Representative offices of foreign entities:
whether an accredited employee of a representative office needs a work permit

    Coming into force of Federal Law on the Legal Status of Foreign Citizens in the Russian Federation, July 25, 2002, No 115-FZ has seriously confused the accredited employees of the Representative offices of foreign entities. It has raised the issue whether an accredited employee of a Representative office needs a work permit.

    In this article we will try to research the issue and express our opinion. The Procedure for establishing of the representative offices of foreign entities and their further activity was confirmed by Decree of the Council of Ministers of the USSR, 1989, No. 1074. Despite the fact that from this time almost 13 years have passed and our country has changed gradually, the instant document has not been amended and is still operative.

    The accrediting agencies: the Chamber of Commerce and Industry and the State Registration Chamber of Justice Ministry and Finance Ministry continue to accept documents for accreditation from foreign entities. They also continue personal accreditation of the employees of the representative offices according to s.12 of the said Decree.

    The document, which is issued by the accrediting agencies, is called “the permit to establish the representative office of the foreign entity.” The permit contain the term of its validity (depends on the accredited fee) and the limit of foreign employees of this representative office.

    Decree of the President of the Russian Federation on the Procedure for Hiring and Usage of Foreign Labor Force in RF, 1993, did not change the status of the employees of representative offices, and thus confirmed the force of Decree No. 1074. In 1994 the Decree of the President has spread its force on foreign entities hiring foreign employees for execution of contracts with Russian partners. It is obvious that it does not concern the accredited employees because the purpose of their stay in Russia is not to execute contracts between foreign and Russian partners, but to represent and defend the interests of the company, which established its representative office.

    However, in 1999 Moscow authorities started to apply the notion “foreign labor force” to the accredited employees of the representative offices, compelling them to obtain work permits following the same procedure as highly qualified specialists, being hired by entities with 100% of foreign investments. Justifying such application the authorities referred to Decree of the President No. 2146 in which the list of foreign citizens who do not need work permits did not mention the employees of representative offices. As migration services of Moscow performed the controlling and punitive functions concerning the execution of the Regulation of the Mayor of Moscow No 183-PM, a lot of Moscow representative offices were reluctant to spoil the relations with them and obtained work permits for their accredited employees.

    However, after numerous inquires federal authorities confirmed that an accredited employee did not need any permitting documents. For example:
1) The reply of Ministry of federation, national and migration policy (“Minfederaziy”) of May 05, 2001 to our inquiry, signed by Deputy Minister B.B. Khamichev: “Minfederaziy of Russia confirmed that the employees of foreign entities and representative offices, accredited under the established procedure on the territory of the Russian Federation, do not need work permits of Minfederaziy of Russia.”
2) The reply of the State Registration Chamber of July 26, 2000: “Pursuant to Regulation on the procedure for establishing and activity in the USSR of the representative offices of foreign entities, banks and organization confirmed by Decree of Council of Ministers, November 31, 1989, No. 1074, foreign employees of representative offices being the staff employees are considered to be on business trip and directed to the branch of the foreign entity on the territory of the Russian Federation in comparison with the foreign employees, working for Russian entities and organizations. Therefore, the employees with personal accreditation in the representative office of foreign entities do not need permit of Ministry of federation, national and migration policy of the Russian Federation.”
3) Information from the official site of the Chamber of Commerce and Industry also confirmed that “All foreign employees of a representative office shall have personal accreditation. It means that the stay of such employees in the territory of the Russian Federation is agreed with appropriate authorities and their right for labor is legalized.”

    Now let’s turn back to Federal Law on the Legal Status of Foreign Citizens in RF. Firstly, the wording of the law does not contain such words as representative offices and employees of representative offices. Secondly under s. 2, Art. 13 “the employer under the said Law is an individual or legal entity, obtained in the established procedure the permit for hiring and usage of foreign employees and using the labor of such employees in accordance with labor contracts concluded with them. A foreign citizen, registered as an entrepreneur, can also be an employer.” Note the mentioning of the foreign citizen is not incidental, but there is no mentioning of a foreign legal entity. The representative office is not a legal entity; it is just a branch thereof on the territory of the Russian Federation.

    Hence, Decree of the Council of Ministers No. 1074 does not contradict Federal Law on the Legal Status of Foreign Citizens in RF because a foreign legal entity, acting as an employer, obtains work permits for the foreign employees of its representative office during the process of accreditation.

    If the said Regulation had contradicted the Federal Law then Art. 36 of the Federal Law, listing the legislative acts, which become inoperative from the moment of its enactment, would have mentioned it. The Government of the Russian Federation should amend its respective legislative acts in accordance with this law within three months, but up to present time has not amended the Regulation No. 1074.

    Actually, it is illogical to go through the double permitting procedure during the establishment of the representative office. Thus, the accreditation procedure for representative offices of foreign legal entities shall be either applied in its present/ amended form or invalidated, only then a foreign legal entity shall obtain permits on hiring of foreign citizens for its representative office, being establishing or operable.

    Moreover, the foreign employees of representative offices do not violate the preemptive right of Russian citizens for vacancies in the Russian Federation, because they perform only representative functions on behalf of the foreign legal entity.
By the way, there are a lot of examples when foreign entities hire Russian citizens to represent them.