As general, Advocates Bureau Yug and Legal Media Pravo.ru became organizers of a new legal forum WINTER LEGAL WEEK 2022, with information support from Yug Times, social and political weekly newspapers. Over 200 lawyers and advocates from Moscow, St. Petersburg and many Russian regions took part in it. Representatives of major international companies also attended the forum.
The event was held in Radisson Rosa Khutor Hotel – the place was not chosen by chance. According to the organizers, the Sochi ski resort, located in Krasnaya Polyana, is an ideal place for such events, since it allows you to organize both fruitful work and enjoy quality rest. While welcoming the participants, Yuri Pustovit, Managing Partner of the Advocates Bureau Yug, noted that such meetings in Sochi, during the ski season, are becoming a tradition. And despite charms of online events, live communication remains the most effective way of interaction.
By the way, "interaction" was the main concept of the both informal and business parts of the forum. The main agenda involved topics on interaction within a companies, among themselves and relations between business and the state.
Financial transparency and attorney-client privilege
Speech by Vladimir Efremov, partner of the company "Arbitration.ru", about "Forced financial transparency of lawyers and business" aroused great interest and became the subject of lively discussions. The speaker highlighted the trends of "anti-laundering" regulations, stipulated by the Central Bank and Rosfinmonitoring in 2022.
Now, in order to stimulate more effective legalization of crime profits, all entrepreneurs and organizations providing legal services are required to identify their clients, monitor transactions and report any cases of suspicions payments to Rosfinmonitoring. These actions are not recognized as a violation of attorney-client privilege.
The data is to be transmitted under certain procedure, and managements of law firms are obliged to develop internal control regulations for their employees, which shall stipulate the said procedure, deadlines for data providing, forms of documents, etc. The following sanctions will be applied to organizations that do not comply with the new requirements: a fine of 400.000 RUB and banking restrictions (blocked accounts, refusal to conduct transactions).
"Traffic light" from the Central Bank
Another innovation is expected in the summer. This federal law comes into force on July 1, which launches the KYC (Know Your Customer) platform from the Central Bank. A program is based on daily data on all questionable transactions conducted in the country (collected data on all current bank accounts), will divide Russian business into three risk levels: green, yellow, red.
Customers of the red zone will be completely cut off from the banking system. They will not be able to open accounts, conduct transactions, transfer funds. Moreover, they will be deprived of the right to use funds from their current bank account.
Similar, albeit smaller, sanctions are expected by customers of the yellow zone.
Upon receiving information from the Central Bank, banks will be required to consider the degree of risks determined by Rosfinmonitoring and respond accordingly. The system is already working in test mode, and Russian lawyers will have to identify there each potential client, preferably, before signing the contract.
If we talk about how these innovations can affect the activities of law firms in real life, then, in addition to the increased flow of documents and new job responsibilities for employees, as well as the risk of 0.5 million rubles fine, the relations with clients, who can no longer count on attorney-client confidentiality, will likely deteriorate significantly. Moreover, Vladimir Efremov stressed in his speech that there is a risk for law firms to be in the "red zone" themselves.
“Rosfinmonitoring and the Central Bank have an internal data exchange, informing banks about companies to which they must pay attention and additionally check their activities,” Efremov said. “If a law firm has many clients from yellow and red zones, and if Rosfinmonitoring sends a recommendation to the bank, saying to pay extra attention the said firm, then general measures will be applied to the law firm in accordance with the law “On countering the legalization (laundering) of crime profits ...”. To put it simply, even one client from the "red zone" will drag down their lawyer or law firm. Thus, the company may face with a refusal to conduct transactions on the current bank account, to use the funds on the account. There is also a possibility that the bank unilaterally terminates service agreement with the company or even bans it from opening new bank accounts.
The personal data “worth”
Mikhail Khokholkov, the leading lawyer of the Law Firm INTELLECT, spoke about changes in the law "On Personal Data", which will adjust the activities of all lawyers and advocates, as well as most modern digital projects, including startups. One of these changes will involve biometric data, including photos.
Previously Roskomnadzor’s explanation stated that a photo can be considered biometrics only when certain conditions (GOST, angle, requirements) are met. Last year in Decembe this explanation officially lost its relevance. So far, lawyers do not fully understand how to act in new conditions. However, it is clear that it will not be possible to use photographic materials as before. This is especially true for small and medium-sized projects that simply will not be able to pass the necessary accreditation, as one of the requirements for its successful completion is the authorized capital of 50 million rubles for an operator who plans to use biometrics processing for authentication in their activities. Regarding identification, the financial security should already amount to 100 million rubles.
Only major players will be able to comply with the new requirements, while representatives of medium and small businesses must either find opportunities for multimillion-dollar support to implement their projects, or otherwise develop business processes, excluding the use of biometrics.
At risk: media, lawyers, notaries
The risks under new conditions are that the number of complaints received by Roskomnadzor from citizens may increase, particularly, due to the Citizens Legal Protection Center in the digital environment created by Roskomnadzor. Over the past year alone, the center has prepared over a thousand applications to the courts. Now it may happen more often.
If previously, upon receiving a complaint, Roskomnadzor carried out a lengthy procedure before drawing up a protocol, now the documents are immediately sent to the court. Accordingly, lawyers should be ready to protect interests of companies. “The innovation can become a means of unfair competition,” noted Mikhail Khokholkov, a leading lawyer at Law Firm INTELLECT, a member of the Roskomnadzor working group on Personal Data, a member of the expert council on advertising legislation of the FAS of the Russian Federation.
“We are already seeing such a problem, especially in the cases of our clients, the media, who, by virtue of their professional activities, somehow operate with personal data,” said Khokholkov. “And we see how the number of appeals keeps increasing, no matter reasons.
The problem is that if the request is made within the framework of the law on personal data, each operator must respond to it. The lack of an answer is an independent part of an administrative offense, very painful one. This is also relevant for liquidators, for lawyers who operate with evidence, personal data of witnesses and other participants in the process. We have already met such cases, too.”
The speech of a Siemens representative aroused a great interest. Anastasia Fomicheva, Director of the Legal and Ethical Compliance Department of Siemens Healthcare, spoke about the working specifics of a large international company.
“In 2007, I came to work at Siemen and as a Russian lawyer I was surprised that the contract necessarily provides for a provision on limited liability,” Anastasia Fomicheva said. “For me it was something new, incomprehensible, unusual. But over time, I got an interesting answer. If we hypothetically imagine a situation when there is a sudden breach of obligations under all the contracts that Siemens has concluded, and the liability will not be limited, then this will force the company to pay unlimited amounts to all its counterparties. As a result, this can lead to the companys bankruptcy. Of course, such a situation is unlikely, but this is the peculiar view of a foreign companies. If there is a risk (even if it is theoretical and, most likely, from the field of fiction), it should be excluded.”
Non-fulfillment of technical conditions equals termination of the contract
During his speech Sergey Radchenko, Senior associate at the Advocates Bureau Yug, suggested considering a common case: the customer fails to fulfill obligations under the contract with the network company on technological connection. In this situation, how can the network company terminate the contract and reimburse its expenses?
“There is a huge amount of judicial practice,” said Sergey Radchenko. “Over the past 10 years I have studied it all and I can say that this is an absolutely typical situation when a network company fulfills its obligations, spends a lot of money, then comes to its senses, but the tariff has already been exceeded, and the customer is in no hurry to pay. This is where the litigation begins.”
According to his own experience, Sergey Radchenko further explained that the company had managed to build a substation, laid cable lines, built air networks (with enormous costs), but payment was not received. Logically, the performer wanted to terminate relationship with a negligent client and reimburse the expenses. Sergey Radchenko offered practical guidance on how to get out of this situation.
One can terminate the contract for several reasons:
- Part 2, Article 328, the Russian Civil Code (the so-called foreseeable violation) with the recovery of losses calculated according to the model of negative contractual interest;
- Article 450, the Russian Civil (essential breach of the contract with the recovery of all expenses incurred as losses);
- Article 451, the Russian Civil Code on significant change in circumstances (expenses are collected on the basis of a courts decision, according to which the costs are fairly divided by the parties).
Regarding what exactly can be recovered the speaker also offered here several options:
- costs (for the preparation and issuance of technical conditions, their approval by the system operator, as well as for the preparation of necessary documentation and execution of design and construction works);
- VAT (20% regardless of the time of signing the contract);
- penalty (within the term of the contract and technical conditions).
As evidence, one can submit any accounting documentation, works performance contract, and, if necessary, the results of the examination.
Sergey Radchenko also noted that judicial practice established a rule that is not in the law, but nevertheless it is relevant.
“It is impossible to collect expenses more than the tariff for technical connection”, the speaker noted. “But what if the amount of expenses is higher? Practice shows that it is still impossible to recover, no matter how much the costs exceed the tariffs. But recently, a new practice has been very cautiously emerging, according to which the network company can add this difference to the tariff for electricity transmission services.
The experts of the forum highlighted the maximum number of questions from various branches of law. During the working sessions, the legal risks of business, including those related to such a large-scale area as bankruptcy, were discussed. The participants of the sessions discussed proposals for making business decisions, gave recommendations on determining the insolvency of counterparties. They also considered an algorithm for assessing risks and profits when deciding on the involvement of a company in litigation.
At the end of the working sessions, the forum participants noted how effective the business program of the event was, as well as its informal part. Thanks to this combination, the delegates had the opportunity to relax and share their experiences at the same time.
The Winter Legal Forum of the Southern Russia was held in Sochi for the second time, however, for many years the web-portal Pravo.ru and Advocates Bureau Yug have been the organizers of similar autumn event, which takes place in September in the coastal part of the resort. In 2022, the forum in autumn will gather guests and participants for the 14th time.
Sergey Kovalev, Managing Partner of the Bar Association “Kovalev, Tugushi and Partners”:
“All speakers were interesting. The business program is a concentrated squeeze of red lines in favour of business and lawyerrs. The organizers managed to find the right format and the right speakers. As for the informal part, the atmosphere is very pleasing. There are many lawyers at the forum who can communicate with each other in a comfortable environment, find common ground. Usually we encounter, as a rule, only when we have joint problems. And we often find ourselves on different sides of the barricades. And here, the meeting with opponents takes place in a comfortable atmosphere, you can talk about abstract topics without touching everyday problems and get to know a person from the other side. Its always good and pleasant experience
“As one of the organizer, I can note that the current agenda of the forum is vivid discussions, which means that the topics resonate with experience of participants and speakers.
If we compare the current forum with the last years one, then in 2021 it was more intimate, and the atmosphere was almost family-like. However, I am glad that the number of participants is increasing. If last year we received about 70 guests, now it is almost three times more. The geography of the event has also expanded, and lawyers not only from Moscow and St. Petersburg, but also from various regions of Russia, including Vladivostok and Siberia, came to Sochi. This year we deliberately made the business part capacious and expanded the informal program, giving our guests the opportunity to take part in winter sports competitions and get enjoyment on the mountain slopes. Lawyers usually work a lot and have little rest, so the balance is shifted towards informal communication, which proved to be important and effective.”
Alexey Otradnov, Commercial Director of the web-portal “Pravo.ru”:
“Last year brought together about 70 participants, now there are more than two hundred, such growth is certainly pleasing. The event has become larger, still intense and, I believe, will continue to develop and grow in the future. We see that the delegates really like the format, everyone is actively working. If we talk about the practical benefits of the event, I note that we are uniting the market. This is a unique and useful opportunity to communicate. Plus, we try to highlight the relevant: the agenda in the area of bankruptcy and litigation, everything that happens on the market in general, and give our participants the most saturated information.”Back