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.
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 approved a form of inquiry which it will use to request information from legal entities regarding their beneficial owners in order to, among other things, identify tax evasion schemes. For the purposes of the law, 'legal entities' means not only Russian legal entities, but also foreign legal entities, including those that perform economic operations in Russia and interact with Russian clients.
The basic value added tax (VAT) rate recently increased from 18% to 20%. The new rate will apply to all goods, works and services which are sold, performed or provided from 1 January 2019. In addition, several estimated tax rates have also been amended. As entities are expected to reflect the increased VAT rate in the price of their goods, economists predict a rise in prices associated with the increase in early 2019.
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.
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.
Roscomnadzor (the Russian data protection authority) recently filed a landmark action against illegal personal data processing by Google Analytics and Yandex Metriсa. If the authority succeeds in the appeal court, Russian websites will have to welcome users with EU General Data Protection Regulation-style cookie banners and privacy policies. Prior to this case, the Russian internet community had not considered statistical information concerning web traffic and user actions to constitute personal data.
Bill 424632-7 on the Amendment of Parts 1, 2 and 4 of the Civil Code of the Russian Federation (the Digital Rights Bill) and Bill 571124-7 on the Amendment of the Federal Law on Information, Information Technologies and Data Protection (the Big Data Bill) were recently submitted to Parliament for discussion. Both bills are essential developments, especially given the increasing interest in and high value of Big Data in the current digital reform.
The EU General Data Protection Regulation (GDPR) applies internationally and can encroach on the national laws of non-EU countries. In Russia, international companies must fulfil the requirements of both the GDPR and local laws, even though they may contradict each other. Companies should follow a number of recommendations in order to find the most practical solutions, mitigate relevant legal risks and keep their noses clean should Roscomnadzor try to find fault with them.
New data storage rules recently took effect for telecoms operators in Russia. Although the rules are aimed at fighting e-terrorism and preserving national cybersecurity, their application and implementation will inevitably lead to substantial financial and material investments by telecoms operators. Therefore, it will be interesting to see how this legislation will be complied with in practice.
New data storage rules recently took effect for online data distributors (organisers) in Russia. The new rules form an integral part of the ongoing reform of the legislation on the national governance of internet sovereignty, data privacy and cybersecurity, which includes the package of laws known as the 'Yarovaya Law'. However, both the Yarovaya Law and the new data storage requirements have been widely criticised.