Cryptocurrency and court practice. Enlightenment

For more than a year, our struggle with St. Petersburg prosecutors to appeal court decisions recognizing illegal information about Bitcoin and cryptocurrency has been going on. These solutions have already led to the blocking of many cryptocurrency sites. During the year we filed 4 complaints from owners of various cryptocurrency portals, and it already seemed that despite the absurdity of the arguments of the supervisory authority, it would be impossible to break the vicious practice created in the northern capital. However, the events of recent months inspire some hope that the situation has begun to change for the better. One court decision was overturned at the level of appeal in the St. Petersburg City Court. The other is currently being heard in the Supreme Court of the Russian Federation.

All judicial acts contain the same unsubstantiated and not reasoned conclusion that cryptocurrencies, or rather bitcoin, are money substitutes, the issue and circulation of which are prohibited by Russian legislation (Article 27 of the Federal Law "On the Central Bank of the Russian Federation"). Also from the lawsuit in the lawsuit are completely flimsy designs that cryptocurrencies are illegal, as they can be used in “trafficking in drugs, weapons, forged documents and other criminal activities”. Prosecutors might as well be able to appeal to a ban on car sales, as they contribute to increased mortality, injuries and injuries.

But apart from formalist sentences, devoid of any meaning, but nevertheless inserted into prosecutor’s lawsuits rather to make them weighty, and just scrutinize each judicial document, even after a cursory reading of the texts of these court decisions it becomes clear how such the conclusion, wording, and presentation logic migrated to judicial acts - from the Bank of Russia caution message on the riskiness of using bitcoins in making transactions, which was published on January 27, 2014.
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Armed with the position of the Central Bank of the Russian Federation, the St. Petersburg courts and the prosecutor's office concluded that it would be better out of harm to ban information about cryptocurrency at all, even if there are no grounds for that. Recall that the legal status of cryptocurrency is still not defined in Russia at all, and even the Ministry of Finance with the Central Bank, whose document prosecutors refer to, only recently decided on how they see state regulation of cryptocurrency, but this is their “vision” that has not been legally approved - the relevant draft law has only been submitted to the State Duma.

Below, we will describe how the three court decisions are being appealed on the recognition of information about Bitcoin prohibited for distribution in Russia.

Localbitcoins.com

In July 2016, another St. Petersburg court ruled to block the international p2p service Localbitcoins.com, the operator of which is the eponymous Finnish company. The administration of the service of private announcements about the purchase and sale of bitcoins found out about blocking its site in Russia only in September from service users, and it was possible to find out the reasons for blocking only after contacting lawyers of the Center for Digital Rights. Roskomnadzor entered the site of the Finnish company Localbitcoins.com into the Unified Register on the basis of the decision of the Primorsky District Court of St. Petersburg dated July 5, 2016 (case No. 2-10224/2016).

Guided by essentially only one legal norm, Art. 27 FZ “On the Central Bank of the Russian Federation”, without having a legal definition of a money surrogate or at least a conclusion by the currency regulator or an independent expert on the content of the term “money surrogate”, the judge of the Primorsky District Court of St. Petersburg found out from the district prosecutor all the “necessary ”Information about the features of using Bitcoin, came to the conclusion that in general all cryptocurrencies are cash substitutes (although case No. 2-10224 concerned only Bitcoin) and decided to prohibit the spread of Site Localbitcoins.com information about Bitcoin throughout Russia. Despite the presence on the site of full contact information of the company Localbitcoins OY, she was not attracted to participate in the case, but Roskomnadzor traditionally participated passively in it, without stating any position or explanation on the application of the provisions of the Law On Information, which laid the grounds for information is illegal and subject to blocking.

The restoration of the deadline for filing the appeal took two meetings (they waited for a response from the Roskomnadzor headquarters), which ended in refusal with reference to the inadequacy of the reasons for missing the deadline and “going to court much later than the one-month deadline provided by the law for appeals”.

Having filed a private complaint about the definition of the Primorsky District Court of St. Petersburg dated January 17, 2017, the lawyers of the Digital Rights Center described in great detail the procedure that Roskomnadzor follows to restrict access to sites, drew the attention of the appellate court to the deadlines for blocking and the lack of notifications from Roskomnadzor. Nevertheless, on April 13, 2017, the St. Petersburg City Court dismissed a private complaint to the Finnish company.

On October 23, 2017, the Presidium of the St. Petersburg City Court appealed against the said rulings of the lower instances to consider at the court session, having considered that the Finnish company had to find out about the violation of its rights when the site was included in the Unified Register (i.e. before the actual lock). At the same time, the refusal decision of the court of cassation states that for a foreign company "on the Internet at blocklist.rkn.gov.ru there is an opportunity to receive complete information about the measures taken to restrict access to sites and the grounds for such measures." At the same time, Roskomnadzor is silent that access to the service is closed from foreign IP.

The second cassation appeal filed with the Supreme Court of the Russian Federation also failed to pass the filter of the court apparatus. The Supreme Court of the Russian Federation very succinctly refused Localbitcoins OY to transfer a cassation appeal to a cassation board meeting, referring to the fact that it did not see any material violations of substantive or procedural law when deciding on the case of the Localbitcoins.com service. Currently under appeal.

"Forty crypto exchangers"

After the district prosecutors laid the foundation for this kind of decisions, the prosecutor's office of St. Petersburg for particularly sensitive sites entered the warpath with cryptocurrency. Apparently, we missed the moment when the Internet was recognized as a particularly secure site. This time it was a wholesale lawsuit to block 40 crypto exchangers at once.

After a lengthy appeal, in which we represented 2 of 40 site owners, at the end of February 2018, the St. Petersburg City Court overturned the decision of the Oktyabrsky District Court to ban sites of 40 crypto exchangers, which was rendered last May at the request of the prosecutor's office. The decision to cancel the blocking is a small but very important victory, which suggests that the city court at least discovered a systemic problem of violation of procedural law when considering claims for the recognition of information illegal. The case was sent for a new trial to the Oktyabrsky District Court with a different composition of judges.

“The case of forty bitcoin-themed sites is the quintessence of all kinds of violations that can be made when considering claims to admit information in the network as prohibited!

- Ekaterina Abashina, media solicitor of the Center for Digital Rights, commented on this situation then. -

The prosecutor's office of the northern capital declared indiscriminately that “money surrogates” were allegedly issued on the sites, and in fact information resources, cryptocurrency courses aggregators, online exchangers were distributed. Neither the procurator nor the court of first instance made a single attempt to contact the site owners, although there is always the opportunity to write an e-mail or request information from domain registrars. Already at the appeal stage, the prosecutor’s office made a rather ridiculous attempt to prove that there was no publicly available contact information for site owners, but this did not work. The Appeals Board refrained from assessing issues related to Bitcoin as a money surrogate and the legitimacy of the ban on the dissemination of information about cryptocurrency, but recognized the need to attract site owners to participate in the trial. ”

Bitcoininfo.ru

In the summer of 2016, a niche information and analytical website Bitcoininfo.ru was blocked , which contains news and materials about Bitcoin cryptocurrency. Roskomnadzor entered Bitcoininfo.ru into the register of prohibited sites based on the decision of the Vyborgsky District Court of St. Petersburg dated July 18, 2016 (case No. 2-10119/2016), which was rendered without the participation of the site administration. The trial of blocking the site, as usual, was initiated by the local district prosecutor, and the site’s administration learned about the judicial act only after actually restricting access to it (i.e., at the time of execution of the court decision, when the monthly appeal period had already expired) judicial genre.



Lawyers of the Center for Digital Rights have made it possible to restore the missed procedural term - an appeal against a court decision to block the Bitcoininfo.ru site was sent to the St. Petersburg City Court for consideration. The appeal stated a number of serious “flaws” in the contested decision:

• the administration of the site Bitcoininfo.ru, which is obviously a person interested in this process, was not involved in the trial;

• in the current legislation of the Russian Federation there is no ban on the dissemination of information about cryptocurrencies, electronic money and new technologies for mutual settlements;

• The site did not offer any transactions between participants of the cryptocurrency turnover on its platform.

Even Roskomnadzor, who usually has no position in such cases, spoke out in this case, as in the context of such cases he plays the role of a digital bailiff (executes court decisions, enters the sites into the register). Despite significant violations of procedural and substantive law, Roskomnadzor supported the court’s decision to ban the dissemination of information about Bitcoin and, in fact, advocated banning Bitcoin trafficking in Russia. Against the background of the current public debate on the possibilities of legalizing cryptocurrency in Russia, such a legal position looked quite ridiculous.

On February 13, 2017, a meeting was held in the court of appeal (in the St. Petersburg City Court), which refused to appeal because “the owner of the site and the domain name administrator is not a person participating in the case; the question of his rights and obligations was not resolved by the court, and in a statement by the prosecutor of the Vyborgsky district of St. Petersburg, only the question of establishing the legal status of the information material posted on the website is raised, which has legal significance to include information in the Unified Register. "

The Presidium of the St. Petersburg City Court refused to transfer the complaint for consideration at the meeting for the same reasons as the Appeals Board, after which we appealed for a second appeal to the Supreme Court of the Russian Federation. First, the consultant of the Supreme Court of the Russian Federation decided to simply return the cassation appeal filed by the lawyer, because the complaint did not include copies of diplomas confirming that the representative had a legal education. The court's adviser referred to the new procedure established by the provision of the Code of Administrative Procedure of the Russian Federation, although the court decisions that were appealed were adopted in the procedure of the Civil Procedure Code of the Russian Federation, and in the end referred not very well - according to the rules of the CAS RF, the lawyer does not need to attach copies of his diplomas.

After re-filing a cassation appeal to the Supreme Court of the Russian Federation in November 2017, the case materials were nevertheless requested from St. Petersburg and the Bitcoininfo.ru case was scheduled for consideration on March 21, 2018. It is worth noting that this is the first case of blocking web portal, which for 6 years of enforcement of the law "on black lists of sites" is considered in the Supreme Court. And this instills in us a certain hope that the highest judicial authority has finally expressed interest both in the very painful question of Russian censorship for Russian society and in the topic of the legal status of cryptocurrency.

However, the consideration on the merits did not take place on March 21, and the hearing was postponed to April 20, 2018 due to the late dispatch by the St. Petersburg prosecutor of the objection to the complaint and the need to study additional materials, namely the position of the leading specialized association RAKIB and Internet Ombudsman Dmitry Marinichev, who, as amicus curiae, presented to the court an opinion on the status of Bitcoin.

RKIB stated that it is impossible to classify information on cryptocurrencies as prohibited for distribution.

In its explanation, RACIB states that the legislation of the Russian Federation does not contain norms, on the basis of which it is possible to limit the dissemination of information about Bitcoin and cryptovalues. In addition, there are no rules limiting the turnover of Bitcoin and cryptocurrency. Prior to the adoption of legal acts at the disposal of entrepreneurs engaged in activities related to cryptoactive assets, there are positions of government agencies, which, despite the fact that they do not have direct force, can serve as guidelines for market participants. These documents are aimed at warning about the risks of transactions with cryptocurrency, but none of them mentions restrictions or prohibit the circulation of cryptoactive assets in the Russian Federation.

The law also does not provide for responsibility for the production and storage of monetary surrogates. The Criminal Code pursues the production, storage, transportation and sale of counterfeit money - copies of existing bank notes, and not the production of its own currency.

The Internet ombudsman Dmitry Marinichev also confirms that the Russian legislation does not provide a basis for limiting the dissemination of information about Bitcoin and cryptocurrencies. Also, neither the Code on Administrative Offenses of the Russian Federation nor the Criminal Code of the Russian Federation contain a single norm providing for the responsibility for disseminating information about the Bitcoin cryptocurrency, or about electronic means of payment or other currencies other than the ruble. Even the rule of authorship of the Central Bank of the Russian Federation on a general ban on the introduction in Russia of monetary units other than the ruble and the issuance of “money substitutes” does not provide for any restrictions on the dissemination of information on various monetary units, means of payment and technologies used in the modern world, and not defines what is a “money surrogate”.

Marinichev also stressed that at present cryptocurrency has an uncertain legal status in Russia, however, a ban on the circulation and use of cryptocurrency by Russian citizens has not been established by law.

The Internet Ombudsman believes that until the Russian legislative body develops special rules defining the status of cryptocurrencies, it should now be guided by the general permissive method of civil law and be guided by the statutory principle of freedom of contract (articles 1, 421 of the Civil Code).

Despite the fact that Bitcoin does not have collateral in gold or other currencies, as well as other modern fiat money, it can still be exchanged for fiat currency in exchange offices, ATMs and exchanges that function legally in many countries around the world. the world. It is also possible to exchange tokens for participation in a specific new project based on distributed registry technology. Bitcoin rate is determined by the exchange principle at the intersection of supply and demand.

Recall that the Bitcoininfo.ru case is the first complaint of site owners about the blocking decision that reached the Supreme Court. The decision on this process can become a precedent for all cases of blocking cryptocurrency websites.

We hope that the Supreme Court will listen to the opinion of experts and make the right decision, which will have a positive effect on the development of cryptocurrencies and the introduction of a “digital economy” in our country, and will also create at the level of judicial practice a number of important recommendations for courts on recognition of information as illegal.