28.11.2015 — Russia-Turkey Trade Relations at Risk: Russia Hits Turkey with Sanctions

On November 28, Russian President, Vladimir Putin, referring to national security, signed an Executive order imposing sanctions on Turkey, effective immediately. Previously, in his comments regarding the shooting down of a Russian fighter bomber by Turkish jets, Dmitry Medvedev, the Russian Prime Minister, clarified that this event may entail severance of relations and a break-up of co-operation in a number of projects.

The Executive Order limits the import to the territory of Russia of certain Turkish goods. It also limits certain types of works (services) rendered in Russia by Turkish companies, and prohibits Russian employers to hire Turkish citizens as of January 1, 2016. The lists of the relevant goods, works, services and employers will be determined by the Russian Government shortly.

The Executive Order also instructs travel agents to suspend the sale of package tours to Turkey to Russian citizens, and introduces a ban on charter flights between the two countries. This is in line with the recommendations made by the Russian Federal Tourism Agency (Rosturism) previously. Russian travel agencies have already suspended the sale of package tours to Turkey.

The Order also suspends the visa-free regime for Turkish citizens, with the exception of those that have temporary or permanent residence permits in Russia. Notably, several Turkish businessmen have already been denied entry to Russia.

Experts claim that Russian and Turkish companies in a number of industries may be affected by the incident, as well as the Executive Order and other legislation that may follow. The potential victims in the energy industry are the Turkish Stream, the proposed natural gas pipeline from Russia to Turkey across the Black Sea constructed by Gasprom in order to by-pass Ukraine and be able to deliver gas directly to the Balkans, as well as the Akkuyu Nuclear Power Plant constructed by Rosatom.

Importantly, a number of Russian companies have invested heavily in the Turkish markets. Thus, Sberbank owns a 99,85% share in DenizBank, one of the largest credit organisations in Turkey. An iron and steel company MMK owns MMK Metalurji, Turkey’s largest industrial enterprise, which produces 2.3 million tonnes of steel products annually. Energy company Inter RAO owns a gas thermal power station Trakaya and a trader TGR Enerji. Russian businessmen own 13% in Turkcell, the leading mobile phone operator of Turkey. The car-making industry and internet companies can be affected as well: GAZ group has reached an agreement regarding the assembly of Gazelle Next in Turkey, whereas the market share of Yandex (largest search engine in Russia) in Turkey hit 7%. It is yet to be seen to which extent these companies will be affected by the severance of relations between the two countries.

Should state authorities decide to go to the extremes, Russia will lose one of its largest trading partners. According to official statistics, the sales turnover between Russia and Turkey for the first none months of 2015 amounted to USD 18.1 million.

26.11.2015 — Constitutional Court to Ignore Decisions of ECHR - State Duma Considers Controversial Bill

The State Duma will shortly be considering a new bill which entitles the Russian Constitutional Court to decide that it is impossible to enforce decisions of international courts and tribunals on protection of rights and freedoms issued against the Russian Federation.

According to the bill, the Constitutional Court will be able to come to the relevant conclusion as a result of an application made by a state authority empowered to protect the interests of the Russian Federation, in cases initiated against it under an international treaty, in an international court established to protect rights and freedoms of individuals.

In effect, the Constitutional Court will be able to assess whether it is possible to enforce the decisions of the European Court of Human Rights, the Economic Court of CIS, as well as decisions of other international courts and tribunals. The application to the court can be made by the President, the Government, or an empowered state authority, including the Ministry of Justice.

According to the bill, having analysed the application, the Constitutional Court will be able to conclude either that the ruling of the relevant international court or tribunal is capable of being enforced, or that the ruling does not comply with the Russian Constitution and, therefore cannot be enforced. Should the Constitutional Court decide that the ruling cannot be enforced, any actions aimed at enforcing it in Russia will be prohibited.

The bill has been seen as controversial, as in effect it may amend one of the principles of the Russian Constitution, which provides that international law prevails over national law.

25.11.2015 — Russian Citizens Cannot Challenge Governmental Decisions in Court, Constitutional Court Says

From now on Russian citizens are not entitled to challenge Governmental decisions in court. The Cabinet of Ministers managed to convince the Constitutional Court that reversal of Governmental acts by courts of general jurisdiction (including the Supreme court) results in non-performance of essential federal laws. Russian citizens will be able to challenge Governmental decisions only in the European Court of Human Rights in Strasbourg.

According to statistical data, approximately several hundred attempts to challenge Governmental acts are made on a yearly basis, and often courts rule in the claimant’s favour. Thus, under this procedure, the Supreme Court reversed the Resolution on payment for environmental damage. Claimants initiate proceedings in order to challenge resolutions establishing the rates of duties, certification and registration rules. Courts have often reversed secondary legislation interpreting and clarifying the Tax code provisions.

The large amount of such claims must have annoyed the Government, which initiated proceedings in the Russian Constitutional Court. Having heard the parties’ claims, the Court held that courts of general jurisdiction are not entitled to carry out judicial review of secondary legislation enacted by the Government in furtherance of federal laws, i.e. when the law unequivocally obliges the Government to issue a relevant Resolution.

Nevertheless, the Constitutional Court failed to specify, whether there are alternative ways for the aggrieved to protect their rights. The Supreme Court may (but is not obliged to) forward similar claims to the Constitutional Court. Therefore, those that allege that their rights have been infringed as a result of unlawful secondary legislation of the Government, have no other choice but to address international courts and tribunals. 

24.11.2015 — Russian Notaries to Comply with New Code of Ethical Conduct

Russian notaries will have to comply with the Code of ethical and professional conduct starting from January 01, 2016. The code sets forth notaries’ duties, specifies disciplinary offences, as well as procedures whereby notaries can be brought to liability. Moreover, the code provides for incentives and encouragements. According to the authors of the code, compliance with the code will increase trust and credibility in the sphere.

The code of ethical and professional conduct was developed by the Federal Notarial Chamber as a result of legislation provisions that came into effect at the beginning of 2015. The new code’s provisions are based on the international standards of the Latin notariat, in view of Russian legislation.

Notaries are obliged to abide by the law, act with honour and dignity, meticulously analyse all the documents that have been provided by their clients, and try to avoid civil disputes.

In comparison with previous versions, the new code comprises a few important developments. Thus, the code defines a disciplinary offence and sets forth an exhaustive list of disciplinary offences that could be committed by a notary. The code establishes a detailed procedure whereby notaries can be brought to liability for a disciplinary offence, and sets forth the rights and obligations of the parties to a disciplinary hearing. Furthermore, the code provides for a list of disciplinary penalties: admonition, reprimand and severe reprimand. The code also sets forth a list of incentives and encouragements, such as expression of gratitude, awarding a certificate of honour, or a title of honour.

The new code shall apply to all Russian notaries. Currently, there are 8.040 registered notaries in Russia, including the ones practicing in Moscow (703), the Moscow oblast (385) and Saint Petersburg (320).

23.11.2015 — Manufacturer Wins Case Against Parallel Importer - Supreme Court Allows Confiscation and Destruction of Goods

The Supreme Court has considered whether a manufacturer is entitled to demand confiscation and destruction of imported goods in a case brought against the importer of Vittel mineral water. Manufactures have yet again secured a victory against importers. Previously import of goods into Russia by a parallel importer without the manufacturer’s consent would entitle the latter to recover monetary compensation not exceeding RUB 5 million and to demand prohibition of import. The Supreme Court, however, decided to extend the manufacturers’ rights, entitling them to demand confiscation and destruction of goods.

The Supreme Court’s Resolution dated October 27, 2015 in the case No. 305-ЭС15-8790 was published last week. The court upheld the decisions of lower instance courts obliging the importer of Vittel mineral water to withdraw the goods from civil circulation and carry out their destruction. In effect, the court equaled original goods produced by the manufacturer, but imported without its consent, with counterfeit goods.

The importer argued that it is impossible to enforce the court’s ruling, as the goods have already been sold to third parties, and therefore enforcement is beyond the importer’s control. Nevertheless, the Supreme Court refused to take this argument into account.

The Supreme Court’s ruling may seriously damage parallel importers. Failure to enforce the court’s ruling will entail payment of penalties and may result in the imposition of criminal liability on the company’s general director.