In the recent past, much interest has been generated in the ability to use Russian commodities as collateral acceptable to Western financial institutions. The obvious problem has been the perception of Russia as a wild west where the acceptance and application of the law is non-existent. The fact is that nothing is further from reality. The Russian Federation is not blind to such a perception and has taken steps and passed strictly enforced laws to specifically address the ability of Western financial institutions to be safe and comfortable conducting business and using Russian commodities as collateral in global finance. . .

The Russian Federation has instituted a law that specifically undertook to improve trade financing and protection of third-party investments in Russian products and business activities. The new Civil Code of the Russian Federation was drafted in two parts between 1994 and 2008 and is a combination of German law, Roman civil law, English common law, and US commercial and constitutional law in an effort to achieve this goal. The result is a fair, transparent system that protects both the investor and the depositor. Steps have been taken to ensure that no third party claims or liens can be placed on commodities pledged for financing. If the lender owns the certificate of deposit and therefore the property, he can immediately dispose of the proceeds in the event of default. These dramatic changes have resulted in Russian depository receipts being used as bank commitments.

Deposited Commodity Pledge is one of the security schemes requested by lenders proposing to conduct structured trade finance commodity transactions. Such a compromise is a well-established security device in most Western European jurisdictions. Russia also has a developed system.

Some of the following has been drawn from Christophe Jacomin’s work on the use of Russian deposit guarantees in financing schemes. Mr. Jacomin is a partner in the firm of Gide Loyrette Nouel in Paris. Gide Loyrette Nouel is an international law firm founded in Paris in 1920 with twenty-four offices located in Europe, Asia, Africa, the Middle East and North America. With more than seven hundred lawyers and legal consultants, Gide Loyrette Nouel offers some of the most respected specialists and provides legal opinions to both governments and the private sector in each of the various sectors of national and international financial and commercial law. The reader will note that securities instruments issued by licensed warehouses of the Russian Federation are called Depository Receipts and Depository Orders. The terms are interchangeable and refer to the same document issued by the warehouse.

Warehouse activities in Russia are regulated by Chapter 47 of the Civil Code of the Russian Federation. In accordance with article 907 (1) of the Civil Code, by virtue of a storage contract, the warehouse undertakes, in exchange for remuneration, to keep the goods deposited by the holder of the goods and to return these goods in their original state. original. The depositor must be the possessor of the goods whatever the reason for such possession. This excludes any right of retention or claim by third parties on the deposited goods. The depositor can be a legal person or a natural person.

The article calls a warehouse an organization dedicated to the storage of goods and the provision of services related to storage as a business activity. The use of the term ‘organization’ means that the warehouse is always a legal entity, not an individual entrepreneur. Warehousing activities in Russia are subject to various licenses depending on the type of goods held in custody.

According to Article 912 (1) of the Civil Code of the Russian Federation, deposit documents are:

• certificate of deposit;

• simple certificate of deposit (the SWC);

• double certificate of deposit (the DWC).

Warehouse Receipt: Confirms the acceptance of the goods for storage under the storage contract and determines their quantity (number of units or pieces, or weight and volume measurements) and external conditions. It is issued by the warehouse to the depositor personally. The only title certified by the receipt is the right of the depositor indicated therein to withdraw the goods from the warehouse in their original state. This right may not be assigned to another person either by delivering the deposit receipt, or by endorsing the deposit receipt, but only in accordance with the procedure provided for in paragraph 2 of Chapter 24 of the Civil Code regarding assignment.

Simple deposit certificate In accordance with article 917 of the Civil Code, the SWC is issued to bearer and must indicate the following:

• name and location of the warehouse that accepts goods for storage;

• serial number of the certificate of deposit in the register of the deposit;

• name and quantity of goods accepted for storage – number of units and/or pieces of goods and/or measurements (weight or volume) of the goods;

• period during which the goods were accepted for storage, if such a period is established, or an indication that the goods were accepted for storage upon request;

• amount of compensation for storage or fee on the basis of which it is calculated and the procedure for payment for storage;

• date of issuance of the certificate of deposit.

According to section 917, the SWC must also contain an indication of the fact that it is issued to bearer. The SWC must have identical signatures of the authorized person and the seal of the warehouse.

Pursuant to Article 146 (1) of the Civil Code of the Russian Federation, in order to transfer to another person the rights certified by a bearer security, such as the SWC, it is sufficient to deliver the security to such person.

Double Certificate of Deposit The DWC consists of two parts: the Certificate of Deposit and the Certificate of Pledge (Warrant), which can be separated from each other.

Each party to the DWC must also state:

• name and location of the warehouse that accepts the goods for storage;

• current depository receipt number in the depository register;

• name of the legal entity or natural person from whom the goods were accepted for storage and location (or residence) of the holder of the goods;

• name and quantity of goods accepted for storage – number of units and/or pieces of goods and/or measurements (weight or volume) of goods;

• period during which the goods were accepted for storage, if such a period is established, or an indication that the goods were accepted for storage upon request;

• amount of compensation for storage or fee on the basis of which it is calculated and procedure for payment for storage;

• date of issuance of the certificate of deposit.

Both parts of the DWC must have identical signatures of the authorized signers and the warehouse seal. Each part of the DWC can be transferred by way of endorsement.

NOTE: Both the SWC and the DWC evidence two types of property rights:

1. The right to withdraw the merchandise from the warehouse.

2. The right to dispose of the goods stored in the warehouse.

In accordance with article 914 of the Civil Code of the Russian Federation, the holder of the deposit certificate separated from the pledge certificate has the right to dispose of the goods, but cannot remove them from the deposit until he repays the granted credit.

Pledge on stored goods According to article 914 of the Civil Code, “goods accepted for deposit under the double or simple deposit certificate may be pledged during their storage by means of the corresponding certificate pledge”.

Such a pledge on property is regulated by paragraph 3 of Chapter 23 of the Civil Code, in particular by Article 357, and by the Law of the Russian Federation on the pledge of May 29, 1992.

In accordance with article 339 of the Civil Code, the pledge agreement on assets deposited in deposit must be in writing and must indicate the object of the pledge (the assets), its value, substance, scope and time of fulfillment of the main obligation. . The pledge contract will also indicate the party that will keep the pledged assets. In accordance with article 357 of the Civil Code, by virtue of a pledge contract on goods, these are left in deposit. In accordance with article 47 of the Pledge Law, in the pledge contract on goods, in addition, the class of the pledged goods, their generic characteristics, the location of the deposit and the classes of goods for which they can be replaced will be indicated. stored ones. for.

We will see the day when the use of Russian Federation deposit guarantees not only becomes commonplace, but may also be the preferred securitization methodology for this type of structured finance transaction.