In the recent past, there has been a lot of interest in the ability to use Russian products as acceptable collateral from Western financial institutions. The obvious problem has been the perception of Russia as a Wild West where acceptance and enforcement of the law is non-existent. The fact is that nothing could be further from the truth. The Russian Federation is no stranger to such perception and has taken steps and passed laws that are strictly enforced to specifically address the ability of Western financial institutions to be safe, secure and comfortable when conducting business and using Russian commodities as collateral in world finance. .

The Russian Federation has enacted laws specifically undertaken to improve trade finance and protection of third party investments in Russian business products and 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 United States constitutional and commercial law in an effort to achieve this goal. The result is a fair, transparent system that protects both the investor and the depositor. Targets have been adopted to ensure that third party claims or ties cannot be placed on commodities promised for financing. If the lender owns the certificate of deposit and therefore the property, they can immediately dispose of the proceeds in the event of default. These strong changes have resulted in Russian warehouse certificates being used as a banking company.

Warehouse commodity pledge is one of the security schemes requested by lenders proposing to engage in structured commodity trade finance transactions. This commitment is a well-established safety device in most Western European jurisdictions. Russia also has a developed system.

Some of the following are taken from Christophe Jacomin’s work on the use of Russian deposit guarantees in financing plans. Mr. Jacomin is a partner at the Gide Loyrette Nouel firm 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 attorneys and legal consultants, Gide Loyrette Nouel offers some of the most respected specialists and offers legal opinions to both governments and the private sector in each of the various sectors of national and international business and financial law. The reader will note that the securities instruments issued by the authorized warehouses of the Russian Federation are called warehouse certificates and warehouse warrants. The terms are interchangeable and refer to the same document issued by the warehouse.

Warehousing 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 owner of the goods and to return them in their original condition. The depositor must be the owner of the property regardless of the reason for such possession. This excludes any links or claims of third parties on the deposited goods. The depositor can be a legal person or a natural person.

The article names a warehouse as an organization dedicated to the storage of goods and the provision of related warehousing services 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, the deposit documents are:

• certificate of deposit;

• Simple Certificate of Deposit (the SWC);

• double deposit certificate (the DWC).

Warehouse Receipt: Confirms the acceptance of the merchandise for storage under the storage contract and determines its quantity (number of units or pieces, or weight and volume measurements) and external conditions. It is issued by the warehouse personally to the depositor. The only title certified by the receipt is the right of the depositor indicated there to withdraw the merchandise from the warehouse in its original state. This right cannot be assigned to another person, neither by handing over the deposit receipt nor endorsement of the deposit receipt, but only in accordance with the procedure provided for in paragraph 2 of Chapter 24 of the Civil Code relating to the assignment.

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

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

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

• 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 period is stated, or an indication that the goods were accepted for storage on demand;

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

• date of issuance of the certificate of deposit.

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

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

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

Each part of the DWC must also indicate:

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

• current warehouse certificate number in the warehouse register;

• name of the legal entity or individual from whom the property was accepted for storage and location (or residence) of the property holder;

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

• period during which the goods were accepted for storage, if such period is stated, or an indication that the goods were accepted for storage on demand;

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

• date of issuance of the certificate of deposit.

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

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

1. Right to remove the merchandise from the warehouse.

2. Right to dispose of the merchandise stored in the warehouse.

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

Pledge on stored merchandise According to article 914 of the Civil Code “merchandise accepted for storage under the double or single deposit certificate may be pledged during storage by pledging the corresponding certificate”.

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, a pledge contract on the goods stored in a warehouse will be made in writing and will indicate the object of the pledge (the goods), its value, substance, scope and time of execution of the obligation. principal. The pledge contract will also indicate the party that will keep the pledged property. In accordance with article 357 of the Civil Code, by virtue of a pledge contract on goods, said goods are left in the warehouse. In accordance with article 47 of the Pledge Law, a pledge contract on assets must also indicate the type of pledged assets, their generic characteristics, the location of the warehouse and the types of assets that may be replaced by those that are stored. for.

We will see the day when the use of deposit warrants from the Russian Federation not only becomes commonplace, but could well be the preferred securitization methodology for these types of structured finance transactions.