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American companies in Russian courts (2015-2017)

A collection of prominent legal cases involving American companies in Russian courts from 2015-2017, highlighting the outcomes and implications for business practices.

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American companies in Russian courts (2015-2017)

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  1. American companies in Russian courts (2015-2017) Evgeny Raschevsky, Partner

  2. Apple vs. FCS (Case No. А40-32818/2016) Apple Rus LLC brought a claim seeking to invalidate the decisions of the Customs authority (FCS) classifying Apple Watchfor entry in the Russian Federation. Apple Watch: an ordinary or a smart watch? 10(7)%or 0%custom duty? First, appellate and cassation courts: it is an ordinary wrist watch. Supreme court: it is a data device (theWorld Customs Organization approach) Result: The FCS decision has been invalidated, which gives rise to recovery of theimport duty overpaid by the company since 2015. This is a precedent-setting case that acknowledges that the Russian legal system is in line with the world – wide standards and business practices. The court proceedings took 18 months.

  3. Google vs. FAS (Case No. А40-240628/2015) The antimonopoly authority (FAS) ordered Google to cancel preinstalled GooglePlay applications on Android services. Googleappealed FAS decision in court. The case was heard in camera as petitioned by Google (trade secret protection) with the participation of a third party (Yandex). Google lost in the first and the appellate courts which have upheld FAS position. At the cassation court Google and FAS have settled the dispute. • “We are happy to announce that today, we have entered into a commercial agreement with Yandex and into a settlement agreement with the FAS that meet all the parties’ interests” Matt Sucherman, deputy general counsel for Google, said in a statement. Googleis to develop a browser selection box for Android devices* FAS is to waive its claim seeking to detachGooglePlayfrom other Google services* *https://www.vedomosti.ru/technology/articles/2017/04/17/686005-fas-google The proceedings took 18 months.

  4. Ford Sollers vs. FAS (Case No. А40-164848/2016) Ford Sollers Holding LLC brought a claim seeking to set aside the order of FAS holding the company administratively liable for business coordination, and, specifically, setting maintenance prices for the Ford dealers. The administrative fine amounted to RUB 2,500,000. FAS calculated the fine based on the extenuations: voluntary termination of the misconduct; assistance to the FAS. The FAS order was upheld by all court instances. The proceedings took 12months.

  5. Mondelez vs. FTS (Case No. А11-6203/2016) Kraft Foods Rus LLC has acquired 100% share in Dirol Cadbury LLC from Cadbury Russia Two Limited (UK) for RUB 12,8 billion. The buyer and the seller are indirectly related to Mondelez International Inc (before 2012 - Kraft Foods Inc, USA). Kraft Foods Rus LLC didn’t withhold tax paying interest under the loan received for the M&A transaction. The Russian Federal Tax Service (FTS) considered the scheme as payment of hidden dividends, challenged deduction of interest for profits tax purposes and charged additional withholding tax, fine and late payment interest (more than RUB 500 million). The first instance court agreed with the FTS and applied “substance over form” principle stating that Mondelez is a beneficial owner performing global reorganization schemes of Kraft Foods Inc. (USA) and Cadbury PLC (UK). The court of appeal has supported the decision of the first instance court in this part. The decision for imposing profit tax of RUB 11 mln. was cancelled. Tax risks upon corporate restructuring has arisen.

  6. Procter & Gamblevs. Rospatent (Case № IPC-328/2013) Rospatent refused to register “Gillette” as a well-known trademark in Russia from 2005, because other companies of the group Procter & Gamble (absorbed DzeZhilettKompani in 2005) were also manufacturing the products. DzeZhilettKomppani appealed in Intellectual Property Court. Result: The court ordered the registration of a trademark (Gillette was given the number 138 in the List of well-known trademarks in Russia); The well-known trademark should be determined disregarding a particular manufacturer but with regards to a company being the source for the origin of goods under the registration designation (the court’s approach is based on the provisions of the Paris Convention for the Protection of Industrial Property and WIPO Joint Recommendation).

  7. Conslusions The one, who is better prepared for litigation, has more chances to win: Preparing and keeping the “litigation file” from early stages of the project (in Russia documentary evidence matters) Early approach to specialized counsel for evaluation of litigation risks and possible strategy Areas to “watch: IP, custom, tax, antitrust. Do not be “shy” in courts in pursuing the legal remedies and defending your business

  8. Evgeny Raschevsky Partner evgeny_raschevsky@epam.ru

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