26.02.2021 — Supreme Court Clarified Conditions for Claiming Return of Advance Payment Provided by Customer for Purchase of Equipment from Contractor

In one recent case the Supreme Court stated that since construction works, as a general rule, shall be performed using the contractor’s resources, the customer terminating the construction contract is entitled to claim the return of the advance payment even if the contractor has already used these funds to purchase equipment. At the same time, the contractor’s right to claim reimbursement of the related losses depends on the grounds for the customer’s termination of the contract. In particular, the contractor may claim compensation if the termination was initiated by the customer on its own initiative and not due to the contractor’s breach. 

In the present case the customer unilaterally terminated the construction contract, explaining that the contractor had missed deadlines for the performance of works, and claimed the return of the advance payment in court. At the same time, the advance payment claimed by the customer had already been used by the contractor to purchase the equipment necessary for the project.

The lower courts dismissed the customer’s claim, stating that the contract combines elements of construction and supply and the customer had no grounds to terminate the contract with regard to the supply of equipment since it had already been purchased by the contractor and was ready for shipment. Therefore, the courts concluded that the customer may protect its rights by concluding the agreement on substitution of the party to the supply agreement. 

The Supreme Court did not agree with the lower courts and stated that the works under the construction contract are usually performed at the contractor’s expense, therefore, the customer fully terminated the contract, both with regard to the performance of works and the supply of equipment by the contractor. However, the lower courts did not examine the grounds for the customer’s termination of the contract and the lawfulness of the customer’s references to the missing deadlines for the performance of works. Depending on the grounds for termination of the contract (at the customer’s discretion or due to the contractor’s breaches), the termination will have different consequences, and the contractor will be entitled to claim reimbursement of its losses, including those related to the purchase of equipment, only if the customer terminated the contract at its discretion. Therefore, the Supreme Court remanded the case for a new trail instructing the lower courts to examine these issues (the Decision of the Supreme Court of the Russian Federation dated 26.02.2021 No. 305-ЭС20-18871 on case No. А40-134159/2019).

24.02.2021 — Penalties for Personal Data and Russian Internet Security Violations to be Increased from End of March

The President has signed the law increasing the administrative penalties for personal data breaches and violations of the Russian Internet security from the end of March 2021. In particular, the law increases fines for unlawful and non-targeted processing of personal data, as well as for processing of personal data without the written consent of citizens. Furthermore, the law prescribes to provide unrestricted access to the personal data processing policy. Non-compliance with the new requirements will entail the imposition of fines on companies and their officials.

The amendments to the Code of Administrative Offenses will enter into force on 27 March 2021. Their declared purpose is to ensure additional protection of the citizens’ rights with regard to processing of their personal data. The amendments double the administrative fines for unlawful or non-targeted processing of personal data, processing of data without the written consent of citizens, as well as for operators’ failure to provide unrestricted access to the personal data processing policy and measures for personal data protection. Fines for companies may amount to 150 thousand rubles and up to 500 thousand rubles for a repeat offense.

The new law also provides for the liability of Internet service providers for violations of the requirements set by the Russian Government to install and use technical tools to combat threats to the Russian Internet (which include, among others, notification of the Russian controlling authority (Roscomnadzor) about the technical data on the design of the operators’ networks, channels load, etc.). Fines for violations by companies may amount to one million rubles. The heavier fines may be imposed on the owners of networks that do not comply with the requirements for means of communication used for investigative activities, which may amount to two million rubles (see the Federal Law dated 24.02.2021 No. 19-ФЗ).