The Federal Law On Amending The First Part Of The Civil Code Has Been Published
Legal Update No. 399, 15 January 2013
Goltsblat BLP advises that, on 4 January 2013, President Putin signed Federal Law No. 302-FZ of 30 December 2012 “On Amending Chapters 1, 2, 3 and 4 of the First Part of the Civil Code of the Russian Federation” (the “Law”), which was published on 11 January 2013.
The signing of the Law by the President has, to a certain extent, summed up the protracted discussion about how civil law in Russia should be improved. The structure and contents of the Law are indicative that the improvement of the civil law will be carried out in gradual stages. Subsequently, the extensive Civil Code amendments that have already passed the first reading in the State Duma will be adopted in portions.
The most important amendments to the Civil Code introduced by the Law are summarised below (we informed you about many of these previously, when the relevant draft law and subsequently the wording of the Law that had passed its first reading in the State Duma were under discussion):
1. Participants in civil law relations are now required to act in good faith (Article 1 of the Civil Code. Each article herein is numbered as in the Law).
2. The Law expressly stipulates that the civil legislation regulates, in particular, relations associated with participation in or management of corporate organisations (corporate relations) (Article 2 of the Civil Code).
3. After a long debate, the original idea of introducing mandatory notarisation of all real estate transactions was abandoned. In fact, Clause 3, Article 8.1. of the Civil Code maintains the effective regulatory approach that a transaction requires notarisation in instances prescribed by law or agreement between the parties.
4. The former right holders to real estate may now enter an objection into the Unified State Register of Real Estate Rights and Transactions (the Realty Register) (Clause 7, Article 8.1. of the Civil Code). If their right is not challenged within 3 months, such an entry is cancelled. In other words, the purpose is to provide effective protection for the violated interests of the former right holder. It should be noted that for this opportunity to be exercised in practice, the Law “On State Registration of Real Estate Rights and Transactions” needs to be amended accordingly.
5. From 1 March 2013, agreements on sale of houses, apartments, parts of houses or apartments, or enterprises, real estate gift contracts and leases, and leases for buildings or structures, provided that they are effective for at least one year, and enterprise leases are not subject to state registration. The Law thus implements the principle that it is real estate rights, restriction of such rights and encumbrance on real estate rather than real estate transactions that are registered.
6. Any actions to circumvent law for unlawful purposes are prohibited (Article 10 of the Civil Code). As we advised earlier, at all stages of the discussion, this provision was met with serious concern over its potential broad interpretation by law-enforcers. In the version passed at the third reading, the concept of “circumvention”, a new one in Russian civil law, was supplemented by the equally ambiguous wording “for unlawful purposes”.
7. The Law introduces important novelties relating to the procedure for and consequences of recognising an individual as having limited legal capacity (Articles 29, 30 of the Civil Code); guardianship of minors (Article 33 of the Civil Code); the procedure by which guardians dispose of their wards’ property (Article 37 of the Civil Code), etc.
8. General regulation of agricultural activities is introduced. In particular, it is established that Russian citizens may engage in production or other business in the sphere of agriculture under an agreement on forming an unincorporated peasant (farmer) household under the law on peasant (farmer) households (Article 23 of the Civil Code). Meanwhile, individuals engaged in joint farming under an agreement on forming an unincorporated peasant (farmer) household may set up a legal entity – a peasant (farmer) household, in which all participants will bear secondary liability for its obligations. The specific features inherent in the legal status of a peasant (farmer) household set up as a legal entity are determined by law (Article 861 of the Civil Code).
Under Article 2 of the Law, most amendments to the Civil Code will come into force on 1 March 2013. Some provisions (certain clarifications relating to individuals’ opportunity for engaging in agricultural production or other business, as well as the novelties regarding the status of a peasant (farmer) household), will become effective on the official publication date. A few provisions (associated with the amendments to the regulation of incapacity/limited legal capacity) will become valid within two years of the Law coming into effect.
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