Russia

Franchise regulation

The Civil Code governs franchising.

Pre-contractual disclosure requirements

None but there is a general duty to act in good faith.

Registration

The franchise agreement must grant a licence to use trademarks together with other relevant IP rights. The trademark licence (but not a franchise agreement itself) is subject to state registration with the Federal Service for Intellectual Property (“Rospatent”) if the registration of the trademarks (international or national) applies to Russia. Without such registration, such grant of a licence to use trademarks is deemed to have not occurred.

A registration form signed by both parties should be filed with Rospatent on behalf of both parties. Alternatively, one of the parties may sign and file a registration form accompanied by the franchise agreement (or its notarised extract) or the notification form should be signed by both parties which confirms the grant of licence and its key terms. The notification form is a more convenient option if the parties do not wish to disclose the franchise agreement. Termination of a granted licence prior to expiration must also be registered.

The registration and/or notification forms filed with Rospatent for registration for the grant of a licence should provide the key terms of the granted licence. It is advisable that all such terms are agreed by the parties in the franchise agreement.

Other issues

The franchise agreement may be governed by foreign law if it is entered into between the parties where at least one of the parties is a non-Russian company. Russian law is rarely chosen by foreign franchisors as governing the franchise agreement as, among other things, it provides the franchisee with a pre-emption right to request the renewal of the franchise agreement and envisages in certain cases the franchisor’s joint and several or subsidiary liability for third party product claims made against the franchisee.

Russian currency control requirements should be observed when drafting the payment obligations.

Although franchise agreements fall within the list of statutory exemptions to which the antitrust prohibitions do not apply, it is advisable that all restrictions imposed on the franchisee are directly provided in the franchise agreement and are not split between different agreements which (together) comprise the entire agreement between the parties.

Once a franchise agreement is entered into, the franchisor is required to provide the franchisee with technical and commercial documentation and other information required, and advise the franchisee on all aspects related to discharging of the franchise agreement by the franchisee.

Due to the temporary measures introduced by Russia in response to foreign sanctions against Russia/Russian individuals/companies, in certain cases, fees owed to a franchisor as consideration for use of trademarks and/or other IP rights under a franchise agreement, may be transferred to a special Rouble bank account. This "type O" account opens in an authorised Russian bank in the name of the franchisor on the request of the Russian franchisee. Transfer of such fees from the type O special account to the franchisor’s bank accounts abroad, requires a permission of the Government Commission for Control over Foreign Investments. The above temporary measures may affect payment of fees to a foreign IP proprietor company incorporated in a country which imposed sanctions against Russia and is deemed unfriendly unless certain statutory exceptions apply or, among others, to IP proprietors who support foreign sanctions against Russia. For example, those who prohibit use of trademarks and other IP rights in Russia after 23 February 2022.

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Contact Mila Navitskaya - Mila.Navitskaya@twobirds.com or Anna Shashina - Anna.Shashina@twobirds.com