GILS Commercial contracts: Russia
GENERAL CONTRACT LAW REGULATIONS
RUSSIA
1. Is it mandatory for a commercial contract to be governed by local law?
Article 1210 of the Civil Code of the Russian Federation (hereinafter - the Civil Code) allows the parties to a contract at the conclusion of a contract or subsequently to agree upon the law applicable to their rights and obligations under this contract, both for the contract as a whole and for its individual parts. However, if, at the time of the parties' choice of the applicable law, all circumstances relating to the substance of the parties' relations are related only to Russia, despite the parties' choice of the law of another country, the mandatory norms of Russian law will apply to the relations of the parties from the contract.
2. What language applies to commercial contracts on the territory of the Country? Is it possible to establish the prevailing language?
Russian as the official language of the Russian Federation is used for the purposes of formation of contracts and other legally binding documents, the parties to which are Russian legal entities, individual entrepreneurs and citizens. Clause 9 of the Regulations on accounting and financial reporting in the Russian Federation approved by Order of the Ministry of Finance of the Russian Federation dated 29 July1998 No. 34h provides that the documentation of property, obligations and other facts of economic activity is carried out in Russian. Primary accounting documents, including contractual ones, drawn up in other languages must have a line-by-line translation into Russian.
If the contract is drawn up in Russian and in any foreign language, it may provide that the version in any language is predominant.
3. Is it possible to use electronic signatures for the execution of commercial contracts between private entities?
Commercial organisations and individual entrepreneurs can conclude an agreement on the use of a specific type of electronic signature when signing a contract (clause 1 of Article 160 of the Civil Code of the Russian Federation). As a general rule, the parties to the contract may choose any type of electronic signature – a simple, enhanced unqualified or enhanced qualified electronic signature (Article 4 of Federal Law No. 63-FZ dated 4 April 2011 "On Electronic Signature").
4. Are there any requirements to the form of a commercial contract? Are there any standard forms of commercial contracts?
In simple written form, with the exception of contracts requiring notarization, contracts of legal entities between themselves and with citizens and contracts of citizens between themselves for an amount exceeding RUB 10 000, and in cases provided for by law, regardless of the amount, must be concluded (Article 161 of the Civil Code).
Contracts must be concluded in notarial form, if this is expressly stated in the law, for example, rent contracts, sale and purchase contracts of share in the authorised capital of an LLC and shares in the common ownership of real estate.
If the terms of the agreement are defined by one of the parties in forms or other standard forms and can be accepted by the other party only by joining the proposed agreement as a whole, such an agreement is recognized as an accession agreement and special rules of modification and termination apply to it (Article 428 of the Civil Code of the Russian Federation).
5. Are there any types of preliminary agreement or “gentleman’s agreement” in the Country?
The parties may conclude a preliminary agreement providing for their obligation to conclude in the future a contract on the transfer of property, performance of works or provision of services (the principal contract) (Part 1 of Article 429 of the Civil Code).
The preliminary agreement must contain the essential terms of the principal contract, including the subject matter, as well as the period in which the parties undertake to conclude the principal contract.
To be legally binding, the preliminary agreement must be concluded in the form prescribed by law for the principal contract, and if the form of principal contract is not established, then in writing.
If the party to the preliminary agreement evades the conclusion of the principal contract, the other party has the right to apply to the court with a demand to compel the conclusion of the contract within six months from the date of non-fulfillment of the obligation to conclude the agreement.
6. What currency is allowed to be used for commercial contracts in the Country?
A contract may set the price of goods, works or services in Russian rubles, foreign currency or conventional monetary units (ECUs, "special drawing rights", etc.), and also provide that the monetary obligation is payable in rubles in an amount equivalent to a certain amount in foreign currency or in conventional units. In this case, the amount to be paid in rubles is determined according to the official exchange rate of the relevant currency or conventional monetary units established by the Central Bank of the Russian Federation on the day of payment, unless a different rate or another date for its determination is established by law or agreement of the parties (Part 1 of Article 317 of the Civil Code).
7. Are there options for the limitation of liability of a party under the commercial contract?
The contract can also establish that only actual damage is subject to compensation, but not lost profits and/or set a limit of liability for each individual violation, in a fixed amount or as a percentage of the amount of the contract or the corresponding obligation.
The parties may as well include in the contract a condition that a party will not be liable if it violates the contract without intent or through the fault of its counterparties in other transactions (paragraph 9 of the resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated 14 March 2014 No. 16 "On Freedom of Contract and its limits").
8. Is the concept of release from liability or indemnity enforceable in the Country?
The parties may provide in the contract for the waiver of the right to full compensation for damages: actual damage and lost profits, such a condition is recognized by most Russian courts as legitimate (ruling of the Supreme Court of the Russian Federation dated 1 April 2020 No. 310-ES20-2238).
At the same time, it is impossible to conclude an agreement in advance on the elimination or limitation of liability for intentional violation of an obligation – such an agreement will be null and void (Part 4 of Article 401 of the Civil Code).
9. Is there the concept of “consequential damages” in the Country? Can it be excluded from liability?
As a general rule, damages incurred by a person as a result of violation of his/her right are subject to full compensation. Damages include expenses that the person whose right has been violated has made or will have to make to restore the violated right, loss or damage to his property (actual damage), as well as lost income (lost profits) (Article 15 of the Civil Code of the Russian Federation).
The Russian courts proceed from the fact that only direct damages can be recovered, provided that a causal relationship between the violation and the occurrence of the damages is proved. Consequential damages cannot be recovered.
10. Is the concept of “force majeure” recognized by the legislation and courts on the territory of the Country?
Article 401 of the Civil Code provides for circumstances of force majeure, that is, extraordinary and unavoidable circumstances under these conditions, as a basis for releasing a person who has not fulfilled or improperly fulfilled an obligation in carrying out entrepreneurial activity from liability, unless otherwise provided by law or contract. Such circumstances do not include, in particular, violation of obligations on the part of the debtor's counterparties, the absence of goods necessary for execution on the market, and the debtor's lack of necessary funds.
11. Are export control provisions due to the economic sanctions specified by legislation and enforceable in the Country?
Legislation provides for provisions on export control; legal relations are regulated by Federal Law No. 183-FZ "On Export Control" dated 18.07.1999. The Government of the Russian Federation has approved lists (lists) of goods and technologies subject to export control, in particular approved:
1. List of chemicals, equipment and technologies that can be used in the creation of chemical weapons;
2. List of nuclear materials, equipment, special non-nuclear materials and relevant technologies;
3. List of dual-use equipment and materials and related technologies used for nuclear purposes;
4. List of microorganisms, toxins, equipment and technologies;
5. List of equipment, materials and technologies that can be used in the development of missile weapons;
6. List of dual-use goods and technologies that may be used in the development of armaments and military hardware.
Export control provisions are subject to enforcement.
12. Is there a mandatory dispute resolution regime in the Country for commercial contracts?
NO.
13. May the arbitration (local or foreign) be chosen by parties as a method of dispute resolution?
The parties have the right to refer disputes arising out of and/or related to a commercial contract to both a state arbitration court and commercial arbitration, including those located outside the territory of the Russian Federation.
However, despite the arbitration clause in the contract on jurisdiction of disputes to international commercial arbitration and application of the law of a foreign state to the relations, the Russian court may currently recognise it as unenforceable due to the application of restrictive measures to the Russian party by a foreign public-law entity and accept the claim for consideration on its merits.
Disputes arising out of relations governed by the legislation of the Russian Federation on the contract system in the sphere of procurement of goods, works and services for state and municipal needs may be referred to the permanent arbitration institution for administration of disputes in the sphere of the contract system - the Arbitration Centre at RSPP.
Authors: Yana Dianova, Counsel
Alena Ivanova, Partner
