Russian Law of Contracts

On February 20, the State Duma (lower house of the national Parliament) enacted amendments to the Civil Code. The legislative reform has introduced certain foreign law instruments into the Russian legal system and broadened the scope of application of the existing legal remedies.

For example, pursuant to Article 308.3 of the Civil Code, specific performance is now available in respect to a basically unlimited range of obligations (provided it does not conflict with the contract’s terms or law). It is not quite clear at this point how courts will treat the updated version of specific performance, but the legal community expects that this remedy is not to be used in the context of personal service contracts. The very same Article 308.3 also embeds the Russian analogy to the French astreinte—a monetary penalty for the debtor’s failure to comply with court’s orders, accrued daily and awarded to the creditor.

Another novelty is the introduction of intercreditor agreements regulating creditors’ relationships inter se with regard to the procedure for claims settlement. In particular, creditors may agree on a specific order of claims satisfaction. Should a creditor act in violation of his intercreditor arrangements, the consideration received by him will be transferred to another creditor in a different obligation.

The year 2016 has seen significant legislative developments in Russian contract law.

The new version of Article 310 cancels the universal ban on unilateral cancellation or alteration of a contract. Business-to-business contracts are currently not covered by such bans, given the parties thereto contractually agreed that either one or both of them shall have this right. Article 310 further sets forth that the exercise of a right of unilateral cancellation or alteration can be subject to payment of a specified sum of money to the contract counterparty.

One of the most frequently commented amendments is found in Article 333 of the Civil Code, which states that a court may no longer ex officio reduce an amount of contractual penalty payable under a commercial contract, save in exceptional circumstances.

To summarize, the Russian legislature undertook serious efforts to bring the national contract law in line with the world’s most progressive legal systems. It however remains to be seen if the judiciary are ready to follow suit.