On 1 October 2019, the so-called ‘Law on digital rights’, Federal Law No. 34-FZ dated 18 March 2019*, will come into force. It introduces the concept of “digital rights” into Russian legislation, simplifies requirements as to the form of electronic transactions and creates the basis for entering into smart contracts.
Digital rights
The Law only recognises rights expressly specified as digital in the legislation, though at present, it does not designate any such rights, nor does it set out any detailed requirements for their exercise. As for now, digital rights may be exercised (e.g. disposed of or encumbered) using automated IT systems. New legislation will establish rules under which IT systems used for exercising digital rights must operate.
No such rules have yet been adopted. However, the Russian State Duma is currently reviewing two bills, one on digital financial assets* and another on attracting investments using investment platforms*. Once adopted, these bills, together with the Law, should facilitate proper recognition and exercise of digital rights in Russia.
Simplification of requirements as to the form of electronic transactions
Currently, transactions in electronic form are entered into by means of electronic signatures only. The Law now simplifies the requirements for entering into such transactions, allowing the use of any other technical method for entering into a transaction, provided that it reliably:
- identifies the parties to the transaction; and
- allows the reproduction of the terms of the relevant agreement.
The new approach is less formal and reduces the risk of the underlying rights being unenforceable on technical grounds (e.g. for non-compliance with legislation pertaining to the use of electronic digital signatures). In practice, however, the application of this new approach will depend on how the courts interpret the above criteria.
Smart contracts
The Law also allows parties to enter into so-called smart contracts. Smart contracts are defined as contracts that are entered into, performed and terminated by automated means (i.e. without human intervention) using special software capable of detecting the fulfilment of relevant conditions.
Although the current Russian legislation does not expressly prevent parties from entering into smart contracts, the new Law now confirms their legitimacy and enforceability in Russia.
Conclusion
Even though the Law introduces a new concept of digital rights, its practical implementation depends on when, and in what form, other laws governing the exercise of digital rights will be adopted, and how the courts will interpret them.
CMS Russia will continue to monitor development of the legislation in this area and inform you about new laws concerning digital rights.
If you have any questions on this eAlert, do not hesitate to contact CMS Russia experts Maxim Gubanov and Alexey Shadrin or your regular contact at CMS Russia.
* In Russian
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