Thanks to Redd Ears for finding this story. Looks like Russian law does not recognise digital information. The piracy laws there were written prior to the Internet and cannot apply.
However, we should wonder if it makes it OK to use such a service, if we cannot prove that the royalties are being honored. Sometimes it is not a question of what is legal or what is illegal. But what is right and what is wrong.
We have to hope that now that the legal system has said that they are unable to prosecute AllofMP3 that they will use this opportunity to create a legal music service that we can all be proud of. There is no doubt that they know what the consumer wants with their variable encoding rates and very reasonable pricing.
But, would't we all pay just a bit more to make sure they could afford to pay those that create the content we all desire? Otherwise, we should not allow them to profit from anothers work. It would be less of an insult to those left out of the loop, the musicians, to simply trade files for no money on P2P.