During the past couple of years significant steps have been taken to modernise Russian commercial legislation, in particular the Civil Code. As part of these efforts, Federal Law 42/2015 entered into force on June 1 2015.
The new law amends the Civil Code provisions regarding obligations and contract law. The amendments aim to implement, among other things, certain foreign legal concepts used in practice in Russia-related finance transactions. The core changes in this respect are as follows:
- Representations and warranties provide a party with the possibility to claim damages, rescind the agreement or declare the agreement invalid (via court decision) if the representation on which the party relied is untrue. The law has clarified that a representation can concern circumstances other than the subject of the contract.
- An abstract guarantee has been introduced to expand the use of guarantees, which may now be issued by corporate entities, and not only banks. In the past, only suretyships could be granted by corporate entities, with the disadvantage for the creditor that a suretyship is conditional on the principal obligation secured by it.
- Intercreditor agreements between creditors under 'same nature' obligations, including on priority and disproportionate application of the proceeds and majority lenders' decisions, should facilitate the restructuring of transactions and the implementation of mezzanine financings.
- The concept of indemnity (which is not identical to indemnity under English law) foresees that a party may be obliged to indemnify losses in the event of defined circumstances under the agreement that are not related to a violation of obligations (breach of contract).
- As regards waivers, a party to a commercial agreement may now declare a waiver to exercise certain rights under the agreement and such waiver can be made subject to a waiver fee.
- Conditional performance (performance of an obligation depending on a party) provides more room for proper implementation of precedent and subsequent conditions. Previously, it was impossible to establish a condition that depended on a party to the agreement.
All of these amendments seem to be fairly positive. However, it remains to be seen how the Russian courts will apply them in practice.
For further information on this topic please contact Stefan W Weber or Vladislav Skvortsov at Noerr by telephone (+7 495 799 56 96) or email (firstname.lastname@example.org? or email@example.com?). The Noerr website can be accessed at www.noerr.com.
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