CHANGE:

As of September 1, 2013, due to the amendment of the Civil Code of the Russian Federation, failure to observe simple written form for foreign trade transactions will no longer result in their invalidation.

Following the amendment, commercial contracts will still need to be in writing. However, failure to observe simple written form for a foreign trade transaction will deprive the parties of the transaction to the right to testify to the confirmation of its existence and terms. The parties will still be allowed to present written and other evidence in this regard.

BENEFITS:

Before the introduction of this amendment, Russian banks refused to conduct currency operations or to issue a transaction passport in the absence of a written agreement signed by all of the parties or an electronic agreement signed by means of electronic digital signatures by all of the parties. 

The amendment, which is currently in effect, should result in simplifying the flow of documents for foreign trade transactions and for the conduct of currency operations, particularly in cases where the goods have already been imported or the services provided.      

Judicial practice in matters relating to the breach of a foreign trade transaction by one of the parties should become more favourable to the party undertaking to prove that a transaction had been entered into and its terms by means of evidence in different forms other than testimony (e.g. by e-mail correspondence). 

RISKS:

In spite of the generally positive effect of the amendments, the following risks remain:

• Banks still have the right to refuse to conduct the currency operation in the absence of supporting documentation;
• The absence of a written contract signed by the authorised persons of the parties may make it difficult to prove that an  agreement exists and its actual terms.

RECOMMEN-DATIONS:

• When entering into a foreign trade transaction, all e-mail correspondence, and at the very least, the offer, should be sent from the electronic address (preferably corporate address) of the person authorised to sign the contract, to the person who is authorised to sign the contract on behalf of the counterparty;
• We recommend that you use your electronic digital signature when corresponding by e-mail;
• At the time the transaction is entered into, we recommend that each party have available documents and other information regarding the counterparty’s signatory and obtain documents confirming the signing authority of that individual, if available.