Russia is ready for parallel import

The Russian Federal Antitrust Service has developed new amendments to Russian law and these amendments are a very unpleasant surprise for business. Amendments to Russian civil code would legalize parallel import in Russia in 2021. The business warns this law innovation would cause depletion of investments in Russian economy.

Explanation note to the draft law outlines its basic premise. The current development of manufacturing and technologies in Russia is not able to satisfy most needs of people by means of internal resources. Therefore the legalization of parallel import would improve competition and as consequence would decrease the prices. Partially legalization of parallel import is not enough to resolve identified problem. The parallel import stimulates innovation activity, decrease prices and increase the availability of products.

The amendments propose four cases when the parallel import is allowed. First case is when the products are not available in the internal market. The second case is when quantity expression of products is not able to satisfy demand in internal market. The third case is if the prices are inflated. The fourth case is when the quality of products, marketed in Russia, is different from their analogues, marketed in other countries. The amendments also provide exception from the rules. Exception applies to the products if their manufacturing is localized in Russia.

But it is unclear for stakeholders how this law innovation would be implemented in practice. Eurasian union (some of former CIS countries) law provides regional principle of exhaustion of rights in trademarks, in other words after the sale of product in one member-country of EU. The union law provides opportunity to legalise parallel import in union only if all members of union approve it. Belorussia does not approve it.

Foreign investors and interested parties don’t support legalizing of parallel import. They believe it could hamper development of pharmaceutical market in Russia and cause increasing of counterfeiting. Customer would not benefit from parallel import – the prices would change for them because distributors would take all margins (difference in price). The parallel import would also obscure liability for low quality of product.