Legal alerts / 12.07.2021

Foreign IT companies now required to open representative offices in Russia

Starting 1 January 2022, foreign companies operating on the internet (IT companies) will be required to open representative offices in Russia. The new requirement was introduced by Federal Law No. 236-FZ enacted 1 July 2021[1] (hereinafter the Law).

According to the Law, foreign IT companies working in Russia have to create branches, open representative offices or establish a legal entity in Russia. These will fully represent the parent companies.

Foreign IT companies are deemed to be operating in Russia if they have a daily audience of more than 500,000 Russian users and their activities involve any of the following:

    • dissemination of information in Russian or other languages of the peoples of Russia;
    • dissemination of advertising aimed at Russian consumers;
    • processing of information about Russian users;
    • receiving money from Russian legal entities and individuals.

Besides, foreign IT companies are deemed to be operating in Russia if they:

    • are a hosting provider or other person hosting information resources on the internet and whose users are located in Russia;
    • support the operation of a computer program designed to distribute advertisements aimed at attracting the attention of Russian consumers on the internet;
    • support the operation of a computer program designed to receive, transmit, deliver and/or process electronic messages of internet users from Russia.

Previously, Russian law did not expressly require IT companies providing information services to Russian citizens to establish a legal entity in Russia.

The Law aims to create an effective mechanism for working with foreign internet companies in Russia when Russian citizen’s personal data are processed.

Foreign IT companies that do not have a representative office in Russia are not obliged to comply with Russian state authorities decisions related to administrative offenses involving personal data.

One example of such a situation is the case of Twitter. The company has been refusing to pay fines for violating the localisation requirement since February 2020.

The Law provides a set of measures that can be applied to encourage companies to comply with Russian law, among them are:

    • informing users about the IT company’s violation of Russian law;
    • banning the dissemination of advertising, both by the IT company itself and on its internet resource;
    • restrictions on money transfers and acceptance of payments by individuals and legal entities for the IT company;
    • a ban on search engine optimisation;
    • a ban on the collection and cross-border transfer of personal data;
    • partial or complete blocking of access to an internet resource.

The head of the State Duma Committee on Information Policy, Information Technology and Communications, Alexander Khinstein, announced a preliminary list of internet resources whose owners may be obliged to open branches or representative offices in Russia. The list includes 20 platforms, e.g. social networks (Facebook, Instagram, TikTok, Twitter), video hosting platforms (YouTube, Twitch.tv), messengers (WhatsApp, Telegram, Viber), a mail service (Gmail), search engines (Google, Bing.com), hosting providers (Amazon, Digital Ocean, Cloudflare, GoDaddy), online stores (Aliexpress.com, Ikea.com, Iherb.com), and Wikipedia.org.

[1] Federal Law No. 236-FZ of 01.07.2021 “On the activities of foreign persons on the internet information and telecommunications network on the territory of the Russian Federation”

Share on LinkedInTweet about this on TwitterShare on Facebook

Additional information