Structuring and legal considerations

Key laws and regulations

What are the key laws and regulations implicated in technology M&A transactions that may not be relevant to other types of M&A transactions? Are there particular government approvals required, and how are those addressed in the definitive documentation?

Technology M&A deals in Russia may fall under numerous rules and restrictions. First, limitations on foreign investments are set with respect to Russian mass media (Mass Media Law 2124-1 of 27 December 1991) and online video-on-demand services that have substantial audiences in Russia (Information Law 149-FZ of 27 July 2006, as amended). A bill of law currently under consideration would similarly limit foreign participation in significant information resources (ie, major Russian IT companies) if approved. 


Second, state approval is required for foreign investment in companies involved in certain types of activity of significance for the state under Law 57-FZ of 29 April 2008, as amended. The list of strategic activities includes:

  • space-related activities;
  • certain activities related to aviation and transportation security;
  • certain biotechnology research;
  • research involving nuclear materials;
  • work and research in the military field;
  • television and radio broadcasting (depending on the coverage);
  • activities of a telecom operator with a dominant position on the market; and
  • cryptography. 

Applications for ‘strategic investment’ approvals are considered by a special governmental commission – a separate body meeting ad hoc to review such deals. Members of the commission include the prime minister, his or her deputies, other heads of state departments, and state agencies and services. 

The above restrictions typically have the heavier impact on the deal structuring. The approvals are commonly addressed in the definitive documentation as non-waivable conditions precedent to deal closing. In practice, these conditions are usually the last to be met and (with respect to the ‘strategic investment’ clearance in particular) may take months. Filings are done by buyers, subject to sellers’ comprehensive support, and provision of documents and information.

Third, businesses in the technology sector may be subject to specific requirements of the Russian privacy statute (Personal Data Law 152-FZ of 27 July 2006, as amended), the statute on online payment services (National Payment System Law 161-FZ of 27 June 2011, as amended), the law on e-signatures (E-signature Law 63-FZ of 6 April 2011, as amended), and certain provisions of the civil legislation concerning digital rights and assets, and e-commerce (Civil Code).

Lastly, Part IV of the Russian Civil Code, which governs intellectual property, applies in specific technology-related deals, including in relation to so-called ‘integrated solutions’. An ‘integrated solution’ is the result of scientific and technological development that includes various combinations of intellectual property that can be used for civil, military or dual purposes. These provisions apply to integrated solutions created with the use of federal or regional budget funds and specify when the Russian Federation or a federal subject is recognised as the owner of the solution or has rights with respect to its exploitation. Further requirements for disposal of integrated solutions owned by state or federal subjects, including grant of rights to such solutions to third parties for implementation, are set forth in Law 284-FZ of 25 December 2008, as amended. 

Certain limitations may be imposed by regulation in the sphere of secret protection, including, in particular, the State Secret Law (5485-1) of 21 July 1993, as amended. State secret requirements may apply to state-funded developments, including the integrated solutions described above.

Registration requirements that may affect transfer of rights in M&A transactions are set for certain types of intellectual property by the relevant provisions of Part IV of the Civil Code.

Transfer limitations also exist for certain telecom and broadcasting licences (Communications Law 126-FZ of 7 July 2003, as amended, and the Mass Media Law, as well as ancillary licensing regulations).

Government rights

Are there government march-in or step-in rights with respect to certain categories of technologies?

Part IV of the Russian Civil Code provides for specific rules applicable to works of science, literature and art, inventions, utility models and industrials designs, selection inventions and circuits created under state or municipal contracts. Unless otherwise specified in the relevant contracts, rights to such intellectual property are retained by the authors/contractors. However, in any case the state, the federal subject or the municipality acting as the client reserves the right to grant free non-exclusive licences in such intellectual property to any party of their choice for the use of such intellectual property for state or municipal purposes. The same rule applies to any software not specifically commissioned under a state/municipal contract, but created in the course of performance thereunder.

Specific rights can be vested with the state or federal subjects with respect to integrated solutions including technology of civil, military or dual purpose, depending on certain criteria set forth in the Civil Code.

In addition, in practice the state may also have a word at the stage of the state approval procedure or antitrust clearance. While it is common for the antitrust clearance to be conditional and involve a request that the parties take certain steps aimed at the mitigating potential negative impact on competition, until recently such conditions had not directly affected the technology aspects of the contemplated transactions. In April 2018 the Federal Antitrust Service of Russia (FAS) approved the merger of German Bayer and US Monsanto with respect to the Russian market under the condition that Bayer share its selection technologies with Russia. Under the terms of the order issued by FAS along with the approval, Bayer agreed to hand over molecular markers for breeding of several types of crop, provide access to digital agriculture technologies and participate in the establishment of a local technology transfer centre. This was the first reported case where FAS made technology transfer of this scale a condition to deal approval in Russia. Thus, deal structuring should take into account the possibility that clearances may involve conditions, including the provision of access to production capacities or information, assignment or prohibition of assignment of property rights and establishment of protection for industrial property.

Legal assets

How is legal title to each type of technology and intellectual property asset conveyed in your jurisdiction? What types of formalities are required to effect transfer?

In the absence of specific regulation for most new technologies, one of the main tasks in deal structuring is identifying all elements protectable by Russian legislation in the asset in question. For most types of technology, the key element is software, which is protected under copyright regulation. Other elements may include patentable designs or methods, databases, know-how or other protected intellectual property.

Aside from IP legislation, Russian legislation does not contain specific provisions on the transfer of rights to technologies. The exception is the recently introduced provisions of the Civil Code on digital rights (in force since October 2019), which are not yet functional in the absence of supporting laws and regulations. The new legislation is primarily designed to regulate token and cryptocurrency trade. The bill of law on digital assets currently under discussion is expected to provide rules and regulations for trading processes and initial coin offerings. Another law will come into force in January 2020 to regulate crowdfunding – that is, investments via online investment platforms.

The general rule is that a transfer of any IP asset that is subject to mandatory state registration is also registrable. Thus, patentable intellectual property (including inventions, utility models and designs) is registered with Rospatent, the federal authority for intellectual property; Rospatent also registers any disposal of patent rights.

Russia has no mandatory requirements for registration or depositing of copyrightable works, but there is an option to register software (or database) on the register operated by Rospatent, or on the register of Russia-made software managed by the Ministry of Digital Development, Communications and Mass Media of the Russian Federation. The latter register was created to support locally produced products and as part of software localisation requirements applicable to state-controlled companies.

Additional formalities may be applicable to certain technologies or solutions that fall under state secret, or other type of protected secret or confidentiality obligations. For example, a mandatory bid process is required for the disposal of state-owned integrated solutions; if a technology is protected by state secret, it is not accessible by, or allowed to be disclosed to, anyone without corresponding access rights.

Due diligence

Typical areas

What are the typical areas of due diligence undertaken in your jurisdiction with respect to technology and intellectual property assets in technology M&A transactions? How is due diligence different for mergers or share acquisitions as compared to carveouts or asset purchases?

Due diligence of a company with technology or IP assets usually involves the review of registrations for registrable IP rights, chain of title for copyrightable works (including software), review of IP assignment provisions in employment or similar contracts (if the company generates IP assets in-house or orders the development to third parties), review of contracts for acquisition or licence of IP rights. In addition to the IP section, due diligence would also focus on relevant regulatory requirements and analysis of compliance therewith. Such regulatory requirements depend on the type of technology, but the critical provisions for which compliance should be checked are usually those under the personal data regulations and the requirements and limitations set forth under the Information Law.

It is also customary to review the history of claims, if any, over the relevant intellectual property or technology and, if the assets are licensed to third parties in the normal operations of the target, the actual licences would be reviewed. 

In addition, due diligence may also include the review of a company’s books to confirm if relevant IP and technology objects are adequately reflected as intangible assets. In some cases, such analysis reveals assets not otherwise disclosed by the target. However, such review would rarely help with the determination of the technology and IP assets value, as the valuation market for such assets is not quite mature. If relevant assets are generated within the company and/or have never been transferred or licensed, their value in books can be completely arbitrary. The issue of evaluation of technology and IP assets can be crucial in both share acquisition deals and asset purchases, when the share/asset price is tied to the book value. 

Due diligence for potential carve-outs or asset purchases does not involve in-depth review of the seller’s corporate structure and potential corporate risks, as well as lending history and debts, but would rarely be notably different as regards the IP assets or technology.  

Customary searches

What types of public searches are customarily performed when conducting technology M&A due diligence? What other types of publicly available information can be collected or reviewed in the conduct of technology M&A due diligence?

The official state register of registrable IP rights (trademarks, patentable inventions, designs and utility models) is available online on the website of the federal authority for intellectual property (Rospatent) at The register allows to confirm information on ownership and any transfers, licences and encumbrances related to the asset. The same resource contains the register of voluntarily registered software programs and databases.

Ownership of domain names can be checked online in the Whois service database. For Russian domain names, information on the website administrator (if corporate) is often available, as well as the reference to the relevant local registrar.

Information on litigations, including the background of ongoing cases and, among others, bankruptcy cases, can be found in the open register for disputes subject to consideration by the ‘arbitrazh’ courts (ie, disputes involving commercial entities and business interests) at

In any due diligence for potential merger or share acquisition, the main source of corporate information is the Unified State Register of Legal Entities of Russia. An excerpt can be generated online at and will show if the company is in the process of reorganisation or liquidation. For limited liability companies, the register also contains information on participants and their participation interests.

Registrable intellectual property

What types of intellectual property are registrable, what types of intellectual property are not, and what due diligence is typically undertaken with respect to each?

Under Russian civil legislation, the rights to the following intellectual property are subject to mandatory state registration: trademarks, appellations of origin, inventions, utility models and industrial designs, and selection inventions. Software, databases and circuits may be registered at the right holder’s discretion. Further disposal or encumbrance of rights to registered intellectual property is also subject to state registration.

Copyright and related rights are protected by Russian laws irrespective of registration. While software (protected as literary work) can be registered voluntarily, there are no state registers or depositories for other copyrightable works.

Starting from 27 July 2020 the Civil Code will be amended to include another type of registrable intellectual property: geographical designation for marks identifying goods produced in specific regions.

Domain names are not regarded as intellectual property; they are protected as means of use of registered trademarks and company/trade names. Rights to domain names are registered with the relevant national registrars acting under the general rules of the Russian ccTLD coordination centre. Information on registration can be checked in the Whois database available online. 

Registrable rights are relatively easy to check in the course of a due diligence exercise, since most of the information is available in online state databases. Moreover, with respect to mandatory registrable types of intellectual property, parties are entitled to rely on the information in such registers, which is why no further review is usually undertaken. Compared to registrable objects, rights to copyrightable works require more substantial revision of underlying documents. Rights to such works are normally confirmed through establishing a proper chain of title, which may include licence or transfer agreements with previous owners, or employment or commissioning contracts with relevant authors. A review should confirm that relevant contracts are compliant with mandatory requirements of the legislation, that all conditions precedent to the transfer of rights were met by the purchaser, and that there are no terms allowing authors or previous rights holders to reverse the transfer of rights.

Importantly, the protection of certain types of intellectual property, even registrable, can be terminated in specific circumstances. Thus, trademark protection can be terminated if the owner fails to use the trademark for three consecutive years; patent protection can be terminated if the patent fee is not paid within the set term. The risks of loss of protection are also analysed in due diligence. 


Can liens or security interests be granted on intellectual property or technology assets, and if so, how do acquirers conduct due diligence on them?

Liens and security interests with respect to IP assets are allowed by Russian law, as long as the assets in question are transferrable – thus, moral rights, for example, cannot be encumbered. Encumbrances on registrable IP rights are also subject to mandatory registration with the state, which makes checking and confirming rather straightforward a task. For intellectual property not subject to registration, liens can be certified with a notary and entered into the register of notary notifications on liens, thus making this information presumed as available to third parties.

The law also requires that each pledgor keep a pledge book as a company’s internal document.

Employee IP due diligence

What due diligence is typically undertaken with respect to employee-created and contractor-created intellectual property and technology?

In respect of employee-created works, the vesting of the rights in such intellectual property with the employer is rather straightforward. The Russian IP legislation contains specific provisions for the so-called ‘employment works’ – that is, works created by employees within their employment duties and job description. In such cases, employees retain non-proprietary moral rights, while the employer is granted exclusive proprietary rights to the works, unless the parties agree otherwise in the employment contract.

The practical application of the concept of ‘employment work’ entails some specificities. Thus, in order to qualify as such, the employment work must clearly and undoubtedly fall within the description of the employee’s duties. In accordance with the explanation provided by the Plenum of the Supreme Court of Russia in its Ruling No 10 of 23 April 2019, if the status of work is disputed, the employer has the burden of proving the scope of the employee’s duties and the relevant work matching within such duties. The use of an employer’s materials by an employee is not considered as ground for recognising his or her work as an employment work.

Another issue is related to the fact that the Civil Code expressly states that the employee is entitled to compensation where the employer uses the employment work, licenses or assigns it, or even if the employer decides to keep such work a secret. While it is common practice to specify in the employment contract that any compensation for exploitation of employee-created works is included in the salary, some scholars opine that such provision is not sufficient and does not make the employer compliant with the legal requirement.

Lastly, if within three years of creation of the relevant work the employer neither commences the exploitation of the employment work, nor licenses or assigns it, nor notifies the author of the intention to keep the work a secret, the proprietary rights automatically return to the author. 

Contractor-created works may fall into two categories: works specifically commissioned by the target and works created as a by-product of the provision of other works or services to the client. If the contractor was hired for the creation of intellectual property, the contract qualifies as authorship commission and by default vests the rights in the work with the client, unless otherwise agreed between the parties. In cases where creation of intellectual property is not within the main scope of the contract, the rights would normally be retained by the contractor. To avoid any risk of confusion, it is advisable to specify that the contractor undertakes to transfer any and all rights to works or other IP results or technologies created in the course of the provision of services to the client, irrespective of whether such results were expressly commissioned.

Transferring licensed intellectual property

Are there any requirements to enable the transfer or assignment of licensed intellectual property and technology? Are exclusive and non-exclusive licences treated differently?

Under Russian law there are two categories of IP right:

  • non-proprietary moral rights, which are non-transferrable and technically non-waivable by authors (inventors) together with some other specific rights such as right of access or right to resale royalties; and
  • proprietary rights (ie, the rights to exploit the intellectual property), defined in their entirety in respect of a particular intellectual property as the ‘exclusive right’. The proprietary right can be assigned or licensed (in the latter case, as a whole or in parts). Unless the agreement expressly states that the entire ‘exclusive right’ is assigned, such agreement is presumed a licence.

The term used in Russian law for all proprietary rights – namely, ‘exclusive rights’ – is somewhat confusing and may erroneously be understood as referring to an exclusive licence. The law further distinguishes between exclusive and non-exclusive licences. Under a non-exclusive licence, the licensor retains the right to grant other licences, while an exclusive licence means that the licensor is not entitled to grant licences to other persons, or (unless the parties agree otherwise) to use the intellectual property itself. If there are no provisions on exclusivity, the licence is presumed non-exclusive.

Under a licence agreement, the proprietary right stays with the original rights holder, while certain rights and powers are granted to the licensee with respect to specific means of use, territory or term of use. The rights to use the intellectual property not expressly specified in the licence agreement are retained by the licensor. As the licensee does not own the proprietary right, the ownership of a licensed IP right cannot be assigned by the licensee.  However, the licensee’s rights may be transferrable if the licence agreement allows assignment or novation. Sublicences may also be granted by the licensee, if expressly allowed by the terms of the licence. 

The owner of the proprietary right is not restricted by law from assigning its right irrespective of whether it has been licensed to a third party. In case of such assignment, the licence remains valid.

There are specific requirements for licence agreements under Russian legislation, which are usually the subject of review during due diligence. To be valid, a licence agreement has to be concluded in writing. If a licence agreement contains no provisions on the territory and the term of use, the territory is presumed the territory of the Russian Federation and the term is presumed five years. Most importantly, a licence agreement must contain provisions on the licence fee. Free licensing is not allowed between commercial organisations worldwide for the entire term of use and on exclusive terms. If a non-free licence agreement contains no provisions on the amount of fee or means to determine it, the agreement is considered non-existing.

Software due diligence

What types of software due diligence is typically undertaken in your jurisdiction? Do targets customarily provide code scans for third-party or open source code?

Since software is copyright-protected as literary work, due diligence typically includes the review of underlying chain of title documents, such as employment or service contracts (if software was created in-house or commissioned), or licence or acquisition agreements (if software was purchased or licensed from other parties). If the relevant software appears in one of the state registers, the information can be confirmed in the online database of the relevant registrar.

Legal due diligence does not typically include a review of the code itself, which can be done as part of a separate technical due diligence. There is no uniform approach to requesting code scans and, while buyers agree that full-scope due diligence and code analysis are preferable, whether a buyer will in reality insist on the review of the code as part of due diligence largely depends on the buyer’s business (technology-related or investment) and the level of the buyer’s technological savviness.

Other due diligence

What are the additional areas of due diligence undertaken or unique legal considerations in your jurisdiction with respect to special or emerging technologies?

With respect to most new technologies, due diligence in Russia usually focuses on regulatory compliance and risks that may affect the exploitation of the relevant assets. Regulatory areas to look into may include personal data regulation, consumer protection, regulation applicable to online payment systems, electronic signatures and distribution of certain types of information.

Privacy issues emerge in nearly all new technology projects. Russian legislation uses a broad definition of ‘personal data’, understanding it as any information related to a directly or indirectly identified or identifiable individual. The authority responsible for supervising compliance with personal data protection requirements (the Federal Service for Supervision in the Sphere of Communications, Information Technologies and Mass Media) also tends to treat any type of data pertaining to an individual as personal data. The authority’s approach to some of the interpretations of the legal provisions is not fixed in any official way and is often inconsistent, which makes it difficult to rely on. Different approaches to the legislation on big data have been discussed over the past few years. Various authorities are planning bills of law in this regard, with major industry players also involved. Until changes are implemented, the competent Russian authorities are examining each case separately, but there have been situations when cookie files, IP addresses and online logs have been considered capable of identifying individuals and, thus, personal data. Consequently, any business plans involving the collection or transfer of data pertaining to Russian citizens should be analysed from the perspective of compliance with the Russian personal data regulation, including the requirements on data localisation.  

Another specific consideration is the list of restrictions and requirements set by the Information Law, with respect to information distribution. The law contains specific requirements applicable to hosts of online platforms allowing exchange of messages, including instant messaging services, to operators of search engines, news aggregator websites and video-on-demand services. Among such requirements are registration with state registers, mandatory identification of users, storage and provision on demand to state authorities of correspondence and meta data of users, and the provision of codes for deciphering transmitted data.

The absence of specific laws or legal provisions regulating technologies in such popular areas as artificial intelligence, internet of things or autonomous driving does not mean the absence of regulation altogether. There may be certain requirements set at the authorities’ level that are a challenge to track. For example, starting from January 2020 operators of LPWAN frequencies (normally used for the internet of things) will be obliged to use base stations manufactured in Russia. The requirement was adopted by a decision of the State Radio Frequencies Commission in the end of December 2018.

Many new technological projects are developed within the state national programmes, such as the Digital Economy Programme. The companies involved in these projects are acting under the approval and coordination of the state and within temporary requirements. One of such projects is the testing of autonomous cars in the territory of Moscow and the Republic of Tatarstan, rules for which were set in Governmental Order 1415 of 26 November 2018.

Purchase agreement

Representations and warranties

In technology M&A transactions, is it customary to include representations and warranties for intellectual property, technology, cybersecurity or data privacy?

It would be fair to say that all technology M&A deals include some IP, technology, data privacy and security representations and warranties; however, the very concept of the representation/warranty may differ depending on the law governing the deal. In the authors’ experience, English law-governed deals dominate the market, largely as a result of multi-level corporate structuring, with holding companies of the target and/or buyers located outside Russia. English law agreements usually contain warranties. 

If the deal is governed by Russian law, a somewhat similar concept of ‘representations as to facts’ recently introduced into Russian civil legislation can be used. The seller gives representations with respect to circumstances that are of importance for the execution, performance under or termination of the deal. In case the representations are not true, the seller is obliged to reimburse the buyer for all the damages caused by the breach of representation, and if the representations were substantial for the deal and the buyers’ decision to enter into it, such party is entitled to terminate the agreement. The concept of ‘representations’ is actively used in Russian law-governed contracts; that said, since the concept’s introduction in 2015 the court practice has not developed to allow adequate prediction of the outcome of disputes as the Russian legal system does not rely on precedents.

Regarding the scope of the warranties, in general Russian sellers are more willing to give warranties with respect to shares and corporate status and would normally insist on qualifying and limiting warranties on compliance, tax and business. It is customary to include representations and warranties with respect to intellectual property and technology, which would normally cover ownership, validity and enforceability, no infringement of third parties’ rights, no claims, validity of third-party licences, and similar. Specific warranties on open source code are increasingly often seen.

Cyber-security is not as typical, but if the main asset involves operation of networks or systems, it would be customary to request warranties concerning measures and security of these systems.

Data privacy is usually covered by warranties for general state requirements compliance, or separately as compliance with requirements for personal data protection.

It is customary to limit representations and warranties by seller’s knowledge, or by referring to actual facts, rather than general compliance. For example, instead of confirming that the company is in compliance with personal data protection requirements, the sellers would normally insist on warranting the absence of claims by the competent authority with respect to data processing within a certain period. For data security, it would be customary for sellers to warrant that the company does not install malware, rather than to confirm that the system is appropriately protected.

Customary ancillary agreements

What types of ancillary agreements are customary in a carveout or asset sale?

In general, asset sales are less popular than company acquisitions due to the fact that transfer of rights to registrable intellectual property and certain permits and licences for operation in different technology-related areas is time-consuming and complicated. In some cases, licences and permits are non-transferrable. It is not uncommon for the seller to already have a separate business with related assets extracted in a separate company in the group. Company acquisition approach also helps with minimising transitional issues, especially for portfolio investors.

Buyers usually opt for carve-out approach due to tax/regulatory compliance issues. In deals structured as carve-outs or asset sales, service agreements and cross-licences are typical for transitional periods, with the asset support system remaining with the seller.

Conditions and covenants

What kinds of intellectual property or tech-related pre- or post-closing conditions or covenants do acquirers typically require?

For IP-focused deals, a chain of title corrections is a typical pre-closing condition, as well as requirements to complete registration of registrable intellectual property, and to clear any existing encumbrances and not create new ones. Pre-closing conditions may also require amendments to target’s policies and templates, if IP and technology assets are created and/or supported in-house.

For post-closing covenants, there may be the seller’s obligation to first offer new developed products (eg, software) to the buyer. Buyers are also typically looking for non-compete and non-solicit obligations, even though such provisions may be hard to enforce in Russia. In terms of intellectual property, the Russian Civil Code does not allow any limitations of the author’s creative rights. 

It is typical in Russian M&A deals to secure the seller’s obligations by a performance guarantee issued by the seller’s beneficial owners or the seller group holding company.

Survival period

Are intellectual property representations and warranties typically subject to longer survival periods than other representations and warranties?

Survival periods for IP representations and warranties are heavily negotiated and often tend to be shortened. In normal scenarios, such survival periods would coincide with those agreed for other representations and warranties, and rarely exceed one year for general warranties and three years for key assets.

Breach of representations and warranties

Are liabilities for breach of intellectual property representations and warranties typically subject to a cap that is higher than the liability cap for breach of other representations and warranties?

There is no typical approach to evaluating caps on liabilities for breach of IP representations and warranties. Normally, the parties’ agreement depends on the asset and its value. Liability caps on IP warranties can be even lower than the caps for other representations and warranties, since the appropriate evaluation of these rights may be problematic. 

Are liabilities for breach of intellectual property representations subject to, or carved out from, de minimis thresholds, baskets, or deductibles or other limitations on recovery?

There is no market standard, and the parties may form the approach on a case-by-case basis. Same as with liability cap, parties are more likely to limit the scope of representations and warranties. Different types of intellectual property can have different thresholds and limitations, depending on how easy it is to trace risks and encumbrances thereon.


Does the definitive agreement customarily include specific indemnities related to intellectual property, data security or privacy matters?

Normally, indemnities are difficult to obtain as sellers oppose them and insist that the buyer should make its own judgement on risks based on due diligence. However, if specific risks have been identified during due diligence, those can be covered by indemnities, including with respect to intellectual property. Narrow indemnities against results of on-going litigation of on-going tax audit are more likely to be agreed. Issues that are harder to track for the company, such as cyber-security and data privacy, are more likely to be covered with representations and warranties than indemnities. Another reason for buyers not to press too hard for indemnities on privacy issues is that in Russia, the risks are effectively limited to regulatory and compliance, with fines much lower than those seen in the European Union. Adverse impact of individuals’ claims has been virtually negligible so far, and class actions have been introduced only recently and are still rare in Russia.

Walk rights

As a closing condition, are intellectual property representations and warranties required to be true in all respects, in all material respects, or except as would not cause a material adverse effect?

The IP representations given as true in all respects are rare. More often than not, there are materiality qualifiers and it is not uncommon for different categories of IP and technology matters to have different and specific materiality criteria or thresholds specified. The qualifiers may depend on a range of issues, including the territory and scope of the warranty. If, for instance, the territory for the representations and warranties is limited (eg, to Russia, or Russia and the Russian-language market in case of a Russian target), the buyer is more likely to lower materiality thresholds compared to matters beyond the principal market.Warranties relating to third-party-provided rights tend to have higher materiality thresholds.

Updates and trends

Key developments of the past year

What were the key cases, decisions, judgments and policy and legislative developments of the past year?

Over the past couple of years the Russian market has seen an increase in technology-related deals, and the forecast is that the industry will become even more attractive for investment, considering projected state financing and overall prioritisation of the digitalisation of the Russian economy, which is the focus of one of the national strategy programmes. The main players on the market are large IT and telecom companies, which are seen to be developing their businesses to diversify and cover more areas and offer to their clients universal services. Other prominent deal-makers include state-controlled banks Sberbank and Gazprombank, and the Russian sovereign investments fund. The largest M&A deals in 2018 and 2019 were executed with respect to online applications, including taxi services, food delivery and online e-commerce retailing platforms. There is a lot of interest in blockchain-based technologies and services, especially in finance.

While the market is developing rapidly, the law does not always manage to keep up. Despite active discussions and a number of regulatory developments concerning tokens, cryptocurrencies and online investments, Russia still has not come to a unified approach to the regulation of the technology and its implementation within the existing legal system. Starting from 1 October 2019, the provisions of the Civil Code of Russia came into force introducing a new type of rights – digital rights – and certain rules applicable to them. The new provisions sometimes lack consistency (eg, digital rights are categorised as both property rights and contractual rights) and will remain unviable until the adoption of the supporting system of ancillary laws and regulations. Such laws include the currently discussed bill on digital assets and Law 259-FZ of 2 August 2019 on, among other things, the attraction of investments through investment platforms, which will come into force on 1 January 2020. 

Some of the other legislative initiatives in the sphere of technology may result in further limitations for the market. Thus, the State Duma (Russian parliament’s lower chamber) adopted a bill in November 2019 (now signed into law) introducing a mandatory list of Russian software applications that will have to be preinstalled on smartphones, smart TVs and computer devices sold in the country, including those imported. This suggestion falls within the recent trend for support of local software and hardware by Russian legislators and regulators, which is greatly criticised because, in many cases, there are no Russian alternatives to foreign programs and equipment.

Another bill suggests introducing limitations of foreign participation and control over ‘significant’ internet companies. The limitation is similar to the one already in place for mass media and telecom businesses. This initiative has already had a negative impact on the share prices of the largest Russian IT companies and is heavily criticised by the industry.

Law stated date

Correct on

Give the date on which the information above is accurate.

5 December 2019.