Russia is considering new restrictions on foreign ownership and control of online video services, similar to the rules recently imposed on “mass media” such as television, radio, and publications.

Currently, any direct foreign investment, or indirect foreign investment resulting in ownership or control of more than 20% of the equity in Russian mass media companies, is generally prohibited. On 25 November, a draft bill was introduced in the State Duma (the lower house of the Russian Parliament) that would impose restrictions on foreign ownership of online video services, as well as a number of obligations on online video service operators. If adopted, the new law would take effect in March 2017.

Below are some of the key features of the current draft law:

Affected Services

The law would apply to online video services with more than 100,000 users per day that offer content for a fee or on an advertising-supported basis. It is not clear whether social networks or content-sharing applications would also be affected. Based on the current draft, any website, software or application available online that includes audiovisual content may be included, as well as media content distribution applications that are pre-installed on certain devices. However, it appears that internet search engines, as well as websites and services that exclusively distribute content posted by individual users, will not be covered.

Content Monitoring Requirements

The online video services covered by the law would be required to monitor videos for compliance with certain Russian laws that restrict or prohibit specific content, including socially harmful or “extremist” content. Age ratings will be required, and certain defamatory communications or unauthorized disclosure of private information must be deleted at the request of the affected user or Roskomnadzor (Russia’s mass media and internet regulator).

Foreign Investments Restriction

Foreign investors, along with Russian companies in which foreign investors have more than a 20% equity stake, would not be allowed to organize online video services. Foreign investors would also be prohibited from managing, owning, or controlling online video services—similar to the current rules limiting foreign investment in mass media companies. Unlike with mass media companies, however, the draft law does not limit indirect foreign participation in companies operating online video services, provided that such participation does not result in control.

Clearance from Government Commission

Notably, the law would make it possible for a foreign investor to obtain a controlling stake in an online video service with the permission of Russia’s Government Commission for Control over Foreign Investments (which generally oversees foreign investments in sectors deemed “strategic”).

Enforcement

Roskomnadzor could seek court approval to prohibit access to any noncompliant video service. After court proceedings resulting in such an order, the corresponding website or service would be blocked in Russia.

Transition Period

If the law is adopted in its present form, affected services will have to bring their activities and corporate structures into compliance by 1 July 2017.

Status of the Draft Bill

The first reading of the draft bill in the State Duma is not scheduled yet but may be included in the agenda for January 2017. Generally, for a draft bill to become a law, three readings in the State Duma are required, followed by the approval of the Council of the Federation (the upper house of the Russian Parliament). After these steps, the President of Russia signs the law and then it is officially published. Typically, this process takes from three to nine months. However, this timeline can move much more quickly for laws that are deemed to be of significant importance (e.g., it took less than a month to adopt the foreign ownership restrictions in the mass media sector). Therefore, it is possible that the new draft bill will also be approved in an expedited fashion.