Our Newsletter for this month contains a few pieces on some highly technical subjects. While technical in nature, the recently adopted new legislation may well have an impact on everyday transactions and dispute resolution in Russian courts.
Thus, Dmitry Milyutin briefly describes the new law on Electronic Signature which replaces current legislation governing this area. The law introduces different types of electronic signature and is designed to facilitate the use of electronic signatures in transactions between private parties, as well as dealings with the state. One of the consequences created by the new law will, hopefully, be the ability of parties to sign cross-border transactions involving assets/parties located in Russia, without having to be physically present in the same location.
Yulia Babkina discusses a resolution adopted in March by the Supreme Arbitrazh Court that contains guidance on matters relating to the submission of documents in electronic form, use of the internet for filing documents and use of internet print-outs, as well as some of the types of evidence admissible in courts. The overall thrust of the resolution is to make the use of electronic documents more common and evidence generated from certain types of websites admissible in Russian courts.
Violetta Molchanova talks about the recent amendments to rules of registration of foreigners in Russia. Work permits and visas for foreigners coming to live and work in Russia has always been a subject widely discussed in Russia and abroad. Changes to that legislation have been introduced slowly and gradually and the most recent amendments form part of this process.
Igor Orlov writes about the new draft bill aiming to substantially raise penalties for bribery. Corruption is a hotly debated topic in Russia with President Medvedev pledging to launch an unprecedented fight against corruption. If adopted, the law will impose amounts of fines for bribery unheard of before, with lengthy jail sentences as an alternative. Sceptics of the draft bill claim that one cannot unroot corruption with penalising measures alone and other steps are required as well.
The State Duma has adopted legislation on electronic Signature
Dmitry Milyutin, Senior Associate
On 25 March 2011 the State Duma adopted a new law entitled "On Electronic Signature (ES)" that will replace the current law "On Electronic Digital Signature".
Prior to the adoption of the new Law the Russian legislation permitted only one type of electronic signature technology; the old law "On Electronic Digital Signature" applied only to civil-law transactions and corporate entities were not allowed to have their own electronic signatures. Moreover, the law "On Electronic Digital Signature" was not fully consistent with other legislative acts of the Russian Federation, in particular with laws on licensing and technical regulation. In addition to the above, provisions of the law were not in line with the vest practices of electronic signature regulation used in European countries.
The new Law "On Electronic Signature (ES)", as recently adopted, has removed these deficiencies. The term 'electronic signature' has been given a new definition based on the key factor common to all types of electronic signatures – the capacity of an electronic signature to serve for identifying the signatory, i.e. the legal or natural person who has signed certain data in electronic digital form. The new law also provides for the recognition of foreign electronic signatures.
The Law distinguishes between three types of electronic signatures: - a simple electronic signature, an advanced unqualified electronic signature (i.e. unqualified electronic signature) and advanced qualified electronic signature (i.e. qualified electronic signature). A simple electronic signature is an electronic signature that evidences, through the use of codes, passwords and other tools, the fact that this electronic signature was formed by a particular person.
An unqualified electronic signature is an electronic signature that meets the following requirements: it is created with the help of cryptographic data processing using a signature key; it is capable of identifying the signatory; it makes any subsequent change of the data detectable; and it is created using the means of electronic signature.
A qualified electronic signature meets all the requirements of the unqualified electronic signature. Additionally, the verification key of such signature is indicated in a qualified certificate and the means of electronic signature used for creating and verifying such signature have been certified as compliant with the requirements of this Federal Law. The new legislation establishes liability for damage caused by breach of electronic signature rules. This liability is imposed on certification service providers and users of advanced or qualified electronic signatures. The law sets out the duties of those who participate in electronic communication with the use of advanced electronic signatures. It outlines the requirements for the recognition of electronic documents authenticated by electronic signatures. Rules for the recognition of foreign electronic signatures are also included.
The Law has preserved the most widely used provision of the old law in relation to corporate IT networks: rules governing the use of electronic signatures in a corporate IT network may be established by decision of the owner of such corporate IT network or by agreement between participants in these communications.
As Yuri Isayev, Deputy Chairman of Parliamentary Committee for the Financial Markets, noted in his address to the media, "the new law regulates relationships arising in connection with the use of electronic signatures in civil-law transactions, provision of public and municipal services and making other legally significant acts". The MP told journalists:
"Electronic signatures have been successfully used all over the world for many years. The new law must become useful for citizens". Isayev is hopeful that "for many, the law should make it easier to sign sale and purchase contracts, file tax returns and complete financial and legal documents." He concluded by saying that "once the law takes effect, business partners located in different countries can enter into transactions via the Internet in the online regime."
The Law "On Electronic Signature (ES)" will become effective on the date of its official publication, and the federal law dated 10 January 2002 "On Electronic Digital Signature" will be repealed from 1 July 2012. However the signature key certificates issued in accordance with the current law will remain valid until the planned expiration of their term.
Resolution of the Plenum of the Supreme Arbitrazh Court of the Russian Federation on the application of the Arbtirazh Procedure Code in connection with the introduction of electronic filing and document management
Yulia Babkina , Associate
On 27 July 2010 the Russian Parliament passed Federal Law No.228-FZ which amended the Russian Code of Arbitrazh Procedure. The amendments were designed to optimise the work of arbitrazh (commercial) courts by introducing electronic document management. The law became effective on 1 November 2010.
In order to ensure uniform and consistent application of the Arbtirazh Procedure Code as amended by that Federal Law (the Code) the Plenum of the Supreme Arbitrazh Court of the Russian Federation issued Resolution No.12 dated 17 February 2011 "On some matters of application of the Russian Federation Code of Arbitrazh Procedure as amended by Federal Law No. 228-FZ dated 27 July 2010 "On amending the Russian Federation Code of Arbitrazh Procedure"" (the Resolution). The Resolution was published on 15 March 2011.
The Resolution gives detailed guidance on matters relating to the following:
- submission of documents in electronic format (the procedure of electronic submission is governed by a decree of the Supreme Arbitrazh Court; presently, the applicable instrument is Decree No.1 dated 12 January 2011 which sets out a temporary procedure);
- use of the Internet for filing, and in particular, the submission of print-outs from official websites;
- use of the Internet for serving court notices; and
- use of teleconferences and audio recordings.
First of all, the Resolution clarifies which rules should be applied to the ongoing arbitrazh proceedings after the effective date of Federal Law No.228-FZ, which is 1 November 2010. Starting from 1 November 2010 all cases pending on that date before arbitrazh courts, whether in the first instance, on cassation or on appeal, will be forthwith administered in accordance with the new rules, including those relating to the court notices and other legal proceedings.
The Resolution contains a list of documents that can be submitted to the arbitrazh court in electronic form. Persons participating in the proceedings may submit documents in electronic form and fill in the forms placed on the official website of the arbitrazh court in accordance with the procedure prescribed by the Supreme Arbitrazh Court of the Russian Federation. At the same time the Code does not permit electronic submission of the following documents: (1) applications for interim relief; (2) applications for precautionary measures to secure a claim and (3) applications to suspend the enforcement of a judicial act. Such documents can be submitted to the court only in hard copies. This includes the filing of documents listed under (1) or (2) above in electronic form as a part of the relevant claim: such documents will be deemed not to have been submitted.
The Resolution clarifies the requirements of the Code as to which documents can be used as proof of the claimant's or the defendant's location or place of residence and/or whether a person has the current status of an individual entrepreneur. It follows from Article 126(1)(9) of the Code, as amended by Federal Law No.228-FZ dated 27 July 2010, that an extract from the Unified State Register of Legal Entities or the Unified State Register of Individual Entrepreneurs may be admissible evidence for these purposes. Extracts can be obtained from the relevant registration authorities in electronic form and they are issued with the help of certified encryption tools to protect the information. An extract received in this form can be submitted to the arbitration court in electronic format.
Alternatively, a number of other documents are admissible as evidence of such facts:
- a print out of the relevant web page from the registration authority's official website, authenticated by the signature of the claimant or its representative. The page must show the corporate entity's place of location and the date on which the information was updated;
- a print out from the database of the Unified State Register of Legal Entities, authenticated by a person who has access to such information in accordance with the rules prescribed by the competent federal executive authority.
The Resolution also comments on the rules governing court notices of hearings. The new rules contained in Article 121(1)(2) of the Code require that all arbitrazh courts publish the time and place of hearings, as well as information on individual procedural steps, on the official website of the arbitrazh court in the Internet.
The Resolution provides detailed guidance as to when a person is deemed to be duly notified for the purposes of the arbitrazh proceedings. The key element of due notice is the disclosure to that person of information on the instituted proceedings. Such information is deemed disclosed to participants in the proceedings when a copy of the first judicial act in the case is delivered to them in accordance with the rules of the Code. For those who participate in the proceedings, such judicial act is a decision of the arbitrazh court to accept the statement of claim and institute proceedings in the case. For any person that joins the case at a later stage such document is a court decision to grant their application for intervention or joining as a third party. For a person who has not participated in the proceedings but whose rights and duties are affected by a judicial act issued in the proceedings, such document is the court's decision to admit that person's appeal (or cassation) claim, or their application or motion for a review of that judicial act via the judicial supervision procedure.
In addition, the Resolution clarifies some matters relating to the use of audio recordings of court hearings and the circumstances in which audio recording of court proceedings is permitted or required (e.g. in the absence of some or all participants in the proceedings or in respect of specific categories of cases heard in federal arbitrazh district courts). It further comments on the rules relating to the storage of audio recordings, the production of copies of the audio recordings for the parties at their request and the taking of written minutes of court proceedings (minutes of hearing are described in the Code as an additional method of recording the information about the course of a court hearing.
Finally, the Resolution explains the rules relating to the use of teleconference systems and the organisation of teleconferences. Teleconferences may be used to submit not only statements, explanations and clarifications of the parties, but also written evidence.
According to experts, introduction of electronic document management in the Russian arbitrazh courts will help to optimise the work of arbitrazh courts and reduce the time parties spend on filing pleadings, taking other procedural steps, and obtaining the necessary information on the progress of the case.
Changes in the registration rules for highly qualified migrants in Russia
Violetta Molchanova, Associate
Federal Law No.42-FZ dated 20 March 2011, "On amending the Federal Law 'On migration registration of foreign nationals and stateless persons in the Russian Federation' and some other legislative acts of the Russian Federation" has been passed to introduce amendments to the registration rules for foreign migrants in Russia.
The Law gives a more precise definition of the term "place of stay". The premises or the agency/company where a migrant is based are seen as his place of stay where the migrant needs to be registered for the purposes of migration control. Not only the person providing accommodation, but also the person providing employment to the migrant can be seen as the "host party".
The key amendments introduced by the Law relate to the status of highly qualified foreign workers in Russia.
It will be recalled that Federal Law No. 115-FZ dated 25.07.2002 "On Legal Status of Foreign Nationals in the Russian Federation" defines a highly qualified migrant as a foreign national who has experience, skills and achievements in a particular trade or profession, and whose work in Russia would involve annual remuneration of:
- at least RUR 1 million per annum (365 calendar days), for highly qualified migrants who are researchers or professors invited to teach or conduct research by a statecertified higher education institution, public academy of science or a regional branch thereof, a national research centre or state scientific centre; and
- at least RUR 2 million per annum (365 calendar days), for other highly qualified migrants.
Starting from the effective date of the above Federal Law No.42 dated 20 March 2011, a highly qualified migrant may act as a host party to their family members, on condition that such highly qualified migrant must own property in Russia. If this is the case, visas to family members of such foreign highly qualified migrant are issued by the relevant territorial unit of the Federal Migration Service on the application of such migrant. Those applications are outside of the existing quotas that put a cap on the number of foreign migrants entering Russia each year. Family members of such highly qualified migrants get multi-entry visas that authorize them to work in Russia.
Where a family member of a highly qualified migrant enters Russia under a visa-free regime, their length of stay in Russia is limited to the outstanding term of the work permit issued to the respective highly qualified migrant. At the same time, family members of a highly qualified migrant are permitted to work in Russia subject to relevant work permits which are not included in the quotas, to study or to carry on any other activity that is not prohibited by law. Employers do not need a permission to hire foreign workforce in order to enter into employment contracts with them.
In accordance with the amended law, a foreign national who arrives in Russia for temporary residence has 7 days to register at their place of stay (rather than 3 days under the old rules). The host party must notify the migration authorities of the migrant's arrival at their place of stay within the same deadline.
A migrant who has failed to get registered at their place of stay will be penalized to the extent they had a duty to notify the authorities of their place of location.
The President's bill substantially raising penalties for bribery passed the first hearing in the State Duma
Igor Orlov, Senior Associate
On 9 March 2011 the State Duma upheld a federal bill entitled "On amending the Criminal Code and the Code of Administrative Offences of the Russian Federation in connection with the improvement of public administration in the sphere of anti-corruption efforts". It was resolved that the bill be adopted in the first reading and any persons with legislative initiative may file amendments to the bill within 30 days of the adoption. The bill was presented by the President to the lower chamber of the Russian Parliament on 16 February 2011 and on the same day it was published on the official website of Rossiyskaya Gazeta newspaper which caused a wide public discussion.
As is clear from the title of the bill, it proposes a number of changes to the Criminal Code and the Code of Administrative Offences of the Russian Federation. The amendments are designed to introduce stronger sanctions against bribery involving government and corporate officers, including substantially higher penalties for such offences. A significant increase in the level of fines came into the spotlight of public interest and the bill is now generally discussed in connection with those increases. However the bill also includes some other significant amendments to the Russian criminal and administrative laws. These will be reviewed in more detail below.
Relevant sections of the Criminal Code are amended so as to make fines the main type of punishment for giving a bribe to a public servant or a corporate officer, taking a bribe by a public servant or a corporate officer, or acting as an intermediary in a bribery transaction. The fines may reach up to 100 times the amount of the bribe, but in any case within the limit of RUR 500 million. The amendments to this effect are sought to be introduced into Articles 204 (bribe to a corporate officer), 290 (receiving a bribe) and 291 (giving a bribe), plus a new Article is added (Art 291.1) to establish criminal liability for acting as an intermediary in a bribery transaction.
For the purpose of differentiating criminal liability for bribery, the Criminal Code distinguishes 4 types of a bribe, depending on its size:
- a simple bribe – up to RUR 25,000
- a significant bribe – from RUR 25,000 to RUR 150,000;
- a large bribe – from RUR 150,000 to RUR 1 million
- an exceptionally large bribe – over RUR 1 million.
By way of example, the new edition of Article 290 of the Criminal Code provides that a person convicted of receiving a simple bribe shall be liable to a fine of 25 to 50 times the amount of the received bribe and a court order prohibiting him from holding certain offices or performing certain activities for a term of 3 years; alternatively, he shall be liable to imprisonment for a term of up to 3 years plus a fine of 20 times the amount of the bribe he received.
A person convicted of receiving a significant bribe shall be liable to a fine of 40 to 70 times the amount of the received bribe and shall be prohibited from holding certain offices or performing certain activities for a term of 3 years; alternatively, he shall be liable to imprisonment for a term of 3 to 7 years and a fine of 40 times the amount of the bribe he received.
A person convicted of receiving a large-scale bribe shall be liable to a fine of 70 to 90 times the amount of the received bribe; alternatively, he shall be liable to imprisonment for a term of 7 to 12 years and be prohibited from holding certain offices or performing certain activities for a term of up to 3 years plus pay a fine of 60 times the amount of the bribe he received.
Finally, a person who accepted an exceptionally large bribe, i.e. a bribe in excess of 1 million Russian roubles would be liable to a fine of 80 to 100 times the amount of the bribe received, plus the bribe-taker will be prohibited from holding certain offices or performing certain activities for a term of up to 3 years; or alternatively, liable to imprisonment for a term of 8 to 15 years with a fine of 70 times the amount of the bribe.
It should be noted that the current version of Article 290 of the Russian Criminal Code distinguishes between simple (less than RUR 150,000) and large bribes (more than RUR 150,000). The penalty for receiving a simple bribe is either a fine in an amount of RUR 100,000 to RUR 500,000 or a fine equal to the earnings of the offender over the period of 1 to 3 years; alternatively, it is an imprisonment for a term of up to 5 years with a ban on holding certain offices or performing certain activities for a term of up to 3 years. Receiving a large-scale bribe is currently punishable by imprisonment without an alternative penalty in the form of a fine.
As mentioned previously, the bill criminalizes intermediation in bribery as a separate offence. Intermediation in bribery means the act of passing the bribe upon request of the bribe-giver or the bribe-taker, or assisting the bribe-giver and the bribe-taker in achieving or effecting the agreement between them in respect of receiving or giving a bribe.
The bill also proposes to extend the list of crimes that are punishable by confiscation of property received as a result of the crime. This would include the acquisitive crimes that were recently added to Russian criminal law.
The bill also seeks to amend the Russian Code of Administrative Offences
The bill proposes to clarify and detail the parts of the law relating to criminal liability for bribing foreign officials and officers of foreign public organizations. In particular, in accordance with the proposed amendments to Article 19.28 (Illegal compensation on behalf of a legal entity) of the Code of Administrative Offences, a legal entity will be fined for any transfer, offer or promise of money, securities or other property, or the provision of services having monetary value, or the transfer of other proprietary rights, to a foreign official or an officer of a public international organisation in return for any actions or omissions taken or made by an officer or another person with management functions in a commercial or other organisation, a foreign official or an officer of an international public organisation in connection with their position in favour of such legal entity.
The term "foreign public official" is construed in accordance with the UN Convention against Corruption as any person holding a legislative, executive, administrative or judicial office of a foreign country, whether appointed or elected; and any person exercising a public function for a foreign country, including for a public agency or public enterprise. Respectively, an official of a public international organisation means an international civil servant or any person who is authorized by such an organisation to act on behalf of that organisation.
The bill also introduces a legal aid scheme in administrative offence cases.
Where any procedural actions under the Code of Administrative Offences need to be taken in a foreign country the official who conducts the administrative offence proceedings will request the relevant authority or official of the foreign state to perform such actions either in accordance with an international agreement or treaty to which the Russian Federation is a party, or on a reciprocal basis. A request to conduct procedural actions will be channelled through the Supreme Court of the Russian Federation (where judicial activities of the Supreme Court are concerned), the Supreme Arbitrazh (Commercial) Court of the Russian Federation where judicial activities of the Russian arbitrazh courts are concerned), the Ministry of Justice of the Russian Federation (where judicial activities of all Russian courts other than the Supreme Court are concerned). The Ministry of Foreign Affairs of the Russian Federation, the Federal Security Service, the Federal Service for the Control of Drug Trafficking (in respect of investigative actions that do not require a court decision or the prosecutor's consent), and, finally, the General Prosecutor's Office of the Russian Federation (for all other matters).
The new bill (or, rather, its provisions relating to the increased fines) has received a mixed public response, including comments in support of the bill and expressions of doubt as to the effectiveness of the proposed measures. Some experts say the gigantic fines may well turn out to be a promising solution, especially where corruption among rank and file officials is concerned, while others seem to doubt whether these steps alone will have the desired effect, and compare them with other potential solutions (such as public scrutiny over the personal spending by government officials and their family members). In any case the bill is yet to pass the second and the third reading and to absorb various amendments on the way; time will tell what the bill will look like when it becomes law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.