Introduction
Electronic Signatures
Domain Name Registration
Cybersquatting
Other Intellectual Property Rights
Consumer Protection Legislation
Personal Information
Content Liability
Russian Taxation
Conclusion
One of the striking developments in the Russian Federation in the past year has been the dramatic increase in investment in the Internet and e-commerce. However, this expansion has not been accompanied by either a flurry of legislation or administrative decrees. Instead, Russia has relied on existing laws to regulate the Internet. Although there are gaps and inconsistencies in this legislation, these problems have not proved to be insurmountable obstacles to the initial growth of Russian e-commerce. This Overview examines existing legislation and some noted court decisions to outline the existing legal environment for e-commerce in Russia.
Russian legislation allows for the completion of e-commerce transactions via electronic signature. According to Articles 160(2) and 434(2) of the Russian Civil Code, contracts signed by electronic signatures will be enforced if (i) there is a mutual agreement between the parties to use electronic signatures, and (ii) it can be established that the particular document comes from the particular party under the contract. The Civil Code does not impose any technological or verification requirements on the use of electronic signatures. Thus, the Civil Code provisions can be described as technology neutral, in the sense that they do not rely on a specific type of technology to generate acceptable electronic signatures. Instead, the Civil Code allows for an unlimited number of valid electronic signatures, provided that there is mutual agreement between the parties to use such signatures.
Russian internet transactions have relied on these two Civil Code provisions for their legal foundation, yet it is unclear whether they offer the necessary guarantees that will allow for the further growth of e-commerce. For example, it is still standard practice in Russia to require a written signature and a stamp not only to have a contract but also to have sufficient proof for tax and other public authorities. Russia will not enjoy the full economic benefits of e-commerce if all agreements must be reduced to paper. Only a court decision or further legislation will determine if these Civil Code provisions, by themselves, provide a stable legal environment in which to conduct e-commerce transactions.
In order to address this uncertainty, the Russian Duma is considering a draft law on Electronic Digital Signatures, which moves away from the technology-neutral understanding of electronic signatures as articulated in the Civil Code. Instead, the draft Electronic Digital Signature legislation only recognizes digital signatures, a sub-category of electronic signatures that relies exclusively on encryption technology and would require the establishment of a state-licensed certification centre to oversee the verification process. Other legislation has also been proposed in the Duma, including a draft Internet Law which would significantly increase state supervision of e-commerce and the Internet. Nevertheless, until formal legislation is adopted by the Duma and signed into law, the Civil Code provisions will serve as the legal basis for e-commerce transactions in the Russian Federation.
Until recently, the registration of domain names in the '.ru' zone has been coordinated by the Russian Scientific Research Institute of the Development of Public Networks (RosNIIROS). RosNIIROS developed a standard procedure to ensure that no two identical domain names existed. However, after mounting government criticism, the minister of communications announced in February 2000 that RosNIIROS would no longer supervise the recording of domain names. The minister did not designate a successor in its announcement, meaning that RosNIIROS - at least in the interim - continued to register domain names.
The Coordination Group of Domain Names in the '.ru' Zone publicly announced a new registration scheme on June 1 2000. Instead of a monopoly under RosNIIROS, 21 non-government organizations were assigned the responsibility to record domain names in the Russian Federation. There are several indications, however, that these reforms may be short-lived. Draft legislation has been circulated which strongly suggests that the state hopes to supervise the registration of domain names. The Duma's draft Internet Law, for example, states that all Internet addresses will be registered by a federal agency, to be designated later. The Ministry of Communications is the clear favourite to assume this task, although draft legislation has also been prepared granting the Ministry of Press, Television and Radio Broadcasting, and Means of Mass Communications the responsibility to register all domain names. Therefore, the legislative debates must be carefully monitored to see if the state ultimately decides to assert control over the registration process.
Under RosNIIROS, the registration of domain names was conducted on a first come, first served basis. Unsurprisingly, there have been numerous examples of cybersquatting, and one of the Ministry of Communications' stated reasons for depriving RosNIIROS of its power to register domain names was that RosNIIROS failed to do enough to stop this practice.
The Russian courts have reviewed cases involving cybersquatting and the poaching of domain names, but their rulings have been inconsistent. Most notably, the Moscow Arbitration Court recently rejected Kodak's attempt to prevent another company from using the domain name 'www.kodak.ru'. However, the Moscow Arbitration Court ruled in favour of MosFilm in a similar cybersquatting case last year. It is therefore unclear to what extent the courts will recognize company names or trademarks as domain names in Russia.
As of June 1 2000, the party recording a domain name must make all necessary payments within one month of its registration. Failure to make such a payment on time will automatically annul the registration. The offending party will not be able to renew its application until all past debts are paid. These procedures were introduced to stop cybersquatters who previously managed to retain their rights to domain names by constantly renewing their applications to RosNIIROS without ever paying the required fee.
Other Intellectual Property Rights
Specific legislation does exist in Russia on such topics as copyright and software protection, trademarks, trade secrets and patents. However, all of these laws were passed prior to the rapid expansion of e-commerce and their direct application to the Internet has yet to be fully determined. Moreover, there have been difficulties in enforcing the intellectual property laws irrespective of their internet implications. Therefore, although the necessary intellectual property legislation is largely in place, it remains uncertain to what extent it can be successfully applied to the Internet.
Consumer Protection Legislation
Russian legislation does provide certain guarantees for purchasers of goods, although these protections are not identical for businesses and consumers. All business-to-business transactions are subject to the relevant protections as articulated in the Russian Civil Code. Alternatively, all business-to-consumer transactions are governed by the consumer protections in the Russian Law 2-FZ on the Protection of Consumers Rights of January 9 1996, as amended (the Consumer Protection Law). The seller's duties under the Consumer Protection Law include the responsibility to provide the quality of goods as indicated in the contract. The consumer, in turn, has the right to receive reliable information about both the manufacturer and the purchased goods. Such information must be presented in a clear and accessible form.
If personal data is collected and stored inside the Russian Federation, then this information will come under the protection of both the Russian Constitution and Russian Federal Law 24-FZ on Information and Information Protections of February 20 1995 (the Information Law) .
Article 24 of the Russian Constitution prohibits the gathering, storing, utilization and distribution of personal data without the consent of the individual involved. Additional privacy guarantees are included in the Information Law. Article 11.1 states that it is not permissible to collect, store, use and disseminate information about the private life of an individual without his consent, unless ordered so by a court. Personal data also cannot be used to cause property or moral damage to Russian citizens, or to interfere with the realization of the rights and freedoms of Russian citizens. According to Article 15.2, the owner of the information resource bears legal responsibility for the violation of the rules regarding the information.
The question of liability under Russian law for the contents of individual web sites is largely undefined. No law assigns liability to an internet service provider (ISP) for the content of third-party web sites, nor is there any regulation governing the potential liability of one web site's hyperlink to another web site.
In terms of individual liability, web sites are not currently recognized as a means of mass information and do not have to register or receive a licence from any state authority. As a result, the owner of a web site is not subject to the liabilities as articulated in the Federal Law 2141 on the Means of Mass Information of December 27 1991, which includes penalties for the misuse of information, the illegal distribution of pornography, defamation and so on. Draft legislation has been proposed that would require all web sites to register as a means of mass information. If such legislation is approved, then the potential liability of a web site owner will be equivalent to that of owners of radio/television stations, newspapers and other means of mass information.
A Russian web site is subject to the established civil and criminal penalties for defamation. However, no rulings to date have clarified to what extent libelous statements can be punished if they are simply disseminated over the Internet. The same uncertain position applies to pornographic and obscene materials that are released over the Internet in violation of Article 242 of the Russian Criminal Code.
The purchase of all goods and services in Russia over the Internet would be subject to the normal rules of taxation. Therefore, all domestic transactions will include VAT. Moreover, if the goods are purchased with cash, then the buyer will be charged the local sales tax as well. Such cash purchases are not uncommon for e-commerce transactions in Russia today, since many Russian buyers do not have access to credit cards or debit cards. This means that many internet purchases are either paid cash on delivery or involve a payment at a local bank. Such cash payments must include sales tax. However, if a business purchases a product with a credit card over the Internet, then sales tax is not charged. Most retail purchasers who pay with credit cards also do not pay sales tax, although this situation is beginning to change.
Russia has primarily relied on existing laws to regulate e-commerce, although it is anticipated that the draft Electronic Digital Signature law will shortly be adopted. In addition, however, several prominent politicians and government officials have called for new e-commerce legislation and increased state control over the Internet. Therefore, legal developments will continue to play a crucial role in the evolution of Russian e-commerce and must be carefully monitored.
For further information on this topic please contact William Pomeranz or Alla Izmailova at Baker & McKenzie's Moscow office by telephone (+7 095 230 60 36) or by fax (+7 095 230 60 47) or by e-mail ([email protected] or [email protected]). Alternatively, contact Anya Kruglova at Baker & McKenzie's St Petersburg office by telephone (+7 812 325 83 08) or by fax (+7 812 325 60 13) or by e-mail ([email protected]).
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