A Russian distributor, buyer or contractor: vetting the partner and drafting a contract that works

What is happening

A Chilean winery has received an exclusive distribution offer from a Moscow company. The company was registered recently, its director is asking for a marketing prepayment and promises volumes that are hard to verify.

A Mexican IT company signed a contract with a Russian client, signed on the client's side by a deputy director. A payment dispute has arisen, and the client claims the signatory had no authority.

A Peruvian exporter is negotiating US dollar payments with a Russian importer. The exporter's bank warns that the payment may be delayed or returned by a correspondent bank and asks for advance disclosure of who stands behind the buyer.

What the law says

• A person signing on behalf of a Russian company acts under a power of attorney or by operation of law (Article 182 of the Civil Code); the form, content and term of a power of attorney are governed by Articles 185 and 185.1 of the Civil Code. That is why we check the document on which the signatory's authority rests before signing.
• A party that conducts or breaks off negotiations in bad faith, for example with no intention of concluding a contract or by concealing material facts, must compensate the other party's losses (Article 434.1 of the Civil Code). The parties may also sign an agreement on how negotiations are to be conducted.
• A Russian resident company contracting with a foreign non-resident is subject to currency control rules (Article 1 of Federal Law No. 173-FZ of 10 December 2003 on Currency Regulation and Currency Control), and its bank may request transaction documents and refuse to execute a payment (Article 7 of Federal Law No. 115-FZ of 7 August 2001 on Countering the Legalisation (Laundering) of Proceeds of Crime and the Financing of Terrorism).
• The countries of continental Latin America are not on the list of unfriendly states approved by Russian Government Order No. 430-r of 5 March 2022. However, the restrictions of Presidential Decree No. 81 of 1 March 2022 also extend to persons controlled by persons from listed states, wherever they are registered, so we check the ownership structure of both parties.

What we do

• We vet the Russian partner: Unified State Register of Legal Entities (EGRUL) data, management and shareholders, history of changes, court cases, red flags of unreliable data, links to restricted persons. You receive a written report.
• We establish who may sign the contract and request a power of attorney or a corporate resolution if the signatory is not the general director.
• We draft supply, distribution, agency or service agreements in Russian and Spanish or English, stating which version prevails.
• We set out payment terms: currency, bank, a backup payment route, a currency clause and the consequences if a correspondent bank delays or returns a payment.
• We allocate roles in the supply chain: who imports the goods and acts as declarant, who is responsible for certification and marking.
• We propose a dispute resolution clause with an eye to where a judgment or award would have to be enforced. Disputes themselves are handled as a separate service of this practice.
• If the parties are only starting to discuss a deal, we prepare an agreement on the conduct of negotiations, confidentiality and exclusivity.
• We review drafts sent by the Russian side, prepare a schedule of objections and take part in agreeing the terms.

What we will need from you

• The name and taxpayer number (INN) of the Russian partner, or its details from correspondence.
• A description of the deal: goods or services, volumes, timing, currency.
• The draft contract if the Russian side has sent one, and correspondence on the terms.
• Your bank's requirements for payments from Russia, if known.