Russian Federation: Securitisation In Russia

Last Updated: 25 November 2008
Article by Dmitriy Glazounov and Alexandra Fasakhova

This article was originally published in The International Comparative Legal Guide to: Securitisation, 2007.

1 Receivables Contracts

1.1 Formalities. In order to create an enforceable debt obligation of the debtor to the seller, (a) is it necessary that the sales of goods or services are evidenced by a formal receivables contract; (b) are invoices alone sufficient; and (c) can a receivable "contract" be deemed to exist as a result of historic relationships?

According to Russian legislation, a receivable contract is required to be made in writing when at least one of its parties is a legal person, or when the contract value made between individuals is more than a certain threshold (currently, approx. USD 400), or in some other cases directly prescribed by law. The requirement of a written form is deemed to be complied with when there is a single written document, or an exchange of written communication, or by an implied acceptance of a written offer. In some cases, the law also establishes special forms of a written contract e.g. cashier's or sales receipt in retail sales, etc. The invoice alone, if not followed by an implied action of a counter party or written communication is not sufficient. However, a written contract as a single document is a preferred form of contract due to considerations of certainty, practicality and tradition.

1.2 Consumer Protections. Do your country's laws (a) limit rates of interest on consumer credit, loans or other kinds of receivables; (b) provide a statutory right to interest on late payments; or (c) provide other noteworthy rights to consumers with respect to receivables owing by them?

Currently, there are no restrictions or other applicable regulation on the maximum amount of consumer credit interest rates (or other receivables). At the moment, the rates of interests are determined by the loan/credit contract. In case the contract does not specify the rate of interest, the rate shall be determined by the bank interest rate (refinancing rate) existing at the borrower's place of residence or, if the lender is a legal entity, at the place of its location on the day when the borrower pays the sum of debt or a respective part thereof. As to the penalties for a breach of contractual obligations the Russian legislation provides the amount of such penalties may be decreased by a court decision in case of its incommensurability to the breached obligations on a case-by-case basis. It should be noted that a draft law on consumer credit is being elaborated by the government at the moment, though it is not clear whether the law will put restriction on the interest rate.

1.3 Government Receivables. Where the receivables contract has been entered into with the government or a government agency are there different requirements and laws that apply to the sale of receivables?

There are no specific requirements for the sale of receivables entered into with the government or governmental agencies. Nevertheless, a possibility to face the immunity of the state from enforcement proceedings, which may be granted to it by a court decision, should be carefully examined.

2 Choice of Law - Receivables Contracts

2.1 No Law Specified. If the seller and the debtor do not specify a choice of law in their receivables contract, what are the main principles in your country that will determine the governing law of the contract?

Generally, it will depend on whether the seller and the debtor are both Russian residents or any of them is a non-resident (or any other foreign element is present in their relation). In the first case, the Russian civil law will imperatively regulate contractual and other obligations of the parties. In the latter case, according to the Russian conflict of law rules, the law of the country with which the contract is most closely connected shall apply to the contract. For the purposes of determination of the "most close connection" principle an internationally recognised rule of "the party's most characteristic performance" should be applied.

2.2 Base Case. If the seller and the debtors are resident in your country, and the transactions giving rise to the receivables and the payment of the receivables take place in your country, and the seller and the debtor choose the law of your jurisdiction to govern the receivables contract, is there any reason why a court in your country would not give effect to their choice of law?

No, there is no any reason for a court not to apply Russian law. Moreover, in such a case (where all the parties are residents of the Russian Federation and transactions in question take place in Russia) according to the Russian conflict of law rules the parties are not entitled to choose another jurisdiction to govern their contractual relationships.

2.3 Freedom to Choose Other Law. If the seller and the debtors are resident in your country, and the transactions giving rise to the receivables and the payment of the receivables take place in your country, can the seller and the debtor choose a different country's law to govern the receivables contract and the receivables?

No, according to the Russian conflict of laws rules, a foreign law may only be applied if the transaction has a foreign element (e.g. civil relations with participation of foreign citizens or foreign legal entities or civil relations complicated by another foreign element, for instance, when the object of the contract or its performance are abroad).

2.4 Seller Resident. If the seller is resident in your country, and the seller and the debtor choose the law of your country to govern their receivables contract, will a court in your country give effect to their choice of law?

Under the Russian conflict of law provisions, the parties to the contract with a foreign element may choose the law applicable to their rights and duties under that contract. There is no general reason why a Russian court will not accept such choice of law by the seller and the debtor. It shall be taken into account that if the contract is actually related with only one country, then the choice of the law of the other country by the parties may not affect the operation of mandatory rules of the country with which such contract is actually related. There are also some other limitations, known by most other jurisdictions, as "public order" and "mandatory rules", which may limit application of the law chosen by the parties by the Russian court or lead to impossibility to exclude the application of certain rules of the Russian law (e.g. currency, customs, taxation regulations).

2.5 Debtor Resident. If the debtor is resident in your country, and the seller and the debtor choose the law of your country to govern their receivables contract, will a court in your country give effect to their choice of law?

The analysis applied to this question should be the same as in question 2.4 above.

3 Choice of Law - Receivables Purchase Agreement

3.1 Freedom to Choose Other Law. If your country's law governs the receivables, and the seller sells the receivables to a purchaser in another country, and the seller and the purchaser choose the law of the purchaser's country or a third country to govern their sale agreement, will a court in your country give effect to their choice of law?

According to the Russian conflict of law rules the parties to a contract, when one party is a foreign entity, may choose the law applicable to their rights and duties under that contract including sale agreements provided that such a choice does not affect the operation of mandatory rules of the country with which the contract is actually related.

In the absence of an agreement between the parties on the applicable law, the law of the country with which the contract is most closely connected shall apply to the contract. Generally, the law of the country with which the contract is most closely related shall be considered the law of the country in which the party performing execution of crucial importance for the contract has itsplace of residence or main place of activity (the seller in the sale and purchase transaction, the lender in a loan agreement, financial agent in a contract of financing against assignment of a monetary claim etc.).

3.2 Other Advantages. Conversely, if another country's law governs the receivables, and the seller is resident in your country, are there circumstances where it would be beneficial to choose the law of your country to govern the sale agreement?

It would be beneficial to choose Russian law to govern the sale of receivables agreement since the buyers are also resident in Russia and, therefore, the Russian courts will in most cases have the authority to judge upon possible disputes arising from the parties' contractual relationships - the application of Russian law in this case will obviously facilitate implementation of related legal provisions, the understanding of certain institutions of the legal system, the enforcement of court decisions against seller, etc.

3.3 Effectiveness. In either of the cases described in questions 3.1 or 3.2, will your country's laws apply to determine (i) whether the sale of receivables is effective as between the seller and the purchaser; (ii) whether the sale is perfected; and/or (iii) whether the sale is effective and enforceable against the debtors?

Therefore, there is no doubt that in the mentioned cases Russian law will be applied to determine effectiveness and performance of the sale agreement as between the seller and the purchaser as well as the perfection of such a contract, but as for its effectiveness and enforceability against the debtors, the risk that the receivables' contract governing law shall prevail should be carefully examined.

4 Asset Sales

4.1 Sale Methods Generally. In your country what is (are) the customary method(s) for a seller to sell accounts receivables to a purchaser?

According to the Civil Code of the Russian Federation, receivables are transferred through assignment both under a transaction (agreement of the parties) and by operation of law.

By operation of law the rights can be transferred upon occurrence of following circumstances: (i) as a result of universal legal succession; (ii) by decision of a court concerning the transfer of the creditor's rights to another person; (iii) as a consequence of the performance of the debtor's obligation by its surety or by a pledger who is not a debtor to the obligation; (iv) in the event of the subrogation; and (v) in other instances provided for by law.

Assignment by the agreement of the parties is undoubtedly the most common and widely used form to transfer the rights for most classes of receivables subject to be securitised (e.g. sale and purchase, swap, gift, financing against assignment of a monetary claim (factoring) etc.).

4.2 Perfection Generally. What formalities are required generally for the sale of accounts receivable to be perfected? Are there any additional or other formalities required for the sale of accounts receivable to be perfected against any subsequent good faith purchasers for value of the same accounts receivable from the seller?

Generally there are no special formalities for the sale of accounts receivables. The Russian Civil Code provisions of the sale and purchase and on the assignment shall apply to the sale of accounts receivable as well, unless it follows otherwise from the contents and nature of such rights. The form of assignment shall correspond to the form of transaction on which it is based: simply written; notarised; or state registered respectively.

4.3 Perfection for Promissory Notes, etc. What additional or different requirements for sale and perfection apply to sales of promissory notes, mortgage loans, consumer loans or marketable debt securities?

The form for a transfer of rights under the securities depends on the kind of securities to be transferred. According to the Russian Civil Code, securities can be transferred in the following ways: delivery (for securities in a documentary form); assignment (for registered securities); and endorsement (for securities including promissory notes). The sale of a mortgage loan certified by a mortgage certificate is perfected by means of an endorsement on the certificate. The assignment of rights under a mortgage loan not certified by a mortgage certificate is subject to registration in the Unified State Register for Transactions and Rights in Immovable Property. Perfection of the sale of a promissory note is subject to general rules described above depending on the type of a note. Marketable debt securities are transferred by execution of a relevant entry in the register of rights to such securities (for a nondocumentary form of securities), or by delivery (in case of a bearer form).

4.4 Debtor Notification. Must the seller or the purchaser notify debtors of the sale of receivables in order for the sale to be an effective sale against the debtors?

Generally, neither the consent, nor the notification of the debtor shall be required for the sale of receivables unless otherwise provided for by law or by the contract. However, the purchaser shall bear the risk of unfavorable consequences caused by nonnotification if the debtor was not informed in writing about such a sale of receivables. Moreover, all the payments made by the debtors to the seller of receivables up to the moment they are duly notified of the assignment should be considered as proper performance by the debtors under receivables contracts.

4.5 Debtor Consent. Must the seller or the purchaser obtain the debtors' consent to the sale of receivables in order for the sale to be an effective sale against the debtors? Does the answer to this question vary if (a) the receivables contract does not prohibit assignment but does not expressly permit assignment; or (b) the receivables contract expressly prohibits assignment?

As it has been already mentioned (see question 4.4) consent of the debtor shall not be required unless otherwise provided for by law or by the contract. However, according to the Russian Civil Code, the sale (assignment) concerning the obligation in which the personality of the seller (creditor) is of vital importance for the debtor shall not be permitted without the consent of the debtor.

Furthermore, a limitation to execute an assignment without consent of the debtor can be imposed by the underling contract itself. In such a case any sale of the receivables made without the debtor's consent should be deemed void. If the receivables contract expressly prohibits an assignment, such an assignment shall be void unless the parties thereto amend it in a proper form.

4.6 Liability to Debtor. If the seller sells receivables to the purchaser even though the receivables contract expressly prohibits assignment, will the seller be liable to the debtor for breach of contract?

So, if such a sale has been performed in spite of the prohibition, it shall be deemed invalid and, therefore, the seller remains the party to the contract and is liable to the debtor for the breach of contract.

4.7 Identification. Must the sale document specifically identify each of the receivables to be sold? If so, what specific information is required (e.g., debtor name, invoice number, invoice date, payment date, etc.)? Do the receivables being sold have to share objective characteristics?

Under Russian law, a contract (including sale contract) shall be considered concluded if the parties have agreed upon all material conditions of the contract which includes the subject thereof, i.e. description of receivables. It is generally recognised under Russian law that such elements of the assignment as names of the parties, amount of obligation, nature and specific particularities of an obligation are deemed to have crucial importance as for the purposes of an assignment.

4.8 Economic Effects on Sale. What economic characteristics of a sale, if any, might prevent the sale from being perfected? Among other things, to what extent may the seller retain (a) credit risk; (b) interest rate risk; and (c) control of collections of receivables without jeopardising perfection?

The sale contract will be considered to constitute a "true sale" if such a contract and the language thereof clearly reflects the intention of the parties to transfer to the purchaser a full title to the assets (in case of receivables that means fully changing the party to the obligation). Given that the transfer of a full title results in all the risks associated with assets also passing to the purchaser, leaving certain risks, such as credit and interest rate risks, may make a Russian court question the intention of the parties to sell the receivables. Such an approach should not preclude the parties from entrusting the seller with the servicing function, though under a separate agreement and not a part of the sale contract.

4.9 Continuous Sales of Receivables. Can the seller agree in an enforceable manner (at least prior to its insolvency) to continuous sales of receivables?

In general, an agreement establishing the procedure for making an assignment of receivables in portions over a certain period of time is possible. However, due to the problem of enforceability of an assignment of future flows (see question 4.10 below), such an agreement will be a mere framework agreement, and separate writings should be signed by the parties to effect the assignment of each portion of receivables upon maturity of same.

4.10 Future Receivables. Can the seller commit in an enforceable manner (both prior to and after its insolvency) to sell receivables to the purchaser that come into existence after the date of the sale contract (as in a "future flow" securitisation)?

Though there is no direct provision in the legislation on assignment of future claims, the Russian doctrine holds the opinion that only existing and mature rights can be sold by the assignment (not thefuture receivables). As a general rule, the sale of future receivables is not supported by the Russian court practice but, under certain circumstances, may sometimes be recognised as a preliminary agreement (with the obligation to conclude a principal agreement in future).

There is a special mechanism for the sale of future receivables - by way of factoring which is a special type of contract regulated by the Civil Code of the RF deemed to be a sort of a "commercialised assignment". The factoring is defined as a contract for financing against the assignment of a monetary claim by the client (recipient of financing). This contract can be used for both full assignment (sale of receivable) and assignment by way of security of a client's obligation. The Civil Code expressly provides that both present and future receivables can be subject to assignment under the factoring. The use of factoring is limited by a legal requirement that the financing party should be a bank, other credit institution or an entity with a special licence.

4.11 Related Security. What additional formalities must be fulfilled for the concurrent transfer of related security to be enforceable? If not all related security can be enforceably transferred, what methods are customarily adopted to provide the purchaser the benefits of such related security?

As a general rule, unless otherwise prescribed by law or the contract, a security, being an accessory obligation, is transferred together with the main obligation. If there is a separate agreement for a security, such as a pledge, for example, it should be transferred in the same way as the receivable itself. Amortgage securing a loan and certified by a mortgage certificate is being transferred together with the loan by means of endorsement on such a certificate.

5 Security Interests

5.1 Back-up Security. Is it customary in your country to take a "back-up" security interest over the seller's ownership interest in the receivables and the related security, in the event that the sale is deemed by a court not to have been perfected?

Taking a "back-up" security interest in a receivable together with transferring the full title to it is not customary practice in Russia. Moreover, making such a "double" agreement both for the sale and creation of security interest may undermine the true sale, because it makes the real intention of the parties uncertain for a court to decipher.

5.2 Seller Security. If so, what are the formalities for the seller granting a security interest in receivables and related security under the laws of your country, and for such security interest to be perfected?

A written form is required in order to create a security interest in a receivable (usually, a pledge; an assignment by way of security is also possible through factoring contract (see question 4.10 above)). Unless otherwise prescribed by the contract, consent or notification of the debtor is not required for validity for creation of such security, provided that it is not envisaged to shift performance by the debtor from the seller to the holder of such security interest.

5.3 Purchaser Security. What are the formalities for the purchaser granting a security interest in receivables and related security under the laws of your country, and for such security interest to be perfected?

See question 5.2.

5.4 Recognition. If the purchaser grants a security interest in the receivables under the laws of the purchaser's country or a third country, and that security interest is valid and perfected under the laws of that other country, will it be treated as valid and perfected in your country?

If there is a foreign element in the relations, the security interest in receivables may be governed by a foreign law, subject to the usual limitations of the "public order" and "mandatory rules".

5.5 Additional Formalities. What additional or different requirements apply to security interests in or connected to promissory notes, mortgage loans, consumer loans or marketable debt securities?

A pledge in a security, like a mortgage certificate, promissory note, or marketable debt security, should be perfected, essentially, in the same form as the sale, i.e. by means of a special pledge endorsement, entry in the securities' register of the relevant pledge, etc. (see question 4.3. above). There are no special rules for a pledge over consumer loans.

6 Insolvency Laws

6.1 Stay of Action. If, after a sale of receivables that is otherwise perfected, the seller becomes subject to an insolvency proceeding, will your country's insolvency laws automatically prohibit the purchaser from collecting, transferring or otherwise exercising ownership rights over the purchased receivables ("automatic stay")? Does the insolvency official have the ability to stay collection and enforcement actions until he determines that the sale is perfected?

Once the receivables are purchased by the purchaser in accordance with all legal requirements, the purchaser becomes the owner of receivables and, therefore, collects proceeds, transfers and otherwise exercises its ownership rights over the receivables. The purchaser is not restricted to exercise its right as a legal holder of receivables automatically, only by the fact of the seller becoming insolvent. If collection is performed by the purchaser itself the seller's insolvency official has no right to stay such collection, however, in case the seller exercises collection on the basis of a separate (servicing) agreement the collections may be interrupted due to commingling of money of the purchaser and that of the seller.

6.2 Insolvency Official's Powers. If there is no automatic stay, under what circumstances, if any, does the insolvency official have the power to prohibit the purchaser's exercise of rights (by means of injunction, stay order or other action)?

According to the Russian insolvency legislation only a (state) arbitration court has the right to take measures to prohibit or otherwise preclude the purchaser's exercise of rights. The insolvency official can file a petition to such a court for invalidation of a transaction, otherwise, including arrest of the purchaser's bank accounts, etc .

6.3 Suspect Period. Under what facts or circumstances could the insolvency official rescind or reverse transactions that took place during a "suspect" or "preference" period before the commencement of the insolvency proceeding?

Generally, the transaction concluded or accomplished by the debtor during a "suspect" or "preference" period before the commencement of the insolvency proceeding can be recognised as void by the court under the petition of the insolvency official or the creditor if the specified transaction entails preferable satisfaction of claims of this creditor before others. A "suspect" period constitutes 6 months before the date of filing of the bankruptcy petition. During this period transactions connected with the payment (distribution in kind) to a shareholder (participant) of the debtor of the value of respective share (stake) can also be invalidated.

6.4 Substantive Consolidation. Under what facts or circumstances, if any, could the insolvency official consolidate the assets and liabilities of the purchaser with those of the seller or its affiliates in the insolvency proceeding?

The Russian law does not know the concept of consolidation per se. A somewhat similar effect is envisaged but only for shareholders and other persons entitled to give a mandatory instruction to the debtor (e.g. managing company) upon whom a subsidiary liability for the debtor's obligation can be imposed when such instructions have caused insolvency of the latter.

6.5 Effect of Proceedings on Future Receivables. What is the effect of the initiation of insolvency proceedings on (a) sales of receivables that have not yet occurred or (b) on sales of receivables that have not yet come into existence?

As said above the sale of a future receivable is not enforceable under the Russian law, it has to be effected after the assigned right matures, however, after the initiation of an insolvency proceeding most of the transactions are concluded exclusively upon a written consent of the insolvency official.

7 Special Rules

7.1 Securitisation Law. Does your country have laws specifically providing for securitisation transactions? If so, what are the basics?

The only law devoted to securitisation is the Federal Law No.152- FZ dated 11 November 2003 "On Mortgage-Backed Securities" (the "MBS Law") accompanied by several implementing regulations by The Federal Financial Markets Service (FFMS). It allows for securitisation of only one kind of assets - mortgage loans; and envisages two types of securities: mortgage backed bonds; and mortgage participation certificates (collective investment instrument). It is worth while bringing to notice that currently a draft law "On amendments to some legislation acts of the Russian Federation as to the regulation for financial assets securitisation" (apart from mortgage-backed assets) is being elaborated at the RF government.

7.2 Securitisation Entities. Does your country have laws specifically providing for establishment of special purpose entities for securitisation? If so, what does the law provide as to (a) requirements for establishment of such an entity; (b) legal attributes and benefits of the entity; and (c) any specific requirements as to the status of directors or shareholders?

The establishment of a special purpose entity (a "mortgage agent") is only provided by the MBS Law for mortgage securitisation through an issue of mortgage-backed bonds. The following requirements apply to their creation and activity: a mortgage agent can only be established in the form of a joint stock company; it has a limited legal capacity (to acquire mortgage loans as collateral for a number of bonds prescribed by the charter); a mortgage agent cannot have employees; the functions of its sole executive body shall be delegated to a management company; and accounting ones - to a bookkeeping company; and both functions may not be performed by the same company; and there are no specific requirements for shareholders.

The main benefit of the mortgage agent is that one can implement off-balance securitisation structure under the Russian law using this type of entity only.

7.3 Non-Recourse Clause. Will a court in your country give effect to a contractual provision (even if the contract's governing law is the law of another country) limiting the recourse of parties to available funds?

Under the Russian law such a contractual provision shall be unenforceable.

7.4 Non-Petition Clause. Will a court in your country give effect to a contractual provision (even if the contract's governing law is the law of another country) prohibiting the parties from (a) taking legal action against the purchaser or another person; or (b) commencing an insolvency proceeding against the purchaser or another person?

Generally, the non-petition clauses are viewed by the Russian courts as "waivers of rights" which are not enforceable under the Russian law and this approach may even be applied as "mandatory rules" of the Russian law overriding other applicable law.

7.5 Independent Director. Will a court in your country give effect to a contractual provision (even if the contract's governing law is the law of another country) or a provision in a party's organisational documents prohibiting the directors from taking specified actions (including commencing an insolvency proceeding) without the affirmative vote of an independent director?

The entity's constituent documents can establish the jurisdiction and voting quorum of certain corporate bodies (such as, the board of directors including independent directors) in such a way as to preclude making certain transactions or decisions without their consent.

8 Regulatory Issues

8.1 Required Authorisations, etc. Assuming that the purchaser does no other business in your country, will its purchase and ownership or its collection and enforcement of receivables result in its being required to qualify to do business or to obtain any license or its being subject to regulation as a financial institution in your country? Does the answer to the preceding question change if the purchaser does business with other sellers in your country?

A mere purchase and ownership of receivables, as well as receiving collections shall not constitute for the purchaser activity subject to licensing or other qualifying requirements.

8.2 Data Protection. Does your country have laws restricting the use or dissemination of data about or provided by debtors? If so, do these laws apply only to consumer debtors or also to enterprises?

Personal data of debtors is confidential information. A new Federal Law No. 152-FZ dated 27 July 2006 "On Personal Data" entered into force on 25 January 2007. It introduced additional requirements for processing personal data. Due to a lack of court practice under the new Law, it is not certain at the moment how the personal data protection rules will correlate with the general right of creditors to assign their rights.

8.3 Consumer Protection. If the debtors are consumers, will the purchaser (including a bank acting as purchaser) be required to comply with any consumer protection law of your country? Briefly, what is required?

Under the Russian law there is no any special requirement of assignment of consumer receivables and their purchasers.

8.4 Currency Restrictions. Does your country have laws restricting the exchange of your country's currency for other currencies or the making of payments in your country's currency to persons outside the country?

The following groups of transaction may be subject to the currency regulations restrictions: operations in a foreign currency between residents, which are restricted with certain exceptions; and operations in a foreign currency between a resident and nonresident which may be performed without restrictions except for the requirements that the transaction involving a foreign currency shall be carried out through the authorised banks only, and certain other currency control procedures and restrictions which may apply for foreign currency payments by a non-residents.

9 Taxation

9.1 Withholding Taxes. Will any part of payments on receivables by the debtors to the seller or the purchaser be subject to withholding taxes in your country? Does the answer depend on the nature of the receivables, whether they bear interest, their term to maturity, or where the seller or the purchaser is located?

If the seller or the purchaser is a Russian tax resident no withholding tax will apply to interest payments from the debtors. If the purchaser is not a tax resident of the RF, and its activity does not constitute the "permanent establishment", receivables payments may be subject to withholding tax in Russia at the rate of 20% subject also to provisions for the respective double taxation treaty, which would depend on the country where such a purchaser has a tax residence.

9.2 Seller Tax Accounting. Does your country require that a specific accounting policy is adopted for tax purposes by the seller or purchaser in the context of a securitisation?

No special requirements are imposed upon the parties in this respect, however, use of a certain accounting policy by the seller (at its own discretion) in relation to assignment of receivables may have an influence for the tax accounting purposes.

9.3 Stamp Duty, etc. Does your country impose stamp duty or other documentary taxes on sales of receivables?

No stamp duty or any other documentary tax is imposed in respect of the sale of receivables in general, however, there may be special rules for certain types of receivables, for example, an assignment of mortgage will require the state registration and thus entail a payment of the state duty, which though can be avoided in case the mortgage loan is certified by a mortgage certificate.

9.4 Value Added Taxes. Does your country impose value added tax, sales tax or other similar taxes on sales of goods or services, on sales of receivables or on fees for collection agent services?

The value added tax (at the rate of 18, 10 or 0 per cent) is applied to the sale of goods and services in the RF, such a tax may be offset, as a rule. The general approach to assignment of receivables is that such a transaction is subject to VAT as long as the underlying receivable contract is also taxable.

9.5 Purchaser Liability. If the seller is required to pay value added tax, stamp duty or other taxes upon the sale of receivables (or on the sale of goods or services that give rise to the receivables) and the seller does not pay, then will the taxing authority be able to make claims against the purchaser or on the receivables or collections for the unpaid tax?

Generally, every tax payer bears sole responsibility for fulfilling its own duties imposed by the tax legislation and, as a matter of law, such duties and liability cannot be shifted to other persons.

9.6 Doing Business. Assuming that the purchaser conducts no other business in your country, would the purchaser's purchase of the receivables, its appointment of the seller as its servicer and collection agent, or its enforcement of the receivables against the debtors, make it liable to tax in your country?

The purchaser may be subject to payment of the profit tax in Russia in case its activity in Russian constitutes a permanent establishment in terms of the applicable double taxation treaty. According to the rules of the Russian Tax Code which reflects the approach of the majority of the double taxation treaties to which the RF is a party to definition of a "permanent establishment", the described activity of the purchases through a servicer, or its agents, may sometimes be deemed as constituting a permanent establishment of the purchaser in the RF. By virtue of the double taxation treaty the tax paid in Russia should be offsetable against the tax paid in the home tax jurisdiction.

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.

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Terms & Conditions (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

To Use 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.


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.


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