The movement of mineral collectors is gaining strength worldwide from year to year. This is a part of the national culture. The most important aspect of any mineralogical collection is precious and semiprecious stones, or otherwise - gems. Gems in modern Russia got the raw end of the stick. To put it more precisely, bad luck struck those who would like to keep gems in their mineral collections.
1. Ban on civil circulation of gems
According to the Russian Federal Law "On Precious Metals and Precious Stones," gems include natural diamonds, rubies, sapphires, emeralds and alexandrites of any quality, as well as natural pearls and unique pieces of amber.
Previously, according to the revised version of the then Federal Law "On Foreign Exchange Regulation and Foreign Exchange Control," these precious stones were attributed to foreign exchange assets. And pursuant to that law there was issued now invalid Russian Federation Government Decree No. 759 dated 27.06.1996 as amended by Russian Federation Government Decree No. 215 enacted on 10.03.2000. Respectively, already in pursuance of the above the Ministry of Finance of the Russian Federation issued the "Instruction on the Procedure of Keeping Record of Transactions Made in Raw Gems" as of 2001.
Decree No. 759 with amendments imposed much more significant constraints on deals in natural gemstones as compared to the Federal Law of 1998. But even after the Federal Law was passed Decree No. 759 was still efficient until 2004.
However, Federal Law No. 173-FZ as of 10.12.2003 cancelled all precious stones from the list of forex assets. Accordingly, on 24.08.2004 the Russian Federation Government issued Decree No. 433, which, together with other acts, recognized completely invalid aforementioned Decrees No. 759 and No. 215. As a consequence, the "Instruction on the Procedure of Keeping Record of Transactions Made in Raw Gems" issued by the Ministry of Finance ceased to be in force.
Thus, from 24.08.2004, deals involving natural precious stones on the territory of the Russian Federation are regulated directly by the Federal Law. That is de jure the law in this part turned to be a directly applicable law.
So what does this federal law allow? The most important thing - the law allows without any restrictions to have any legally acquired gems in property of businesses and individuals. Article 2 of the federal law stipulates: "... Precious stones acquired in the manner prescribed by the legislation of the Russian Federation may be in the ... ownership of businesses and individuals. Owners ... of gems exercise their right for ownership of these gems ... in accordance with this federal law and the Civil Code of the Russian Federation ..."
Please note: the law makes it clear that ownership is executed in conformity with the federal law as well as with the Civil Code of the Russian Federation and nothing else! And what does the Civil Code say about acquisition of property rights? Article 218 of the Civil Code reads: "The right for property possessed by an owner may be acquired by another person by way of a contract of sale, exchange, gift or other transaction alienating the property." That is, any individual who becomes the owner of what he or she was sold, donated, etc. by the former owner of the property.
On the other hand, the federal law contains Clause 4 in Article 2 saying: "Precious stones recovered from subsoil deposits ... are the property of mining subjects ... unless otherwise stipulated by the license for their production, supply contracts ..." This means that if a certain company with an appropriate license has mined gems and they are not to be supplied to Gokhran, etc., then this company becomes the owner of these precious stones, and they can freely and legally be sold to any individual. In this case, now the individual becomes the owner of these precious stones and in accordance with the federal law and Civil Code of the Russian Federation may exercise his or her ownership rights - for example, selling or donating these gems to anyone. The federal law "On Precious Metals and Precious Stones" itself does not contain any restrictions on civil circulation of precious stones.
Article 3 of the federal law, which is often cited by law enforcement agencies, does not contain regulations as to how OTC trading in precious stones should be done. The case in point is that the provisions prescribed by Article 3 refer only to the procedure of exchange operations involving precious stones, which is wholly in line with the name of this article - "Precious Metals and Gems Exchanges." Nothing says that these rules should apply to OTC transactions. And nothing says that transactions involving precious stones (including those in civil circulation) are to be exercised only at exchanges (which, incidentally, so far do not operate in Russia): "In Russia there are exchanges of precious metals and gems designed to carry out transactions by legal entities and individuals involving: ...
sorted out rough gems;
processed and certified precious stones;
nuggets of precious metals ..."
However, all this is only "de jure." While "de facto" Decree Nos. 759 and 215 carrying restrictions for civil turnover of precious stones and repealed as far back as 2004 together with the void “Instruction on the Procedure of Keeping Record of Transactions Made in Raw Gems” continue to be used illegally by law enforcement agencies as the "rules" governing the circulation of precious stones to this very day.
So the question arises, what prevented the concerned authorities during all these six years to change the federal law in such a way as to relieve the problems related to the legitimacy of such prohibitions? The answer is simple.
Firstly, no one among the authorities was interested in the legitimacy of prohibitions for civil circulation of precious stones, as in Russia courts are always right, by definition.
Secondly, there is absolutely no need to bring such cases before a court since people usually want to grease the wheels at a much earlier stage.
And thirdly, an attempt to bring back to life all the prohibitions - once already lost after precious stones had been cancelled as forex assets - would look too unconstitutional and ill-founded.
But to miss the opportunity of "inconspicuous" restoration of the pattern where "everything is prohibited" in the market of precious stones and even enhancing it in comparison with the previous government decisions would be foolish from the point of view of the concerned agencies. And they have not missed their chance when such an occasion emerged while developing the legislative framework for the Customs Union of Belarus, Kazakhstan and Russia, namely the Guidelines for Transactions Involving Precious Metals and Gems in the Customs Territory of the Customs Union.
The document has not yet been adopted, but in its draft version there are decisions aimed at a complete ban on civil turnover of precious stones. Subparagraph d) of Paragraph 7 of the Guidelines states that "transactions involving raw gems ownership transfer are to be registered by a specially authorized body (organization) of a Customs Union member state on the territory of which the transaction is effected ..." And is there any way to "register transactions" between individuals? There is none. This means, for example, that if any organization has quite legitimately recovered a gem, it cannot sell it to an individual unless it labels the gem as "unfit for making jewelry."
However, there are no such prohibitions in any part of the world, except some CIS countries. In addition, there cannot be any reasonable criteria to attribute precious stones as “unfit for jewelry manufacturing," since absolutely any material is capable to be a piece of innovative jewelry. And gems "unfit" for making a certain kind of jewelry may well be quite "fit" for another.
But the main thing about it lies with the following idea, preposterous a priori: if a precious stone is recovered abroad or imported from abroad, it must be sawn and faceted, unless it is unique. And if it is unique, it must be given to the state, to Gokhran. But this is absurd! After all, the collection value of very many gems, which are far from being unique, may be hundreds of times greater than the value of a stone as a piece of raw material.
This provision is unconstitutional because it substantially prejudices the rights of people to own precious stones (possession of such goods does not imply any danger to society, as for instance possession of weapons or drugs). Naturally, this rule is an essential obstacle to the cultural movement for collecting minerals hailed worldwide, since the total part of precious (by the Russian law) stones in the world market of collectible minerals although approximating to 6% of mineral species in circulation is nevertheless very important for making such collections complete.
It can be assumed that by introducing the rule for "mandatory sawing and cutting stones” the authorities were focused exclusively on diamonds. Indeed, rough diamonds, even in well-formed crystals and even abroad, are not particularly popular among collectors. But all foreign collectors do have at least one diamond in their collections.
There is another important aspect. In the world there are many mineral parks, where any individual for a small fee is given an opportunity to recover and obtain into ownership the above mentioned stones. But this rule prohibits even to pick up a stone found somewhere by chance. In other words, in some areas this rule simply blocks mineralogical tourism which is gaining popularity worldwide. And which is most important, this rule is absolutely unnecessary either for normal functioning of the industry or economic security.
The Guidelines infringe the rights of legal entities as well: “12. Within the Customs Union it is not allowed to conduct transactions in rough gemstones if their classification characteristics are not defined."
The question is: if Russia already has a specialized federal law which does not prohibit deals in rough stones with undefined classification characteristics, then does it mean that by imposing additional restrictions the Guidelines contradict the spirit and letter of the law?
In some countries the legislation contains restrictions on export of rough gems of jewelry quality, as a rule precisely indicating their names. It is an understandable protectionist measure aimed at protecting the interests of domestic manufacturers producing various goods using these gems – such as faceted inserts or stone-carved products. Legislative acts which require documents proving that gems have passed preliminary certification for the purpose of domestic circulation are effective only in some countries of the former USSR. Such a ban should not be confused with the Kimberley Process requirements for circulation of diamonds supported by the United Nations. It's quite a different story.
2. Ban on collecting precious and semiprecious stones
To collect minerals for a collection one should have a license. But starting from January 2010, it became impossible to obtain such a license not only for precious stones but also for "semi-precious" stones. The procedure for issuing collection licenses is regulated by Order No. 711 issued on 29.11.2004 by the Ministry of Natural Resources of the Russian Federation "On approving the procedure for examining requests for the right to use subsoil to collect mineralogical, palaeontological and other geological materials for collections." The document approves this “procedure.”
Please, keep it in mind that in 2004 this "procedure," immediately after precious stones were deprived of their forex asset status, did not contain any restrictions. But later the Ministry of Natural Resources of the Russian Federation issued Order No. 211 dated 10.09.2008, which prohibited collecting geological materials containing precious metals and precious stones for collections. And last year, the Ministry of Natural Resources issued Order No. 12 on 19.01.2010 which banned collecting samples of “semi-precious” stones.
Vladimir Zboikov for Rough&Polished
