Foreign Economic Contracts with Russian Companies

Legal system of the Russian Federation doesn’t contain any definition of a term “foreign economic contract”. However, a foreign economic contract can be determined as a contract of business nature, even if only one party has its place of business (permanent place of doing business) abroad. When concluding foreign trade contracts with Russian companies, it’s essential to consider the following:

Russian legal system, as a majority of European countries, belongs to continental law. So when foreign economic contracts are made by companies from common law countries with Russian legal entities it’s necessary to take into account essential differences between continental and common law.

The parties to a transaction complicated by a foreign element are free to choose any national law (either Russian or foreign) as applicable to their transaction. But this rule has an effect only if the chosen law does not contravene to the public policy (public order) of the Russian Federation or mandatory rules of Russian law.

When concluding a foreign trade contract it’s essential to check legal capacity of a partner.

You should make a request for copies of the following documents: a) certificate of state registration of the company, b) certificate of registration with tax authority, c) charter of the company, d) license, if necessary. It’s necessary because absence of license in cases when it’s prescribed by the law means absence of legal capacity of the partner. This may lead to invalidity of the contract.

The contract may be signed on behalf of legal entity by two types of its representatives. The first representative is a sole executive body, or a person who represents the company under the law. The second one is a representative under the power of attorney.

Branches and representative offices of legal entities are not considered to be legal entities. They perform their functions on the basis of regulation approved by the legal entity.

If a transaction is made by a chief executive officer of a representative office, corresponding powers of a representative office is not to be based only on objective evidences under the constitutive document of legal entity, branch regulation or regulation of representative office. Transactions made by a chief executive officer of representative office without proper powers arising from branch regulation and power of attorney shall be considered unenforceable according to Russian law.

It’s necessary to provide text of a contract with complete authentic translation and to introduce the provision which of the languages prevails in the event of arising any controversies and disputes when construing terms of the contract. Therewith, it is recommended to consume a time and means for checking the content and authenticity with Russian text, as far as in the event of arising controversies and disputes, both texts are taken into account.

Bilingual approach provides means to consider mentality of both parties, use clear terms that is of the high importance for making agreement between the parties and successful implementation of foreign economic activity projects.

When analyzing draft of a contract received from Russian business partners, it is essential to pay attention to arbitration clause (as a type of arbitral agreement). Ways to settle disputes arising out from foreign economic contracts are the following: settlement of disputes in national courts (Arbitral court in Russia) or settlement of disputes by the means of international commercial arbitration. For this purpose when analyzing particular contract, it’s necessary to consider issues not only in connection with settlement of disputes, but also practical issues concerning the recognition and enforcement of foreign awards.

Exercise 4.Consult the text and find the English equivalents to the following word combinations.

1. подписывать от имени; 2. заключать внешнеторговый контракт/сделку; 3. общее право; 4. противоречить государственной политике (публичному порядку); 5. устав компании; 6. недействительность контракта; 7. общая правоспособность; 8. совершать сделку; 9. принуждение к исполнению иностранных арбитражных решений; 10. принимать во внимание/учитывать образ мышления.

Exercise 5.Decide whether the following statements are true or false. Correct the false ones.

1. The absence of license in cases when it’s prescribed by the law may lead to validity of the contract. 2. The contract may be signed on behalf of legal entity by the only representative. 3. There are two ways to settle disputes arising out from foreign economic contract. 4. It’s unnecessary to make a request for copies of documents. 5. Foreign trade contracts in Russia are usually made as bilingual.

Exercise 6. Answer the following questions. Use the text when necessary.

1. How can a foreign economic contract be determined? 2. What law does Russian legal system belong to? 3. What are the parties of a transaction complicated by a foreign element free to do? 4. How can a party check legal capacity of a partner? 5. Who may sign the contract on behalf of legal entity? 6. What is not considered to be legal entities? 7. What transactions shall be considered unenforceable according to Russian law? 8. Why is it necessary to provide text of a contract with complete authentic translation? 9. What is essential when analyzing draft of a contract received from Russian business partners? 10. What are the ways to settle disputes arising out from foreign economic contracts?

Exercise 7.Give a short summary of the text.

Exercise 8.Now read and translate the text about the International Trade Contracts. Use the dictionary when necessary.