TUL Lecture in Russian Contract Law, E-commerce and IP Law.

RUSSIAN BUSINESS LAW
Contracts, E-Commerce & Intellectual Property
Vladislav V. Arkhipov
Ph.D, Associate Professor
Saint Petersburg State University

vladislav.arkhipov@gmail.com

About Me
PAST
With ‘Egorov, Puginsky, Afanasiev & Partners’ (www.epam.ru):
Practice. Dispute resolution, corporate law, IP, media and telecom law.
PRESENT
With Saint Petersburg State University (www.spbu.ru, www.law.spbu.ru):
Lecturing. The course of ‘Legal Regulation of Relationships in the Internet’.
Managing. Virtual Law Discussion Club (htttp://vk.com/virtuallaws, www.virtuallaws.ru).
Researching. Directing ‘Legal Regulation of Internet Trade’ topic.
Without any affiliation:
Internet activism. Blog at www.gameponder.blogspot.com, twitter @GamePonder.
FUTURE
Practice. Commitment to join an international law firm. IP, IT and telecom practice (combining with
teaching).

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© V.V. Arkhipov, 2013 (Presentation, Except
for Photos)

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Join Me in Social Networks!
Facebook

https://www.facebook.com/#!/vladislav.arkhipov.5

Twitter

https://twitter.com/GamePonder

Scoop.It

http://www.scoop.it/t/video-game-law

LinkedIn

http://www.linkedin.com/pub/vladislav-arkhipov/14/968/805

Blogger

http://gameponder.blogspot.ru/

Google+

https://plus.google.com/101236615041366654003#101236615041
366654003

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Structure of the Course

1. Contracts. E-contracts. Digital Signatures
2. E-money & Virtual Currency

3. Copyright. Protection of Copyright in the Internet
4. Trademarks and Other Brand Identities

5. Legal Aspects of Online Game Business

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Source, Warning and Disclaimer
Civil Code of the Russian Federation (Part 1) of 30.11.1994 No. 51-FZ (ed.
of 02.11.2013).
WARNING: In 2013 the Civil Code has been substantially reworked. There
are many changes to general provisions. Pre-2013 literature may be
outdated.
DISCLAIMER: the aim of the course is to provide general understanding
of Russian business law. Some details may be omitted. Nothing in these
presentations constitutes legal advice and/or official position of Saint
Petersburg State University and/or other affiliated parties.
You may refer to www.russian-civil-code.com for basic understanding in
English, but it is now extremely outdated (2006).

We will use technical term ‘source of private law’ which means
law, other enactment, terms of commitment/agreement and customary
business practice.
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Contracts. E-contracts. Digital Signatures

CONTRACTS. Definition

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Basic Assumptions
o Contract law is an ‘advanced part’ of general civil
law provisions which involves most of the general
institutions by ‘snowball’ principle.
o As such, contract directly embraces the law of
transactions and of obligations, as any contract is a
kind of transaction which implies commitments.
o Contract law applies only to civil (or private)
relationships. Public entities though may also act as
subjects of civil relationships.
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Definition of Contract
Contract is an agreement of two or more parties on
institution, modification or termination of their civil rights
and duties (Item 1 Article 420).
To what is this limited?
o Law of contracts as set forth by the Civil Code applies to
contracts which affect civil rights and duties.
What does this entail?
o Contract is a form of transaction, either bilateral or
multilateral (Item 2 Article 420).
o What is implied by contract is obligations which also
have general rules for them (Item 3 Article 420).
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What Does ‘Civil’ Mean?
In this context ‘civil’ basically means ‘private’ as opposed to
‘public’ [law].
Etymologically this term derives from Roman ius civile – the
Latin for ‘citizen law’ which applied to Roman citizens.
Note that Russian law operates with the term ‘relationship’.
Law governs relationships (like in other continental
systems, but unlike common law).
How civil relationships can be distinguished from any other?

Civil relationships comprise of ‘property’ and ‘non-property
personal’ relationships based on equality, autonomy of will
and property independence of parties (Item 1 Article 2).
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Transactions
Transaction is an action of a natural person or legal entity
which are aimed towards institution, modification or
termination of civil rights and obligations (Article 153).
Transactions can be unilateral, bilateral or multilateral (Item
1 Article 154).
Unilateral transactions require a will of one party, while
others – of two parties (bilateral), or even three or more
(multilateral).
Bilateral and multilateral transactions are synonymous for
contracts.
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Commitments
By force of a commitment, one party (debtor) shall
perform in favor of other party (creditor) some
action, in particular: transfer property, perform
work, pay money etc., or to abstain from some
action, while the creditor is entitled to claim the
discharge of an obligation by the debtor (Item 1 Article
307).
Commitments may derive from contracts, as a
consequence of inflicting harm and from other grounds
specified by the Code (Item 2 Article 307).
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Conclusion on Nature of Contract
Contract is a kind of transaction which pertains to civil
relationships and implies commitments.
Three main institutes of civil law which govern
contracts:

o Transactions, general (form and validity)
o Commitments, general (debtor-creditor
relationships, guarantees, responsibility)
o Contracts, specific (conclusion, amendment and
cancellation)
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CONTRACTS. Transactions

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What Does Law of Transactions Govern?
Form of transactions (Articles 158-165.1)

o

Transactions are made either orally or in written form (simple
or notarial).

o

A transaction which may be made orally is considered to be
made even if the will to make a transaction follows from
behavior of a party.

o

It is not possible to make a transaction by remaining silent
unless specifically provided by law or a contract.

Invalidity of transactions (Articles 166-181)
o

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A transaction can be invalid on the grounds provided by law as
a consequence of deeming it invalid (‘voidable transaction’)
or irrespective of such decision (‘void transaction’).
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Oral Transactions
o On leftovers, any transaction which should not be made
in written form due to law or an agreement may be
made in oral form (Item 1 Article 159).
o Unless otherwise provided by the parties, any
transactions which are discharged at the moment they
are made may be made in oral form, except for those
which require notarial form or which are void if written
form is not observed (Item 2 Article 159).
o In case a contract is made in written form, any
transactions to fulfill it may be made in oral form if the
parties agree to it and it does not contradict to law, other
enactments or a contract (Item 3 Article 159).
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Written Form of Transaction
o

Written form of transaction shall be made by creating a
document which expresses its content and is signed by party(ies) which make the transaction or by their proxies (Item 1
Article 160).

Which transactions shall be made in written form?
o

Transactions of legal entities between themselves or with
natural persons (Point 1 Item 1 Article 161).

o

Transactions of natural persons between themselves if the
amount is higher than RUR 10 000 (app. EUR 223), or if
required by law (Point 2 Item 1 Article 161).

Unless otherwise provided by law, if written form requirement
was not observed, the parties cannot use witnesses, but the
transaction is not invalid.
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Notarial Form of Transaction
o Notarial certification means checking the legality of
a transaction, including rights to make it, which is
made by a notary or other person entitled to make a
notarial certification pursuant to the law (Item 1
Article 163, edition of 07.05.2013).
o It is obligatory to make a notarial certification if
required by law or by an agreement (even if the law
does not require this), and incompliance with this
rule results in void transaction (Items 2 and 3 Article
163).
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State Registration

NOTE: State registration is not a form of transaction
itself.
o State registration may be required by law, and in
such cases the legal consequences of a transaction
occur after the transaction is registered.
o A transaction which modifies a transaction which
was registered, is subject to state registration itself.

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What If a Bad Guy Avoids Registration?
o

In case one party has completed the transaction which
requires notary certification in full or in part, but other party
avoids such certification, court, under the claim of the first
party may deem such transaction valid without further need
for certification (Item 1 Article 165).

o

In case a transaction which requires state registration is made
in due form, but one of the parties avoids its
registration, court, under the claim of the ‘good’ party may
rule to register the transaction, so that it is registered
pursuant to the court ruling (Item 2 Article 165).

o

In both cases the ‘bad buy’ shall reimburse the losses
incurred by the avoidance of finalizing or registering of the
transaction, and the statutes of limitation is one year (Items 3
and 4, Article 165).

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Void Transactions
‘Void’ means that a transaction is void by default, and
court may only apply consequences.
o The claim to apply such consequences may be made
by a party to the transaction or any other party
provided by the law.
o In terms of theory, void transactions partly imply
breach of public interest, therefore, court may apply
consequences at its discretion if discovers this.

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Voidable Transactions
‘Voidable’ means that a transaction is not void by
default, but can be deemed as such by court.
o Voidable transaction may be contested by a party or a
person specifically mentioned by law, in case such party
suffered from such a transaction.

o A party which shows by its behavior its will to keep the
transaction intact, cannot contest the transaction on the
grounds known when showing this.
o If no one contests a voidable transaction, it remains
intact. This effectively means that any voidable
transactions which survive statute of limitations (in
general, 1 year) are same as valid.
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List of Void Transactions
o

Transaction which breaches law or other legal enactment AND
infringes public interest or protected rights and interests of third
parties (Article 168).

o

Transaction made to reach the aim which is contrary to basics of
legal order and morality, if the parties know about this in advance
(Article 169).

o

Simulated transaction (made just to create illusion of a transaction)
and fraudulent transaction (made to hide other transaction) (Article
170).

o

Transaction made by a legally incapable person (e.g. formally
recognized as insane or under 14 years) (Articles 171 and 172).

o

Transaction made with breach of restriction to dispose of property
which follows from legislation, including bankruptcy law (Article
174.1).

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List of Voidable Transactions
o

Transaction made by a legal entity which does not correspond
to clear limitations of its constituent instruments if the other
party knew or should have known about such limitation
(Article 173).

o

Transaction made without consent of a third party, corporate
body or state/municipal authority if such consent is required
by the law, if the other party knew or should have known
about this (Article 173.1).

o

Transaction made by a corporate representative or body with
breach of procedure or interests of the principal, if the other
party knew or should have known about this (Article 174).

o

Transaction made by a minor 14-18 years old without consent
of parents if such consent is required, unless such a minor has
been deemed fully capable (Article 175).

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o

Transaction made by a natural person with capability limited
by a court (e.g. addict) – only the guardian is entitled to make
a claim (Article 176).

o

Transaction made by a natural person who could not
understand meaning of his actions or govern himself while
being capable. The claim may be brought by citizen himself
(Article 177).

o

Transaction made under the influence of significant
misbelief, i.e. the party would not make the transaction if it
could assess situation reasonably and objectively (Article 178).

o

Transaction made under deceit, violence, threat or in course
of adversary circumstances. Note that deceit also means
silence when a good-willed person should not be silent
(Article 179).

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Consequences
Consequences:

o Invalid transactions do not entail any legal consequences
except for those connected with invalidity (Item 1 Article
167).
o Each party shall return to other party anything gained as
it was gained or as a monetary reimbursement if not
possible (Item 2 Article 167).
o The court may not apply consequences of invalidity if
such application would contradict to the basics of legal
order and morality (Item 4 Article 167).
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Statutes of Limitations
Statutes of Limitations:

o For void transactions – 3 years starting from the
execution of void transaction, or – if the claim is
raised not by a party – when it got to know about
start of execution but not more than within 10 years
(Item 1 Article 181).
o For voidable transactions – 1 year starting form the
moment when the claimant got to know or should
have gotten to know about the grounds or starting
from the termination of violence or threat (Item 2
Article 181).
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CONTRACTS. Commitments

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Parties to Commitments
o Both creditor and debtor may comprise of one or
more parties (Para 1 Item 1 Article 308).
o When claim just to one person on one side is
invalid, it does not affect others (Para 2 Item 1
Article 308).
o One person may be debtor to other person as
creditor and vice versa at the same time (Item 2
Article 308).
o Commitments do not create obligations of third
parties, but can create rights (Item 3 Article 308).
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Performance of Commitments
o Commitments shall be performed duly, in compliance
with their terms as well as requirements of law or, when
no such requirements are present, with customary
business practice (Article 309).
o It is not possible to quit a commitment unilaterally
unless otherwise provided by the law. In commercial
practice – also by the agreement (Article 310).
o Creditor is entitled NOT to accept performance made in
part unless otherwise provide by any source of private
law (Article 311).

o Debtor may ask to prove that the person accepting
commitment is a due person, and the debtor bears the
risk of not asking to do so (Article 312).
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o

Unless otherwise provided by any source of private law
(except for custom), the debtor may entitle third party to
perform commitment, and creditor shall accept that (Article
313).

o

A commitment shall be performed in time or within period
determined by its terms or in reasonable period if no such
term is provided (Article 314).

o

Debtor is entitled to perform commitment prematurely unless
otherwise provided by any source of private law (except for
custom) (Article 315).

o

A commitment shall be performed at debtor’s place except for
sale of land, sale of good with transportation, other sale of
good by entrepreneur and monetary obligation (Article 316).

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o

A monetary commitment shall be performed in Roubles, even
if foreign currency equivalent is used (Article 317).

o

Unless otherwise provided by an agreement, in case debtor
pays not enough money to perform monetary
commitment, this money firstly covers creditor’s
expenses, then – interest, finally – main debt (Article 319).

o

Unless otherwise provided by written sources of private law, a
debtor is entitled to choice when commitment is alternative
(Article 320).

o

When there are many persons at certain side, by default
commitments shall be performed in equal shares. However, if
prescribed by law or agreement, commitments are solidary
(Articles 321 – 326).

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Security Measures
o Penalty (fine). Fixed amount determined by agreement.
Written form irrespective of the main commitment.
Sometimes commitment is provided by the law.
Disproportional penalties may be reduced by the court
(Articles 330-333).

o Pledge. Creditor may get discharge from pledged
debtor’s property or (if something happens) from
insurance. Specific rules apply to mortgage. Any property
(including rights) may be pledged. There shall be an
agreement specifying property, its value, nature, volume
and term of main commitment. Written form is
mandatory. Debtor usually can use pledged property
(Articles 334-358).
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o Retention. If creditor has the asset which shall be
given to debtor, but the debtor does not perform its
commitment, the creditor can retain the asset until
the commitment is performed, even if a third party
has purchased such asset meanwhile. Then it may
be sold as pledge (Articles 359-360).
o Suretyship. Third party bears responsibility as the
debtor in case the latter defaults. Separate written
agreement or void transaction. Solidary
responsibility. Third party reserves the right to
contest creditor’s claim (Articles 361-367).
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o Bank Guarantee. Unrecallable and independent
commitment of a bank which cannot be transferred
unless otherwise specified in the commitment. After the
guarantee commitment is fulfilled, the bank makes a
regress claim to principal (Articles 368 – 379).

o Holding Deposit (Downpayment). One party gives
money to other party as advance payment, proof of
contract and security measure. If commitment has not
started and is terminated, downpayment just returns. If
commitment has failed, the party which received
downpayment and failed returns twice as much.
Otherwise – just the amount (Articles 380-381).
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Change of Parties in Commitments
Chapter 24:
o

The creditor may change without consent of the
debtor, unless the commitment is tied to personality of the
creditor, and the debtor may require proof of the rights of the
new creditor.

o

The debtor may change only if the creditor gives his consent.

o

Change of creditor (effectively, assignment of the claim) shall
be made in the form of the main commitment, including state
registration requirement. Same for transfer of debt.

o

Assignment of claim is a general instrument used for
circumvention of property rights (like rights to share capital in
limited liability companies).

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Liability for Breach of Commitments
Chapter 25:
o

The debtor shall reimburse the losses (real harm and denied
profit).

o

As a general rule which can be modified by an agreement, if
there is a penalty, it covers the losses appropriately.

o

Interest is accrued at the refinancing rate for default on
monetary commitments.

o

As a general rule, covering of penalty and losses does not
relieve debtor of the main obligation.

o

Actions of employees of a legal entity are actions of the legal
entity for the purpose of liability for commitments.

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Termination of Commitments
o

By completion (general way).

o

By compensation for release of commitment.

o

By set-off.

o

By collision of debtor and creditor.

o

By novation.

o

By forgiving of debt (unless it does not infringe rights of third
parties).

o

By act of state authority (which makes commitment
impossible).

o

By death of a natural person or liquidation of legal entity.

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CONTRACTS. Specific

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General Rules
o

Natural persons and legal entities are generally free to enter
contracts, but tied by the prior commitments and legislative
requirements.

o

The parties may enter any contract provided by the Civil Code or any
other contract which is not directly provided, they can mix elements
of different contracts.

o

The parties are free to determine terms of a contract unless
otherwise directly provided by law.

o

By default contracts are considered to be ‘on a paid basis’.
Therefore, pro-bono contracts should directly contain the
corresponding provisions. Commercial companies cannot enter probono contracts as a general rule.

o

Unless directly prescribed by the law, only parties and subjectmatter are essential. The price and terms may be determined in
other ways.

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Public Contract & Contract of Adhesion
Public Contract - Consumers (Article 426):

o Contracts which are made by commercial entities with
consumers.
o Entity cannot individually change terms and price, as
well as refuse to enter.
Contract of Adhesion – Business (Article 428):
o The terms are determined by standard forms and other
party may enter the contract in general.

o The other party may request modification only if the
contract deprives it from usual terms and if it was not (or
should not be) aware of this.
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Preliminary Contract
o Preliminary contract contains commitments to make
contract on transfer of property, performance of works
or services in future on conditions of the preliminary
one.
o Preliminary contract shall be made in the form of the
main contract, otherwise it is void (not voidable).
o Preliminary contract shall contain all essential terms of
the main contract and the term of conclusion of the
main contract (if there is no latter – the term is 1 year).
o If a party avoids to enter the main contract, the other
party may address the court with the relevant claim.
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Entering the Contract
o Substantially, a contract is considered being made when
the parties agreed on all essential terms in the form
prescribed.
o Procedurally, a contract is considered being made when
a party which has sent an offer receives the acceptance
without alteration of terms, unless it is not needed to
transfer property in addition.
o Form of the contract is determined pursuant to the law
of transactions.
o Advertisements are considered as invitation to make
offers unless an advertisements says otherwise.
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Grounds for Modification and Termination
o By default, modification or termination is possible only
under the agreement of the parties.

o Unilateral modification or termination is possible under
the claim of a party, by court, in case: (a) the other party
makes substantial breach, (b) in other cases provided by
written sources of private law.
o Substantial breach is a breach which significantly
deprives a party from what it would be entitled to upon
entering a contract.
o Additionally a contract may be modified or terminated
under substantial change of circumstances which were
not expected, foreseen, which drastically change
interests and the risk is not borne by an interested party.
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CONTRACTS. E-contracts

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General Provisions

o Russian law does not have specific regulations for
general e-contracts and specifically Internet contracts.
o First general reference. Transactions may be made with
the use of faximile or other copy, as well as with digital
signature in cases prescribed by law or an agreement
(Item 2 Article 160).
o Second general reference. A contract in written form
may be made by exchange of documents via electronic
communication which allows to identify parties in a
trustworthy manner (Item 2 Article 434).
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E-contracts’ Stages of Complexity
o Simple case. A contract is made by exchange of
electronic messages with fortified qualified esignatures.
o Medium complexity case. A contract involves
completion of commitment with something which
involves a kind of qualified e-signature, like bank
cards.
o Hard case. A contract is made without any direct or
indirect use of e-signatures, somehow preceded by
an ordinary written agreement.
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The Core of the Problem
How natural persons may enter into agreements and make
commitments?
o

Under his real name which includes last name, first name
and, unless otherwise follows from law or national
custom, patronymic (Para 1 Item 1 Article 19).

o

Under a pseudonym, but only in cases explicitly state by the law.
Currently this covers just copyright issues (Para 2 Item 1 Article 19).

o

Virtually the same rules applies to legal entities (Item 1 Article 48).
Remember that legal entities get commitments via their employees.

Rhetoric question: how natural persons and company employees act in
the Internet?
Credits to my student Nikita Melaschenko who was the first to
emphasize this problem.
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CONTRACTS. Digital Signatures

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Sources
Federal Law of the Russian Federation No. 63-FZ “On
Electronic Signature” of 6 April 2011, came into force
on 8 April 2011.
This law replaced old Federal Law of the Russian
Federation No. 1-FZ “On Electronic Digital Signature”
(which was still in effect until 1 July 2012).
The new Law introduced to Russian law rules similar to
the provisions of the EU Directive 1999/93/EC on a
Community Framework for Electronic Signatures.
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Definition
Electronic signature is information in electronic form which is
attached to other information in electronic form (information
being signed) or is connected with the latter in other way and
can be used for identification of the person which signs the
information (Item 1 Article 2).
General and vague legal definition of ‘information’ is given in the
Federal Law of the Russian Federation ‘On
Information, Informational Technologies and On Protection of
Information’ No. 149-FZ of 27 July 2006:
Information – data (messages, materials) irrespective of how
they are presented (Item 1 Article 2).
Note that the first version of the Civil Code listed information as
an object of civil relationships.
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Principles of E-signatures
Article 5:
o The participants of electronic communication are
entitled to use any e-signature at their discretion unless
there is a specific rules provided by law or an agreement.

o Possibility to use any information technology and/or
technical devices which allow to comply with the
requirements of the law to specific kinds of e-signatures.
o It is not possible to deem an e-signature and/or the
document signed with it legally invalid one the sole
ground that such e-signature was created automatically.
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Principles of E-signatures
Article 5:
o The participants of electronic communication are
entitled to use any e-signature at their discretion unless
there is a specific rules provided by law or an agreement.

o Possibility to use any information technology and/or
technical devices which allow to comply with the
requirements of the law to specific kinds of e-signatures.
o It is not possible to deem an e-signature and/or the
document signed with it legally invalid one the sole
ground that such e-signature was created automatically.
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Types of E-signatures
o

Simple e-signature. Confirms the fact of forming of esignature by a specific person by means of codes, passwords
and other means.

o

Non-qualified advanced (fortified) e-signature. It should:
(1) be formed by cryptographic processing of the
information with use of key of electronic signature;
(2) allow to identify the person who signed the document;
(3) allow to identify facts of introducing changes into the
document after it is signed;
(4) be created with use of the means of e-signature.

o

Qualified advanced (fortified) e-signature. Additionally to
the aforesaid: should have its verification key stated in
qualification certificate and be formed by e-signature means
which have a proof of compliance with statutory
requirements.

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Highlights of the Law
o

Simple e-signatures and advanced non-qualified esignatures may be used without assistance of third-party
providers (certification centers) whenever it is
technically possible).

o

An e-signature may be associated not only with natural
persons, but also with companies and state
bodies, however it is still necessary to indicate
authorized natural person.

o

E-signatures should allow for identification of author
and authenticity of the document, and any
cryptographic technology may be used if it is as resilient
as the law prescribes.

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Equality to Paper Document
o

A document signed by qualified advanced e-signature
equals to a document made and signed on paper unless
it is specifically provided by law/ and/or subordinate
legislation that the document should be made on paper.

o

A document signed by non-qualified advanced esignature or simple e-signature equals to a document
signed on paper only if it is explicitly provided by law
and/or subordinate legislation, or the agreement
between the parties. Such an agreement should set
forth the procedure of verification of e-signatures and
the requirements should comply with statutory ones.

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Foreign E-signatures
o The fact that a certificate of an e-signature
verification key is issued in accordance with the
rules of foreign law does not itself affect validity of
e-signature.
o Foreign e-signature is valid if it corresponds to
Russian statutory requirements and its kind is
determined by those statutory requirements to
which it complies with.

Theoretically, European e-signatures of citizens can be
used in Russia by default (due to adoption of EU rules in
form of law).
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Some General Observations
o

Use of qualified advanced e-signatures generally does
not imply any substantial legal problems.

o

The same is true for use of other e-signatures pursuant
to provisions of paper contract.

o

Current simple e-signature provisions do not resolve
‘Internet contract’ problem.

o

It is not specified that relationships governed by the Esignature Law are either public or private.

o

Agreement of parties referred to in the E-signature law
should not necessarily be civil law agreement.

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Russian Universal E-Card

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E-money & Virtual Currency

E-MONEY. General Framework

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Source and Background
Federal Law of the Russian Federation of 27.06.2011 No.
161-FZ (ed. of 23.07.2013) ‘On National Payment System’.
o Drastic change of electronic payments. Before it only
‘ordinary’ money in electronic form operated by banks
were regulated, while e-money
(PayPal, WebMoney, YandexMoney etc.) were
unregulated.
o The law contains new and extremely complex set of
definitions and rules, regulating all service providers in
the area of payments as a system.

Its adoption directly affected all service providers who acted
in the unregulated area forcing them to react (close or
transform).
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Definition of E-Money

E-money (literally ‘electronic monetary means’) –
money which were provided in advance by one party
(the person who provided money) to other party, who
records the information about the amount of money
provided without opening a bank account to execute
monetary obligations of the person who provided
money to third parties and in relation to which [money]
the person who provided money is entitled to make
instructions by electronic means exclusively (Item 18
Article 3).
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Breakdown of the Definition
What do e-money imply?
o One person provides money in advance (i.e. before any
instructions) to other person.
o Such other person records information about the
amount of money provided without opening a bank
account.
o The aim of such a record is to execute monetary
obligation of the person who provides money to third
parties.
o The person who provides money can make instructions
by electronic means only.
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Statutory Requirements
o The service provider must be registered as a credit
organization (it may not be a bank though).
o Obligatory notification of Russian Central Bank not later
than 10 days after the start of operations.

o As service provider is a credit organization, statutory
requirements of the Federal Law ‘On Banks and Banking
Activity’ of 02.12.1990 No. 395-1, in particular on
minimal share capital, apply, either:
- RUR 18 million (app. EUR 400 000), without right to
serve legal entities.
- RUR 90 million (app. EUR 2 000 000), with right to
serve legal entities.
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Clear Examples of E-Money

o Bitcoin
o PayPal
o WebMoney
o YandexMoney

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Definition of Virtual Currency
Virtual currency can be generally defined as means of payment used in online
games, associated services and online services based on same principle of
payment arrangements (digital distribution, social networks etc.).
General features of virtual currency:
o

User has an account with a record of his ‘money’ (a wallet).

o

You ‘buy’ virtual currency in advance, and use it to effect payments later.

o

It is neither money nor (prima facie) e-money in traditional sense, even if it
is called like currency.

o

Virtual currency is usually used for buying objects which pertain to virtual
world or virtual space.

Examples of services which use (or used before) virtual currency: Steam
(currency), Battle.net (currency), Facebook (coins), MTGO (tickets), Riot
(points), Funcom (points), Innova (currency) etc.

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Tricks of Virtual Currency
o

In its original and narrow sense, virtual currency is imaginary
(prima facie) currency of MMORPGs, MUDs or other virtual
worlds.

However, this imaginary currency has economic value – it is
traded on a grey (rejected by most EULAs and/or ToS) market. E.
Castronova: EQ1 GDP = Bulgaria GDP (2002). Tax authorities
worldwide consider taxation of virtual currency.
o

It is clear that virtual currency can be interpreted as property
right according to Russian civil law (you buy right to demand
future service in certain amount).

However, this virtual currency is recorded as a part of program
code which users reproduce on their computers and as such it
implies IP part. Some lawyers argue that virtual currency should
be governed by IP law.
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Recap on Russian Payments Law
As applied to virtual currency:

o E-money imply payments to third parties. Therefore, if
virtual currency is used to buy services of one
company, it is regulated as property rights. No additional
registrations required.
o In case virtual currency is used to officially pay for at
least one third party product, it is e-money, and the
service provider shall be registered as credit
organization.
This is the reason why Blizzard did not allow Russian players
to cash-out Diablo III RMAH earnings to PayPal.
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Copyright. Protection of Copyright in the Internet

COPYRIGHT. Relevant Practice

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Vkonakte Case, 2010-2012
Case No. A56-57884/2010 (Ruling of
07.11.2012), claimants – CJSC “S.B.A. Music
Publishing” and CJSC “S.B.A. Production”, defendant
LLC “V Kontakte” (www.vk.com).

Subject matter of the claim: collection of RUR 850 000
(app. EUR 19 000) as compensation for breach of
exclusive rights and RUR 300 000 (app. EUR 6 700) as
compensation for breach of associated rights to various
songs and phonograms respectively of a popular
Russian singers.
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What the Court Established?
o Exclusive rights. The fact that the works belong to the
claimants was established on the basis of documents
provided by the claimants.
o Website owner. Defendants relation to the website was
established on the basis of information possessed by
accredited registrar.
o Uploading of works. Notary witnessed examination with
use of the ‘search’ function showed that the
phonograms were uploaded to users’ pages.

o Open access. The same notary witnessed examination
showed that the access was open for all registered users
(interpreted as public access).
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Basic Arguments
Claimants:
o

Works were uploaded without consent of the copyright holders.

o

Works were uploaded with open access for unlimited amount of
persons.

o

This constitutes breach of their exclusive and associated rights.

Defendant:
o

The claim cannot be accepted, because the defendant did not make
any uploads.

o

Furthermore, the defendant, as a social network, cannot be held
responsible for the actions of users.

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The Core of the Decision

o The court held that there is no substantial evidence
that the defendant has made necessary actions to
prevent breach of exclusive and associated rights of
the claimants.
o Note that the court investigated Terms of Service
and Terms of Use of a social network, but did not
answer whether it is contract or not, limiting its
scope just to assessment of evidence.

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Argument in Detail
o

Although the defendant had rules developed for users with
prohibition to upload and use of third party IP, the fact that
the defendant has a lot of technical opportunities which are in
its full control, it is the defendant who may be in part
responsible for unauthorized use and dissemination of
information at its website.

o

The defendant did receive pre-court claims of the claimants to
cease unlawful activity, but failed to do effective action to
stop the infringement of intellectual property.

o

The observation given above is additionally grounded by the
fact that the dubious content was still on the website of the
defendant and could be accessed by the users, in particular by
using search mechanism.

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TUL Lecture in Russian Contract Law, E-commerce and IP Law.

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