What procedures shall substitute licensing from 01.01.2011? Will there any self regulated organizations be established? What is the difference between the licensing and the declarative (notification) procedure? Will the persons still requiring licenses need to carry out re-licensing due to the new rules of the game?

These and some other questions were answered during the author program of Denis Aleinikov, Senior Partner of Law Group “Argument” by one of the developers of the new licensing concept, Deputy Head of the Methodology, Expert and Legal Work Section of the Entrepreneurship Department at the Ministry of Economy of the Republic of Belarus Irina Babachenok and Deputy Editor-in-Chief of “The LAWYER” magazine Maxim Polovinko.

What have the Ministry of Economy and other bodies been governed by while participating in the development of this normative legal act and excluding certain types of activities and leaving the other ones? Have they examined the international experience of state regulation of these activities?

Irina Babachenok (I.B.): Prior to answering this question, it is important to mention that licensing in its general sense implies permissive way of state regulation which is aimed at regulation of those activities which are potentially unsafe from the point of view of national safety, life and health, rights of the population and environmental protection. This method is aimed at excluding from the circle of economic entities willing to conduct certain activities, those ones who won’t be able to provide the sufficient safety level of this activity. Pursuant to the above, estimation whether there is any direct link between conducting a certain activity and any potential risk of damage to the social relations mentioned above, lying at the heart of the work on reduction the number of licensable activities. Along with that, the possibility of providing effective regulation of the analyzed activities by some other methods, apart from licensing, was assessed, by taking into account state control and supervision mechanisms already existing in the respective fields.

In the course of draft developing of this document the experience of such CIS countries as Russia, the Ukraine, Kazakhstan, as well as that of the Baltic countries and the number of Eastern and Western Europe countries has been studied. Thereby, in the course of studying these legal systems the most interesting thing was to compare the lists of activities traditionally licensed in our legal system and that in foreign legal systems, and also to look at regulation possibilities for certain activities which are referred to as licensable, but are regulated by some other methods in the foreign countries, in order to determine whether these methods could be applied to our legal realities.

Can we say that licensing remained in respect of those activities which have been considered by the state as potentially unsafe?

I.B.: It is not the only criterion of risk or safety that was taken into account while making decision on exemption of certain activities from the licensable ones. There was one more criterion – the possibility of regulation of a certain activity by some other method which is different from the permissive procedure and does not imply obtaining any special permits.

Preceding from these considerations what is the most impressive example of licensing abolition you can tell us about?

I.B.: A special achievement which affected a big number of economic entities was license abolition in the field of retail trade with foodstuffs, manufactured goods and public catering.

According to the assessment of the Ministry of Economy, licensing abolition of this activity will enable simplifying the economic activity conditions for more than 130 thousand economic entities. This is the basic mass of licensees in the country.

Well, everything is clear with retailing. No doubt, this is a very progressive and absolutely correct decision. Let’s look at some other activities: licensing in construction has also been abolished, but it is not the same for licensing of transport activity. Does it mean that transport activity is more dangerous than construction?

I.B.: Certainly, one can not say that one activity is more dangerous than the other one. Within the frames of Edict of the President No.450 transport activity has been substantially liberalized. Within the scope of licensable activities that have been cut, licensing in the sphere of aviation has been abolished; the same is for activities in the sphere of inland water and marine transport. As to the activity in the sphere of transportation by road the necessity of obtaining special permit (license) for domestic passenger transportation for the in-house needs has been excluded. The license for domestic republican cargo carriages has also been completely abolished. The same is also for international cargo transportation by road with capacity of not more than 3.5 ton. The same privilege is stipulated today by Edict of the President No. 477 for individual entrepreneurs who are engaged in export of domestic manufacture goods. From January 1 this system will also be applied to all economic entities. That is why one can not say that the previous order in the sphere of transport has remained.

How many activities (constituent works/services) have been affected by the licensing reform?

I.B.: The result that has been reached in the balance of the work connected with drafting of the edict is rather impressive. The edict stipulates licensing abolition for 16 activities, 7 of which include 59 constituent works and services. Apart from that, licensing of about 60 works and services related to some other 14 activities will be abolished, although licensing of the latter shall remain in force. Speaking in figures, over 30% of activities licensable for today shall be abolished.

Maxim, being a representative of the biggest professional edition you should have probably got letters and comments from businessmen and lawyers, and you should have also done some analytical work in relation to the legal normative acts. What is your assessment of the results reached by today? Licensing of more than 30% activities shall be abolished, and this is a good result. Is there anything else to be abolished or moved forward?

M.P.: To my mind, this is not everything that should be abolished. Proceeding from the thesis being voiced by the representative of the Ministry of Economy, we should take into account that the licensing abolition criterion shall imply specific regulation by normative legal acts and the possibility to execute control, so at least legal activities shall be subject to licensing abolition. Any lawyer shall act within lawful frames, so anyway, it is not as difficult to prescribe the possibility of participation in the economic as well as in civil or ordinary court, and it does not require any extra control means.

I would disagree with you. Within our professional organization, Belarusian Public Association of Commercial Lawyers, we have come to the conclusion that it is necessary to preserve licensing of legal activities as far as this regulation is laying down a certain access right to this profession, including the exam for professional competency which shall be passed at the Ministry of Justice by any lawyer willing to become an external business counselor. Such an approach provides certain guarantees to the economic entities enjoying the services that the legal assistance is of high quality and there are no odd men in that business. We have applied to the state to preserve licensing for legal services.

M.P.: That’s quite possible; there is some sense in adopting Russian experience and establishing a self-regulating organization in the sphere of legal services. It corresponds to the regulation and control reality to a far greater degree. As far as it goes to the rest of activities, the first step has been done, to my mind, but the way which is thousand miles long starts with the first step. Evidently, we shall proceed. And it is very praiseworthy that the auditing activity has stopped being licensable.

Irina, lots of entrepreneurs who have read the edict, noticed that licensing requirements and terms for certain activities which remain licensable after the new year, shall change. According to the edict, if any licensing requirements were changed, the licensee shall bring his activity in line with the new requirements by March 1, 2011. Having read these provisions a number of people started raising questions, in particular, in the TUT.BY portal, whether this would threaten general “re-licensing” for those whose activity shall remain licensable after the New Year?

I.B.: Some changes of requirements and terms for the licensee affected the insignificant number of activities. Meanwhile, the edict was signed on September 1, 2010 and it shall come into force from January 1, 2011, so the licensees will have three months in order to bring their activity in line with the licensing terms and requirements. Along with that, the matter is to bring everything in line with the new licensing requirements and terms, so there is no need in this case to obtain a new license. You must admit that the time frame is rather long and the sense in setting such a period of adaption is to avoid any bustle and tension in the entrepreneurial environment and to ensure that everything is gone through quietly. In case of observing this term the licensee is not required to submit any additional documents of confirmation: the ordinary notification principle shall be activated here. The licensee shall notify the licensing authority in writing of conformity with all licensing terms and requirements at a certain moment. Good faith presumption of the economic entity is being implemented in full. If the economic entity shall be proved to be not quite honest, the responsibility in accordance with the law shall come into effect in this case.

Let’s assume that a person has notified of conformity with the licensing requirements but it is actually not true. What happens if the inspection comes?

I.B.: The responsibility in the form of license revoking or any other mechanism will incur, as the case may be, depending on the type of infringement. One of the advancements of edict No.450 is abolition of automatic nullification of the license, there is no such a mechanism any more. Moreover, the edict on licensing stipulates the significant preventive measures steps up to the moment of revoking the license from the economic entity: warning and suspension of license. So, depending on the nature of infringement committed by the licensee, the respective responsibility measures shall be applied. And by no means shall they be applied post factum – only at the moment the infringement was revealed. On the other hand, giving credit of trust to the economic entities we expect the appropriate response from them.

Can we say that the terms and requirements of licensing have become more liberal after changing? Or vise versa, have they become more tough?

I.B..: Liberalization of conducting licensable activities was the key goal of the edict drafting. That is why they have become more liberal in a way. A brilliant example is abolition of the need to have operating licensing card for the vehicle in conducting road transport activity. Speaking of all activities, the necessity to have the normative legal, or technical legal normative acts regulating this or that activity has been excluded. It’s clear that the economic entity may conduct its activity on legal basis guided by the applicable documents. Within the frames of Decree No.17 and resolutions of the government adopted in the course of its development, the necessity to submit notarially certified documents was preserved, but it has been excluded in relation to the whole range of activities.

Maxim, have you noticed any tendencies for simplifying the procedure of obtaining licenses in relation to the activities which have remained licensable?

M.P.: I could note just one norm that has remained. The Edict has preserved the same norm of the Decree stipulating personal submitting of the documents through representatives. It is still not allowed to send the documents per post, the representation is needed.

Irina, what is the reason for preserving this requirement?

I.B.: We have excluded the necessity of submitting notarially certified documents; now one shall submit the originals to verify the copies and to certify their validity. Moreover, in case of submitting the incomplete package of documents such a form as refusal to accept is being practiced. Some discrepancies may be frequently removed on-site, that is why it is more convenient for the license applicant to submit the documents personally and to remove some small shortcomings. In the process of further improvement of legislation in the sphere of licensing, submission of documents per post or e-mail is possible.

Notwithstanding that the personal submission has not been abolished, according to the text of the edict, I have noticed that the system of obtaining and termination of the license has become more liberal. What are the most significant improvements that you could mention as such?

I.B.: The licensing terms have been changed considerably. It was one of the key moments pursued by the edict on licensing. If today’s consideration term for issuing the license makes up to one month, from January 1 it will amount 15 working days. The consideration term for the application on extending the term of license in its turn, as well as on implementation of the expertise of the Licensee’s conformity with the settled requirements shall make 10 working days. The term of issue of the duplicate license shall be reduces to 3 working days. If obtaining the license makes 45 days for the Licensee today, it will take maximum 25 working days.

One more novelty has been covered in the edict – that is the possibility to refuse issuance of the license in part. For example, the license applicant submits the application on issuance of the license indicating the definite list of constituent works and services as well as particular branches where he intends to conduct such activities. If any control activity concerning checking the conformity of the licensee with the terms and conditions put forward against him or her, it comes to light that he can satisfy just two from the three claimed constituents to a sufficient degree, the licensing body shall have right to issue the license for two of the constituents and to refuse in issuance of the third one. Today it would have generally refused to issue the license on the whole. So, the applicant has the possibility to work and subsequently, when he intends to remove all the deficiencies, he can get the opportunity to implement all initially claimed works and services by means of introduction of amendments to this license. In such a way the terms for entering by the economic entities into a certain business area shall be reduced.

Apart from that the list of refusal reasons for license issuance is being limited in a more clear way today. Automatic nullification of license has been excluded as a form. What is more, the edict explicitly differentiates such notions as nullification and termination of the license. The difference is that nullification of the license becomes due from the very moment of issuance of that license and there are three grounds for such nullification: two of them – upon resolution of the licensing body and one more – upon court decision. These grounds are connected with the illegality of license issuance or its issuance with law infringement by the licensing body.

Among the most significant novelties we may name is that upon coming of the edict into force the possibility of nullification and termination of the license by other authorities than the licensing body and the court shall be excluded. Tax authorities may be entitled to such right in relation to the activity connected with manufacturing or turnover of spirits, alcohol-containing and tobacco products. Suspension, termination or nullification of the license shall be abolished upon the grounds which are not directly connected with licensing and are independent measures of administrative responsibility. Among such grounds is violation of conducting cash operations and violation of running the Book of Complaints. There is a separate responsibility for these things and the license shall not be withdrawn for that.

We should say that the effective term of licenses in relation to 16 activities has been extended. The license shall be effective for the period of 10 instead of 5 years and thus the need frequency to apply for extension of the effective period of the license shall be reduced.

Shall establishment of liability insurance for persons conducting certain activities become alternative?

I.B.: Within the framework of Edict No.450 establishment of insurance has not been stipulated. On the whole, there is a normative legal act draft which provides for the introduction of voluntary insurance in relation to the activities subject to licensing abolition. As far as it goes to certain activities, along with licensing there is insurance liability which is in force even today. As an example we may name the activity of interim anti-crisis managers which is being licensed by the Ministry of Economy.

Voluntary insurance is an additional issue which enhances the trust towards the economic entity conducting a certain activity: if in the course of conducting activities the consumer knows that the eventual risks he can run while using the services of an economic entity, have been insured, then the trust will enhance. If a person insures his civil liability he is more confident then in the quality of services he is rendering.

In what way shall the activities subject to licensing abolition be regulated? What shall the licenses be substituted for?

I.B.: Licensing abolition does not exclude any other regulation mechanisms for certain activities. These mechanisms shall be specified by January 1, 2011, in accordance with the provisions of Edict No.450.

Based on the preliminary information of the state administration bodies pursuing the state policy in certain spheres we may speak with a certain degree of confidence today that in relation to the whole range of activities there will be no any additional regulation means introduced apart from the existing ones.

As far as it goes to the possible introduction of the new state regulation forms, position of the Ministry of Economy in relation to this issue is quite definite: such innovations shall not lead to formal substitution of licensing for the similar permission procedure with a different name.

So you are against the new permission mechanism in relation of all activities?

I.B.: Then the sense of licensing itself is being lost. The Ministry of Economy today is expressing its viewpoint that regulation of non-licensable activities in 2011 shall be effected by means of declarative or notification principle exclusively for the purpose of accounting of the economic entities conducting a certain activity. By analogy, it’s the same with the state registration of economic entities when the economic entity just declares itself and that it is conducting a certain activity.

While introducing this system the rules of the game for conducting certain activities shall be explicitly outlined. A normative legal act shall be adopted to regulate the order of conducting activities and the responsibility measure for the infringement of that order.

Along with that the possibility of introducing such a regulation type like establishment of self -regulated organizations has not been included. This can be not the only organization in a particular activity field, there may be a number of them, but in this particular case the key possibility condition for conducting the activity shall be membership in a certain organization.

The Ministry of Economy suggests substituting the permissive principle existing today for the declarative one, doesn’t it?

I.B.: For the declarative or for the notification principle, in case one of the state bodies shall consider it possible. The declarative principle suggests submission of a certain list of documents which does not assume execution of some specific conditions and obtaining a specific document confirming conducting of a certain activity. The notification principle is a message from one party which means that I am saying that I conduct a certain activity and everybody shall take it into consideration, so I am working.

The overseas experience shows that there is a register system in western countries which is very efficient; the economic entity shall notify that he intends to conduct a certain activity from the certain date, and along with that he declares that he conforms with all terms and requirements claimed to him within the frames of the applicable branch of the law. This shall be accepted in good faith, with the assumption that the notification approach does not imply waiting for the return document from the state body on the allowance to start working. Silence gives consent. Control mechanisms shall be switched on then. It’s quite interesting that there is a possibility for the state authorities to come with inspection to such an economic entity the next day.

Have any state bodies come to the development of the terms of introducing such declarative or notification procedures by today? What happens to the retail trade after the New Year?

I.B.: I can only speak about what is supposed to take place. The Ministry of Trade has prepared the draft of the Edict of the President of the Republic of Belarus On Certain Issues of Trade Regulation, Household Services for the Population, Activities of Trade Centers and Markets. This is probably the only draft of the normative and legal act developed in support of Edict No.450 which has been seen by the Ministry of Economy. Within the frames of this edict it is supposed to determine and to settle the unified simplified and accelerated procedure for opening a trade object, an object of household services of population, trade centers and markets by means of inclusion of these objects to the Trade Register of the Republic of Belarus upon declarative “one stop shop” principle. It is supposed to submit the application and two more documents to the local executive administrative body; the registration term will be three days. According to the draft, the state duty in amount of 0.25 basic units shall also be paid.

It is assumed that the entities already having licenses shall be included into this Register free of charge. They shall have three months from the moment of coming of this edict into force, during which they need to submit the application, so the entities they are employed for, shall be included into this Trade Register. Certain objects conducting e-shop trade services today are already included to the Trade Register.

Is it possible to project this procedure to the other activities with licensing abolition from January 1? For example, what happens to regulation in the sphere of design and construction of buildings?

I.B.: The Ministry of Economy does not dispose of this information today. The Ministry of Economy has not seen even the drafts of any normative acts in the sphere of construction by today.

In accordance with the edict “the abolished” license shall be returned. May be, it is essential to stipulate in the normative acts to be adopted in support of this edict, that in case the term of license has expired, it should be returned and be automatically substituted for the membership in the register or for the new paper allowing conducting a certain activity? The purpose is to avoid the situation when the entrepreneur who got the license today shall have to obtain anything else tomorrow in accordance with the new rules. Is it possible to stipulate automatic substitution of the licenses which have not expired yet?

I.B.: The Ministry of Economy has the following position today. In order to avoid creating any situation which would make the activity of economic entities more complicated and would worsen their position after introducing the new procedures, this very issue should be paid special attention to.

Our vision of the procedure is that a simple exchange of the current license and a certain certificate on validation or accreditation or certificate for including to a certain register, if such is to be introduced, shall take place. We are saying that such an exchange shall take place in relation to the licenses which shall be valid on December 31, 2010.

Take special note that the edict on licensing in its transitional provisions stipulates that if the validity term of special permit or license issued for the constituent works and services subject to licensing abolition from January 1, expires from the day of the official publication of the edict prior to January 1, 2011, any special extension of the license shall not be required. The economic entity is entitled to implement activity upon this license until December 31, 2011.

This paragraph of the edict has already entered into force and the following law enforcement practice is already familiar to us. A number of entrepreneurs with the licenses which are subject to expiration feel evidently that the license may be substituted for the document of a different sample, and have gone to the state authorities for extending these licenses. We have some data that some state bodies reject extending these licenses. To what extent has this rejection been regarded as lawful in accordance with p.2.2.1. of the edict?

I.B.: We should emphasize that the norm of p.2.2.1 stipulates that it is the right of the licensee to extend the license, not the obligation of him. As far as it is considered to be the right, the licensee may consequently enjoy the right not to apply for the extension, or may reject exercising it.

If somebody has decided to exercise this right he won’t apply for extension and will successfully work until December 31, 2010 inclusive. If for some reason he would decide to extend his license, then according to the general procedure, with observance of the terms set by Decree No.17, the person may apply to the licensing authority. And the authority shall have no grounds to reject accepting the documents or observing them with further decision on extension or rejection to extend this license.

M.P.: All these innovations are very good. However, I would like to note that to our opinion, the rules of the licensing game have not been finally settled yet. The same is for the position to the permissive or declarative approach towards conducting new activities. I believe that the attempt of the state authorities to introduce permissions is in a way the so called phantom extremity pain. Referring to history we may recall that the abolition of wholesale trade in its turn has been successfully gone through. So, analyzing edict No.450 from the point of view of analysis of further normative acts on the level of such rather serious normative acts as the law, edict or decree, one shall determine the right to establish the permissive principle for conducting certain activities only on the bases of the edict, so that no one could make out a new licensing having substituted it for the different name.

Irina, could any sectorial licensing authority actually agree with the position of the Ministry of Economy and introduce the permissive procedure by means of its normative legal act or leave the previous licensing procedure having just changed the name for the word “certification”?

I.B.: It can not be done by its normative legal act. The key goal of adopting edict No.450 was introducing complex regulation of licensing relations and putting all normative and legal acts to the level of the Head of the state. If any normative legal acts aimed at introducing the new regulation forms shall be adopted then it should be the act of law. Taking into account that these are basically administrative procedures, there is an alternative of adopting the document on the regulation level of the Council of Ministers, but it is no way the departmental normative legal act.

M.P.: There is no any ban on introducing the own normative legal act at the current moment. This is one of the game rules which, to my mind, would be worth being mentioned in the basic edict.

I.B.: Introducing the administrative procedure by the normative legal act today is not possible by virtue of the law on the fundamentals of administrative procedures. It has been clearly prescribed at what level of normative legal acts a new administrative procedure may be introduced or the previous one may be regulated.

Preparation of any normative legal act is coming through such a stage as coordination. It is not only one initiative body that makes the decision: there are interested authorities. The norm stipulating that all normative legal acts on issues of entrepreneurial activities shall be agreed upon with the Entrepreneurship Development Council, was applied to the regulations of the Council of Ministers in 2004. That is why the business community may affect the establishment of the new terms through this authority.