The new amendments to the Commercial Procedure Code of the Russian Federation (the “Code”), required by Federal Law No. 47-FZ dated 2 March 2016, will come into force in June 2016.

The key changes include the introduction of a mandatory pre-trial settlement of commercial disputes, the introduction of the concept of enforcement order proceedings for considering certain categories of commercial disputes and modification of the existing simplified small claims procedure.

The new developments should to a certain extent help reduce the costs and time that an aggrieved party will spend to protect their interests in small claims. 

Mandatory pre-trial settlement of commercial disputes 

Under the new rules, a claimant is only entitled to initiate proceedings in a commercial court provided that they had taken measures to seek a pre-trial settlement of the dispute. From now on, a lawsuit can only be filed after 30 days from the date of sending a demand letter to the respondent, unless a different period or a different dispute settlement procedure is stipulated by law or contract. Moreover, this rule will apply to both contractual and non-contractual disputes.

There are, however, several exceptions to this rule. Specifically, the rule does not apply to, among others, insolvency (bankruptcy) cases, corporate disputes and challenges of arbitral awards.

In view of the new version of the provisions of the Code, it has become particularly important to comply with the pre-trial settlement procedure. A breach of the mandatory demand letter procedure is a ground for the court to reject a claim or leave it without consideration.

Small claims novelties

Enforcement order proceedings

The amendments to the Code have introduced enforcement order proceedings to the commercial courts system.

An enforcement order is a judicial act which is adopted pursuant to a simplified procedure and is subject to execution.

An enforcement order will be issued when a claim is filed:  

  • based on the documents submitted by the claimant in relation to financial obligations of up to RUB 400,000 (approx. EUR 5,333), which are not disputed by the debtor, but are not properly discharged;
  • based on a notary’s protest of a bill of exchange in relation to a non-payment, a non-acceptance and an undated acceptance, provided that the claim does not exceed RUB 400,000 (approx. EUR 5,333);
  • for the recovery of compulsory payments (such as tax payments) and penalties in an amount not exceeding RUB 100,000 (approx. EUR 1,333).

The court issues an enforcement order within 10 days after receiving the claimant’s application and supporting documents without summoning the parties and without a holding a hearing.

A copy of the enforcement order is sent to the debtor who has the right to raise objections within 10 days after receiving it. The judge will cancel the enforcement order if objections are received within the stipulated period.

If the debtor fails to submit objections within the stipulated period, the claimant is given the second copy of the enforcement order for execution.

The enforcement court order comes into force 10 days after the expiration of the deadline for the debtor to submit objections, but the order could be challenged in cassation within two months after coming into force.

Applications for the issuance of an enforcement order will be returned to the applicant if the debtor’s place of residence or location is outside Russia, or if it appears from the application and supporting documents that there is a dispute as to title.

This procedure contains a number of limitations. It is, in particular, not possible to obtain interim measures or make a counterclaim.

Simplified small claims procedure 

The revised Code increases the maximum financial value of claims that can be allocated to the simplified small claims procedure:   

  • for legal entities – up to RUB 500,000 (approx. EUR 6,667);
  • for individual entrepreneurs – up to RUB 250,000 (approx. EUR 3,333);
  • claims for the recovery of compulsory payments – an aggregate amount from RUB 100,000 to RUB 200,000 (from approx. EUR 1,333 to EUR 2,667).

The amendments also state that decisions rendered under the simplified procedure have immediate effect and come into force within 15 days from the date of their adoption provided that no appeal has been filed.

Recommendations 

In light of the amendments to the Code, businesses should regularly monitor claims made against them, in particular via the electronic filing system of the commercial courts (see the Russian version here). 

They should also take into account the new rules on pre-trial settlement of disputes. When contracts are being drafted, it is recommended to agree on a pre-trial dispute procedure that accommodates insofar as possible, the interests of all the parties. 

Unfortunately, the new rules of the Code on the pre-trial dispute procedure did not address some procedural issues. In particular, the law does not specify how these rules apply when a counterclaim is made.

We expect the Supreme Court of the Russian Federation to clarify these issues in the future.

Until the law is clarified, it should be interpreted strictly and accordingly, if a dispute arises, the parties will have to comply with the pre-trial dispute procedure agreed in the contract.

However, if no pre-trial dispute procedure is specified in a contract, one will have to apply the rule under which a court claim can only be filed within 30 calendar days after sending a demand letter to the counterparty.