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Russia: A new law to target foreign entities within the Russian infosphere

The Russian Parliament adopted Bill No. 1176731-7 on Activities of Foreign Undertakings in the Information Telecommunication Network in the Territory of the Russian Federation, dated 17 June 2021 ('the  Law'), aimed at establishing a specific regulatory and legal framework for the activities of foreign (non-Russian) companies operating in the information network (internet) within the Russian Federation. Maxim Boulba and Elena Andrianova, from CMS Russia, provide an overview of the scope of the Law's application, as well as the requirements and sanctions introduced by the Law.

gremlin / Signature collection / istockphoto.com

As stated in the concept note accompanying Bill No. 1176731-7, considering significant market shares in the IT sector in Russia held by foreign companies, there was a strong need to elaborate a regulatory and legal framework for their activities in the Russian infosphere.

Scope of application

The Law applies to foreign (non-Russian) undertakings (both legal entities and individuals) being owners of websites, webpages, information systems, or application software ('Information Resource') with an access score of more than 500,000 users located in Russia per day and provided that at least one of the followings conditions is met:

  • the Information Resource is in Russian and/or other official languages of Russian federal republics or nationalities;
  • the Information Resource distributes advertising targeting Russian users;
  • the foreign undertaking (owner of the Information Resource) processes data of the users/customers located in Russia; and
  • the foreign undertaking (owner of the Information Resource) receives payments from Russian customers/users.

Obviously, the definition is rather broad and, presumably, covers a significant number of 'foreign' Information Resources being available in Russia for Russian customers.

Furthermore, it is specifically provided that the following activities are also caught by the Law:

  • foreign hosting providers or other providers of Information Resources on the internet which are available to Russian users;
  • foreign operators of internet advertising systems aimed at Russian customers/users; and
  • foreign undertakings organising the functioning of Information Resources used by Russian customers.

Accordingly, the Law provides that the regulator in the area of control and supervision over mass media and the IT sector, the Federal Service for the Supervision of Communications, Information Technology and Mass Communications ('Roskomnadzor'), shall identify the foreign entities being subject to the Law following the methodology to be adopted by the Russian Government. Thus, it can be expected that such methodology will be elaborated further.

Measures and requirements introduced by the Law

The Law introduces the following requirements to be complied with by foreign undertakings concerned:

  • Firstly, the Information Resource should provide for a specific online application form to be submitted by Russian customers:
    • It is supposed that the secondary legislation will establish specific requirements to the content of such online application form.
  • Secondly, the foreign undertaking concerned should be registered online (via a personal online account at the official website of the Roskomnadzor):
    • The key purpose of this online registration (personal online account) is that via such registration the foreign undertakings will communicate with the Russian authorities, and submit the information required by such authorities. Again, the Russian Government will establish the list of authorities that will 'communicate' with the foreign undertaking online, via the personal account.  
    • For instance, as soon as the online personal account is created, the foreign entity should, within one business day, apply to the regulator to be included in the specific Register of Foreign Undertakings Carrying Out Activities on the Internet in the Territory of the Russian Federation. Such Register will be held by the Roskomnadzor.
  • Thirdly, more importantly, the foreign undertaking concerned shall establish in Russia either a branch or representative office or a subsidiary (a Russian legal entity).
  • Finally, the foreign undertaking will be also obliged to install on the Information Resource one of the tools approved and proposed by the Roskomnadzor for monitoring of the number of users.

Sanctions

The Law provides for the following sanction for non-compliance:

  • special marking: publication of official notice on non-compliance of the Information Resource with the applicable requirements;
  • ban on advertising of the foreign entity and its Information Resource on the territory of Russia;
  • ban on any advertising to be distributed on the Information Resource;
  • restrictions on money transfers from Russian customers to the foreign undertaking concerned;
  • ban on search results (i.e. the Information Resource will not be seen in the search results);
  • restrictions on collections and processing of personal data; and
  • partial or full restriction of access to the Information Resource.

The requirements of the Law will gradually enter into force, thus, the legal obligation to establish a branch/representative office/subsidiary in Russia will be effective as from 1 January 2022.

Outlook and reactions

Overall, the Law is in line with the general trend of the Russian legislation enhancing control over activities of foreign undertakings in Russia and restricting their access to the sensitive industries and areas of business, including the media and telecommunication sector.

The business community expects that around 20 Internet Resources will be subject to the Law, including major digital and social networking platforms. As announced by one of the authors of Bill No. 1176731-7, the deputy of the Russian Parliament, "the Law is clearly aimed at establishing a direct dialog with the foreign Internet resources in Russia." However, for the moment, it is difficult to predict how foreign providers will react to these new legal requirements, and how many of them will accept to comply with them rather to exit the Russian market. It could be possible that, also for political reasons, some of the foreign services may leave the Russian market following the adoption of the Law.

Maxim Boulba Partner, Head of TMT
[email protected]
Elena Andrianova Senior Associate
[email protected]
CMS Russia, Moscow