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Russia's Constitutional Court decides to ease limits on foreign involvement in the media — a bit

Source: Meduza
Петр Ковалев / ТАСС / Scanpix / LETA

Russia’s Constitutional Court issued a decision today regarding Article 19.1, a law that governs mass media. The law prohibits foreigners from founding or controlling media outlets in Russia, but the Court ruled that it requires correction. The new ruling indicates that the prohibition itself is just “because that sort of influence might threaten the security of state information,” but the Court also decided to clarify what rights foreigners do have if they own shares in Russian media companies.

In its 2014 edition, the law prohibits foreigners, foreign firms, and Russians who also have citizenship elsewhere from establishing media outlets in Russia. Individuals who match those descriptions are also forbidden from controlling, directly or indirectly, more than 20 percent of a company’s shares if that company houses a Russian media outlet.

In addition, amendments made to the law in 2014 ensured that if a foreigner or a dual citizen already owned more than 20 percent of a Russian media outlet, then that person would not have the right to do any of the following:

  • Participate in the company’s decision-making,
  • Receive information about the company’s activities,
  • Issue complaints about the company’s decisions,
  • Request compensation for any losses from the company, or
  • Challenge any finalized business dealings.

The Chance Radio case

The Court’s decision was triggered by an appeal on the part of the billionaire Evgeny Finkelshtein, who has dual Russian and Dutch citizenship. In 2016, he turned to an arbitration court to challenge a decision by the St. Petersburg radio station Chance, in which Finkelshtein owns 49 percent of shares, to hand over its assigned frequency to another station, Russian Radio. Proceedings in the case lasted for almost a year, but the court ultimately decided that because Finkelshtein has dual citizenship and owns more than 20 percent of a media company, he has no right to challenge that company’s decisions even though almost half of it belongs to him.

That interpretation of the law is unconstitutional

The Constitutional Court decided that the ability of a foreigner or a Russian with dual citizenship to challenge a company’s decisions if that person practically owns the company is unrelated to “the politics of the organization’s broadcasts.” The Court also pointed out another problem. Legally, if a foreigner owns more than 20 percent of a media company’s shares, then the company will sooner or later find itself unable to operate due to regulation by Roskomnadzor, the Russian government’s censorship agency. For example, the Echo of Moscow radio station began encountering resistance from Roskomnadzor soon after the 2014 amendments to Article 19.1 came into effect. However, no one can force a non-Russian citizen to sell her shares of a Russian media company and comply with the law. That is a decision the shareholder can only make herself.

In sum, any given non-Russian citizen is not obligated to sell her shares in a company, but if she does not, she is inevitably deprived of certain rights, and her shares practically lose their ability to lend influence over a company’s work. The Constitutional Court decided that such a situation entails “unjust risks both to the property rights of the shareholder and to the legal capacities of the business entity.” The Court added that “the interpretation at hand does not correspond with the need to maintain trust in the legal system and stability in citizens’ legal relations.”

The State Duma now holds the responsibility to produce new amendments to the law that will define the rights of foreign shareholders in Russian media and determine whether they will be obligated to sell any shares they own above 20 percent. Finkelshtein’s case will be considered again only after that new legal framework is finalized.

Mikhail Zelensky

Translation by Hilah Kohen

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