department reported that, immediately afterward, the question of a refund arose.

In December 2009, the export duty for the VC oil field was zero. From July 2010 to May 2011, a preferential duty applied. The measure was subject to an extension, but VCNG did not file the necessary documents with the ministry. As a result, the regular export duty for oil came into force. Nevertheless, according to the representative of the company, VCNG met the deadline because it submitted the documents in January and because the law provides that challenges to tax issues can take place within three years. He claimed that “the denial of the Ministry of Energy and Rosnedr [to grant an extension] violates the rights and legitimate interests of stakeholders.”

Dmitry Magonya, the managing partner of ART DE LEX, commented:

The reference of the subsoil user firm to the term of three years for an appeal is not justified since it did not initiate the procedure for obtaining benefits; consequently, it did not get them. The Ministry of Energy states that VCNG should have applied in the 2011-2013 period and not later than the tenth day of each month preceding the month for which the privilege applied. The applicant is requesting the privilege a half year after the rate ceased to apply. The next meeting for the VCNG suit is scheduled for June 2; for Rosneft and RN-holding, it is on May 14. The exemption for export duty is not automatic but only applies after compliance with an established order, which begins with the subsoil user sending an application to the Ministry of Energy. Then, interagency coordination takes place. Only after that there is a decision, which is effective for the period stated in the application but not retroactively.