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Tech & Sourcing @ Morgan Lewis

TECHNOLOGY, OUTSOURCING, AND COMMERCIAL TRANSACTIONS
NEWS FOR LAWYERS AND SOURCING PROFESSIONALS

Draft law “On Activities of Foreign Companies in the Internet in the Territory of the Russian Federation,” introduced to the State Duma, a lower chamber of the Russian parliament, on May 21, 2021, aims to extend Russian jurisdiction to certain non-Russian internet businesses by requiring them to open local offices in Russia and to comply with orders of Roskomnadzor, a Russian internet and data privacy regulator. Failure to do so may result in restrictive measures limiting ability to work with Russian users and businesses.

If adopted, the law would come into force immediately, other than the requirement to open an office in Russia which would be in effect from 1 January 2022.

Who May Be Affected?

The draft law, if adopted, would apply to any non-Russian website, application, or platform with more than 500,000 Russian users a day if it is used to (i) distribute information in Russian, or (ii) publish advertising targeting Russian users, or (iii) process data of Russian users, or (iv) receive payments from Russian individuals and companies.

The law would also apply to non-Russian hosting providers, advertising platforms, and information dissemination organizers determined pursuant to methodology to be approved by the government.

There will be a special register of the affected businesses and Roskomnadzor will have the discretion to decide whom to include in it. Mr. Alexander Khinshtein, an MP and the head of the State Duma IT committee, announced that there is a preliminary register with already 20 names in it.

Key Requirements

If the law is adopted in its current form, an affected business will have to comply with a number of requirements, including:

  1. posting on its website a special form through which a user in Russia can contact it;
  2. registering an online account with Roskomnadzor, to interact with Russian state authorities; and any information or document posted in that account would be regarded as validly delivered to the foreign business; and
  3. opening a branch, a representative office, or a subsidiary in Russia to interact with Russian individuals and companies, represent the company in Russian courts and procure compliance with court judgments against the company, as well as to take measures to prevent access to information deemed illegal in Russia.

Affected businesses would also be required to respond to Roskomnadzor’s information requests.

Restrictive Measures

The draft law gives extraordinary powers to Roskomnadzor and offers Roskomnadzor a menu of restrictive measures that it may apply if a foreign business fails to comply with this new law or any other Russian laws including data privacy, cybersecurity, advertising, anti-extremist and other laws. Such measures include:

  1. requiring search engines to label the noncompliant websites, applications, and platforms;
  2. prohibiting advertising including ban on advertising of the noncompliant websites, applications, and platforms as well as ban on placement of advertising on the noncompliant resources;
  3. restricting money transfers to the noncompliant businesses (and Russian banks, payment agents, and other finance institutions would have to ban the transfers);
  4. prohibiting collection and cross-border transfer of personal data of Russian citizens; and
  5. full or partial blocking of the noncompliant resources.

What’s Next

The bill has generated a lot of controversy already, as it significantly changes the legal landscape. Among other things, it purports to grant extraordinary powers to Roskomnadzor to make a determination in its discretion and to impose sanctions without having a court judgement and to exercise powers in areas that are other state authorities’ domain. For example, the Federal Antimonopoly Service is in charge of the advertising matters, and the Central Bank oversees the payment rules. The draft has not yet been approved in the first hearing and it remains to be seen what changes will emerge during the debate.