Category: Russia

In late April 2020, the ban was lifted on the provision of services related to the conclusion of insurance contracts in electronic form by insurance agents and brokers.

It had been possible to conclude insurance contracts in electronic form since 2014 (Article 6.1 of the Law of the Russian Federation “On organisation of insurance business in the Russian Federation”* or “Law”). Until recently, this applied only to online interactions between policyholders and insurers, while insurance agents and brokers were prohibited from providing this type of service.

The new version* of the Law, which came into force on 24 April 2020, both removes this prohibition and sets up the procedure for the electronic interaction between insurers, insurance intermediaries and their clients.

Participation of insurance intermediaries in the exchange of electronic information

Article 6.1 of the Law allows a policyholder (insured person, beneficiary) to send information to the insurer in electronic form. This information includes a proposal form, a notification of the occurrence of an insured event, an application for insurance payment or other documents. With only a few exceptions, the policyholder has to sign these documents with a simple electronic signature.

Prior to the adoption of the current version of the Law, insurance agents and brokers were not allowed to participate in the electronic exchange of information. Such an exchange had to take place between insurers and their clients directly. This prohibition has now been removed, and insurance intermediaries can participate in the information exchange. They can also provide services related to voluntary insurance in electronic form on behalf of and at the expense of the insurer.

To make it technically possible for an insurance intermediary to participate in the information exchange, the insurer will provide it with access to its information system. When this happens, insurance intermediaries are required to ensure an appropriate level of protection of the information transmitted.

Signing an insurance contract in electronic form

Even though electronic insurance contracts can be concluded with the assistance of insurance intermediaries, an insurance agent or broker is not entitled to sign such an insurance contract with an electronic signature on behalf of the insurer or to receive the insurance premium from the policyholder under such an agreement. According to the explanatory note to the bill, lawmakers established these rules to minimise the risk of bad-faith actions by insurance intermediaries. Thus, services of insurance intermediaries in electronic document management are more informational or technical in nature, and the insurance contract can still be signed electronically only by the insurer itself.

If the insurance broker represents the interests of the policyholder, it also does not have the right to sign the insurance contract in electronic form on behalf of the policyholder when it is an individual. If the policyholder is a legal entity, the insurance contract must be signed with the enhanced qualified electronic signatures of the insurer, the insurance broker (acting on its own behalf, but at the expense of the policyholder) and the corporate policyholder.

The insurance agent or broker must ensure that the policyholder has the opportunity to examine the insurance rules before the insurance contract is concluded (e.g. by sending links to the official website of the insurer) and to obtain from an insured individual confirmation signed by the insured’s simple electronic signature.

However, if the insurance agent or broker violates the conditions established by the Law, the insurer is not entitled to declare the insurance contract (concluded in the form of an electronic document) invalid or null and void.

Mobile apps

The previous version of the Law referred only to the insurer’s website as a source of online information and a platform for exchanging information. The current version of the Law added that mobile applications (defined as software of an insurer, insurance agent or broker used for exchanging information with clients) are of the same nature.

Conclusions

The participation of insurance intermediaries in the conclusion and the provision of online insurance services can be considered as a step in the development of Insurtech in Russia. Despite the fact that insurance intermediaries are not allowed to sign insurance contracts on behalf of the insurer in electronic form, they can facilitate interactions between clients and insurance companies online at other stages of provision of services, which should have a positive impact on the development of the Russian insurance market.

*in Russian

By Leonid Zubarev, Senior Partner, CMS

In late April 2020, the ban was lifted on the provision of services related to the conclusion of insurance contracts in electronic form by insurance agents and brokers.

It had been possible to conclude insurance contracts in electronic form since 2014 (Article 6.1 of the Law of the Russian Federation “On organisation of insurance business in the Russian Federation”* or “Law”). Until recently, this applied only to online interactions between policyholders and insurers, while insurance agents and brokers were prohibited from providing this type of service.

The new version* of the Law, which came into force on 24 April 2020, both removes this prohibition and sets up the procedure for the electronic interaction between insurers, insurance intermediaries and their clients.

Participation of insurance intermediaries in the exchange of electronic information

Article 6.1 of the Law allows a policyholder (insured person, beneficiary) to send information to the insurer in electronic form. This information includes a proposal form, a notification of the occurrence of an insured event, an application for insurance payment or other documents. With only a few exceptions, the policyholder has to sign these documents with a simple electronic signature.

Prior to the adoption of the current version of the Law, insurance agents and brokers were not allowed to participate in the electronic exchange of information. Such an exchange had to take place between insurers and their clients directly. This prohibition has now been removed, and insurance intermediaries can participate in the information exchange. They can also provide services related to voluntary insurance in electronic form on behalf of and at the expense of the insurer.

To make it technically possible for an insurance intermediary to participate in the information exchange, the insurer will provide it with access to its information system. When this happens, insurance intermediaries are required to ensure an appropriate level of protection of the information transmitted.

Signing an insurance contract in electronic form

Even though electronic insurance contracts can be concluded with the assistance of insurance intermediaries, an insurance agent or broker is not entitled to sign such an insurance contract with an electronic signature on behalf of the insurer or to receive the insurance premium from the policyholder under such an agreement. According to the explanatory note to the bill, lawmakers established these rules to minimise the risk of bad-faith actions by insurance intermediaries. Thus, services of insurance intermediaries in electronic document management are more informational or technical in nature, and the insurance contract can still be signed electronically only by the insurer itself.

If the insurance broker represents the interests of the policyholder, it also does not have the right to sign the insurance contract in electronic form on behalf of the policyholder when it is an individual. If the policyholder is a legal entity, the insurance contract must be signed with the enhanced qualified electronic signatures of the insurer, the insurance broker (acting on its own behalf, but at the expense of the policyholder) and the corporate policyholder.

The insurance agent or broker must ensure that the policyholder has the opportunity to examine the insurance rules before the insurance contract is concluded (e.g. by sending links to the official website of the insurer) and to obtain from an insured individual confirmation signed by the insured’s simple electronic signature.

However, if the insurance agent or broker violates the conditions established by the Law, the insurer is not entitled to declare the insurance contract (concluded in the form of an electronic document) invalid or null and void.

Mobile apps

The previous version of the Law referred only to the insurer’s website as a source of online information and a platform for exchanging information. The current version of the Law added that mobile applications (defined as software of an insurer, insurance agent or broker used for exchanging information with clients) are of the same nature.

Conclusions

The participation of insurance intermediaries in the conclusion and the provision of online insurance services can be considered as a step in the development of Insurtech in Russia. Despite the fact that insurance intermediaries are not allowed to sign insurance contracts on behalf of the insurer in electronic form, they can facilitate interactions between clients and insurance companies online at other stages of provision of services, which should have a positive impact on the development of the Russian insurance market.

*in Russian

By Leonid Zubarev, Senior Partner, and Darya Lukoyanova, Associate, CMS

Akin Gump has advised PJSC Lukoil on its issuance of USD 1.5 billion Eurobonds listed on the Main Market of the London Stock Exchange. Clifford Chance advised joint lead managers Citigroup, Societe Generale CIB, and Bank GPB International S.A. (Gazprombank).

The offering consisted of 10-year 144A/Reg S notes with a coupon of 3.875% per annum. The notes were issued by Lukoil Securities B.V. and guaranteed by PJSC Lukoil with the transaction completing on May 6, 2020. The debt issuance was the company’s first since 2016.

According to Akin Gump, “the transaction was conducted against a backdrop of the COVID-19 pandemic, massive falls in oil demand and prices, as well as the current geopolitical environment. All parties worked remotely for seven weeks, closing the transaction smoothly notwithstanding the logistical challenges. Lukoil intends to use the net proceeds for general corporate purposes, including the refinancing of certain existing indebtedness.”

Akin Gump’s team was led by Moscow-based Partner Natalia Baratiants, with London-based Partners Dan Walsh and Robert Aulsebrook. It also included Partners Alexey Kondratchik, Wynn Segall, Nnedi Ifudu Nweke, Arina Lekhel, and Bruce Simonetti, Senior Counsels Inderveer Hothi and Louis Zivot, Counsels Olga Te and Andrey Kulikov, and Associates Alex Leitch, Camila Rodriguez, Anna Kardash and Andrew Schlossberg.

Clifford Chance’s team included London-based Partners John Connolly and David Dunnigan, Moscow-based Partner Arthur Iliev, and Moscow-based Counsel Evgeny Soloviev.

On 1 April 2020, amendments* came into force allowing Russian legal entities and individual entrepreneurs to enter additional information about themselves on the Fedresurs* website, as well as information relating to individual terms of contracts they enter into.

In particular, the following information can now be published:

• when there is a right to repurchase a property;

• when the rights of the owner or possessor of an asset under a contract are restricted;

• when a debtor enjoys a possessory lien over an asset and how this lien can be terminated;

• when a party to a contract retains ownership rights to goods;

• when a surety commitment is in place; and

• when a party wishes to publish any other information, except in cases when access to such information is restricted under Russian law or a confidentiality agreement.

When information is published on Fedresurs, and provided that the objects in respect of which the respective rights or restrictions are established can be unambiguously identified, it will be presumed that third parties have been notified of such rights or restrictions from the day following the day of publication. This will be the case unless otherwise provided by law, or unless it is proven that the person knew or should have known about the rights or restrictions before the relevant information was published.

Who can benefit from this development?

This new instrument constitutes an additional guarantee for contractual creditors and can be used for a wide range of contracts, such as movable property sale and purchase agreements (for industrial equipment, large quantities of goods, etc.), share sale and purchase agreements, and corporate agreements.

For example, Fedresurs may contain information specifying that ownership over a large piece of equipment to be delivered under a contract will only be transferred after full payment, or information about restrictions contained in a corporate agreement relating to the alienation of shares.

In addition, information published on Fedresurs can be used to check counterparties before signing contracts with them. Companies can, for instance, assess the financial risks of interacting with a counterparty based on whether the counterparty is a surety in relation to any obligation.

Recommendations

We recommend that persons or entities who benefit from restrictions imposed over property (e.g. sellers, creditors under surety agreements) actively use Fedresurs to publish information on such restrictions. This will help reduce the risk that debtors enter into transactions in violation of the terms of the relevant contract. It will also make it easier for creditors to challenge these transactions.

As published information will be considered known to any third parties, all persons or entities planning on concluding contracts with Russian counterparties should check whether information on restrictions affecting their counterparties has been published on Fedresurs.

* in Russian

By Georgy Daneliya, Counsel, Alexey Shadrin, and Elizaveta Rakova, Associates, CMS

Bryan Cave Leighton Paisner has advised PJSC Sovcombank and Mobile Payments LLC on their entrance into a partnership with IDRAM LLC and IDBank CJSC, which were advised by TA Legal Consulting.

According to Bryan Cave Leighton Paisner, “the parties intend to cooperate in providing customers from Russia and Armenia with the possibility of replenishing accounts and electronic wallets opened in Sovcombank PJSC and Idram LLC. As part of the first stage of the partnership, the participants established a new company in the Russian Federation that will develop innovative fintech solutions.”

Bryan Cave Leighton Paisner’s team included Partner Ekaterina Dedova, Senior Lawyer Mikhail Filatov, and Lawyers Elena Shelomentseva and Anton Nefedyev.

TA Legal Consulting’s team was led by Managing Partner Marat Agabalyan and included Partner Ivan Tertychny and Junior Associate Anton Ivanov.

As of 27 July 2020, geographical indications on products will be protected in Russia. It will be possible to register them with the Federal Service for Intellectual Property (Rospatent). These changes are the result of the entry into force of recent amendments to the Russian Civil Code.

A geographical indication is a sign used on a product that refers to its specific geographical origin and the particular qualities and reputation it possesses due to this geographical origin.

Geographically related designations are already protected in Russia as appellations of origin of goods. This regime will continue to exist, but geographical indication rights will be easier and faster to obtain than appellations-of-origin rights, especially for foreign producers, for the following reasons:

• The key difference between a geographical indication and an appellation of origin is: to register a geographical indication, it is sufficient for the applicant to prove that at least one important stage of the product manufacturing process (i.e. a stage that has a significant impact on the product’s particular qualities) takes place at a certain geographical location while, for an appellation of origin, all stages must be carried out in the relevant geographical territory.

• When applying for the registration of an appellation of origin, the applicant must submit the report of a competent authority or organisation confirming compliance with product-manufacturing requirements. No such requirement exists for registration of a geographical indication, which should simplify the registration process.

• Foreign producers may register their geographical indications in Russia if an indication is duly registered in the country of the product’s origin either as a geographical indication or a geographically related designation. In this case, the producers will have to file a relevant registration certificate and accompanying documents with Rospatent.

Protection of a geographical indication will be granted for ten years from the filing date. This period can be extended for an unlimited number of ten-year periods provided that, upon renewal, the right holder submits a document confirming that it still manufactures the product for a Russian geographical indication or, for a foreign geographical indication, that it is still protected outside of Russia.

Both domestic and foreign producers are expected to favour the newly introduced regime of geographical indications and many will likely apply for registration with Rospatent, which will provide them with an additional tool for preventing the sale of products that mislead consumers about place of origin.

By Anton Bankovskiy, Partner, Irina Shurmina, Senior Associate, and Ksenia Danshina, Associate, CMS

 

Alrud has advised the Mechel Group on the sale of its 51% participatory interest in the companies which operate the Elga coalfield project in Russia to A-Property. Monastyrsky, Zyuba, Stepanov & Partners advised A-Property on the deal, which was valued at RUB 89 billion.

The Elga coalfield owns one of the world’s largest deposits of high-quality coking coal. Its estimated reserves are approximately 2.2 billion tons.

Alrud’s team included Partners Andrey Zharskiy and Alexander Zharskiy, Counsel Oleg Ezhov, and Associates Kristina Akalovich, Anna Derbak, and Irina Cherdintseva.

Monastyrsky, Zyuba, Stepanov & Partners’ team included Partner Mikhail Motrich and Senior Associate Alena Shubina.

Starting in March 2020, Rospatent implemented Covid-19 pandemic containment measures in line with the high-alert regime adopted by the authorities. In particular, new rules were established for handling communication with applicants during the obligatory self-isolation period, such as a ban on accepting paper-based applications and other measures restricting direct communication.

On 28 April 2020, the Head of Rospatent, Grigory Ivliev, held an online press briefing to discuss the work of Rospatent in the new reality.

Mr Ivliev informed the press that despite the non-working period declared by the Russian President starting from 30 March 2020, Rospatent continues to operate and provide services online. Currently, the majority of examiners are working remotely. This includes conducting searches and performing fully-fledged examinations without slowing down the usual pace of work.

Earlier, in addition to existing electronic services, Rospatent introduced the option of filing new applications by email, deemed equivalent to filing applications on paper.

The Chamber for Patent Disputes also continues to conduct hearings on administrative proceedings by video conference.

Mr Ivliev also talked about the future digitalisation of Rospatent’s services and how traditional ways of communication will change after the coronavirus crisis is over. For instance, new digital platforms have been developed and will already be implemented by Rospatent in 2020-2021, including the blockchain-based unified register of intellectual property rights, allowing their direct acquisition and licensing.

Finally, Mr Ivliev confirmed that all deadlines for filing documents and paying official fees that fall within the period of the high-alert regime and the non-working period will be extended. Rospatent, together with the Ministry of Economic Development of Russia, is also considering the option of amending the legislation to extend the deadlines, including those related to the payment of patent and other fees, until 11 January 2021.

By Polina Galtsova, Senior Associate, Noerr

On 21 April 2020, the Russian Supreme Court clarified in an official Review certain issues of judicial practice related to the application of legislation in the context of measures to combat the spread of COVID-19 and more specifically in relation to:

• the impact of non-working days and restrictive measures on the performance of contractual obligations; and

• the definition of procedural and limitation periods.

Working days from 30 March 2020 to 11 May 2020 inclusive were declared as non-working by the Russian President in several announcements (Executive Orders dated 25 March 2020*, 2 April 2020* or 28 April 2020*), and the non-working period could be further extended. Also, Russia took a series of actions to prevent the spread of COVID-19 (the “Preventative Measures” or “Restrictive Measures”), such as restrictions on the free movement of persons, their presence in public places, state and other institutions, and changes in the work of bodies and organisations. These circumstances have given rise to a number of uncertainties, which the Supreme Court addressed.

Impact of non-working days and Restrictive Measures on the performance of contractual obligations

How do non-working days affect the obligations of the parties?

The Supreme Court clarified that non-working days declared by the Russian President are not weekends or public holidays in the usual sense. Accordingly, the declaration of non-working days is not a reason for postponing the term of performance of a contractual obligation. Contractual time limits continue in the usual manner.

Are limitation periods suspended automatically in view of the introduction of Restrictive Measures?

Limitation periods are not automatically suspended in the current context. Restrictive Measures imposed by the state that prevent litigants from applying to the court may be recognised as grounds for suspending the limitation periods.

If an applicant wants the period for filing a claim to be restored, he must present evidence to the court that it was impossible to file a claim in court on time due to the introduction of the self-isolation regime and other Restrictive Measures.

Are the pandemic and Restrictive Measures force majeure events? Is it possible to stop performing obligations?

The Restrictive Measures taken are not force majeure by default.

As previously explained, the existence of force majeure must be determined by the competent court on a case-by-case basis based on the circumstances of the specific case (including the period for the performance of the obligation, the nature of the unfulfilled obligation, the reasonableness and good faith of the actions of the debtor, etc.).

If the court recognises the impact of force majeure, the debtor will be released from liability (it will not have to compensate losses or pay a penalty to the counterparty), and must perform the obligation once the force majeure event ends.

Are the introduction of non-working days and Restrictive Measures grounds for amending or terminating a contract?

Contracts affected by the Preventative Measures can be amended or terminated due to a significant change of circumstances (Article 451 of the Russian Civil Code). Circumstances unforeseen at the conclusion of the contract may form the basis for amending or terminating the contract. This is because the contract would not have been concluded (or concluded on significantly different conditions) if the parties had foreseen these circumstances.

Procedural periods and court hearings

Do court hearings take place if they are scheduled on a non-working day?

Court hearings may be held under certain conditions.

Taking into account the circumstances of the case, the opinion of participants in the proceedings and the conditions imposed in each Russian region, the court may decide to consider only urgent cases, cases of simplified or writ procedure, and other disputes, such as if parties lodge a motion for consideration of a case in their absence.

A court hearing scheduled on a non-working day can be postponed, and the term for consideration of the case may be extended if the case cannot be examined due to Preventative Measures. A court can adjourn a hearing on its own initiative or on the basis of a participant’s application for postponement, which can be submitted electronically.

If technically possible, court hearings can be held using a videoconferencing system if the participants of a dispute agree.

The courts also have the right to suspend proceedings if the participants in the case are unable to attend the court hearings.

Are procedural periods suspended?

Procedural periods are not suspended by default during non-working days.

During the period when Preventative Measures are taken, procedural periods are calculated in the usual manner. If the last day of the period falls on a non-working day, the period is not extended, and the procedural action must be performed before the expiration of the corresponding period.

For example, an appeal against a decision of a commercial court must be filed within one month from the date of issue of the judicial act, and not on the first business day after the lifting of Restrictive Measures.

However, if the procedural deadline is missed due to Restrictive Measures, it is subject to extension. At the same time as the procedural action (e.g. filing an appeal, submission of documents, etc.), one should submit a request for an extension of the period with a description of the legitimate reasons for having missed the deadline.

Comments

The spread of COVID-19 in Russia is not recognised as force majeure by default and does not result in automatic exemption from liability of the contract’s parties. For this reason, we recommend companies:

• fulfil contractual obligations to the extent possible;
• inform their counterparties in case of partial or complete inability to fulfil the assumed obligations in due time, having analysed in advance the terms of force majeure provisions in existing agreements;
• promptly notify counterparties when establishing the presence of a force majeure event and start collecting evidence confirming force majeure; and
• consider whether it is possible to renegotiate or terminate existing contracts affected by COVID-19 due to a significant change of circumstances.

If companies are involved in or planning to participate in litigation in Russian state courts, they should consider the following:

• observing the procedural and limitation periods established by law;

• monitoring information over official court websites on postponements of court hearings and documents that have been submitted on ongoing cases;

• filing with the court a motion of adjournment of a court hearing and a request not to consider the case in the absence of the company’s representative, if necessary;

• submitting to the court a request for the restoration of the limitation period and relevant evidence if a deadline has been missed; and

• ensuring the collection of evidence confirming the existence of circumstances that prevent the initiation of legal actions on time.

 

By Sergey Yuryev, Partner, Igor Sokolov, Senior Associate, Tatiana Sviridova, Associate, and Mikhail Ivannikov, Attorney at Law, CMS

DLA Piper has advised Debex on the sale of a minority stake in the company to Dmitry Shushkin, the managing director of ABBYY Russia.

Debex is an online marketplace allowing financial institutions to sell non-performing loans and commercial debt to debt collectors through the auction process. It was founded by Alexander Danilov and Oleg Zankov, co-founders of CarPrice, an online car auction website. According to DLA Piper, “by the end of 2020, Debex plans to occupy up to half of the Russian market for overdue debt sold online, as well as start operations outside of Russia.”

According to the ABBYY website, the company is “a leading provider of document recognition, data capture and linguistic software.”

DLA Piper’s team was led by Moscow-based Partner Leo Batalov, who was assisted by Senior Associate Andrei Sheetkin and Associate Tatiana Askarova.