22.06.2013 Sergey Bakeshin, Evgeniy Druzhinin, Maxima Legal associates

Reform of civil legislation is in process

The Federal Law on the introduction of another set of amendments to the Russian Civil Code (further, the “Law”) has been adopted. Now amendments relate to the general provisions on civil rights' objects, securities’ norms and non-material objects.

Non-cash funds are designated as a special kind of object. The concept of "objects excluded from civil relations" is stricken off the Law, only the concept of non-fully tradable objects is preserved. The Civil Code articles regulating indivisible and complex things are modified.

A concept of "unified immovable complex" was introduced. The concept means a complex of buildings, structures and other things incorporated due to the same designated purpose which are either inseparably physically or technologically connected, including linear facilities (railways, transmission lines, pipelines and others), or are located on the same land plot if a right to the complex of the said properties is registered in the unified state register of rights to immovable properties as a right to one immovable thing in general. This institution which is new for our legislation is similar to the institution of "enterprise", however unlike enterprises unified immovable complexes relate to things only (they do not include rights of claim, results of intellectual activity, etc.), and they are not necessarily used for conducting business activity. Legislator does not expressly specify whether it is possible or impossible to include land plots in a unified immovable complex. Probably, this issue must be addressed to the higher instance court.

Profits, products and proceeds gained from using a thing used to belong to a person who legally used such a thing. After the amendments become effective such profits, products and proceeds shall belong to the owner of a thing, unless otherwise is provided by law, other legislative acts, agreements or follows from the nature of the relationship. Those provisions of the Russian Civil Code that govern lease, expressly set out that profits, products and proceeds belong to the tenant (unless otherwise is provided by the agreement), therefore the amendments shall not have any adverse effect on the tenants.

Besides, for the first time in almost 20 years history of the first part of the Russian Civil Code its chapter regulating non-material objects was significantly modified. The peculiarity of the above-mentioned modifications is that they cover not only specifics of protection of certain non-material object (honor, dignity, business reputation, citizen’s picture, privacy), but also conceptual aspects of non-material objects theory, namely, limits and ways of their protection in general.

The most important modification for the entire institution of non-material objects protection was made to Article 150.2 of the Russian Civil Code: hardly noticeable inclusion of non-material objects in the list of objects protectable by any means provided in Article 12 of the Russian Civil Code solely for protection of civil rights is intended to increase the number of methods and extend the limits for protection of those non-property interests with respect to which law provides for no special civil rights (honor, dignity, business reputation, picture, privacy and many others).

It should also be noted that the range of persons entitled to compensation for moral damage is restricted by individuals only (paragraph 2 of Article 151, Article 152.11 of the Russian Civil Code as amended on 2 July 2013) which is to put the lid on a longstanding dispute regarding the right of legal entities to compensation for moral/non-material damage, non-material losses, etc.

The institution of protection of honor, dignity and business reputation (Article 152 of the Russian Civil Code) was considerably modified to the extent related to permissible methods of protection and limits of their application. For the first time at the level of federal law there was a provision introduced that refutation of untrue information discrediting honor, dignity or business reputation of a citizen shall be made the same way it was disseminated or other similar way.

A new version of Article 152 of the Russian Civil Code expressly provides for a possibility to remove discrediting information which became publicly known (including the same published in the Internet) and suppress or prohibit its further dissemination by means of seizure or destruction without any compensation of physical information-carrying media containing the said information produced for its entering into civil relations in case it is impossible to remove the respective information without destruction of such copies of physical information-carrying media.

The same is applicable to the information disseminated through the Internet.

Another innovation that deserves support is the one permitting a person with respect to whom one disseminates the information which is not discrediting, yet false to defend himself by any methods provided by Article 152 of the Russian Civil Code. We remind you that before only the right to answer was granted and only in case if one could prove that his rights and interests were infringed.

However, we note a new shorter statute of limitations for the claims filed in connection with the dissemination of false information in mass media which equals one year upon publication of such information.

On the morrow of the extension of the limits for protection of honor, dignity and business reputation, legislator introduced some new provisions aimed at the reinforcement of right to protection of citizen’s picture and privacy.

For the first time in the entire history of Russian legislation the independent statutory regulation of protection of citizen’s privacy was introduced (Article 152.2 of the new version of the Russian Civil Code). Specifically, Article 152.2 of the Russian Civil Code sets out that as a general rule collection, storage, dissemination and use of any information about private life of a citizen, in particular data related to his origin, place of his stay or residence, his personal or home life is not permitted without such citizen’s consent. An exception from this rule is provided for collection, storage, dissemination and use of information (including in course of creation of a work of science, literature and art, if such a use breaches citizen’s interests) about private life of a citizen in state, social and other public interests and in cases when the information on private life of the citizen became publicly known earlier or was disclosed by such citizen or upon his consent.

This general non-disclosure rule and an exception therefrom equally relates to binding obligations (for example, under contracts) where the parties thereto are not entitled to disclose information about private life of a citizen or a third party being a party to such obligations  which became known to them when such obligations arose or were discharged, unless the contract provides for a possibility to have such information about the parties disclosed.

Among possible methods of protection against breach of privacy and in cases involving honor, dignity, business reputation and picture of a citizen it is mentioned that information can be removed from a physical medium and that further dissemination of such information can be suppressed or prohibited by means of seizure and destruction of such a physical information-carrying medium. Moreover, the same way as in connection with the foregoing non-material objects, children, parents and survived spouse of a citizen may claim protection of such a citizen’s privacy in case of his death.

A whole chapter of the Russian Civil Code related to the regulation of such an object of civil rights as securities is restated.

Most of amendments introduced by legislator actually legislatively consolidate those approaches to securities’ regulation that were elaborated during the years of practice. Some novels of Russian legislation can be marked out, though. Let’s dwell on the most important ones.

Law has finally divided securities into certificated and uncertificated and set out that they constitute different objects of civil rights. For example, in accordance with Article 142.1 of the Russian Civil Code (as amended) certificated securities mean those documents that meet statutory requirements and certify rights exercising or assignment of which is permitted only upon presenting of such documents. While uncertificated securities mean rights set out in a decision on issuance or other deed of the person who issued securities in compliance with law and exercising and assignment of which is permitted only subject to the rules for observance of those rights pursuant to Article 149 of the Russian Civil Code.
A separate paragraph is dedicated to the regulation of each of the above mentioned types of securities. However, legislator paid special attention to the methods of protection of rights of owners (right holders) of securities having at long last distinguished such methods between those that relate to certificated securities and those that relate to uncertificated securities.

Article 147.1 of the Russian Civil Code (as amended) expressly sets out that certificated securities can be reclaimed from unlawful possession of by other persons according to the rules of the Russian Civil Code governing reclaiming of a thing from unlawful possession by other persons subject to the peculiarities provided by Article 147.1. Whereas Article 149.1 of the Russian Civil Code (as amended) establishes special rules with respect to uncertificated securities knowledgeably avoiding specifying that such a method of protection constitutes vindication. For example, according to clause 1 of the said article the right holder from whose account uncertificated securities were unlawfully written off shall have a right to claim from the person in whose account the securities were entered to return the same number of respective securities. Therefore, legislator draws a line under the issue on the possibility to apply vindication as a method of protection of rights of the right holders of uncertificated securities by introducing a special method of protection of breached rights. It is interesting to note however, that if those uncertificated securities which the rights holder is entitled to reclaim, were converted into other securities, the right holder shall have a right to reclaim those securities into which the securities written off his account were converted.

Legislator clearer distinguished types of certificated securities: bearer’s, order and registered ones having expressly specified the persons entitled to reclaim such securities (Articles 143.2-143.4 of the Russian Civil Code).
We specially note Article 149.2 of the Russian Civil Code (as amended) under which maintenance of records with respect to the rights to uncertificated securities shall be made by the person having a license prescribed by law. Therefore, legislator deprived joint stock companies of the right to maintain records with respect to the rights to uncertificated securities (shareholders’ register). Those joint stock companies that were holders of the shareholders’ register as of the effective date of the said Law shall preserve the right to maintain the mentioned registers during one year after the effective date thereof. Upon the expiration of one year after the effective date of the foregoing Law such joint stock companies must assign maintenance of the register to the person having a license prescribed by law.

The mentioned amendments shall become effective on 1 October 2013.