Category: Russia

Although, unlike the GDPR, Russia’s Personal Data Law does not clearly distinguish the concepts of data controller and data processor, there is a draft amendment to Russia’s law which, if adopted, would introduce these concepts.

So, what does the Russian Personal Data Law say about the roles of personal data controller and processor and how these concepts could help manage the Russian personal data localization requirement, especially in regards to cross-border personal data transfers?

In determining the parties involved in personal data processing, Russia’s Personal Data Law refers only to a “data operator,” which it defines as a person who, independently or in cooperation with others, organizes and/or processes personal data as well as determining the purposes and scope of personal data processing. This definition is rather unhelpful, because it suggests that with respect to the same set of personal data a company could be regarded as both controller and processer within the GDPR’s meaning of these concepts (although it is unusual, under the GDPR, to have one company act in both roles simultaneously with respect to the same set of personal data).

Furthermore, Russia’s Personal Data Law, while setting out the requirements on personal data processing and the relevant obligations of the parties involved, usually refers only to the obligations of a data operator, suggesting, at first sight, that it does not distinguish between a controller and a processor in the GDPR-sense.

However, the Law, though in a rather non-evident manner, provides that apart from a personal data operator there might be a de facto separate data processor. The Russian Personal Data Law allows a personal data operator to “assign” the processing of personal data to a third person based on a contract and provided that the consent of the data subject is obtained. It is notable that, at the same time, the Law requires that any such processor follow all the requirements of the Personal Data Law.

This ambiguity in the separation of the legal roles between a data operator (controller) and a data processor, as well as the absence of comprehensive regulation of relations between the two, results in many complications in practice. A clearer distinction between the concepts of data operator and data processor would help resolve many practical issues.

For instance, there is a rather unique feature in the Russian personal data regulations – the data localization requirement. Although the Russian Personal Data Law does not per se prohibit the cross-border transfer of personal data, according to the localization requirement during the process of the collecting of personal data, including collection via Internet, a data operator must provide that a record, and the organization, accumulation, storage, update, and retrieval of personal data of citizens of the Russian Federation is held on databases located within the Russian Federation. In certain cases, this obligation also applies to those foreign companies who do not have a corporate presence in Russia but who target the Russian market and Russian customers via the Internet.

Although the Russian personal data regulator has announced that the Russian Personal Data Law does not have exterritorial effect, and that once personal data has crossed the Russian border, it shall be regulated by the jurisdiction of the place of destination, recent developments in the Twitter case – in which Twitter Inc. (California, USA) was fined for failing to localize the personal data of Russian citizens in Russia – confirmed that Russian authorities intend to apply this specific requirement extraterritorially.

Thus, if a foreign company wishes to comply with the Russian localization requirement, engaging a local data processor with a clear role and legal status to ensure that the personal data of Russian citizens are first processed locally and only then transferred abroad to a data operator might be an option. Moreover, introducing the concept of data processor to Russian law would not only help eliminate the current legal ambiguity but would also promote local data processing business.

By Eldar Mansurov, Leader of Regulatory and Compliance, Peterka & Partners Moscow

This Article was originally published in Issue 7.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Hogan Lovells has advised coordinating mandated lead manager ING Bank N.V. and mandated lead arrangers Credit Agricole Corporate and Investment Bank, NATIXIS, SGBTCI, AO Raiffeisenbank, Bank of America Merrill Lynch International Designated Activity Company, Mizuho Bank, Ltd., Deutsche Bank AG, London Branch, Bank ICBC (JSC), UniCredit S.p.A., and Intesa Sanpaolo Bank Ireland Plc on a EUR 600 million revolving loan facility agreement with Russia-based steel producer NLMK.

An accordion option was also stipulated in the agreement, which allows NLMK to increase the loan limit up to EUR 1 billion.

Hogan Lovell’s team was led by British Partner David Leggott, supported by Russian Counsel Alexander Gasparyan and Paralegal Alexander Kitaev.

Hogan Lovells did not reply to our inquiry about counsel for NLMK.

White & Case has advised VTB Bank and a consortium of investors on the RUB 132 billion sale of a 55% stake in Tele2 Russia to Russia’s Rostelecom, and on the acquisition of an approximately 29% stake in Rostelecom.

White & Case’s team in Moscow included Partners Eric Michailov and Igor Ostapets, Counsel Adam Smith, and Associates Evgeny Chernyavsky, Ksenia Tyunik, and Tigran Saakyan.

White & Case did not reply to our inquiry on the matter.

From 1 January 2021, foreign nationals will be able* to enter Russia with electronic visas at border control posts to be specified by the Russian government in a separate document.

An e-visa will be valid for a single entry into Russia. Its term of validity will be 60 calendar days, and the allowed term of stay will be up to 16 calendar days. 

Obtaining e-visas will not be available to all foreigners, but only to nationals of states to be approved by the Russian government.

Electronic visas will be issued by the Russian Ministry of Foreign Affairs within four calendar days based on applications that foreign nationals will complete over a special website. 

It will be possible to use e-visas for business, personal, tourism and humanitarian purposes.

Do not overstay

Foreigners using the e-visa entry procedure should ensure that, when completing visa applications, they provide full identification details strictly as per their ID details. To avoid administrative sanctions, e-visa holders must not overstay their visits to Russia as specified by the visas.

As previously reported, the Russian government is pursuing a consistent policy of introducing e-visas, which are already available for visits to Saint Petersburg, the Leningrad and Kaliningrad Regions, and the Far Eastern Federal District. From 2021, e-visas will not be restricted to certain cities and regions but will be valid throughout the country.

* In Russian

By Valeriy Fedoreev, Partner, Christophe Huet, Partner, and Ekaterina Elekchyan, Senior Associate, CMS Russia

Baker McKenzie has advised audio streaming service Spotify on its launch in 13 new markets — Albania, Belarus, Bosnia & Herzegovina, Croatia, Kazakhstan, Kosovo, Moldova, Montenegro, North Macedonia, Russia, Serbia, Slovenia, and Ukraine — giving it a presence in 92 markets worldwide.

Spotify, which launched in 2008, now reports a community of more than 299 million users. According to Baker McKenzie, “as the leading platform driving music discovery on more types of devices than any other service, Spotify’s expansion in Europe comes as consumers in the region embrace streaming. According to the International Federation of the Phonographic Industry, Russia is the 17th-biggest streaming market in the world and on pace to be the 10th-biggest streaming market by 2030. More than 87 percent of fans in Russia now access music through streaming, compared to 61 percent adoption globally, and 68 percent adoption in the U.S., according to IFPI.”

“Today’s launch opens the door for nearly 250 million fans to start discovering new music from around the world on Spotify, and for artists in the region to reach the increasingly connected global audience of fans,” said Gustav Gyllenhammar, Spotify VP, Markets and Subscriber Growth. “Launching in these 13 markets is an important moment in Spotify’s journey, especially as we welcome fans and artists in growing music markets like Russia, where streaming is being widely adopted and where we see a significant opportunity for Spotify.”

Baker McKenzie’s team was led by Stockholm-based Partner Anna Orlander and Moscow-based Partners Ed Bekeschenko, Denis Khabarov, Konstantin Kouzine, and Vladimir Efremov, and included Associates Vadim Perevalov, Anna Bazhenova, Denis Ezhov, Valeriya Eystrakh, and Lilia Badretdinova. 

Editor’s Note: After this article was published Semenov & Pevzner reported that it had advised Spotify on intellectual property issues related to its launch in the Russian market, as well as in Ukraine, Belarus, Moldova, and Kazakhstan. The firm’s team was led by Managing Partner Roman Lukyanov.

Amendments* to the Labour Code of the Russian Federation regarding severance pay will come into force on 13 August 2020.

These amendments are aimed at clarifying the procedure for providing guarantees to and protecting the rights of employees who are dismissed due to the liquidation of their organisation or due to staff redundancy.

Amounts and conditions for providing payments

Currently, upon dismissal due to any of the grounds mentioned above, an employee will be paid severance pay in the amount of one average monthly salary.

The amendments state that the employee is to be paid the average monthly salary for the second month from the date of dismissal if it takes more than one month for the employee to find a new job.

The employee can receive an average monthly salary for a third month from the date of dismissal provided that:

• the employee contacted the Employment Service within 14 working days from the date of dismissal (previously, the period was two weeks);
• the Employment Service could not find a new job for the dismissed employee (within two months from the date of dismissal); and
• the Employment Service adopted a decision that the relevant payment should be made.

The amendments further state that if an employee finds new employment for only part of the second or third month, the average monthly salary for the corresponding month is paid in proportion to the period of time the employee spent searching for a job during that month.

Procedure for providing payments

The amendments establish a new requirement: a deadline for applying for payment of severance pay. To receive the average monthly salary for the second or third month from the date of dismissal, an employee must apply to the employer in writing for payment no later than 15 working days after the end of the corresponding (second or third) month from the day of dismissal. If this deadline is missed, the employee loses the right to receive payment. (We believe that the courts will be inclined to restore this deadline for employees if they have good reasons for having missed it.)

The employer must make payments for the second and third months within 15 calendar days from the date of the employee’s application for payment.

One-time compensation instead of payment of average salary

An important innovation is the right of the employer to immediately make a one-time compensation payment to the employee in the amount of twice the average monthly salary for the second and third months of employment search from the day of dismissal instead of paying the average monthly salary for the second and third months in instalments (as indicated above). 

If the employer has already paid the average monthly salary for the second month, it has the right to pay a lump-sum compensation for the third month of employment search without having to wait for the employee’s application and comply with the above conditions (necessary for the employee to receive the average monthly salary for the third month of job search).

Additional guarantees for employees in the Far North

As before, increased payments are provided for employees dismissed from organisations located in the regions of the Far North (and other areas with the same status). In particular, if they cannot find a new job, they also retain their average salary for the third month from the date of dismissal (without having to contact the Employment Service), and in exceptional cases (provided that they apply for employment through the Employment Service and the Service makes a decision on payment) also for the fourth, fifth and sixth months.

The term by which these employees must contact the Employment Service to be paid an average salary for the fourth, fifth and sixth months was reduced from one month to 14 working days from the date of dismissal.

The procedure for making payments to persons dismissed from organisations located in the regions of the Far North has been specified in the same manner as for other employees. In particular, depending on the circumstances, payments can also be made not for a whole month, but in proportion to the number of days of job searching in a particular month. A similar period of 15 working days (after the end of the corresponding month) is set for an employee to apply for payment.

In addition, the employer also has the right to pay a lump-sum compensation. In particular, to exclude all subsequent applications of the employee for payments, the employer can pay the employee a lump-sum compensation in the amount of five times the average monthly salary (in addition to the severance pay in the amount of one average monthly salary, which is payable upon dismissal).

Time frame for making payments in the event of liquidation

An important clarification in the amendments is in the event of the liquidation of an organisation whereby all the payments mentioned above must be made before the completion of the liquidation of the organisation (i.e. before making an entry on its termination in the Unified State Register of Legal Entities). This requirement protects the rights of employees since in practice it is impossible for employees to receive the established payments after the completion of liquidation.

Conclusion and recommendations

These amendments are primarily aimed at protecting the rights of employees who have been dismissed on the grounds described above, and in particular in the event of a business liquidation, as the new regulations guarantee that employees will receive appropriate payments before the employer has been liquidated.

Employers should consider the new opportunity to make a one-time compensation payment without waiting for employees to file stage-by-stage applications for receiving payments. In particular, when staff redundancy is implemented, one-time compensation makes it possible for employers to predict in advance the corresponding costs that will be incurred and to avoid the financial burden of subsequent employee requests for payments.

* In Russian

By Christophe Huet, Partner, and Maxim Gubanov, Senior Associate, CMS Russia

Former Egorov, Puginski, Afanasiev & Partners Partner Tatyana Nozhkina has joined ZKS Attorneys.  

According to ZKS, Nozhkina, who joins as a Senior Partner, moved to the firm “for the purpose of strengthening its international criminal practice and for the further development of the practice of internal investigation and compliance procedures. For more than 22 years, Tatyana has specialized in criminal defense of owners and managers of Russian and international companies. She represents international companies in cases involving criminal investigations and other activities carried out against them by law-enforcement authorities and has also successfully advised various companies in internal investigations and compliance procedures. Tatyana has many years of experience in criminal defense in cases of economic crimes and crimes of public officials, including tax crimes.”

Nozhkina is a graduate of the Lomonosov Moscow State University. Prior to joining ZKS, she spent 15 and a half years with Padva & Partners and three years with Egorov, Puginski, Afanasiev & Partners.

“ZKS continues to grow and develop,” commented Managing Partner Denis Saushkin. “Our strategy to attract the best attorneys in criminal law who have worked both in governmental investigative bodies before and as attorneys from the very beginning of their careers. Such an approach allows us to provide more resources, expertise, and criminal defense to our clients. In line with these goals, we are happy to welcome Tatyana Nozhkina as a Senior Partner. For many years she has managed projects on behalf of large Russian and international companies. I am sure that her experience will allow us to be more effective in the defense of our clients in major criminal cases. Congratulations to Tatyana on joining the team!”

White & Case has advised the Moscow Exchange, Russia’s largest securities exchange group, on its acquisition of a 17% stake in BierbaumPro AG and the right to acquire the rest from unidentified sellers.

BierbaumPro is a Switzerland-based company that, through its wholly-owned Russian subsidiary NTProgress, develops and owns an e-fx NTPro trading platform.

According to White & Case, “the transaction aligns with the Moscow Exchange growth strategy and will enable it to provide flexible FX trading solutions to its clients. Post-acquisition, the Moscow Exchange will continue to develop the NTPro platform and the existing NTProgress team.”

White & Case’s team in Moscow was led by Partner Nikolay Feoktistov and included Partner Andrei Dontsov, Counsel Adam Smith, and Associates Evgeny Chernyavsky, Alexander Karmalita, and Valery Lavrov. 

On 20 July 2020, laws governing the activities of financial marketplaces came into force, namely, Federal Law* No. 211-FZ “On Concluding Financial Transactions Using a Financial Platform” dated 20 July 2020 and Federal Law* No. 212-FZ “On Amendments to Certain Legislative Acts of the Russian Federation Concerning the Conclusion of Financial Transactions Using a Financial Platform” dated 20 July 2020 (the “Laws”).

Information on the Laws at their adoption stage can be found in this eAlert.

The Laws establish the procedure under which operators of financial platforms (marketplaces), which provide an opportunity for consumers to conclude certain financial transactions through information systems, can operate.

Financial platform operators

According to the Laws, which introduce the following requirements for financial platform operators, an operator must:

• be a Russian legal entity in the form of a joint-stock company;
• be included by the Bank of Russia in the register of financial platform operators;
• have a minimum amount of equity capital of RUB 100m (EUR 1.2m);
• not combine its activities with those of a credit institution or a non-banking financial institution, except for conducting activities as a trade organiser, depository, specialised depository or registrar;
• implement an internal control system and a risk management system;
• be in legal possession of a hardware and software complex located in Russia;
• comply with information protection requirements established by the Bank of Russia; and
• comply with qualification requirements for members of its management bodies and for individual employees, and with requirements for shareholders of the marketplace operator (e.g. a shareholder with more than 10% of voting shares cannot be a company registered in an offshore zone).

The marketplace operator will also be required to disclose certain information on its website, including service fees and technical failures that have occurred.

When making insurance transactions through a platform, the operator will not be recognised as an insurance agent or insurance broker, which eliminates the risks of having its activities regulated by insurance legislation.

Transactions that can be concluded on a financial platform

Financial marketplaces can be used to conclude transactions between consumers (individuals) and financial institutions or issuers.

The following transactions can be made over a financial platform:

• for the provision of banking services;
• for the provision of insurance services;
• for the provision of services in the securities market; and
• for the provision of other services of a financial nature, with the exception of bank account (deposit) agreements for entrepreneurial activities.

Marketplace rules

The rules of a financial platform must include provisions established by the Laws, such as requirements for persons registering on the platform, types of financial transactions, and the terms of service agreements.

The rules, as well as changes to them, are subject to mandatory registration with the Bank of Russia.

To make transactions through a financial marketplace, consumers and financial institutions or issuers must adhere to the agreement on the provision of financial platform services posted by the operator in the financial platform rules.

Under a service agreement, the operator provides the parties with the opportunity to conclude a financial transaction on the marketplace, and also provides information services. In addition, the operator may provide additional consumer identification services for financial institutions in order to comply with anti-money laundering legislation.

Settlements under transactions entered into in a financial marketplace will be carried out using a special account for the marketplace operator or, if provided by the platform rules, using the fast payment service of the Bank of Russia.

Comments

Given the popularity of classic goods marketplaces in the Russian market, the creation and development of financial marketplaces certainly has significant consumer potential.

Given the absence of transitional provisions for clarifying the procedure for applying the Laws to existing financial marketplaces, with the adoption of the new regulation, existing financial services marketplaces should be included in the register of financial platform operators and ensure compliance with the new requirements. New companies wishing to create such a platform must also take into account the requirements enacted for the relevant activity.

When creating new marketplaces, insurance companies, banks and other financial organisations can benefit from new online means to promote and sell their services.

By Leonid Zubarev, Senior Partner, Konstantin Baranov, Partner, Anton Bankovskiy, Partner, and Vladislav Eltovskiy, Associate, CMS Russia

Bryan Cave Leighton Paisner has helped the PSA Group obtain Russian antitrust clearance for its merger with Fiat Chrysler Automobiles.

According to Bryan Cave Leighton Paisner, “the intended merger brings together all activities of the two groups. The deal is yet to be completed but it would form the world’s fourth-biggest car manufacturer with 8.7 million vehicles sold per year, a turnover of EUR 170 billion, and 410,000 employees worldwide. After almost a 3-month review, the Russian Federal Antimonopoly Service issued an unconditional clearance for the merger.”

Bryan Cave Leighton Paisner’s team was led by Partner Nikolay Voznesenskiy and included Counsel Andrey Neminuschiy and Associate Vladislav Feklin.