Russian Federation: Russia Takes Steps To Implement Import Substitution Plan For Software

On June 16, 2015, the Russian Duma—the lower house of the Russian parliament—approved Legislative Bill No. 764677 in a third (and likely final) reading, taking another step forward on an import substitution strategy for software used in Russia.1 Earlier this year on April 1, 2015, the Ministry of Communications and Mass Media ("Minkomsviaz" or the Ministry) issued Order No. 96 "On the adoption of plan for import substitution of software" ("Order No. 96"). The Russian government also drafted and published a regulation on the public procurement of software for federal and municipal needs in February 2015 (the "draft Software Procurement Regulation").

These steps are aimed at implementing the Russian government's strategy of preference for domestic IT products in federal government and municipal procurement programs. The stated goal is to support Russia's domestic IT companies and, ultimately, to reduce the dominant position of foreign (primarily U.S.) software in Russia's domestic software market. Presently, according to some experts, imported software accounts for 95 percent of the market in virtually every category of corporate and office software.

Should U.S. software giants be concerned? Probably not now, but they may want to pay attention to Legislative Bill No. 764677 and other steps the Russian government is taking to effect import substitution, including Order 96 and the Software Procurement Regulation.

Minkomsviaz's Order No. 96 contains an addendum that divides all software products into three categories:

  • Category 1 includes B2B apps (ERP, CRM and BI), antivirus software, data security software and web-based services utilized in corporate Russia (email, Internet browser, instant messaging and maps).
  • Category 2 includes desktop and mobile operating systems (OS), server OS, database management systems, cloud infrastructure and virtualization management systems, and office user software.
  • Category 3 includes software for specific industries, namely: manufacturing (PLM, CAD, CAM and CAE), oil and gas, construction (BIM, CAD and CAM), healthcare, finance, and transportation.

The plan introduced by Order No. 96 calls for reducing imported software for government use, by 2025, having a 50-percent share of software in Categories 2 and 3 developed domestically and having a dominant share of domestic software in Category 1 (for example, web-based corporate services to be about 90 percent).

Some experts seem skeptical about this initiative. However, the Ministry appears optimistic and cites Russia's history of producing competitive Russian IT solutions in the corporate software market segments. Although the Ministry does not provide specific names, it probably has in mind Kaspersky® antivirus programs that are successful worldwide, including in the United States, and the Yandex® search engine, which still dominates Russia's market.

Legislative Bill No. 764677, approved in June, is titled as law "On Amending Federal Law on Information, Information Technologies and Protection of Information and Other Legislative Acts of the Russian Federation." Once approved by the Federation Council (the upper house of the Russian parliament) and signed by President Vladimir Putin, the bill will become law. The bill proposes that the law will come into effect on January 1, 2016.

If Bill No. 764677 becomes law, a registry of domestic software programs will be created. Inclusion of a software program in that registry will enable its owner to participate in Russian federal government and municipal procurement programs and receive preferential treatment in certain cases.

Under the bill, the criteria for inclusion of software in the registry are as follows:

  1. ownership of the software belongs to a single or several Russian entities;
  2. software is available for purchase on an open market;
  3. the total amount of license fees or other royalties paid to foreign entities and domestic entities controlled from abroad is less than 30 percent of gross receipts received by the software owner from the annual sales of the software;
  4. the software owner must be an accredited IT entity2; and
  5. the software does not contain data that are considered a state (government) secret.

Under the government's draft Software Procurement Regulation, an organization that is soliciting contractors and products for government needs would have to limit bidders only to owners of software that is included in the registry. If it does not do so, it has to explain the reasons. It appears the absence of a capable domestic software product in a particular software segment in which the bidding is organized would be a satisfactory explanation. For many public procurement programs, developers and owners of software programs that are not in the registry but that include open source software may also receive preferential treatment.

Because the Russian government and municipal governments, as well as the financial and oil and gas sectors,3 are the main purchasers of software (others often obtain software illegally or on the gray market), the import substitution for software measures may have an impact on U.S. and other software companies that sell their software in Russia. Interestingly, Russia's import substitution measures do not appear to provide any preference to software owners from China, India and other non-western countries—countries that were not subject to Russia's food import ban4—but ultimately give preference to software owners in the countries of the Eurasian Economic Union.5

Footnotes

1 See text in Russian for Legislative Bill No. 764677: http://asozd2.duma.gov.ru/main.nsf/%28SpravkaNew%29?OpenAgent&RN=764677-6&02.

2 Decision of the Government of the Russian Federation No. 758 of November 6, 2007, on the "Procedure of state accreditation of organizations carrying out activity in the field of information technologies."

3 It is quite likely that the import substitution measures would also apply to some private procurement if an entity has a significant government stake. For example, these measures most likely would be extended to such giants as Sberbank (savings bank of Russia, the largest bank in Russia) and Rosneft, Russia's largest publicly traded oil company.

4 Russia introduced the ban on most food imports from the United States, European Union and other countries on August 7, 2014, in response to Western sanctions on Russia over the Ukraine crisis.

5 A treaty establishing the Eurasian Economic Union (EEU) was signed on May 29, 2014, by the leaders of Belarus, Kazakhstan and Russia, and came into force on January 1, 2015. Armenia and Kyrgyzstan also signed treaties, acceding to the EEU.

Originally published July 15, 2015

If you have any questions about the topics discussed in this Alert, please contact Max Voltchenko in our Philadelphia office, any of the attorneys in our Information Technologies and Telecom Practice Group, any of the attorneys in our Privacy and Data Protection Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions