The East Europe Franchise Association - A Comprehensive resource for effective franchise business in East & Central Europe.

East and Central Europe Market Intelligence

Legal Country Overviews
These are legal overviews of key CEE countries.

Russia

The flag of Overview:
Franchising became a popular means of doing business in Russian Federation in the early 1990’s. According to market experts, the first franchise was established in 1993.

Nowadays Russian Federation has more than 300 franchising brands, a number which continues to grow.

Russia has one of the few legal systems in the world where statutory law regulates the entire franchise relationship. As such, franchising relations in Russia are expressly regulated by the Civil Code of Russian Federation and are called “commercial concessions. Furthermore, under Russian law the franchisor is called the ”right holder” and the franchisee is called the “user.”According to the principle of a commercial concession (franchising) under Russian law, the franchisor must grant the franchisee the right to use trademarks or service marks and (optional) rights to use other intellectual property rights, in particular the right to use know-how for a defined or undefined period of time in exchange for some type of remuneration.

Noerr is an international partnership of attorneys, tax advisors and auditors.Elena Frolovskaya, LL.M.
Associated partner
elena.frolovskaya@noerr.com

Dr. Natalya Babenkova, LL.M.
Senior associate
natalya.babenkova@noerr.com

Recent Articles on Franchising - Russia:

Franchisor may use trademark in territory despite franchisee's licence - January 2012
Franchising: positive changes in legal resolution - February 2011
Overview - July 2011
Civil Code changes ease market entry for non-Russian franchisors - August 2011
Unregistered agreements: dangers of deferral for franchisors - October 2011
Getting the deal through Franchise 2012 - Russia Chapter

A commercial concession (franchising) agreement in the Russian Federation may only be concluded between business organisations or individuals acting as registered individual entrepreneurs. The agreement has to be concluded in writing.

For a trademark to be licensed to a user (the Russian legal term for a franchisee) before execution of the franchise agreement, the trademark must first be registered with the Russian Patent Agency (Rospatent) or the World Intellectual Property Organization (WIPO), with Russia designated as the registrant country.

A commercial concession (franchising) agreement in Russia is subject to a special state registration. Before January 1, 2008 commercial concession (franchising) agreements in Russia were subject to double state registration – one registration with the Russian tax authority and another one with Rospatent. On January 1, 2008 the requirement of registration with the tax authorities was eliminated, so nowadays any commercial concession (franchising) agreement needs only be registered with Rospatent. First, Rospatent verifies whether the documents submitted are complete. Then, Rospatent verifies whether the commercial concession (franchise) agreement comply Russian legal requirements and with each other.

Under Rospatent regulations, the registration authority must register a commercial concession (franchise) agreement within two months if the parties have provided all relevant information and documents. However, in practice, the registration process may last longer.

The state registration fee depends on the number of trademarks to which rights are to be granted: approximately USD 250 per trademark. A commercial concession (franchising) agreement which is not registered with Rospatent is deemed invalid.

All amendments to a commercial concession (franchising) agreement and the termination of such agreement must also be registered.

Furthermore, a right holder (franchisor) must provide the user (franchisee) with technical and business documents (such as booklets or operating manuals) which summarize the know-how relating to the franchise system and business methods at issue.

The commercial concession (franchising) agreement must contain detailed provisions on remuneration such as: fixed non-recurrent or regular fees, deductions from proceeds or mark-ups on wholesale prices for goods supplied by the right holder (franchisor). Such forms of remuneration may be combined or the parties may provide for other remuneration. In cross-border franchising agreements, the Russian user (franchisee) may be required to withhold Russian taxes on behalf of the foreign right holder (franchisor), such as VAT and/or withholding tax.

 

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