A Franchise Agreement May Not Include

The most important condition is that a commercial establishment (unit) has a good reputation, since non-commercial entities or organizations are not allowed to conduct transactions in the franchising format. There is no need to create and register a special business unit in Russia or to open a local branch, as the foreign franchise may be offered and sold through direct franchising or under-franchising. Can the parties freely choose the law applicable to the franchise agreement? The aforementioned restrictive agreements are authorised by Russian law and can be enforced if they are not respected, especially during the franchise agreement. Litigation is the most common dispute resolution process, particularly for local franchisors and franchisees. Mediation and arbitration are also popular alternative settlement mechanisms. If the law of foreign governance is elected by the parties, arbitration will certainly be beneficial. Russia is a signatory to the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitration Awards (hereafter the New York Convention). Therefore, an arbitration award received from another jurisdiction, a party to the New York Convention, will be enforceable in Russia. In general, there are no regulatory implications or legal restrictions for foreign franchisors who want to expand in Russia.

It is not mandatory to establish a local business entity as a precondition for franchising in Russia. International companies are free to offer and sell franchises directly or indirectly to local companies. When franchising enters the Russian market, foreign companies should comply with national laws and regulations applicable to franchises and general principles of civil law. Like any other agreement, franchise agreements must be thoroughly checked before signing on the points line. Keep in mind that when considering entering into a franchise agreement, franchisees or even employees of the franchisee cannot be treated as employees of the franchisor for liability or other purposes in Russia. However, in some cases, as indicated by law, franchisors may assume subsidiary or even joint and third-party liabilities in product-related claims. Early termination of the franchise agreement is subject to mandatory registration at Rospatent. Without registration, the previous termination will not take effect. Key field: Use legal aid before entering into a franchise agreement to fully understand your commitments, franchisor commitments and rights as a franchisee.

The franchisor can deduct the amount of VAT as well as the amount of the deductible fee if it pays its own CIT to the government. „Every franchisor is a little different because every brand wants to have something different from its franchisee,“ Goldman said. Many franchise agreements include know-how licenses, as the transfer of proprietary and confidential information is often considered the most valuable intangible asset of any franchised activity. According to Goldman, three elements must be included in a franchise agreement: the aforementioned restrictive agreements are authorized by Russian law and can be enforced if they are not respected, particularly during the franchise agreement. However, these restrictions may be recognized as invalid by the anti-monopoly service or by other interested parties if they are found to be contrary to anti-monopoly legislation, subject to market conditions and the economic status of the parties. If the franchisee becomes insolvent(insolvent), the franchise agreement must be terminated. If the foreign franchisor does not have a stable establishment or representation in Russia, the Russian franchisee acts as a tax agent for the foreign franchisor.