GILS Commercial contracts: Belarus

GENERAL CONTRACT LAW REGULATIONS

BELARUS

1. Is it mandatory for a commercial contract to be governed by local law?

According to the conflict of laws of Article 1124 of the Civil Code of the Republic of Belarus (hereinafter - the Civil Code), the parties to a contract may, at the conclusion of the contract or subsequently, agree on the applicable to their rights and obligations under the contract law, as long as it is not contrary to the legislation.

The parties' agreement on the choice of the applicable law must be expressly stated or must arise directly from the terms of the contract and the circumstances of the case considered in their totality.

Thus, Belarusian legislation doesn’t impose any restrictions on the parties' choice of the applicable under a contract law with a non-resident. At the same time, Belarusian legislation contains a number of mandatory requirements that are to be applied to the parties' relations regardless of the applicable law chosen (e.g., currency legislation).

2. What language applies to commercial contracts on the territory of the Country? Is it possible to establish the prevailing language? 

As a general rule, there are no requirements to the language of a contract concluded with a non-resident.

At the same time, for example, for the purposes of currency control, the National Bank is entitled to request documents and other information related to the fulfilment of obligations under a currency contract from residents. In this case, documents and/or their copies, including contracts with non-residents (if requested) should be provided in one of the state languages of the Republic of Belarus: Belarusian or Russian.

3. Is it possible to use electronic signatures for the execution of commercial contracts between private entities? 

As a general rule, a contract may be concluded by drawing up a text document, including an electronic document expressing its content, which is signed by the subject or subjects making a deal or by subjects duly authorised by them in their own hand or with the use of communication and other technical means, computer programs, information systems or information networks. It is necessary that such a method of signing allows to reliably establish that the relevant text document has been signed by the subject or subjects making a deal or duly authorised by them (facsimile reproduction of sign manual by means of mechanical or other copying, electronic digital signature or other analog of handwritten signature ensuring identification of the respective person or persons), and does not contradict the legislation and the agreement of the parties (part 1 clause 1 of Article 161 of the Civil Code).

However, the use of electronic digital signature in contracts with non-residents is allowed by Belarusian legislation only if a foreign public key certificate is recognized. Such recognition is carried out in two ways: either on the basis of a treaty concluded with the Republic of Belarus on mutual recognition of public key certificates, or by establishing trust in the public key certificate of a trusted third party. Work is currently underway to ensure the possibility of using electronic digital signatures in electronic document flow, including when signing contracts electronically with residents of the Russian Federation. As a result, it is now possible to recognize electronic signature (electronic digital signature) in transport (shipping) documents through a national operator of a trusted third party when carrying out international mutual trade between Belarus and Russia.  

The civil legislation of Belarus doesn’t prohibit the use of other electronic signatures (not electronic digital signatures) when signing contracts with non-residents. However, problems arise with the fulfilment of all requirements imposed by civil and currency legislation on contracts signed in this way, including the proper identification of the signatories. Thus, when choosing such a method of signing a contract with a non-resident, one should properly assess and try to minimise the associated risks for both parties.

4. Are there any requirements to the form of a commercial contract? Are there any standard forms of commercial contracts? 

A contract with a non-resident must be concluded in a simple written form. Failure to comply with the simple written form shall entail invalidity of the foreign economic contract.

In the Republic of Belarus there are no approved forms of a contract with a non-resident. However, civil and currency legislation sets requirements for the content of such agreements. They must obligatorily contain all essential elements:

1. subject matter (part 2 clause 1 of Article 402 of the Civil Code). It depends on the type of the contract. For example, for the supply contract subject matter is the transfer of goods of a certain name and quantity (clauses 1 and 5 of Article 424, clause 3 of Article 425 of the Civil Code);

2. conditions that are named in the legislation as essential, necessary or mandatory for this type of contract (part 2 clause 1 of Article 402 of the Civil Code), as well as conditions regarding which an agreement must be reached upon the application of one of the parties.

The currency legislation includes the following mandatory conditions that must be contained in a contract with a non-resident:

1) terms of fulfilment of obligations under a contract with a non-resident (part 2 clause 1 of Article 10 of the Law on currency regulation), namely:

• in case of export - the term of payment by a non-resident for goods, undisclosed information, exclusive rights to intellectual property objects (hereinafter - IPO), property rights transferred to him, performed works, rendered services;
• in case of import - the term for a non-resident to return the amount of prepayment paid by a resident. Within this term, a non-resident will have to return the prepayment if it fails to fulfil or doesn’t fully fulfil its obligations under the contract, which will include obligations to transfer goods, undisclosed information, exclusive rights to IPO, property rights, property for rent, perform works, render services.

2) the amount of the parties' monetary obligations. It may be specified precisely or indicatively (paragraph 4 part 2 of Edict N 178);

3) payment terms. This condition should specify the payment procedure: prepayment or postpayment (paragraph 4 part 2 of Edict N 178).

5. Are there any types of preliminary agreement or “gentleman’s agreement” in the Country?

The parties have the right to conclude a preliminary contract, under which they undertake to conclude a future contract (main contract) on the terms stipulated by the preliminary contract (Article 399 of the Civil Code).

A preliminary contract is concluded in the form established by the legislation for the main contract, and if the form of the main contract is not established, then in writing.

The preliminary contract specifies the term in which the parties undertake to conclude the main contract. If such a term is not specified, the main contract must be concluded within one year from the date of conclusion of the preliminary contract.

If a party to a preliminary contract avoids concluding the main contract, the other party has the right to apply to court with a claim to compel the conclusion of the contract.

Due to the principle of freedom of contract Belarusian legislation doesn’t prohibit the use of other similar contractual constructions, such as a letter of intent, a “gentleman's agreement”, etc. However, when concluding such agreements in practice, questions arise regarding the obligatory nature of their execution by the parties, as this issue isn’t regulated by the legislation.

6. What currency is allowed to be used for commercial contracts in the Country?

The Republic of Belarus has no requirements for the currency of payment and the currency of obligation under contracts with non-residents. In a contract with a non-resident, they may be different (Belarusian rubles, Russian rubles, US dollars, euros, Chinese yuan, etc.), which is determined by the agreement of the parties (currency clause) in the relevant contract. In addition, the currency of payment and the currency of obligation may be the same or different, which the parties must also specify in the currency clause. A contract with a non-resident may also contain a multi-currency clause.

7. Are there options for the limitation of liability of a party under the commercial contract?

According to clause 1 of Article 371 of the Civil Code the legislation may limit the right to full compensation for losses for certain types of obligations and for obligations related to a certain type of activity (limited liability).

For example, under a service contract if the customer refuses from such a contract, the customer must compensate only the costs actually incurred by the contractor (real damage). Loss of profit is not compensated in this case.

Clause 1 of Article 14 of the Civil Code establishes that a subject whose right has been violated may demand full compensation for the losses caused to him. Other may be stipulated by the legislation or the contract corresponding to the legislation.

Thus, the parties have the right to agree in the contract terms on limitation of liability for compensation of losses caused. Compensation may be limited by the composition of losses. For example, it may be specified that loss of profit or certain expenses of the party related to the real damage are not subject to compensation. It is also possible to limit the amount of losses to be compensated.

In addition, according to part 2, clause 1 of article 365 of the Civil Code, the legislation or the contract may provide for cases when it is allowed to recover only the penalty, but not losses, when losses may be recovered in the full amount in excess of the penalty, when at the choice of the creditor may be recovered either the penalty or losses.

Therefore, in the contract the parties may stipulate the recovery of only penalties and exclude the recovery of losses or provide that the creditor may at its option recover either penalties or damages.

However, clause 4 of article 372 of the Civil Code establishes a prohibition on the elimination or limitation of liability for willful misconduct by agreement of the parties. Such an agreement will be null and void.

The contractual penalty may be limited by agreement of the parties in the contract. At the same time, a prohibition to reduce the statutory penalty (the penalty provided for by the legislation) may be established. Thus, the amount of the statutory penalty under construction contracts cannot be reduced, the legislation only allows increasing the penalty.

Therefore, limitations of liability that would reduce the amount of statutory penalty under construction contracts would be contrary to the requirements of the legislation.

8. Is the concept of release from liability or indemnity enforceable in the Country?

The civil legislation of Belarus establishes grounds for exemption from liability for unfulfilled or improperly fulfilled obligations:

1) irresistible force (force majeure);

2) the subject who failed to fulfil (improperly fulfil) the obligation, took all measures for its fulfilment with the degree of care and diligence required of it by the nature of the obligation and the terms of civil turnover;

3) impossibility of fulfilment due to circumstances for which neither party is responsible.

Exemption from liability for causing harm is possible in the following cases:

1) if the subject who caused the harm proves that the harm was not caused through its fault. However, the law may provide for compensation for harm even in the absence of the causer’s fault;

2) harm is caused at the request or with the consent of the victim, and the actions of the causer don’t violate the moral principles of society;

3) the harm was caused in a state of necessity, if its limits were not exceeded.

9. Is there the concept of “consequential damages” in the Country? Can it be excluded from liability? 

In accordance with clause 1 of Article 14 of the Civil Code, the subject whose right has been violated may demand full compensation for the losses caused to him, unless otherwise provided by the legislation or the contract corresponding to the legislation.

According to clause 2 of Article 14 of the Civil Code, losses are understood as expenses that the subject whose right has been violated has made or will have to make to restore the violated right, loss or damage to property (real damage), as well as unreceived income that the subject would have received under normal terms of civil turnover, if his right had not been violated (loss of profit).

Consequently, Belarus provides for the division of recoverable losses into real damage and loss of profit.

Belarusian legislation doesn’t contain the concept of “indirect damage” or “indirect losses”.

However, this doesn’t prohibit the contract from providing for the division of losses into direct and indirect losses by agreeing on clear criteria for such division or a clear definition of indirect losses. In this case, based on the principle of freedom of contract, the parties may also agree in the contract the exclusion of indirect losses from the scope of contractual liability of the parties. But it is necessary to take into account the statutory prohibitions on limitation or exclusion of certain liability, for example, prohibition on the elimination or limitation liability for willful misconduct by agreement of the parties, because such an agreement in this part will be considered null and void (clause 4 of Article 372 of the Civil Code).

10. Is the concept of “force majeure” recognized by the legislation and courts on the territory of the Country?

Belarusian legislation doesn’t contain the concept of “force majeure”. Instead, the Civil Code contains the concept of “irresistible force”. Thus, clause 3 of Article 372 of the Civil Code establishes that unless otherwise provided for by the legislation or the contract, a subject who failed to fulfil an obligation or fulfilled it improperly in the course of doing business shall be liable unless it proves that the proper fulfilment of the obligation is impossible due to irresistible force, i.e. extraordinary and unavoidable circumstances under the given conditions.

According to the established court practice in Belarus, irresistible force circumstances due to which a subject hasn’t fulfilled an obligation or has fulfilled it improperly in the course of doing business don’t include, particularly:

• breach of obligations on the part of the debtor's counterparties;
• lack of goods needed for execution on the market;
• the debtor doesn’t have the necessary funds.

The Belarusian Chamber of Commerce and Industry (BelCCI) also notes that irresistible force circumstances generally don’t include:

• changes in exchange rates;
• a decrease in revenue from the sale of goods, works, services, including in connection with the suspension of business;
• decrease in the number of visitors to cafes, restaurants, other public catering organisations, casinos, hotels, cinemas;
• increase in the cost of transportation of goods, including by sea transport;
• reduction in the number of sea vessels on maritime transportation lines.

11. Are export control provisions due to the economic sanctions specified by legislation and enforceable in the Country?

A number of legislative acts aimed at regulating export control, in particular, the Law of the Republic of Belarus No. 363-Z of 11.05.2016 “On Export Control” has been adopted in Belarus. At the same time, the establishment of an export control system in Belarus isn’t related to the effect of sanctions, but concerns the fulfilment of obligations to non-proliferation of weapons of mass destruction and countering terrorist activities, as well as ensuring national security. The objects of export control are specific goods (works, services), namely: military, dual-use, and those controlled in the interests of national security, included in the lists of specific goods (works, services).

In connection with the sanctions imposed on the Republic of Belarus, regulatory legal acts providing for certain retaliatory measures have been adopted separately. Currently, in Belarus there are bans and/or restrictions both on import and export of certain categories of goods, in particular: 

• Resolution of the Council of Ministers of the Republic of Belarus of 22.03.2024 No. 212 “On the introduction of a temporary ban on the export of certain types of industrial goods”;
• Resolution of the Council of Ministers No. 700 of 06.12.2021 “On the application of special measures with respect to certain types of goods”. 

These prohibitions (restrictions) are temporary in nature, but are constantly updated, and their validity is usually extended for new periods. The above regulations provide for special quotas and/or one-time licences for import/export of certain categories of goods.

In addition, after the EU imposed certain sanctions on vehicles from Belarus, the Resolution of the Council of Ministers of the Republic of Belarus of 22.04.2022 No. 247 “On movement of vehicles” was adopted. This Resolution established a ban on the movement across the territory of the Republic of Belarus of:

1. trucks and tractors registered in the EU;
2. trailers (semi-trailers) registered in the Republic of Poland;
3. passenger cars registered in the Republic of Poland and engaged in international transportation in accordance with individual consignment notes and CMR.

12. Is there a mandatory dispute resolution regime in the Country for commercial contracts?

In Belarus there is a mandatory pre-trial procedure for settling disputes between legal entities and individual entrepreneurs by filing a claim or using mediation. However, the parties have the right to agree in the contract to exclude it or to provide for other terms for pre-trial settlement than those established by the legislation.

The parties are free to choose the authority (state or arbitration court) competent to resolve disputes arising from a commercial contract with a non-resident. For this purpose, the parties shall conclude an arbitration or prorogation agreement, respectively. If a prorogation agreement is concluded, it shouldn’t violate the exclusive jurisdiction established by Article 236 of Commercial Procedure Code (hereinafter - CPC). Otherwise, Belarus may refuse to recognize and enforce the decision of a foreign court.

The parties also have the right to determine the territorial location of the state court competent to resolve the relevant disputes. Exceptions to this rule are established in part 3 of Article 49, Article 51 of the CPC. For example, claims for rights to immovable property shall be brought exclusively to the court at the location of this property.

13. May the arbitration (local or foreign) be chosen by parties as a method of dispute resolution? 

The parties may agree in the contract to submit disputes arising from the contract with a non-resident to arbitration institutions located in the territory of the Republic of Belarus (e.g. IAC at the BelCCI, Chamber of Arbitrators at the Union of Lawyers), as well as to foreign arbitration institutions (e.g. SCC, ICC, TIAC, etc.). For this purpose, the parties include an appropriate arbitration clause in the contract or conclude a separate arbitration agreement.

The requirement for the arbitrability of such a dispute must be met to submit a dispute for resolution to arbitration. In determining whether a particular dispute is arbitrable, it will be necessary to take into account the rules of:

• the law applicable to the arbitration agreement as agreed by the parties;
• the law of the country in which the award is made;
• the law of the states where the parties are located.

Thus, according to Article 4 of the Law of the Republic of Belarus of 09.07.1999 “On international arbitration court”, grounds for civil law disputes to be referred to the international arbitration court by agreement of the parties are:

1. disputes are between any subjects of law arising in the implementation of foreign trade and other types of international economic relations, if the location or residence of at least one of them is abroad of the Republic of Belarus;

2. disputes of economic nature, if the agreement of the parties provides for the transfer of the dispute to the international arbitration court and if it is not prohibited by the legislation of the Republic of Belarus. 

However, this doesn’t invalidate any other law of the Republic of Belarus, by virtue of which certain disputes may not be referred to an international arbitration tribunal or may be referred to it on other grounds.

According to clause 14 of the Resolution of the Plenum of the Supreme Economic Court of the Republic of Belarus of 31.10.2011 № 21 “On some issues of consideration by economic courts of the Republic of Belarus of cases involving foreign persons” it is necessary to assess the validity of the arbitration agreement, in particular: whether the written form of the arbitration agreement has been observed; whether the legal capacity and legal capability of the parties have been observed; the voluntariness of the will; whether it hasn’t lost its force (whether the dispute on the same subject of the dispute has already been considered by the economic court) and whether it can be executed; and whether the arbitration agreement hasn’t lost its force (whether the dispute has already been considered by the economic court) and whether it is enforceable (whether the arbitral body is sufficiently clearly defined), as well as whether the subject matter of the dispute falls within the competence of the international arbitration (arbitral) tribunal.

Author: Natallia Zhuk, Counsel

              Lizaveta Tsianiuta, Junior Associate