This overview summarises the recent amendments to the Russian Commercial Procedure Code ("Commercial Procedure Code"), the Russian Civil Procedure Code ("Civil Procedure Code") and the Russian Code of Administrative Court Proceedings ("Administrative Proceedings Code")1 as well as certain clarifications of the Russian Supreme Court ("Supreme Court") on procedural issues.2
The most important amendments discussed in this overview are: (1) mandatory pre-action procedure, (2) expedited proceedings, (3) special rulings in commercial civil procedure, (4) res judicata effect of the facts certified by public notaries, (5) application of Administrative Proceedings Code, (6) the possibility to conduct court hearings in the commercial courts by video conferencing with the assistance of the courts of general jurisdiction, and (7) development of the electronic document management system used by the courts.
This overview provides a detailed description of these amendments and a number of practical tips.
Mandatory pre-action procedure
Since 1 June 2016, in most cases it is necessary to follow a pre-action settlement procedure before commencing proceedings in a commercial court.3
Previously, the pre-action procedure was not mandatory unless expressly required by law (as in cases where the claimant seeks to amend or terminate a contract4) or the parties' agreement.
Unlike civil disputes, economic disputes of administrative or other public law nature require the pre-action procedure (as previously) only where expressly provided by law. By way of example, this procedure is currently mandatory for recovery of compulsory payments and penalties.5
Civil cases which do not require the pre-action settlement procedure
The pre-action settlement procedure is not required for the following types of civil cases:
- proceedings for determining facts of legal significance;
- proceedings for awarding compensation for breach of the right to a fair trial within a reasonable time or the right to enforce a judicial act within a reasonable time;
- insolvency (bankruptcy);
- corporate disputes;6
- proceedings for protection of the rights and legitimate interests of groups of persons (class actions);
- proceedings for termination of the legal protection of trademarks as a result of failure to use them;
- proceedings for challenging domestic arbitral awards.
In addition, the pre-action procedure, in our view, should not apply to writ proceedings because (1) they do not involve a dispute on matters of law and (2) failure to follow the pre-action procedure is not listed among the grounds for returning an application for a writ by the court to the applicant without consideration.7 This view is supported by the Resolution of the Plenum of the Supreme Court "On Certain Issues related to the Application of the Provisions of the Russian Federation's Civil Procedure Code and Commercial Procedure Code regarding Writ Proceedings by the Courts."8 It states that the pre-action procedure is not required in writ proceedings arising out of civil relations or when the claimant submits a statement of claim (or an application) after a writ has been annulled.9
In our view, there should have been many more exceptions from the mandatory pre-action procedure.
Firstly, it is unclear why the exceptions include challenging domestic arbitral awards but not enforcement of both domestic awards and foreign court judgments and arbitral awards. The legislator's idea may have been that a pre-action notice evidencing the claimant's intention to file an application for recognition and enforcement of a foreign judgment or award would encourage the losing party to honour it voluntarily. However, by the time such notice is given the parties would have been already aware of the outcome of the dispute as well as the losing party's intention not to honour the judgment or award voluntarily. Would, in such cases, the mandatory pre-action procedure amount to an unjustified restriction of access to justice?
We note that as a matter of practice, the courts tend to take a rather formalistic approach on this issue and conclude that cases concerning enforcement of domestic awards and foreign judgments and awards do require the pre-action procedure by virtue of not being listed among the relevant exceptions.10 It is gratifying that some courts nonetheless fill this legislative gap and accept that the pre-action procedure is not mandatory because in deciding whether to issue a writ of execution for an award or foreign court decision, the courts do not consider the merits of the underlying dispute (which would have been already heard by the tribunal or foreign court).11
Secondly, the list of exceptions should have, in our view, included proceedings for challenging the recognition of foreign judgments and awards that do not require enforcement.12 This omission may lead to a party not being able to submit its objections to the recognition within the statutory time limit of one month from the date when it has become aware of the relevant judgment or award.13
Finally, in our view, the pre-action procedure is of little use in cases of applications for creation, modification or termination of the parties’ relations (преобразовательные иски), which are addressed to the court rather than to a defendant. An example of such a claim would be a claim to declare a voidable transaction invalid. A voidable transaction is deemed invalid if declared as such by the court, and there is hardly any space for settlement if the claimant intends to challenge its validity.
On the other hand, the currently evolving case law shows that the courts rarely agree that the pre-action procedure is not necessary in such cases. By way of example, in one case the court refused to accept and returned to the defendant a statement of counterclaim to invalidate a part of an agreement on the basis that the defendant has failed to observe the mandatory pre-action procedure. This decision was subsequently upheld by the courts of appeal and cassation instances.14
Form and time limits for the pre-action settlement procedure
Pursuant to the new provisions of part 5 of Article 4 of the Commercial Procedure Code, the default pre-action settlement procedure is the complaint (or claim) procedure, whereby the potential claimant sends a pre-action letter of claim to the other party, who should then respond by a certain deadline. By contrast with mediation or settlement negotiations, it is rather formal and easy to comply with. This procedure is also well established in Russia as it was mandatory in civil cases under the Commercial Procedure Code of 1992 until 1995. Apparently, this is why the legislator chose it over other types of pre-action procedures.
At the same time, by referring to "a different procedure contemplated by contract", the law allows parties to agree on alternative pre-action settlement procedures, such as mediation or settlement negotiations. Where the parties are minded to select one of such alternatives, our advice would be to set out particular deadlines for different stages of the procedure in the contract and define when the process is deemed to have been fulfilled irrespective of its outcome. Otherwise, the parties risk having a dispute as to whether the procedure has been completed.
The law does not permit the parties to contract out of the mandatory pre-action procedure. In this regard, the relevant provision of part 5 of Article 4 of the Commercial Procedure Code is imperative, hence the parties cannot amend it by agreement. This is consistent with the declared purpose of the introduction of the mandatory pre-action procedure, which is to reduce the number of court cases by having more disputes settled out of court. Accordingly, the reference to "a different procedure contemplated by contract" appears to be a specific reference to alternative pre-action procedures as may be agreed by parties rather than a permission for parties to exclude any pre-action procedure altogether.
The law provides that the claimant can commence proceedings not earlier than 30 calendar days following the date when the letter of claim is sent to the other party. Parties are free to agree on a different time limit, just as they can amend the procedure more generally. They can agree on a shorter or longer period of time, and this also applies to alternative procedures such as mediation or settlement negotiations. Can the parties agree on a very short period of time, for example, of one or two days? Taking a formalistic approach, this is not prohibited by law, however there is a risk that the court will view such an agreement as an abuse of rights or evasion of the law by virtue of undermining the purpose of the new provisions.
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1 Introduced by Federal Law No. 45-FZ dated 2 March 2016 "On Introducing Amendments to the Civil Procedure Code of the Russian Federation and the Commercial Procedure Code of the Russian Federation", Federal Law No. 47-FZ dated 2 March 2016 "On Introducing Amendments to the Commercial Procedure Code of the Russian Federation", Federal Law No. 137-FZ dated 1 May 2016 "On Introducing Amendments to Articles 153.1 and 159 of the Commercial Procedure Code of the Russian Federation", Federal Law No. 435-FZ dated 19 December 2016 "On Amending the Commercial Procedure Code of the Russian Federation", Federal Law No. 391-FZ dated 29 December 2015 "On Introducing Amendments to the Certain Legislative Acts of the Russian Federation", and Federal Law No. 220-FZ dated 23 June 2016 "On Introducing Amendments to Certain Legislative Acts of the Russian Federation in Relation to Electronic Documents being Applied in the Activities of the Judicial Authorities" ("Federal Law No. 220-FZ").
2 Resolution of the Plenum of the Supreme Court No. 62 dated 27 December 2016 "On Certain Issues related to the Application of the Provisions of the Russian Federation’s Civil Procedure Code and Commercial Procedure Code regarding Writ Proceedings by the Courts", Resolution of the Plenum of the Supreme Court No. 36 dated 27 September 2016 "On Certain Issues of the Application by Courts of the Code of Administrative Court Proceedings of the Russian Federation"; Resolution of the Plenum of the Supreme Court No. 7 dated 24 March 2016 "On Application by Courts of Certain Provisions of the Civil Code of the Russian Federation regarding the Liability for a Breach of Obligations"; Procedure for filing documents with the Supreme Court in electronic form (approved by Order No. 46-P of the Chairman of the Supreme Court dated 29 November 2016); Procedure for filing documents with the courts of general jurisdiction in electronic form (approved by Order No. 251 of the Judicial Department for the Supreme Court dated 27 December 2016); and Procedure for filing documents with the commercial courts in electronic form (approved by Order No. 252 of the Judicial Department for the Supreme Court dated 28 December 2016).
3 This rule is included in part 5 of Article 4 of the Commercial Procedure Code, as amended.
4 Article 452 of the Russian Civil Code.
5 Part 2 of Article 213 of the Commercial Procedure Code.
6 With the exception of certain categories of disputes based on shareholders’ lawsuits, which, according to Article 93.1 of the Federal Law "On Joint Stock Companies", are subject to the requirement that a preliminary notification must be sent regarding the intention to apply to court. See also the Bank of Russia’s Information Letter No. IN-06-59/77 dated 3 November 2016 "On Notifying Shareholders of the Intention to Apply to Court with Claims Against the Company or Other Persons".
7 Article 229.4 of the Commercial Procedure Code.
8 See the Resolution of the Plenum of the Supreme Court No. 62 dated 27 December 2016 "On Certain Issues related to the Application of the Provisions of the Russian Federation’s Civil Procedure Code and Commercial Procedure Code regarding Writ Proceedings by the Courts".
10 In part 5 of Article 4 of the Commercial Procedure Code. See, for instance, Resolution No. F09-9059/16 of the Commercial Court for the Urals Circuit dated 12 September 2016 in Case No. А60-33490/2016.
11 See, for instance, Resolutions No. F05-16283/2016 in Case No. А41-36154/2016 and No. F05-10867/2016 in Case No. А40-132970/2016 of the Commercial Court for the Moscow Circuit dated 17 October 2016 and 21 July 2016, respectively.
12 Article 245.1 of the Commercial Procedure Code, as amended on 1 September 2016.
13 Part 3 of Article 245.1 of the Commercial Procedure Code.
14 Resolution of the Commercial Court for the Volga-Vyatka Circuit No. F01-4473/2016 dated 29 September 2016 and Resolution of the Second Commercial Court of Appeal No. 02AP-6857/2016 dated 8 August 2016 in Case No. А29-2322/2016.
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