Category: News

602,308,745 rubles were received by illegally dismissed employees from their employers through the courts for the period 2018 – the first half of 2020.

This figure perfectly demonstrates that the employees in Russia actively defend their rights in court, and the employers still make many mistakes while dismissing the employees.

On December 9, 2020, the Russian Supreme Court approved large Survey of the court cases related to the termination of an employment contract at the initiative of the employer (https://www.vsrf.ru/documents/all/29463/ ). In this document, the Supreme Court analyzes the courts’ mistakes and explains how the legal provisions on dismissal shall be applied.

One of the main points of this Survey is that the principle of humanity shall be applied by the courts in relation to the employees. It is forbidden to use the employment law instruments only for the purpose to get rid of an employee. The circumstances of the particular situation must be taken into account.

One interesting case was mentioned by the Supreme Court in its Survey. It concerns the dismissal of a remote employee for absence at work. Initially, this employee worked in the office. Then he started working from home. This was agreed with the employer. However, no amendments to the employment contract were made. One day (after several years working from home!), the employer decided to dismiss the employee for long absence at work. The employee filed a lawsuit and the court in this case took the side of the employee. The court indicated that the employee and the employer have reached an agreement on the remote performance of work. The employer was the one who was responsible for correct formalization of this agreement.

And we would like to remind you that as from January 1, 2021, the amendments to the Labor Code of the Russian Federation concerning remote work came into force. During this year remote work has become our new reality, and now, more than ever, it is important to have legally accurate internal regulations and employment contracts provisions associated with remote work issues.

Our team will be happy to advise you on all the nuances of the new legislation and elaborate all the necessary documents. For all the questions, please contact us.

After having pressed Cyprus, Malta and Luxembourg to renegotiate their Double Taxation Treaties (DTT) for a withholding tax rate of 15% to be applied to most dividend and interest payments, Russia failed to reach a similar agreement with the Netherlands and is now threatening to denounce the Russian-Dutch DTT.

The DTT termination between Russia and the Netherlands would result in:

• Upturn of the tax burden for Dutch residents (20% for interest and royalty payments and 15% for dividends);
• Difficulties with getting a foreign tax credit (no foreign tax credit would be granted to natural persons and legal entities in regard to dividend income, getting a foreign tax credit for further passive income would require extended documentation obligations);
• Increase of tax obligations for Russian companies and natural persons, as Dutch tax reliefs would cease to apply vice versa

Last week the Ministry of Finance of the Russian Federation announced the initiation of a draft law regarding DTT termination. Given the existing denunciation procedure (notification should be done at least 6 months prior the termination year), the new taxation reality might become effective as from 2022. Therefore, taxpayers would still have one more year to consider the effects on their business and restructuring possibilities.

Furthermore, there is still a chance both countries will come to a mutual agreement. The same announcements were published earlier after the negotiations with Malta ended in deadlock. However the parties finally managed to find a compromise and the Russian-Malta DTT was revised. The  day after this announcement the Russian Ministry of Finance confirmed they were still ready to find a compromise with the Netherlands and did not fully exclude further rounds of negotiations.

We will keep you updated on the topic and will be glad to provide further information upon request.

Foreign businesses will no longer need to register a separate company in Russia. The Ministry of Economic Development is planning to allow the branches of foreign companies in Russia to obtain a license without the need to establish a separate Russian entity. The draft law would apply to a wide range of business spheres and should facilitate the access of foreign investors to the Russian market.

At the present moment the grant of license is only possible to the companies established in Russia and registered with the Unified State Register of Legal Entities (USRLE). Branches of foreign legal entities are registered in a separate “Register of accredited branches and representative offices of foreign companies” (Accreditation register), which is kept by the Russian Federal Tax Authority. Currently more than 2000 branches are registered with it. Because of this difference, in case a foreign company is planning to carry out business in Russia, which falls under licensing regulation, it is forced to establish a Russian subsidiary. Thanks to the law amendments Russian and foreign businesses will gain equal opportunities without additional administrative burden.

The draft will enable the branches of foreign companies to obtain licenses based on their registration number and the date of registration in the Accreditation register. 52 types of activities would fall under the new regulation, among which are education, medicine, passenger traffic and pharmaceuticals.

The measure is advertised as stimulating foreign enterprises to expand, invest money into Russian economy and create new jobs. However, not all foreign entities would enjoy the facilitation of market entry. For example no changes are due for the financial sphere: The Central Bank of Russia will not issue a license to carry out banking activities to foreign companies.

If you wish to know more about doing business in Russia, proper choice of the legal form for your activities, advantages and disadvantages of having a Russian subsidiary vs. a foreign branch, envisaged costs, legal and reporting obligations in this regard we would be glad to provide you with detailed advice.

Since 17 November 2020 a number of new COVID-19 rules are applicable in Russia.

The most important new rules are:

1. The COVID-19 laboratory test must be no older than  48 hours now (there was no time limit set previously). 

2. Discharge from COVID-sick leave requires 1 negative test now, instead of 2 previously.

3. Self-isolation of 14 days is mandatory for the following persons:

– COVID-19 positive tested;

– having COVID-19 symptoms (suspected cases);

– having had close contact with persons who have tested positive for COVID-19. In case of absence of COVID-19 symptoms within 14 days, a COVID-19 test is not necessary.

4. The territorial bodies of Rospotrebnadzor are obliged to:

– notify persons who have tested positive for COVID-19 and all their contacts of mandatory 14 days isolation;

– notify medical organizations about the need to establish medical surveillance of the above persons.

The new rules will remain in force until 1 January 2022.

Please let us know if you have any questions. We will be happy to assist you.

Russia is preparing to join the Convention on the Recognition and Enforcement of Foreign Judgements in Civil or Commercial Matters of 2 July 2019.

On 19 October 2020 The Ministry of Justice of the Russian Federation together with the Ministry of Foreign Affairs of the Russian Federation, the Supreme Court of the Russian Federation and other authorities submitted to the Government of the Russian Federation documents proposing to sign the Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters of 2 July 2019.

In case of a positive result (ratification), the Convention provides:

– a list of cases in which the courts of one state which ratified the Convention undertakes to recognize and enforce the decision made a court of another state which also ratified it;

– grounds for refusal to recognise and enforce a decision of a foreign court.

These provisions will increase the guarantees of enforceability of foreign court decisions in Russia and of Russian court decisions abroad.

Meanwhile Juralink is already actively assisting its clients in enforcement of foreign court and arbitrage decisions in Russia without waiting for the ratification of the above Convention but using the possibilities provided by international treaties at present.

When you decide that employees shall (partially) return to your Russian office, be well prepared. You must comply with detailed instructions from government agencies and sanitary inspectors, regarding documents, procedures and goods in place. Authorities take these strict measures to prevent a recurrence of the COVID-19 epidemic.

For a (partial) return to the office you need to purchase antibacterial agents, masks, gloves, and air cleaners etc. for use in the office. You must develop procedures for disinfection, temperature checks of employees and distancing measures. Internal orders are needed to assign COVID-19 prevention tasks to staff. Records must be kept to evidence compliance. And a local act must be drafted to issue requirements for the sanitary regime and personal hygiene of employees, the specifics of access modes, lunch time rules, sanitary treatment of premises, providing employees with protective equipment, and other necessary measures for preventing the spread of coronavirus infection.

Failure to comply with the required measures will result in a fine of up to 1 million rubles or a suspension of activity for up to 90 days.

Please let us know if you have any questions. We will be happy to assist you in drafting the correct documents and organizing the implementation of your return to the office after quarantine.

Recent changes in Russian labor legislation aim to digitalize records with regard to employees’ labor activities and implement so called «e-labor books». During 2020 employees have the right to choose between one of the following two options: to continue registrations in a paper labor book or retrieve their paper labor book and switch to submission of information on employment activity only in electronic form.

The law gives the employer a new obligation. Employers must notify their employees of the regulatory changes, including the procedure of maintenance of employees’ labor books, in writing no later than 30 June 2020 and adjust the employer’s internal regulations accordingly. Hereafter (till December 31, 2020) employees may inform their employer about their choice by filing a respective application. Furthermore, the employer must also notify the Pension fund on his employees’ applications.

Violation of the above mentioned deadline or requirements may lead to administrative fines up to 50.000 RUB, both for the General Director personally, as well as for the company.

Please do not hesitate to contact us should you have any questions or wish the assistance of our legal team in the implementation of the acknowledgment/notification.

Support measures have been announced per May 1, 2020 for SME’s that were included in the list of affected industries published in Government Order Nr. 434 of 03.04.2020.

Companies that as of March 1, 2020 are in the register of small and medium enterprises and work in the affected industries, will receive a subsidy: 12,130 rubles per month per employee for April and May. To get such support, companies must meet three criteria:

1. Retain the jobs of at least 90% of the number of employees during the month for which the subsidy will be received, compared to the number of employees in March.
2. Not to be in liquidation or bankruptcy and not to be excluded from the Unified State Register of Legal Entities.
3. Not to have a deficit in taxes and insurance premiums totaling more than 3,000 rubles as of March 1, 2020.  

The Federal Tax Service has set up services on nalog.ru, which will allow you to check whether your company is entitled to a subsidy:  https://www.nalog.ru/rn77/business-support-2020/subsidy/

Our local lawyer in Ukraine and Belarus is sharing some tips on options to invoke force majeure for non-performance of a contract.

Many businesses are increasingly interested in recourse to force-majeure as a means to postpone obligations under a contract as well as to avoid penalties.  In Ukraine and Belarus the possibilities to invoke force majeure are different.

In Belarussian law there is no actual term “force majeure”.  The Civil Code in clause 3 Art. 372 speaks about “circumstances of insuperable force”.  However, there is no list of which circumstances may be considered as such.  Ukrainian law uses force majeure as a synonym for circumstances of insuperable force.  Also, it is more specific. In clause 2 Art. 14 of the Law on Chambers of Trade and Commerce in Ukraine there is a non-exclusive list of circumstances of insuperable force, in particular: “long-term transport disruptions due to decisions and acts by state authorities” as well as “epidemics”. 

Whatever the terms are, both laws stress the same features of force-majeure. The circumstances shall be:

– unavertable, i.e. having exercised due diligence and care it was impossible to avert the consequences of extraordinary events;

–extraordinary, i.e. the circumstances occurred all of a sudden; they could not be foreseen and are unique under given circumstances.

Thus, we need to underline that due to a certain ambiguity as to definition and list of force-majeure circumstances, their influence on execution of a particular contract shall be judged on a case-by-case basis.

Having said that, here are some useful tips if you consider recurring to force-majeure due to coronavirus:

1. The coronavirus and the epidemic caused by it are not circumstances of insuperable force (force-majeure) by themselves. However, restrictive and other measures by state authorities aimed at preventing virus transmission and its consequences adopted after the conclusion of a contract may be considered force-majeure.

Thus, if a contract was concluded just recently, there is no use to refer to force-majeure:  coronavirus and restrictive governmental measures are a reality and not anything extraordinary and unavoidable.

2.  A reference to force-majeure to get exemption from liability under a contract is valid only if such circumstances led to absolute inability to fulfill duties under the contract.  The referring parties shall first do everything to fulfill a contract. 

For instance, if a seller invokes force-majeure due to inability to get materials from his supplier abroad because of closed borders, it will not lead to automatic exemption from liability for non-fulfillment of the contract.  The seller shall try to find an alternative supplier, even if the materials turn out to be more expensive.  The Plenum of the Supreme Economic Court of Belarus has ruled that non-performance by the debtor’s partners, absence of the goods necessary for fulfilling of the contract, absence of funds of the Debtor are not considered circumstances of insuperable force.  The Ukrainian practice is the same.

3.  Unprofitability of the contract caused by the measures taken against coronavirus (i.e. a need to find a more expensive supplier, etc.) is not a force-majeure clause.  We believe that in such a case a party may instead demand termination or alteration of the contract due to material change in circumstances.  However, court practice shows that it rarely happens in Belarus and in Ukraine.

4. Force-majeure is confirmed by issuance of a certificate by a Chamber of Trade and Commerce of a corresponding state. But, where can you apply for a force-majeure certificate?  Who can apply?

You need to file an application to the chamber of the country that imposed the measures leading to inability to fulfill a contract.  In case of Ukraine, it is possible to get a force-majeure certificate due to acts of the Ukrainian government (termination of movement of people, postponement of flights, etc.)  However, there are limited chances to get it from the Belarusian Chamber of Trade and Commerce, as Belarus has introduced almost no restrictive measures due to coronavirus. Applications can also be introduced by foreign companies.

5. It must be remembered that a reference to force-majeure does not exempt a party from its obligations under a contract.  It only provides for temporary relief of liability for the period of duration of such circumstances. Thereafter, the contractual obligations still need to be fulfilled – except if the contract provides for an option of termination. In all other cases, you may end up in court trying to escape from liability due to a material change in circumstances.

6.  As claiming force-majeure is not as easy as it seems, we recommend that you take measures while drafting a contract: you should insert reservation clauses allowing for alteration or termination of the contract without a need to go to court.