Russian Federation: Agency Law Of Russian Federation - FAQs

Last Updated: 17 August 2016
Article by STA Law Firm

Introduction

Generally speaking the law of agency deals with situations where one person enters into legal relationship with another person by acting not personally but through an intermediary. Agency law is important, since it gives the possibility of entering into business transactions when due to various circumstances a person is unable to participate in personally. Hence, 'a possibility to participate in business transactions through an agent is a guarantee for implementing the right of a person to freedom and initiative of business activity'i.

What is the law governing agency relationships in Russian Federation?

The Russian Federation Civil Code (the Civil Code) regulates and governs the appointment of agents in Russia. In addition, commercial agency services are regulated by means of international agreements and/or conventions, namely:

  • Hague Convention 1978 on the Law applicable to agency;
  • Rome Convention 1980 on law applicable to contractual obligations;
  • Geneva Convention of 1983 on International Sale of Goods;
  • Types of Commercial Contracts of International Chamber of Commerce (ICC) (Publication No.496);
  • ICC Guide on Compilation of Commercial Agency Contracts (ICC Publication number 410); and
  • ICC Commentary on Commercial Agency Contracts (ICC Publication number 512).

How is the agency relationship defined under Civil Code?

Pursuant to Article 1005 of the Civil Code 'under an agency agreement [when one person (the agent) in the name of another person (the principal)] for remuneration takes legal or other actions in his own name, but at the expense of the principal, or in the name and at the expense of the principal'.

Article 1007 of the Code has provided that a principal and an agent may include an exclusivity provision which would refrain the principal from executing similar agency agreements with different agents in the same territory. The concept of exclusivity has substantial connection with the territory in which the agency agreement would be executed. A principal would be refrained from making similar agreements with other agents in the territory defined in the agency agreement as long as an exclusivity provision exists in the agency agreement.

The agency effectively comprises of two types of relationships:

  1. When the agent performs actions in his own name, but at the expense of the principal; and
  2. When the agent performs actions in the name and at the expense of the principal.

A commercial agent is a person who has a direct authority to act on behalf of the principal.

Article 1007 of the Code has provided that a principal and an agent may include an exclusivity provision which would refrain the principal from executing similar agency agreements with different agents in the same territory. The concept of exclusivity has substantial connection with the territory in which the agency agreement would be executed. A principal would be refrained from making similar agreements with other agents in the territory defined in the agency agreement as long as an exclusivity provision exists in the agency agreement.

The agency effectively comprises of two types of relationships:

a) When the agent performs actions in his own name, but at the expense of the principal; and

b) When the agent performs actions in the name and at the expense of the principal.

A commercial agent can not only conclude transactions or sales of foreign goods, but also conduct an advertising campaign at the same time.

A principal is a person who gives a commercial agent authorization to perform legal and other actions on his own behalf or on behalf of the principal.

What is the scope of authority that can be delegated to an agent? How does than the agent bind the principal by his acts?

The principal should provide the agent with lawful, practicable and concrete instructions about how he should execute the subject matter of the agency agreement. Occasionally, situations arise where the agent faces a dilemma in executing the instructions that were conveyed to him. Item 2 of article 973 of the Code has provided agents the authority to deviate from the principal's instructions if it is necessary under the prevailing circumstances and it is in the interest of the principal. However, the agent should have been in a situation where he was unable to obtain the principal's permission for the deviation from the principal's instruction. The agent is also obliged to communicate the details of the deviation to the principal at the earliest period.

If the agent entered into a transaction with a third party on his behalf and at the expense of the principal, the agent will be liable to the third party, even if the principal was named in the transaction or entered into with a third party in a direct relationship to execute the transaction. However, in a transaction made by the agent with a third party on behalf of and at the expense of the principal, the rights and duties arise directly with the principal (Article 1005 (1) of the Civil Code).

What if the agent exceeds the authority granted under the agency agreement?

As per Article 183 of the Civil Code, if the agent exceeded the power granted to him and enters into a specific transaction, such a transaction will be considered as concluded by the agent not by the principal, unless the principal approves such a transaction.

Okay, are there any formalities to follow for appointing an agent?

No. There are no formalities as such under the Civil Code for the principal to comply with when appointing an agent. The agency relationship may be established either by a written contract or an oral agreement. However, commercial agency contracts on foreign trade transactions must be concluded in writing.In addition, to the agency agreement the principal may also issue a power of attorney (POA) to the agent, empowering him to act on behalf of the principal.

What types of agency relationship do exist or are recognized within the Russian Federation?

a) A simple agency agreement – is an agreement by which the principal has the right to sell goods via several sales agents in Russia. b) An agency agreement with the exclusive right of sale – is an agreement by which the principal is obliged to sell the goods only through the commercial agent appointed and is not be able to offer the same product to other commercial agents during the term of this agreement. c) An agency agreement with a preferential right to sell – is an agreement by which the principal is obliged to offer the goods in the first place to the agent and if the agent refuses to accept the goods, the principal has the right to offer it to other commercial agents

a) A simple agency agreement – is an agreement by which the principal has the right to sell goods via several sales agents in Russia.

b) An agency agreement with the exclusive right of sale – is an agreement by which the principal is obliged to sell the goods only through the commercial agent appointed and is not be able to offer the same product to other commercial agents during the term of this agreement.

c) An agency agreement with a preferential right to sell – is an agreement by which the principal is obliged to offer the goods in the first place to the agent and if the agent refuses to accept the goods, the principal has the right to offer it to other commercial agents.

Okay, what are the agent's duty under Civil Code?

According to article 974 of the Code, an agent shall have the duty to:

  1. personally perform the duties assigned to him under the agency agreement;
  2. communicate information regarding the progress of the execution of the agency agreement at the principal's request;
  3. convey to the principal, all information regarding the items which have been received in pursuance of the execution of the agency;
  4. return the power of attorney which is valid even after the execution of the agency.

What are the obligations of the principal?

Article 975 of the Code states the following as the duties of a principal:

  1. to furnish the agent with a power of attorney for the performance of legal actions;
  2. to compensate the agent for his expenses;
  3. to provide the agent with the means required for the execution of the agency;
  4. to accept the performance of the agency;
  5. to remunerate the agent.

How is the remuneration or consideration decided or agreed?

The amount and details of payment of the agent's remuneration depend on how the parties have agreed in the agency agreement. If the agency agreement does not provide for payment mechanism, the remuneration shall be equivalent to such type of services in comparable circumstances (Article 424 (3) of the Civil Code).

Are there any restrictions on not to compete during the agency agreement?

As per Article 1007 of the Civil Code, an agency agreement may provide for restrictions on the part of both the principal and agent. The agency agreement can impose an obligation on the principal not to conclude similar agency agreements with other agents acting on the territory defined in the agreement; or to refrain from the independent activity on this territory, which is analogous to the activity which is the basis of the agency agreement.

The agency agreement may provide for an obligation of the agent not to make with other principals analogous agency agreements that must be performed on a territory coinciding in full or in part with the territory indicated in the agency agreement. It must however be noted that restriction on competition shall not affect customers. The principal is not allowed to restrict the agent in selling goods or rendering services for an exclusively definite category of customers or exclusively for buyers, who have their place of residence in the territory defined by the contract. Such terms and conditions under the agency contract will be void (Article 1007 (3) of the Civil Code).

Can the above restrictions apply once the agency agreement is terminated?

The Civil Code does not provide for a continuation of the restrictions after the agency agreement has expired or sooner terminated. However, the parties to an agency agreement can set out some restrictions on competition for a certain period after the expiry of the agreement.

But what if the agent registers the trademark of the principal in Russia and/or counterfeiting the goods of the principal without disclosing the same to the principal?

The Civil Code stipulates that the rights holder shall have the exclusive right to use its registered trademark for 'goods, labels and packaging which are manufactured, offered for sale, sold, displayed at exhibitions and fairs or used commercially in Russia, or stored and transported or imported into Russia for this purpose; while performing jobs and providing services on documents introducing the goods in commerce'.

So any unauthorized use of a protected trademark is considered infringing. Also goods, labels and packaging on which the trademark is unlawfully placed will be regarded as counterfeit.

What remedies the principal has under Russian laws?

Four types of legal action may be taken against trademark infringers and/or agents infringing the trademarks.

a) Administrative proceedings

The illegal use of a trademark entails administrative penalties, which are seizure of counterfeit goods and a fine as follows:

  • For individuals – twice the cost of the counterfeit goods, but no less than Rb10, 000;
  • For legal entities – five times the cost of the counterfeit goods, but no less than Rb100, 000; and
  • For officers – triple the cost of the counterfeit goods, but no less than Rb50, 000.

b)  Civil proceedings

The principal may claim the following civil remedies in civil claims:

  • cessation of the authorized use of the trademark;
  • reimbursement of damages;
  • removal of all counterfeit goods from the market and their destruction;
  • compensation instead of damages between Rb10, 000 and Rb5 million.

Preliminary injunctions are available. The court may order injunctive relief preventing the agent from performing actions related to the subject matter of the proceedings or ordering the seizure of his property.

c) Criminal proceedings

The principal can bring criminal case, but only if the infringement occurs repeatedly or if the damage exceeds Rb250, 000. Criminal penalties include:

  • a fine of Rb100,000 to Rb300,000 or up to two years' salary or other income of the convicted person;
  • compulsory community service for up to 480 hours;
  • corrective or disciplinary work for up to two years; and
  • imprisonment for up to two years with a fine of up to Rb80, 000 or up to six months' salary or other income of the convicted person.

Note that the principal may the reimbursement of damages from the agent. It may initiate civil claim within the ambit of criminal proceedings.1

So, how about terms and termination of the agency agreement?

An agency agreement can be entered into for either a defined term, or indefinitely (Article 1005  (3) of the Civil Code). Therefore, the parties are free to decide on the term of the agreement. In practice, agency agreements are often concluded for an indefinite period and the parties have the right to unilaterally terminate the agreement.

A notice period for termination of the agency shall not be less than 30 calendar days (Article 977  (3) and Article 1004  (1) of the Civil Code).

Now, once the agency is terminated, will the agent have any right of compensation or indemnity?

No. Russian law does not set out any compensation or indemnity on termination of an agency agreement.

Footnotes

http://legislationline.org/documents/section/criminal-codes/country/7

i The Civil Code of the Russian Federation; Russia (Federation), Peter B. Maggs, Aleksei Nikolaevich Zhiltsov, First Part, page 74-77

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.

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
 
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”

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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

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