RUSSIA | Crucial Obligations for High-tech Companies

President Vladimir Putin signed a new law affecting companies with more than 500.000 daily online users in the territory of the Russian Federation (“Russia”).

On 1st July 2021, the Law, No. 1176731-7 on the activities of foreign entities on the “Internet” telecommunications network in Russia (“the Law”), was signed by the Russian President, Vladimir Putin. The Law will enter into force on 1 January 2022 and substantially impacts many foreign internet companies.

Which Entities Will be Affected?

The Law applies to all foreign enterprises or individuals who conduct activities on the internet with over 500,000 daily users in Russia and meet one of the followings conditions:

  • entities with websites, webpages, information systems, or application software  that share or contain information in Russian language and/or other official languages of Russian federal republics or nationalities;
  • entities with websites, webpages, and so forth with advertisements targeting consumers within Russia; or
  • entities who receive the funds from Russian users.

What are the Obligations for Such Entities?

Affected entities are obliged to fulfill the following:

  • establish an electronic form on their website to receive appeals from Russian citizens and organisations;
  • register a personal account on the official website of Roskomnadzor (Federal Service for Supervision of Communications, Information Technology and Mass Media); and,
  • establish a representative office or a branch in Russia that operates and manages the operation in Russia.

Also, the above requirements apply to entities conducting activities aimed at users in Russia including:

  • hosting providers;
  • operators of advertising systems; and 
  • Internet information distribution platforms (i.e. social networks).

What are the Penalties?

Entities failing to follow the requirements shall face penalties including:

  • prohibited from distributing adverts;
  • prohibited payment transfer and receipt from Russian customers to the foreign company;
  • restrictions in the collection and cross-border transfer of personal data;
  • partial or full restriction of access to a resource; and
  • prohibited search results ( for example, the search engine shall not show the company website).

The Law mainly affects hi-tech giants, such as Facebook, Twitter, Google, who have not established representative offices or branches in Russia. However, the Law applies to all companies with websites, webpages, information systems, or application software that attracts high online traffic in Russia.

Therefore, investors seeking to invest in Russia, or with over 500,00 daily online users in Russia, should be ready for the Law before the effective date of January 1, 2022.

Our international legal and tax experts can support your investment in Russia, including establishing branches and offices and registering legal entities.

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