Legislative amendments regulating the use of digital technologies were implemented to the Russian Civil Code. New legislative developments provide definition of digital rights and change the rules on the form of transactions concluded through electronic means of communication. Further, the amendments stipulate in which case transaction executed by electronic or other technical means will be deemed compliant with a mandatory written form. Also, the amendments provide for regulation of smart contracts with automatic performance of the contract through electronic means.

Russian Civil Code was supplemented by Article 141.1, which gives a definition of “digital rights”. In accordance with the amendments, digital rights are obligations or other rights specifically named as such by law, and their essence and terms for exercising them are provided for by the rules of an information system meeting the legal requirements.  

In order to facilitate transactions with digital rights, the rules on the form of the transaction have been changed. New Article 160 of the Civil Code stipulates that a transaction executed by electronic or other technical means will be deemed compliant with a mandatory written form, if it is recorded by electronic or other technical means. The legal provision on the signature is deemed to be complied with when it is possible to reliably identify the person who has expressed the will. Still, the amendments do not clarify how the person shall be identified, and therefore the application of these provisions in practice can be rather problematic.

In addition, the amendments introduce the concept of smart contracts. Smart contracts are recognized not as a special type of contract, but as an automatic performance of contract under certain circumstances through electronic means without any additional actions or intent from the parties (Article 309 of the Civil Code). A good example of smart-contract is automatic payment.

The amendments will enter into force on 1 October 2019. The full text of the law can be found on the official portal of legal information.

The Supreme Court drafted a bill that provides for the insolvency managers’ right to include undisputed creditors’ claims in the bankruptcy register in out-of-court procedure. The bill was passed by the State Duma in the first reading. According to the suggested amendments, undisputed claims will be included in the register on the basis of decisions of insolvency managers. These amendments will allow creditors to save time and expenses, as well as reduce court workload in bankruptcy cases.

According to the law in effect an insolvency manager includes claims in the registry of the creditors’ claims on the basis of the court decision that handles the respective bankruptcy case, even if the claim is undisputed, for example, if the claim is evidenced by a court decision or there are no objections to it.

In order to reduce the court workload, the Supreme Court suggested that the insolvency managers shall be granted the right to resolve such claims independently, as well as assess their reasonableness so that the undisputed claims are resolved in out-of-court procedure. According to the bill, the insolvency manager should send a copy by e-mail to those persons who have the right to object to the claim within three working days from the date of receipt of the respective request. After that the insolvency manager shall consider the reasonableness of the claim taking into account objections received from interested parties. The insolvency manager shall adopt decision on the inclusion or the failure to include the claim in the register within 30 calendar days from the date the claim was filed. The decision of the insolvency manager can be appealed to the arbitration court within 30 calendar days. 

Currently, the bill was adopted by the State Duma in the first reading (see passport of the bill).

The local administration canceled the previously issued construction permit after it found out that the land plot is located in the zone of protection of cultural heritage objects, where construction is prohibited under law. The company filed a lawsuit against the local administration to challenge the termination of the construction permit. However, the Supreme Court sided with the state authorities, pointing out that authorities as a part of self-control function are entitled to cancel previously adopted legal acts, including construction permits, if they do not comply with the law. This position of the Supreme Court emphasizes the importance of a thorough independent due diligence on the possibility of construction on the land plot before obtaining the construction permit and starting construction works.

The local administration issued a construction permit, but later it turned out that the land plot is located in the zone of protection of cultural heritage objects, where construction is strictly prohibited under law. Thus, the local administration canceled the previously issued construction permit. However, the company filed a lawsuit against the local administration seeking to challenge the termination of the construction permit. The court of the first instance dismissed the claim, arguing that the disputed land plot is located within the zone of the cultural heritage object protection and therefore the construction permit was issued in violation of law.

However the appellate court and the court of cassation decided that the local authorities have the right to cancel the previously issued construction permit only in cases provided for by the City Planning Code, and in this case there are no grounds for termination of the construction permit, and ruled that the termination of the construction permit was illegal.

The Supreme Court overturned the decisions of the lower courts and remanded the case for a new trial (Decision of the Supreme Court of the Russian Federation dated 29.04.2019 on case No. 307-KG18-21642). According to the Supreme Court, the lower courts did not take into account that the land plot is located within the zone of protection of cultural heritage objects, where construction is prohibited. In addition, the Supreme Court emphasized that as a part of self-control activities, the local authorities have the right to abolish the municipal legal acts if they contradict law.

In the case at hand, the taxpayer challenged the decision of the tax authorities on blocking the company’s bank account. The court granted the taxpayer’s claim and ordered to unblock the account, but the tax authorities unblocked the account only upon expiration of one year. Therefore the taxpayer filed a lawsuit to recover 1 million Rubles interest. The cassation court granted the taxpayer’s claim, pointing out that the Tax Code provides for the taxpayer’s right to recover interest from the tax authorities in case of unlawful or unreasonably lengthy blocking the company’s account. Such an interest is compensatory in nature and is subject to recovery in any case, and the taxpayer does not have to prove losses or attempts to use the blocked account.

The tax authorities blocked the company’s account without reasonable grounds. Then the taxpayer challenged the tax authorities’ decision, and the court ordered to unblock the account. However, the tax authorities unblocked the account only one year later. During the whole year the company was unable to use money on the blocked account. Thus, the company filed a claim to the tax service for the recovery of interest provided for by the Russian Tax Code for erroneous or unreasonably long account block.

The court of the first instance and the appellate court sided with the tax authorities, arguing that the company had not incurred material losses and had no intention to use the blocked account. The court of cassation, on the contrary, granted the company’s claim and recovered Rubles 1 million from the tax service. At the same time, the court explained that the interest for unlawful block of the account stipulated in the Russian Tax Code is compensatory in nature, which means that the company does not have to prove that it incurred losses due to account block or attempted to use the blocked account (the Resolution of the Arbitration Court of the North Caucasus District on 20 May 2019 on case No. A32-14521/2018).

Rosreestr promotes the use of drones for land supervision throughout the country. Rosreestr has established a special center for the use of drones for this purpose. The photos taken with drones will be used to determine the actual use of land plots, and will be compared with the information in the real estate register to reveal land law violations.

In 2015 Rosreestr set up a project on revealing land law violations using drones. In 2017-2018 the pilot project on the use of drones was implemented in Tula region and Tatarstan. This experiment was successful and proved the feasibility of using drones for land supervision activities throughout the country. The creation of the center for the use of drones was the next Rosreestr’s step in this direction (see the press release of Rosreestr).

Remote inspection of land plots will significantly simplify revealing the most common violations: unauthorized occupation of land plot, failure to use the land plot for a long time in accordance with its purpose (in relation to land of certain categories, in particular, agricultural land) or use of the land plot not in accordance with its permitted use. The use of drones will allow to inspect land plots without participation of their owners, as well as in cases where there is no access to the land plot or where such access is limited.

Rosreestr plans to create centers for the collective use of drones in central cities of regions and provide them with the necessary equipment and software by the end of 2019.