Draft law on imposing sanctions on the USA and (or) other foreign countries has been introduced to State Duma

20 April 2018

On April 13, 2018 the draft law (hereinafter — the “Draft law”)1 imposing measures (countermeasures) in response to the hostile acts of the USA and (or) other foreign countries has been introduced to State Duma by both State Duma’s chairman and parliamentary leaders.

The Draft law authorizes the Russian Government to introduce certain measures aimed at eliminating and minimization of possible threat to interests and security of the Russian Federation, the rights and freedoms of its citizens from the USA and (or) other foreign countries. Herewith, any foreign countries that have made decisions on joining US actions and have imposed economic sanctions against certain branches of the Russian economy, Russian legal entities and (or) individuals, or have supported such decisions are recognized as the “other foreign countries”.

The Draft law includes2 , inter alia3 , import ban or restriction on drugs (medicines) or medical drugs (finished products) produced in the USA and (or) other foreign countries. The list of such drugs (medicines) and medical drugs (finished products), shall be defined by the Russian Government.

The Draft law puts a special focus on the fact, that the ban or restriction does not extend on drugs (medicines) and medical drugs (finished products) that have no analogues in the Russian Federation and (or) foreign countries. The specified import ban or restriction does not extend on importation of such goods by citizens of the Russian Federation, foreign citizens and stateless persons for personal use as well.

At the same time, the Draft law does not specify the procedure for determining drugs (medicines) and medical drugs (finished products) in order to impose the relevant measures. In practice, foreign companies can transfer some or all their functions regarding the production of medical drugs (finished products) to a Russian manufacturing plant entirely or partially (at separate production stages, e.g. prepackaging, packaging); the supply of medical drugs (finished products) can be carried out not from the USA directly, but from the territory of another state where the American company has its production. At the moment, it is not clear from the text of the Draft law, whether such medical drugs (finished products) are considered as foreign medical drugs (finished products) for the purpose of imposing sanctions.

In addition, the measures provided for in the Draft law may also affect medical products manufactured in the USA and (or) other foreign countries: the Draft law establishes a non-exhaustive list of goods produced in the USA and (or) other foreign countries, in respect of which a ban or restriction on importation into the territory of the Russian Federation may be provided4 .

Further, the Draft law provides5 the exhaustion of the exclusive rights to trademarks in respect of goods whose right holders are:

  • citizens of the USA and/or other foreign countries;
  • companies under jurisdiction of the USA and/or other foreign countries;
  • companies directly or indirectly owned by entities under the jurisdiction of the USA and/or other foreign countries.

The Russian Government is entitled to determine the list of goods that is subject to exhaustion. In fact, this IP restriction legalizes parallel imports ─ importing original goods that have already been brought into circulation in any state6. Parallel imports of goods are currently prohibited by article 1487 of the Russian Civil Code with some restrictions in protection against parallel importers.

The Draft law empowers the Russian Government to impose the enlisted sanctions as necessary in cases and (or) actions on the part of the USA and (or) other foreign countries aimed at diminishing the territorial integrity, security of the Russian Federation, as well as economic destabilization in the Russian Federation.

Consideration of the Draft law by State Duma in the first reading is scheduled for May 15, 2018.

2Clause 15 article 2 of the Draft law
3Full list of the proposed sanctions is enumerated in article 2 of the Draft law
4Clause 16 article 2 of the Draft law stipulates, that import ban or restrictions can be imposed to any other goods
5Clause 11 article 2 of the Draft law
6At the same time, several deputies of the Russian State Duma allege that such restriction “will deprive some right holders of trademark protection” and goods will be produced in Russia without right holders’ consent. It should be noted, that these statements do not correspond to the Draft law.