18.04.2013 Alina Kozmina, junior associate at Maxima Legal

The first set of amendments to Part I of the Civil Code has become effective

On 30 December, 2012 the first set of amendments to the Civil Code of the Russian Federation was adopted. It was prepared within the frameworks of the reforming of civil legislation and was formalized as Federal Law No. 302-FZ “On Amendment of Chapters 1, 2, 3 and 4 of the First Part of the Civil Code of the Russian Federation” dated 30 December, 2012. Most of the amendments became effective on 1 March, 2013.

The foregoing law has modified relatively small number of provisions of section I of the first part of the Civil Code, however the influence of such amendments should not be underestimated. Please see below a brief overview of those key amendments that affect business directly.
One of the fundamental amendments is introduction of general principle of good faith. Paragraph 3 of Article 1 of the Code as amended now provides that in course of the establishment, exercising and protection of civil rights and performance of civil obligations the participants of civil relationships shall act in good faith. Moreover, Article 10 of the Civil Code establishes the presumption of good faith of the participants of civil relationships.Therefore, legislators introduced the full principle and presumption of good faith which have been earlier recognized speculatively, but were applied in practice indirectly only through specific provisions of civil legislation as interpreted by the highest courts.

Nowadays provisions of paragraphs 1 and 3 of Article 10 of the Civil Code not merely prohibit abuse of right, but also prohibit evasion of law for illegal purposes which, as a general rule, entails the court’s refusal to protect the right in full or in part as well as other measures provided by law. Even prior to the introduction of the provision dedicated to evasion of law the same was suppressed at the level of the highest courts despite of the fact such prohibition had not yet been expressly established (see, for example, Ruling of the Higher Arbitrazh Court of the Russian Federation No. 8207/08 of 14 January 2009).

Therefore, the amendment has legal and technical nature and aims to better clarify whether evasion of a law is suppressed in the Russian Federation.

The previous version of Article 5 of the Civil Code named business custom as a source of civil law. This wording provided that the relationships between persons were regulated by a custom limited by business area. However, according to the new version not only business, but also just a custom is recognized as the source of civil law. And a custom now also means a rule of conduct existing and widely applicable in corporate area. Such novel is introduced in order to bring the terms of the Civil Code in compliance with the international agreements to which the Russian Federation is a party.

Corporate relationships now fall within the scope of civil legislation (Article 2 of the Civil Code of the Russian Federation as amended). In cases provided by law decisions of the meetings of participants now serve as grounds for civil law rights and obligations to emerge (Article 8 of the Civil Code of the Russian Federation as amended). Such method of protection of civil rights as the recognition of a decision of the meeting invalid is nowadays expressly provided by Article 12 of the Civil Code as amended.
This novel provides for the extension of civil regulation to corporate relationships, i.e. of any and all general provisions, including civil legislation principles, rules governing application of civil legislation, grounds of and procedure for the recognition of transactions as invalid, limits of rights, methods of their protection, etc.

The Federal Law also revokes rules of state registration of real estate transactions under some types of agreements, namely: sale and purchase of residential premises, sale and purchase of an enterprise, real estate donation, real estate alienation for rent payment. The rules regulating state registration of lease agreements continue to be effective.Therefore, only title to real property is to be registered, rather than the said transactions having real estate as their subject matter.

The new version of the Civil Code of the Russian Federation also provides for a compensation of damage caused by lawful actions of public authorities and their officials in cases stipulated by law. In the previous version of the Civil Code damage caused by public authorities and their officials was to be compensated in case it incurred due to unlawful actions.

It is set out that not only profit making or non-profit organizations may establish associations (unions), but also citizens and all other individuals may do it as well.