The State Duma has received a draft law that foreign internet companies must open representative offices in Russia

Pepeliaev Group advises that on 21 May 2021 a draft law “On the Internet activities of foreign entities in the Russian Federation” (the “Draft Law”)[1] was put before the State Duma. 

It is suggested that foreign internet companies should be obligated to open a representative office, branch office or an authorised legal entity in the Russian Federation. The obligation extends to foreign companies that own an information resource in the Internet with daily traffic of more than 500,000 Russian users.

Among the major foreign Internet companies presently active in Russia are Facebook, Apple and Google. They process personal data of Russian nationals and supply information services to them, including paid services. Current legislation does not contain an obligation for Internet companies to create an authorised legal entity in the Russian Federation or to open a representative office (branch office), and such companies, therefore, can evade complying with Russian legislation in the areas of personal data, Internet advertising and the protection of consumer rights.

Solving this problem was the purpose of the above draft law being proposed to the State Duma. We note that the provisions of the draft law also apply to foreign providers of hosting services, operators of advertising systems, and entities arranging for the distribution of information through the Internet (article 4(2) of the Draft Law).

The Draft Law (article 5) proposes to introduce the following obligations for foreign Internet companies:
  • to place on their website an electronic application form that can be used by Russian individuals and companies;
  • to register an individual account on the official website of the Federal Service for Supervision of Communications, Information Technology and Mass Media (known by the Russian acronym ‘Roskomnadzor’) and to use it for interactions with Russian state authorities; to create a branch office or open a representative office or create a Russian legal entity and ensure the functioning in the Russian Federation of such branch office, representative office or Russian legal entity.
Article 7 of the Draft Law provides that the branch office, representative office or Russian legal entity of the foreign Internet company must:
  • accept and examine the applications of Russian individuals and organisations, as well as to enforce resolutions of courts and state authorities handed down with respect to the foreign internet company;
  • represent the foreign internet company before Russian courts;
  • take actions in Russia to restrict access to information and/or delete information that is being distributed in breach of Russian legislation, if such obligation is provided for in Russian legislation regarding information, information technologies and data protection.
It is proposed in the draft law that Roskomnadzor be given the powers to force foreign internet companies to comply with Russian legislation. Such powers include: informing the users of the information resource of breaches of Russian legislation by the company; prohibiting the distribution of advertisements featuring the information resource; prohibiting advertisements in the information resource; prohibiting payments being transferred to the Internet company; prohibiting the publication of data regarding the information resource in the search engine results page; prohibiting the collection and cross-border transfer of personal data; and restricting access to the information resource in part or in full.

What to think about and what to do

Although the draft law has only been put before the State Duma, foreign Internet companies operating in Russia are already recommended to take actions to bring the activities of their company in line with the requirements of Russian personal data legislation as well as legislation on Internet advertising and the protection of consumer rights.

Identifying and curing breaches in advance will enable foreign Internet companies to mitigate their legal risks and avoid administrative liability.

Help from your adviser

The lawyers of Pepeliaev Group will follow up on the further destiny of the Draft Law to inform you in good time of any changes in its status.

We are ready to provide comprehensive legal support to foreign Internet companies conducting or planning to conduct business in Russia.

Pepeliaev Group provides the following types of services:
  • Advising on legal risks;
  • Auditing Internet services as to their compliance with the regulatory requirements;
  • Representing a client when dealing with state authorities, as well as other services.

[1] Draft Law No. 1176731-7.

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