On 18 December 2012, the State Duma adopted in final (3rd) reading the first part of an extensive number of amendments to the CC RF (Bill No. 47538-6/1, hereinafter the “Bill”). Due to the large quantity of proposed provisions and amendments, it was decided earlier to divide them into small bills. Amongst the most noteworthy amendments are: the exclusion of provisions requiring notarisation of all transactions that are subject to state registration and improvements to the principles for restricting the legal capacity of an individual.

The recently adopted Bill introduces the following key provisions:

1. Duty of good faith

The parties to a civil law relationship must act in good faith when establishing, performing and protecting their civil rights and performing their civil obligations. To this date, the CC RF did not include an express duty of good faith. Still, courts have always implied a duty of good faith from the general provisions of the CC RF. The duty of good faith is, without a doubt, a core principle that should always govern civil law relationships. In addition, the Bill prohibits deriving benefits from unlawful and unfair practices.

2. Corporate relations

The Bill distinguishes for the first time some particular types of relationships falling within the scope of civil law regulation: relations arising from the participation in corporate entities and corporate governance. The Bill sets out a new ground based on which civil rights and obligations may arise: corporate meetings’ resolutions, when such decision-making procedure is expressly prescribed by law. Article 12 of the CC RF, which regulates available civil law remedies, sets forth a new remedy, i.e. the invalidation of corporate meetings’ resolutions.

3. State registration of rights to property

The newly proposed article 8.1 of the CC RF codifies a number of principles that are the foundations of the immovable property registration system: the verification of the legality of grounds for registration, publicity and validity of registered information. Currently, these principles are provided only in a special law.

Agreements relating to rights on property, which are subject to state registration, require notarisation only in the cases prescribed by law or with parties’ mutual agreement. Therefore, the legislator has abandoned the idea to require notarisation of all transactions that are subject to state registration.

The Bill also allows entering into the state register objections of persons whose rights were registered at a prior date, as well as records on judicial disputes relating to immovable property.

4. Law evasion and damages caused by abuse of law

The CC RF will provide for a new category of abuse of law: law evasion with an illicit aim. A court or an arbitration tribunal should not grant protection of rights and should dismiss, in part of in full, the claims of a person who has committed an act of law evasion. Moreover, in the event that an act of law evasion results in violation of another person’s rights, the injured party may claim damages.

5. Compensation of losses caused by lawful acts of public authorities

The Bill prescribes an obligation on public authorities to compensate the damage caused to a person or to property as a result of the lawful acts of state bodies, municipal bodies, officials, as well as other persons vested with public authority.

6. Additional grounds for imposing restrictions on an individual’s legal capacity

Currently, the legal capacity of an individual may be restricted if his/her alcohol or drug abuse has led to his/her family’s precarious financial situation. The Bill has added two grounds based on which such restrictions may be imposed: (1) as a result of gambling and (2) as a result of a mental illness, where the individual is capable of understanding the consequences of his actions and controlling them only through the assistance of other persons.

Further amendments to other sections of the CC RF are scheduled to take place in the near future. We will keep you informed on other proposed amendments to the CC RF if and when the State Duma will consider them.