In practice, properly drafted agreements are of crucial importance in Russian trade relations. Apart from purchase and supply agreements, legal relations with Russian partners are formalized with the use of distribution, franchise, license and cooperation agreements. In contrast to agreements between Russian partners, when agreements with foreign partners are concluded, options for legal enforcement options are available. For example, in supply agreements with a Russian customer, the parties may agree on the prevalence German law. However, in practice, the enforcement of Russian law, which is quite similar to German law, is often agreed upon.
Notwithstanding the options for legal enforcement, Russian imperative rules of law remain applicable. In particular, this applies to customs and monetary law provisions. Therefore, agreements should be checked for compliance with the Russian law before they are entered into.
In the event that foreign entities provide services under an agreement in Russia, they will be subject to the Russian law. This fact is particularly critical when equipment supply agreements and installation agreements are concluded. For example, if a foreign entity runs its business in Russia and fulfills orders for 30 or more calendar days, the entity must be registered at a tax office. For detailed information, refer to our article ‘Installation Sites in Russia’.
It is important that Germany is not to be indicated as a competent jurisdiction for conflict resolution in the case of agreement controversy. German courts judgements are not enforceable in Russia. This provision applies also to Russian arbitration court awards. Russian entities are usually held liable at the local level. It is understood that agreements may contain options for a court clause so that certain disputes may be resolved via an arbitration court of choice, not by a court of law.