Russia: Smart Contracts Definition and Legality

“Smart contract” has not yet been defined in Russian Legal system.

However, according to paragraph 2 of Art. 434 of the Civil Code of the Russian Federation, one of the varieties of the written form of the contract is: “the exchange of electronic documents transmitted through communication channels, which allows to reliably prove that the document is coming from the party under the contract.”

Paragraph 3 notes that: “An electronic document is a prepared, sent, received or stored by electronic, magnetic, optical or similar means information, transmitted through communication channels, including the exchange of information in electronic form and e-mail”. From this legislative definition, the electronic exchange of documents (information) is recognized as an appropriate form of contract. Theoretically, from a legal perspective, a smart contract can be considered in one of the following ways:

a) As a technical way of securing an obligation/liability (bond)

An interpretation of paragraph 1 of Art. 329 of the Civil Code, which notes that the contract and other obligations/liabilities can be provided not only in the ways specified in the law, but also in the ways provided in the contract. Thus, in case of direct indication that the “smart contract” is the enforcement of the contract, such a way of ensuring may have legal force.

b) As a security commitment

This approach differs from the previous one in that it recognizes the force of the obligation/liability for a smart contract. This is possible only if the program code in the form of which the obligation/liability/bond is recorded is in accordance with the rules of the Russian legislation on the form of transactions (since obligations arise from contracts and other transactions), and the fact that the will of the parties was expressed by using a smart contract. If the above conditions are presumed, the smart contract will correspond to the characteristics of the security commitment used in the Russian legal system. To such characteristics usually refer: the inducement of the debtor to the precise and unswerving fulfillment of the obligation (security function), and also the accessory nature of the security obligations.

c) As a way of fulfilling the obligation

A smart contract can also be viewed as a way of fulfilling obligations. However, only in cases where the transfer of an asset occurs in a virtual rather than a fiat (real) world. Since it is often impossible to digitize a certain asset, work or a service, the smart contract itself may be treated as some kind of guarantee of the basic obligation.

d) As evidence proving the actual intentions of the parties, which could not be set up in the text of the main contract, if this contract was on paper (paragraph 2 of Article 431 of the Civil Code of the Russian Federation).

e) In the cases of the transfer of assets or money stipulated by the contract with the use of smart contracts, it can be considered as acceptance of an offer by conclusive actions (clause 3 of Article 438 of the Civil Code of the Russian Federation)

These are only theoretical approaches, assuming that the smart contract is an electronic form of contract, or an electronic evidence/a term/amendment implementing a traditional contract, with or without legal force.


Previous Section Next Section

Have a comment, edit, or item to add? Share your thoughts by commenting below!

comments powered by Disqus