The Plenum of the Supreme Court of the Russian Federation (“SC”) has enacted a Ruling “On consumer protection disputes”.
The ruling establishes a set of important principles that are obligatory for the courts to follow when hearing consumer protection cases.
Wider interpretation of a “consumer”
According to the consumer protection law, a “consumer” is an individual using goods (works and services) solely for its own personal use and other uses not connected with entrepreneurial activities.
The SC explained that consumers’ successors as well as purchasers of the goods from such consumers are also considered to be consumers. Thus, the ruling supports consumer rights of individuals who did not participate in the purchase of the goods and services.
Scope of consumer protection relationships
If certain types of relationships are already subject to particular legal regulation (par example, those relating to insurance and bank deposits) the consumer protection law is applied to the part not regulated by the special legislation.
The ruling explained the types of relationships regulated by the consumer protection law, in particular including the following:
- those arising from prior and commutative contracts not connected with entrepreneurial activities;
- medical services supplied within compulsory and voluntary health insurance; and
- realtor services.
Transactions conducted with an individual not duly registered as an individual entrepreneur are subject to the consumer protection law.The SC clarified that advocacy and notary services are not regulated by the consumer protection law.
The SC clarified that advocacy and notary services are not regulated by the consumer protection law.
Consumer protection enforced by public associations and state agencies
The ruling clarified the requirements for entities empowered to bring claims for consumer protection:
- public associations of consumers must be legal entities;
- acting on behalf of the general public, the relevant bodies may only claim for the defendant’s activities to be invalidated and terminated by the court; and
- competent agencies and public associations may appeal to the court only following a written claim by a consumer.
Debt assignment to collection agencies
A key development in the ruling concerns the ability of banks to assign consumer credit receivables to collection agencies. The SC found such practice to be legal, provided that the right to assign is established by law or the credit agreement.
When assessing damages the courts shall consider current prices on the day of the ruling at the place where the consumer’s claim is to be executed.
The ruling clarifies the order of penalty calculation, which may be reduced by the court only in exceptional cases.
The violation of a consumer’s rights is considered on its own to be enough to award moral damages. The amount of compensation does not depend on the scope and amount of the property damage but is determined by the nature of the specific violation as well as its consequences.
The burden of proof is on the seller. Nevertheless, the apportionment of the burden may depend on whether there is a warranty, as well as the time when the defect was discovered.
The seller (manufacturer or importer) is responsible regardless of whether a third party (agent) has participated in the transaction. The latter may be held liable if they executed settlements with a consumer in its own name subject to the seller’s order. An agent’s liability is limited according to the agency award.
The ruling specified the criteria for determining the significance of defects in engineered products.
In particular, the SC ruled that the following defects should be considered to be significant:
- defects in goods which cannot be remedied (leading to the impossibility or prohibition of use of the product for its purpose);
- a defect that cannot be remedied with reasonable expense (equal to or exceeding the price of the product);
- a defect that cannot be remedied within a reasonable time period (more than 45 days);
- a defect appearing repeatedly (different defects in one product appearing more than once resulting in the impossibility or prohibition of use of the product for its purpose);
- a defect recurring again after it has been remedied.
The ruling enacted by the SC has improved protection for consumers. It is expected that the number of consumer protection disputes will increase following this ruling.