On 1 May 2017 the President of the Russian Federation signed Federal Law No. 87-FZ on Amendments to the Federal Law on Information, Information Technologies and Information Protection and Certain Legislative Acts of the Russian Federation which enters into force on 1 July 2017 (the “Law”).

As the note accompanying it states, the Law was introduced to the State Duma because there is a regulatory gap in the legal regulation of activities of entities providing Over-the-Top (OTT) services, namely, of online cinemas and other web resources engaging in the digital distribution of video content and targeted at Russian consumers, and the Law is intended to bridge that gap.

According to the Law, an audiovisual service is defined as a site, information system or computer program that is used to form and (or) organize the distribution on the Internet of a group of audiovisual works to which access is provided for a fee and/or for watching advertisements targeting Russian audience, and which is accessed by more than 100,000 Internet users located in the Russian Federation within a 24-hour period. Registered online media, search engines and information resources on which a video is uploaded primarily by Internet users are not considered audiovisual services for the purpose of the Law.

The Law sets a restriction on who can own the said audiovisual services: only a Russian legal entity or Russian Federation citizen who does not hold citizenship of another state can be the owner. The Law does not completely ban foreign investments in Russian companies which are the owners of audiovisual services. It stipulates a restriction to invest only for those foreign persons1, which own online video-services with mainly non-Russian audience (more than 50 percent of non-Russian users). This rather narrow category of foreign investors can own, manage or control any stake exceeding 20 percent of shares (participatory interest) of a company owning a Russian audiovisual service only with a prior approval of the Russian governmental commission for Controlling of Foreign Investments.

Thus, it appears that the Law has been changed significantly in the course of it consideration by the parliament. Initially the draft set the 20 percent limit the maximum foreign ownership in companies owning Russian video-services. The final version of the Law restricts investments only by foreign investors owning their own online video-services abroad. The Law explains that this restriction was introduced to support the development of audiovisual services in Russia.

The Law imposes a number of obligations on the owners of audiovisual services, including the obligation apply age-ratings to video content, to comply with the legislation on elections and rules of mass media distribution, and to install software recommended by Roscomnadzor2 designed to calculate number of users of the audiovisual services. The Law has also set requirements concerning the information disseminated by the audiovisual services. In particular, audiovisual services will be obliged to comply with a restriction which previously applied to mass media and which prohibits dissemination of content that promotes pornography, violence and cruelty cults, materials containing obscenities, materials encouraging terroristic activities or justifying terrorism, and other extremist materials. Distribution of information violating the Law could be a reason for blocking of access to the audiovisual service on the basis of a court order.

It is important to note that the Law also prohibits the owners of audiovisual services from distributing TV channels or TV programs that have not been registered as mass media under the Russian Law on the Mass Media3, which is an important expansion of the existing requirement provided for by Article 54 of the Law on the Mass Media.

The Law also provides for the creation of a register of audiovisual services (the “Register”). For the purposes of maintaining the Register, Roscomnadzor may request any necessary information and documents, including from a hosting provider which, in turn, is obligated to provide information about the owner of the service within three business days. Having received a notice that the service has been included in the Register, the owner of the audiovisual service must submit documents confirming compliance with requirements to the ownership structure. Otherwise, the regulatory authority may file an application with Moscow City Court to block access to the audiovisual service.

The Law adds new articles to the Administrative Code4 establishing the liability of the owner of the audiovisual service for failing to perform some of its obligations. Sanctions for legal entities vary from RUB 300,000 to RUB 1 million. The maximum fine of up to RUB 3 million is for repeated failure to comply with Roscomnadzor’s demands to eliminate detected violations.