Following the reform of the Arbitration Law, most existing arbitral institutions must re-register and obtain a permit from the government to administer disputes in Russia before November 1 2017. The International Commercial Arbitration Court at the Russian Chamber of Commerce and Industry has used this opportunity to enhance significantly its previous rules governing international and domestic arbitration.
One of the most praised changes introduced by the recent arbitration law reform concerns the arbitrability of so-called 'corporate disputes'. The Russian Arbitration Association (RAA) was the first Russian arbitral institution to develop and release for public consultation draft arbitration rules for corporate disputes. While some institutions have already followed suit and many more will do so, the RAA's draft rules provide a better idea of what arbitral proceedings in corporate disputes could look like.
Since 2009 Russian law has contained express provisions on shareholders' agreements. Further provisions of the Civil Code came into effect in 2014. The law sets out what shareholders' agreements can and cannot require shareholders to do and whether they can be enforceable against third parties, as well as whether they must be publicly disclosed or registered.
There are a number of restrictions on share transfers in Russia which companies should bear in mind. In addition, companies should be aware of the laws regarding whether minority shareholders can alter or restrict changes to share capital structures, when shareholders must notify changes to their shareholding to a regulatory authority and whether companies can buy back their shares. A number of restrictions also exist with regard to exiting a company.
Transactions of Russian joint stock companies and limited liability companies require the consent of the general meeting or the board of directors if they qualify as material or interested party transactions. As the non-observance of the relevant requirements may be grounds for contesting these types of transaction, they should be observed not only by shareholders and members of the corporate bodies of the respective companies, but also by persons that wish to enter into such transactions with these companies.
The Supreme Court recently clarified parties' right to terminate a contract unilaterally (ie, the 'right to unilateral refusal of performance' in Russian terminology) or amend a contractual obligation unilaterally. The court also clarified the requirements regarding the fulfilment of payment obligations, including with regard to bank transfers, currencies and interest in the event of a default, among other things.
Russian law continues to develop with respect to the disclosure of beneficial owners of Russian businesses. New provisions came into force at the end of 2016, which require all Russian legal entities to take reasonable and available steps to identify their beneficial owners and disclose them on request, among other things. For this purpose, the law expressly entitles a Russian legal entity to request information from its shareholders, as well as from other persons who in any way control the entity.
The Federal Tax Service recently began publishing information concerning the various obligations of Russian taxpayers (ie, legal entities) and their financial reporting on its website. This practice is new in Russia, as such information was previously classified as tax secrets and, by virtue of the Tax Code, could not be disclosed. This development is useful not only for Russian taxpayers, but also for foreign companies choosing Russian counterparties.
In January 2019 a new law will come into force enabling the tax authorities to request client-related documents from auditors which constitute 'auditing secrets'. This law marks the end of years of struggle by the tax authorities to gain access to audit documents. Although these changes carry no significant risks for bona fide taxpayers, the business community is concerned that the authorities may be able to request auditors' documents and opinions on related services, such as accounting and tax consulting.
The Federal Tax Service (FTS) recently issued a letter providing an extensive explanation of the tax authorities' application of the beneficial owner of income (BOI) concept. This concept was previously referred to only in the international tax treaties between Russia and other states, but has recently been actively implemented into Russian tax legislation. In this regard, the FTS's letter is of great interest, as it summarises the approach of both the courts and the tax authorities with regard to resolving BOI issues.
The Ministry of Finance recently issued an important clarification regarding the taxation of a foreign parent company's property rights to a trademark as a contribution to the charter capital of its Russian subsidiary. Previously, there had been ambiguity surrounding this issue due to the competing provisions of the Tax Code with regard to the procedure for imposing value added tax on contributions to a company's charter capital and transactions involving property rights to trademarks.
A new law, which will enter into force in 2019, will introduce significant changes to the special procedure for imposing value added tax (VAT) on services provided in electronic form by foreign companies that have no branch or representative office in Russia. Foreign organisations that provide services in electronic form to Russian buyers are advised to register for tax accounting in Russia as VAT payers, as Russian counterparties will likely refuse to purchase electronic services from parties that fail to do so.
In recent years, the commercial titles of the Civil Code have been aligned more closely with international commercial practices and the Russian courts have been enforcing these new standards. These improvements are noticeable in the area of franchise law. Because these statutory provisions are new, franchisors should check the latest court decisions for additional guidance before structuring transactions based thereon.
Russian design law is incorporated into Part IV of the Civil Code. Additional provisions regarding application proceedings are set out in the Rules on Design Patent Application Proceedings and the Instructions for Design Patent Application Documents. Exclusive rights to industrial designs are recognised through registration in the State Register of Industrial Designs and certified by design patents. Certain designs relating to applied art subject matter may be protected by copyright.
While the Russian domain name registration procedure may seem easy, domain names are always at risk – especially when they overlap with traditional IP rights belonging to third parties. Nearly all domain name conflicts result in dispute resolution involving national and international principles of law and practice. Where the dispute is subject to Russian jurisdiction, a reliable and efficient domain name litigation process is available to rights holders.
The Law on the Circulation of Drugs 2015 regulates the procedure and requirements for registering a pharmaceutical product for the purposes of import, production, advertisement or sale. Under the law, drugs can be manufactured, sold and used in Russia only if they are registered with the Ministry of Health. The procedure and requirements for registering a trademark are regulated by Part IV of the Civil Code.
Thanks to a constant flow of counterfeits on the Russian market, Customs has evolved into a well-regulated government machine, which is orchestrating a promising number of seizures. While entrepreneurs will naturally factor in potential difficulties when launching a business in a new market, these rarely extend to counterfeiting. However, if the business thrives, the owner should be on the lookout for this sort of free-riding – the more successful a business, the more likely it is to attract predators.