Category: Russia

Dentons has advised UniCredit Bank AO Russia on a sustainability-linked CHF 585 million (approximately EUR 545 million) seven-year facility for Russian Railways. Cleary Gottlieb Steen & Hamilton reportedly advised Russian Railways on the deal.

According to Dentons, the interest rate on the facility is linked to the achievement of Russian Railways’ annual commitments regarding the reduction of air emissions and water consumption as part of its Environmental Strategy.

Russian Railways was the first company in Russia’s transport sector to secure an international loan linked to environmental performance.  

Dentons’ team included Warsaw-based Partner Mark Segall, Moscow-based Partner Andrei Strijak and Associate Marina Smirnova, Bucharest-based Senior Associate Lawrence Florescu, and Munich-based Counsel Surbhi Malhotra-Trenkel.

Editor’s note: After this article was published, Cleary Gottlieb Steen & Hamilton confirmed its involvement in the deal. The firm’s team included London-based Partner Polina Lyadnova and Associate Byamba Enkhbayar.

Rybalkin, Gortsunyan & Partners has advised Sistema JSFC subsidiary Segezha Group on the acquisition of a minority stake in Novoyeniseiskiy Wood-Chemical Complex’s owner Tegli Holdings Ltd.

According to Rybalkin, Gortsunyan & Partners, “Segezha Group is the largest forest products producer in Russia with a full cycle of logging and deep wood processing. Segezha Group consists of Russian and European enterprises of timber, woodworking, pulp, and paper industries. Production assets and representative offices of Segezha Group are located in 11 countries of the world and six regions of the Russian Federation.”

The Rybalkin, Gortsunyan & Partners team included Partners Oleg Isaev and Vladimir Pestrikov and Associate Marina Abazyan.

Rybalkin, Gortsunyan & Partners did not reply to our inquiry on the matter.

DLA Piper has advised Borzo on its USD 35 million Series C investment round. Bryan Cave Leighton Paisner advised one of the investors in the round – Emirati investment company Mubadala.

According to DLA Piper, the round saw, aside from Mubadala, Swedish investment company VNV Global, the Russian Direct Investment Fund, and other investors invest in the company. The new funds will be used to support a global rebranding campaign as well as foster further product development.

Borzo, formerly known as Dostavista, is a global crowdsourced same-day delivery marketplace. Founded in 2012, it enables intracity same-day delivery of parcels of any weight and size. The company has a customer base of 2 million users, with 75% being small and medium-sized businesses, according to DLA Piper.

The DLA Piper team was led by Partner Leo Batalov, assisted by Legal Director Andrei Sheetkin and Associate Alexandra Braterskaya.

The BCLP team was led by Partner Anton Panchenkov and Counsel Alexey Koshelev.

In its July 2020 Schrems II judgment, the Court of Justice of the European Union invalidated the Privacy Shield for EU-US personal data transfers for commercial purposes. In a case concerning data transfers by Facebook Ireland to the US, the court concluded that because of its mass surveillance programs, the US does not provide the adequate – that is, a sufficient – level of personal data protection that is guaranteed by EU law. What conclusions may be drawn from Schrems II for personal data transfers to Russia almost one year later?

EU Personal Data Export Rules

Under EU law, personal data transfers to third countries lacking adequacy decisions, including the US and Russia, require that appropriate safeguards be put in place, unless specific exceptions apply. In practice, the most widely used safeguard (which is also used for transfers to Russia), is Standard Contractual Clauses – a set of pre-approved legal provisions to be included in the contract with a data importer outside the EU.

Unfortunately, from Schrems II it follows that the mere conclusion of SCCs may not be sufficient to legitimize the transfer, where local laws and practices in the country of the data recipient hinder or make standard clauses ineffective. In Schrems II, the court held that US surveillance legislation allows authorities access to personal data beyond what is necessary and proportionate, and that EU individuals are not afforded redress. As result, the court concluded that US law does not require minimum safeguards equivalent to the ones required under EU law. In conjunction with the inherently contractual nature of SCCs, making them non-binding for authorities, in the post-Schrems II era, having SCCs in place is not enough for EU-US personal data transfers.

Another, a more general conclusion is that prior to transfer, an EU data exporter should always ensure that the domestic law of the importer does not undermine the effectiveness of SCCs. Specific attention should be focused on the rules for the access of public authorities to personal data for national security purposes.

Russian Surveillance Legislation

So then, is Russian surveillance legislation compliant with EU data protection and privacy standards? Compliance would mean meeting, among others, the following requirements: (1) that the data processing be limited to what is necessary and proportionate for the objective pursued; (2) the existence of independent, preferably judicial, oversight mechanisms; and (3) the existence of effective rights of redress for individuals.

Meanwhile, Russia’s Yarovaya Law requires Russian telecoms and Internet companies to retain copies of all contents of communications – including text messages, voice, data, and images –  for six months, and related metadata for up to three years. All information must be disclosed to the Russian police and intelligence services upon request, even without a court order. This approach is unlikely to meet the proportionality and oversight requirement.

Moreover, in the landmark case Roman Zakharov v. Russia, the European Court of Human Rights concluded that Russian legislation on data interception for law enforcement purposes does not provide adequate and effective guarantees against arbitrariness and the risk of abuse. One of the reasons was the lack of effective remedies.

Consequently, if the Schrems cases had involved transfers to Russia instead of the US, the conclusions of the CJEU would almost certainly be the same, and for the very same reason – intrusive surveillance legislation. As a result, SCCs alone are also no longer sufficient for EU-Russia personal data transfers.

What Can be Done?

The rules are simple: where SCCs cannot guarantee EU data protection standards, additional measures must be adopted. If a level of protection essentially equivalent to the EU still cannot be secured, transfers must not take place.

The problem is that with respect to countries like Russia, in most instances there may be no effective and reasonable safeguard. After all, what could two private companies effectively do to prevent Russian authorities from intercepting data? Accordingly, one year after Schrems II, almost all personal data transfers to Russia remain in the risk zone. What then may be recommended to EU data processors for whom termination of all transfers to Russia is not an option?

First, EU data processors should evaluate the actual need for personal data transfers to Russia, and avoid unnecessary transfers. Second, data exported to Russia should be minimized. Third, in addition to SCCs, adopting relevant contractual, organizational, and technical measures on a case-by-case basis is a must. With respect to Russia, parties should particularly consider data pseudonymization, encryption, and split or multiparty processing.

Though taking these steps may be costly, and they do not guarantee compliance, they may help mitigate potential liability.

By Eldar Mansurov, Head of Data Protection, and Marcin Kryszko, Senior Associate, Peterka & Partners Moscow

This Article was originally published in Issue 8.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Egorov Puginsky Afanasiev & Partners has successfully represented global pharmaceutical corporation Novartis before the FAS in an unfair competition dispute with a Nativa distributor.

According to EPAM, “In 2017, the arbitrazh court prohibited Nativa to sell Nilotinib-nativ, a generic drug, the manufacturing of which unlawfully used a Novartis patent. Despite the prohibition, Nativa transferred the rights to the drug to its distributor – Mamont Pharm, which started offering the generic drug under the vital drugs tenders and procurement programs in 2020.”

“Following the hearings, the FAS Russia qualified Mamont Pharm’s actions as unfair competition and ordered to discontinue the breach, as well as to transfer the illegally obtained income,” EPAM reported.

“This is the first case where the FAS Russia qualified the manufacturing and sale of a generic drug prior to the expiry of the original drug patent as unfair practice,” commented EPAM Partner Anna Numerova. “The regulator’s decision acknowledged the stability and guarantee of protection of intellectual rights in Russia against violations, which is of greatest importance for the manufacturers of innovative drugs and for all bona fide pharmaceutical market professionals.”

EPAM’s team consisted of Numerova and Senior Associate Olga Denchenkova.

Editor’s Note: On January 21, 2022, the Moscow City Arbitration Court rejected Mamont Pharm’s claims in full and agreed with the position of the FAS and of the Novartis group, EPAM has announced.

BGP Litigation has successfully represented UniCredit Bank JSC as one of the creditors in bankruptcy proceedings against Russian shoe retailer Firma ANTA JSC, operating under the brand of Carlo Pazolini. The case was brought before the Moscow Arbitration Court.

According to BGP Litigation, the bankruptcy proceedings started in 2017, during which claims estimated at more than RUB 8.9 billion were included in the register of creditors. According to the firm, UniCredit filed for the imposition of interim measures, foreclosure of the debtor’s pledged property, and challenged its transactions, among other measures. According to BGP Litigation, a bankruptcy estate of RUB 220 million was formed as a result, out of which RUB 121.8 million was paid out to UniCredit.

BGP Litigation’s team consisted of Counsel Ilya Sorokin, Senior Associate Elena Kolomiets, Lawyer Victoria Bogacheva, and Junior Lawyers Sergey Ivanov. 

Rybalkin, Gortsunyan and Partners has advised Etalon on its acquisition of a 35% stake in QB Technology and its associated intellectual property.

According to RGP, the acquisition was aimed at “acquiring a set of IP rights in order to establish a similar hi-tech construction project in Russia.”

The Etalon Group is a Russian construction company that focuses on developments in the residential, commercial, and industrial sectors in St. Petersburg, Moscow, and the Moscow Region.

QB Technology is a UK-based modular construction company.

RGP’s team included Managing Partner Suren Gortsunyan, Counsel Maria Samartseva, Senior Advisor Anthony Walker, and Associate Danil Karimov.

Kachkin & Partners has advised the Krasnaya Strela Group on its acquisition of two buildings in St. Petersburg from the Okhta Group.

According to Kachkin & Partners, the buildings consist of ​​20,300 square meters in the loft-quarter of the former Skorokhod factory, which sits on a total of 3.3 hectares. The completion of all works is expected in 2025.

The Kachkin & Partners team was led by Partner Dmitry Nekrestyanov.

The firm did not reply to our inquiry about the deal.

Pepeliaev Group has announced it hired Mikhail Tserkovnikov as its head of the energy group in Moscow. 

According to the firm, Tserkovnikov specializes in the energy sector and the law of obligations, specifically, in disputes arising out of sale and purchase (supply) agreements for resources supplied by the connected grid, the supply of services involving the transmission (transportation) of a resource, utility connection to the grid, and disputes over the ownership and registration of title to infrastructure facilities. His experience includes working at the Russian Supreme Court and the former Russian Supreme Commercial Court.

“I can say for sure that Mikhail’s outstanding expertise in the field of energy will allow us to decisively move forward, attract new projects and continue developing the industry,” commented Managing Partner Sergey Pepeliaev.

The influence of digital technologies on all spheres of life is currently on the increase. This has led to intellectual activity appearing in a variety of digital formats. One of them is the Non-Fungible Token (“NFT”).

NFT technology is a unique token that cannot be forged, split or discreetly replaced. This technology is increasingly in demand by creators as it allows them to fix their works in a protected digital form.

Whether or not the original work is created in a digital or material form, it can be transformed into NFT format. In the case of an originally material piece of work such as, for example, a painting or hand-made item, it can first be converted into a digital format via the taking of a photo, after which it can also be transformed into NFT format.

There are several platforms for the transformation of creative works into an NFT. Examples are OpenSea, Rarible and MakersSpace, among others. One remarkable example of NFT usage would be when 5000 photos by the artist Beeple were put into one picture, which was then converted into an NFT.

One of the main interests of creators is the commercialization of their works, which can be achieved by the sale of works in NFT form through the aforementioned platforms or one’s own websites. For example, the NBA sells its NFT top shoot drop packs on the website https://nbatopshot.com/.

The most common method of the legal regulation of relations between an exclusive right holder and customer is concluding an agreement for an exclusive or non-exclusive license. An exclusive license grants to only one user the right to use a creative work within the limits specified in the agreement. A non-exclusive license is more widespread and can grant the right to use the same work to several users. 

When purchasing an NFT work, the user obtains a digital certificate to the work, which is an encrypted code recorded in the blockchain and related to the work; the certificate provides the user with access to the work, as well as with the rights to use it prescribed by the license agreement. Unless an agreement between the right holder and the user states otherwise, the exclusive rights do not pass to the user together with the purchase of the NFT work.

Usually, the license grants the following rights to the user: the right to use the work for private purposes and/or the rights to use the work for commercial purposes on the user’s or another website. The right can be limited, for example, by the ways in which a work can be used, or by the amount of income from its commercialization by the user within a year, etc.

Remuneration for the purchase of the NFT work is also set out in the agreement. The types of remuneration can be: 1) a one-time payment; 2) periodic payments; 3) interest on the income from the sale of the NFT work. The first two types of remuneration are more suitable when the right to use the NFT is granted for personal use, while the third type is typically for commercial use of the NFT work. A famous example of commercial use of an NFT work is when DJ 3LAU first sold his album in NFT format for $11.6 million USD. Later the music band Kings of Leon and singer The Weeknd also sold their creations as NFTs.

Among the advantages of NFTs as a new form of creative works are: (i) the convenience of the technology to commercialize a product without intermediaries, as a result of which creators can more easily and cheaply bring their work to market; (ii) the purchase of an NFT work allows the parties to conduct the transaction securely, as the transfer of the NFT work and payment for its purchase occur simultaneously; (iii) users may obtain advantages from the further commercialization of the NFT work.

The drawbacks of NFTs include: (i) the risk of hacking. Although the NFTs themselves are based on the blockchain technology and are thus difficult to steal, the aforementioned platforms as well as relevant user accounts may be hacked. The creator can, however, use existing tools for the protection of his / her exclusive rights if needed; (ii) the saleprice of NFT works is currently high, owing to the popularity of the technology, but it is difficult to predict if consumer demand will remain high.

To conclude, generally we take a positive view of the use of NFT technology as a new form of creative works as it makes works secure as well as allowing authors to promote and commercialize them efficiently.

By Anna Zabrotskaya, Specialist Partner, and Vera Zotova, Associate, Borenius