Non-Deliverable Derivatives Transactions May Become Enforceable Under Russian Law

The legal uncertainty created by the application by Russian courts of Article 1062 (concerning gaming and betting) of the RF Civil Code after 1998 is intended to be addressed by a new section, 1062.2, the first reading of which was approved on June 16, 2006.

Under current Russian law, certain derivatives transactions are classified as wagering or betting, and claims arising under these transactions are not given judicial recognition in Russian courts. According to the draft amendment, derivative transactions that depend on changes in the price of securities, commodities, exchange rates, and levels of inflation, are enforceable if one of the parties is a legal entity with a banking license. In other words, a legal entity must hold a license as a professional participant of the securities market, or another license for transactions on an exchange. Individuals’ claims are enforceable only if such transactions are made on an exchange.