LEGAL NEWSLETTER PERSONAL DATA PROTECTION. Moscow, December 2016

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1 LEGAL NEWSLETTER Moscow, December 2016 PERSONAL DATA PROTECTION By the decision of the Moscow State Court dated 4 November 2016, preceded by the decision of the Federal Service for Supervision of Communications, Information Technology, and Mass Media ( Roskomnadzor ) LinkedIn was blocked in Russia on the grounds of an alleged infringement of Federal Law On Personal Data dated 27 July 2006 No. 152-FZ (the Law on Personal Data ). LinkedIn failed to comply with the new legal requirement to store personal data of Russian users on the territory of the Russian Federation, which entered into force on 1 September Nonetheless, Russian users still have access to their accounts, provided the server is located outside of Russia. However, LinkedIn claims that it has repeatedly proposed to Roskomnadzor to meet in person and discuss the situation at hand. On 8 December 2016 the meeting was held, and the parties agreed to continue working on the issue. Moreover, LinkedIn claims that it does not work on the territory of Russia and does not identify users on the basis of their location. It also claims that the LinkedIn Corporation is an improper defendant since the personal data of users is processed by the LinkedIn company. This case is supposed to be the test case on blocking worldwide social networks in Russia.

2 TRADE LAW On 3 July 2016 the Federal Law dated 28 December 2009 No. 381-FZ On the State Regulation of Trade in Russian Federation (the Law on Trade ) was substantially amended in terms of limitation of maximum remuneration paid by the supplier to the vendor, decrease of time limits for payment for food products, etc. The Federal Antimonopoly Service (the FAS ) prepared the first package of clarifications to the amended Law on Trade in early September, and on 18 November 2016 the FAS presented the second package, containing, among others, the following clarifications: Limitation of maximum remuneration for services paid to third parties The limitation of maximum remuneration prescribed by the Law on Trade (as amended) does not apply to cases when the services are provided by third parties which do not perform retail activity (independent advertising and logistic companies) and do not belong to the supplier s or retailer s group of companies. Discounts provided to the retailer The FAS emphasized that all discounts provided by the supplier to the retailer shall be prescribed in the supply agreement, as well as the procedure and grounds for the provision of discounts. The provision of discounts for goods supplied previously is not allowed, save for cases when the supply agreements provide for such mechanism. Application of the Law on Trade to supplies made to foodservice companies The FAS points out that the retail and foodservice industries are separate types of goods markets, therefore, the Law on Trade shall not apply to the supplies of food products to the foodservice companies. REAL ESTATE Starting from 1 January 2017 Federal Law dated 13 July 2015 No. 218-FZ On State Registration of Immovable Property (the Law on Registration of Immovable Property ) comes into force. The Law on Registration of Immovable Property contains the following most important amendments: Unified State Register of Immovable Property Unified State Register of Rights to Immovable Property and Related Transactions and State Immovable Property Cadastre will be merged into the Unified State Register of Immovable Property (the Register ). This new register will be kept only in electronic form. Exterritorial registration procedure Applicants will be allowed to file applications with any office of the Federal Service for State Registration, Cadaster and Cartography ( Rosreestr ) irrespectively of the location of the relevant immovable property. 2

3 Reduced terms for state registration The Law on Registration of Immovable Property provides for reduced terms for registration procedure: cadastral registration 5 business days, state registration of rights 7 business days, simultaneous cadastral registration and state registration of rights 10 business days. According to the Law on Registration of Immovable Property, legal acts and regulations shall remain effective while compliant with the new law. Therefore, Federal Law dated 21 July 2007 No. 122-FZ On State Register of Rights to Immovable Property and Related Transactions and Federal Law dated 24 July 2007 No. 221-FZ On State Immovable Property Cadastre will remain in force. However, a number of potential difficulties may arise in the application of the Law on Registration of Immovable Property. For instance, as soon as the Register is conducted only in an electronic form, owners may face troubles when proving their rights in case of termination or falsification of a record kept in the Register. Additionally, the Law on Registration of Immovable Property declares the principle of credibility of information kept in the Register, but in fact it means only correspondence of the information provided to third parties to the information kept in the Register, not to the actual data about immovable property. CONTRACT LAW RULING OF PLENUM OF SUPREME COURT REGARDING APPLICATION OF THE CIVIL CODE PROVISIONS ON OBLIGATIONS AND ITS FULFILLMENT The ruling of the Plenum of the Supreme Court of the Russian Federation dated 22 November 2016 No.54 On Several Issues of Application of General Provisions of the Civil Code of the Russian Federation on Obligations and its Fulfillment (the Ruling ) has summarized and clarified several issues related to intercreditors agreements, unilateral termination of agreements, use of foreign currency in contracts, performance of obligations by third parties. Intercreditors agreements The Ruling provides that intercreditors agreements (agreements between creditors regarding the order of the satisfaction of their claims) do not impose any obligations on the debtor who did not participate in such. Therefore, the creditor must accept due performance of the obligation even if it violates the provisions of the intercreditors agreement, otherwise the creditor will be in default. Moreover, the intercreditors agreement does not impact the procedures or priority of the satisfaction of the creditors claims in the course of bankruptcy procedures. 3

4 Unilateral termination The Ruling sets out several important rules related to unilateral termination of the agreements: the shareholder s agreement can provide for the right of its unilateral termination for all parties thereto, regardless of whether such party performs entrepreneurial activity or not; if a party s right to terminate the agreement unilaterally is prescribed by the imperative provision of the law, a termination fee cannot be imposed; the same applies to cases when unilateral termination is caused by non-performance / improper performance of the obligation by another party; the termination fee can be lowered by the court only in outstanding cases; it must be proven that the amount of the termination fee is obviously inadequate to the negative consequences the termination of the agreement caused and the party requesting the payment of the termination fee in such amount acts in bad faith; the party which unilaterally amends or terminates the agreement must act in good faith and take into account the rights and lawful interests of the other party, otherwise the court can refuse to protect the right in question; for example, in case the interest rate in the credit agreement was unreasonably and disproportionally increased by the bank, the court shall reject in collection of part of interest. Foreign currency in contracts The Supreme Court has confirmed that the currency of debt and currency of payment shall be distinguished and has provided the following rules related to contracts with foreign currency: if the debt is calculated in foreign currency and the currency of payment is not specified, the settlement shall be made in Russian roubles; if, according to the contract, the debt is to be paid in foreign currency, but the court declares this contract provision void, the whole contract shall be deemed valid, provided that it is probable that the agreement could have been concluded even without the condition in question. In such case the currency of payment shall be Russian roubles; if the law or the contract does not specify the exchange rate and date of conversion, the court shall declare that the conversion shall be made according to the official exchange rate of the Central Bank of the Russian Federation on the date of actual payment. Fulfillment of obligation by third party if a third party fulfills the debtor s obligation and acts in bad faith, only with the intention to cause damage to the creditor, the court is entitled to declare the transfer of the creditor s rights to such third party void. This rule applies, for instance, in case the third party pays only principal debt in order to obtain additional votes on the creditors meeting in course of a bankruptcy procedure, but refuses to purchase the claims arising from the financial sanctions (such as fines, penalties), thus terminating the rights of the creditor to vote. 4

5 the creditor is not obliged to verify the grounds on which the third party fulfills the debtor s monetary obligation and is entitled to receive the debt amount in absence of the grounds. Consequently, this debt amount cannot be further claimed from the creditor, save for the case when the creditor has received this debt amount from the debtor as well. NEW RULES ON CANCELLATION OF POWERS OF ATTORNEY Starting from 1 January 2017 the Federal Law dated 3 July 2016 No. 332-FZ comes into force, substantially amending the rules related to the cancellation of powers of attorney. It is clarified that the power of attorney shall be terminated in the same form as it was issued, or in the notarial form. If the power of attorney is terminated in the notarial form, the respective information shall be included into the register of notary actions, which will be publicly available. Third parties will be deemed notified on the power of attorney s termination on the day following the inclusion of relevant information into the register of notary actions. Detailed information regarding the powers of attorney (the person who certified the power of attorney, the date of its certification, the registration number, the date and time of inclusion of information on termination of the power of attorney) will be available on the web-site ( TAX LAW On 30 November 2016 Federal Law No. 401-FZ, which introduces numerous amendments to the Tax Code of the Russian Federation, was adopted. The Law contains the following most important amendments. Limitation on loss carry-forward Starting from 2017 and until 2021 losses incurred for profit tax purposes in previous periods may decrease the tax base of the current period by no more than 50%. At the same time, the 10-year limitation period for loss carry-forward has been abolished. Increasing of late payment interest Starting from 1 October 2017 interest for late payment of taxes by companies is increased. Starting from the 31 st day of delay, the daily interest will be calculated as 1/150 of the Russian Central Bank s refinancing rate (i.e. 24% annually). Subsidiary responsibility for individuals Now in certain cases individuals may become responsible for tax debts of related companies (effective from 30 November 2016). This is possible if income for goods or services sold, money and other property is transferred from a debtor to an individual. 5

6 Payment of taxes by third parties Now third parties may pay taxes for taxpayers (effective from 30 November 2016). Prior to that, only the taxpayer himself/herself may pay his/her taxes. At the same time, in case of tax overpayment, only taxpayers, but not such third parties, may request the return. CONTACTS : David Lasfargue Managing Partner dlasfargue@jeantet.org Vladimir Comte Counsel vcomte@jeantet.org Maria Yadykina Counsel myadykina@jeantet.org 6