The Russian President Vladimir Putin submitted to the State Duma the draft law on the ratification of the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism, dated 16 May 2005. The Convention provides for new and important provisions on the powers of the regulatory authorities and the measures they may take when investigating the crimes, filing the requests of information on the bank accounts and their monitoring, and cooperation of the financial intelligence units of different countries.

Russia singed the Convention on 26 January, 2009, still the President suggested that it shall be ratified only at this stage, 8,5 years on.

The requirements of Russian law will be taken into account during the ratification process. Particularly, the confiscation provided by the Convention will be applicable only in those cases when Russian law also provides for such a measure (Article 104.1 (1) of the Russian Criminal Code, para. a). The ratification of the Convention will also require introducing amendments to the legislation on administrative offences concerning the companies’ administrative liability for money-laundering.

The amendments to the legislation on administrative offences which increase the fines for improper processing of personal data will enter into force from the beginning of the next month. Earlier the law provided for a flat fine for all the offences of the kind not exceeding RUB 10 thousand (approx. EUR 150). The amendments provide for a differentiated scale of fines of up to RUB 75 thousand (EUR 1,100).

The amendments distinguish between administrative offences and differentiate fines depending on the offence. The administrative offences concerning the operation of personal data, which may lead to fines for the company, include:

• operation of personal data in cases, not provided by law or in a way, which is inconsistent with the purpose of collecting personal data (fine up to RUB 50 thousand, approx. EUR 740);
• operation of personal data without the consent of the individual in writing or if the requirements to such consent were violated (fine up to RUB 75 thousand, approx. EUR 1,100);
• failure to publish the personal data operation policy with the information on the company’s strategy in respect of the operation of the personal data and the measures taken by the company in this respect (fine up to RUB 30 thousand, approx. EUR 440);
• ignoring the individual’s request to provide information concerning the operation of their personal data (fine up to RUB 40 thousand, approx. EUR 590);
• untimely destruction, blocking, update of information on the individual upon his request (fine up to RUB 45 thousand, approx. EUR 665);
• failure to safeguard the hardware where personal data is stored (fine up to RUB 50 thousand, approx. EUR 740).

To avoid the imposition of liability the company has to operate personal data only in the declared purposes, obtain the individuals’ consent to operate personal data in writing, and such a consent shall comply with the legal requirements. Moreover, the company has to publish a link to the document on the company’s policy in respect of operation of personal data and safeguard the hardware where personal data is stored.

The Russian State Duma and the Federation Council have approved amendments to the Code of Arbitrazh Procedure concerning the pre-trial dispute settlement procedure. The main idea behind the amendments is to cancel the mandatory pre-trial dispute settlement procedure for all the disputes, except for the disputes on the recovery of monetary debt, arising out of the claims from contracts, other transactions and unjustified enrichment.

At the moment as a general rule the pre-trial procedure is mandatory. However, law provides for a list of disputes, where the claimant need not send a pre-trial claim to the respondent. These include: bankruptcy, corporate disputes, early termination of legal protection of trademark due to its non-use, challenging the decisions of the arbitral tribunals and some other.

According to the draft law, this list shall be extended. Moreover, the draft law provides that the pre-trial procedure will be mandatory only for the disputes on the recovery of monetary debt, arising out of the claims from contracts, other transactions and unjustified enrichment. The claimant will have the right to file a court claim only having previously sent the pre-trial notice to the counterparty, provided that the latter refused to satisfy this claim in full or in part, or no answer was received in 30 days from the day it was sent (unless the parties have agreed on a different term in the contract).

In all other categories of disputes the mandatory pre-trial procedure will be effective only if it is provided by law or by the contract.

According to the Constitutional Court, good-faith purchasers of heirless residential premises (which became ownerless after the owner’s death in the absence of any heirs), which relied on the Unified Register of Real Estate and were unable to identify that they purchased the premises from an unauthorized person, cannot be evicted by the authorities. The municipality is unable to claim the return of such property, despite the fact that under law heirless property is deemed to be in municipal ownership, since it failed to take the necessary steps to register its ownership in the state register in time.

In the case at hand, the courts of all instances satisfied the municipality’s claim on an individual’s eviction from his apartment, because the individual had purchased it from an unauthorized person, whereas in reality the apartment was an heirless property. Unfair real estate agents illicitly registered their ownership of the apartment prior to selling it, while in accordance with law the apartment as a heirless property was in the municipal authorities’ ownership. Therefore, the courts of lower instances concluded that the apartment was removed from the possession of the municipal authorities beyond their will, and therefore the purchaser could not defend itself from eviction by reference to its innocence under Art. 302 of the Russian Civil Code.

However, the Constitutional Court disagreed with this position and recognized that since the municipality failed to perform its own duties, and did not register its ownership properly, the new apartment owner has to be protected as an innocent purchaser, since it was entitled to rely on the Unified State Register of Real Estate to ensure that the purchase is legally valid (see Ruling of the Constitutional Court No. 16-P dated 22.06.2017). 

The Arbitrazh Court of Moscow has invalidated a currency option transaction concluded between Transneft and Sberbank, as contrary to the prohibition of unfair dealing and abuse of rights. As a result of transacting with Sberbank, Transneft incurred significant losses, the risk of which was not disclosed by Sberbank properly while marketing this financial instrument to Transneft. The presentations made by Sberbank were underlining the benefits only, whereas in reality the risks associated with this deal were high due to the expected currency fluctuations. The court decided that the bank has violated its customary duty to safeguard the clients’ interest as a professional, and returned the respective amounts to Transneft.

The key issue in the case at hand was whether professionals, such as banks, have an implied duty to disclose risks associated with a certain transaction to their clients, rather than merely pursuing their own interests to acquire profits (case no. А40-3903/2017).

In this case, the currency option transaction resulted in significant losses for Transneft, the amount of which totaled at 66 billion rubles, 138 times more than it received under the transaction. At the same time, Sberbank did not warn its client of this possibility, due to which Transneft had the impression that it does not assume any significant risks by entering into the transaction. The declaration of risks was only sent to Transneft after prolonged negotiations, only 8 days prior to signing the contract, when the commercial decision to conclude the deal had already been taken.

Objecting to the arguments of Transneft, Sberbank insisted that Transneft is an entrepreneur and one of the biggest companies at the market. Sberbank also pointed out that Transneft regularly enters into transactions with financial instruments and even has a department dedicated to such transactions. Therefore, according to Sberbank, Transneft was capable of assessing the risks by its own. However, the court rejected these contentions, stating that due to the fundamental principle of good faith and the industry practices, bank as the professional consultant had the duty to advance the clients interests, rather than merely pursuing its own benefit, and invalidated the transaction.

Sberbank has already announced its decision to appeal this ruling.