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”

Related Topics
 
Related Articles
 
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