New provisions in law of obligations

Review of Changes in the Russian Civil Code 

Deep reform of civil law reached another landmark on March 8, 2015, when the Russian President signed another set of changes to the general provisions of the Civil Code of the Russian Federation, which are to become effective starting from June 1, 2015.

Of the main changes, the following ones are notable:

• New types of agreements are introduced to the civil law and certain provisions of general regulation of contractual relations are being changed;
• Provisions on securing obligations are changing. In particular, new forms have been introduced and the regulation of old ones is changing;
• New rules are being introduced for compensating damages and collecting penalties;
• Approaches to practical issues in the law of obligations that have been developed by courts are being added to the code;
• Changes are being made to provisions governing obligations, grounds for obligations, performance and termination of obligations. Certain types of obligations are described in greater detail.

The new changes actually fix in place the existing practice of the courts as regards, for example, the regulation of accession agreements, recovering damages and unilateral refusal of an obligation. The new changes are intended, among other things, to bring Russian law closer to the institutes used in English law, making it more transparent for foreign companies and giving business a set of tools it is accustomed to in other jurisdictions. For these purposes, in particular, Russian civil law will now have the following institutes which are new to Russian law, but typical for Western legal systems:

• fine for not fulfilling a court order (astreinte);
• contractual indemnity;
• estoppel;
• liability for bad faith negotiations (culpa in contrahendo);
• warranties and guaranties.

The new changes also amend the legal regulation of certain institutes, such as independent guaranty, assignment and interest for using another person’s money. For Russian lawmakers, the main goal of this reform is to eliminate archaic norms and to form a progressive civil law system in Russia which is in line with contemporary business requirements and realities.

With the current economic sanctions and general tension between Russia and certain foreign states, the increased transparency and effective regulation of civil relations, along with the introduction of legal tools to which foreign business is accustomed, are all aimed at increasing Western partners’ confidence in the opportunity to safely do business in Russia.

It is expected that the changes will have a beneficial impact on the country’s investment climate and will entice business to structure its projects under Russian law. This, in turn, should also help to fulfill the deoffshorization policy being steadily implemented in Russia.

Igor Gorokhov    Senior Associate   St. Petersburg   igorokhov@cls.ru   Tel.: +7 (812) 346 79 90

Additional notes

Should any questions arise in connection with the above or if you need any additional materials, please contact Igor Gorokhov, St. Petersburg Office of Capital Legal Services.

This Information letter keeps the clients of Capital Legal Services and other interested parties abreast of information that may, to any extent, affect their activity or cater to their particular interests. The opinions and commentaries expressed in this information letter shall not be deemed as legal opinions and do not cancel the need to obtain legal advice or legal opinion on separate issues.