1. Adoption and entry into force of the Russian Federation Code of Administrative Procedure dated March 8, 2015, No. 21-FZ
The Russian Federation Code of Administrative Procedure (the Administrative Procedure Code) entered into force on September 15, 2015. It is important that this legal act governs only procedure in the courts of general jurisdiction; disputes arising out of public relationships, which are under the jurisdiction of the commercial (arbitrazh) courts, continue to be considered according to the rules of the RF Commercial Procedure Code. The Code also does not apply to administrative offense cases. Among important disputes that will be considered according to the rules of the Administrative Procedure Code we may note practically all cases challenging regulatory acts (other than cases challenging acts concerning exclusive rights, which are under the jurisdiction of the Intellectual Property Court), cases challenging cadastral valuations, and also cases collecting mandatory payments and penalties from individuals.
We note that in a number of instances the Administrative Procedure Code has combined the most successful legislative solutions contemplated by the effective procedural legislation (the RF Commercial Procedure Code, the RF Civil Procedure Code and the RF Criminal Procedure Code). For example, the Code provides for an alternative procedure for sending administrative statements of claim (by the court or by the plaintiff itself); issues of proof, including with regard to using audio and video recordings, etc., are regulated in considerable detail. The rules on provisional remedies and procedural compulsion are also elaborated on.
At the same time, practitioners also see a number of deficiencies in the Administrative Procedure Code that could make it difficult to apply its provisions. For example, the wording on sending an administrative statement of claim allows for divergent interpretations; there is quite an extensive list of grounds for refusing to accept and for returning an administrative statement of claim.
In addition, we cannot help but note that in light of the overall course of court reform a number of innovations that were initially planned have not been fully implemented. In particular, provisions on establishing additional requirements to representatives (a higher education requirement) are debatable; and the provisions on mandatory audio recording of the court record have not yet gone into effect. The justification for removing the procedure for administrative offense cases from the domain of the Administrative Procedure Code is also questionable, as well as other provisions resulting in dissimilarity of procedural regulation (e.g., separate regulation of public-law relationships, which are under the jurisdiction of the commercial courts, terminology that differs from the other procedural codes).
In any event, it is too early to tell whether the Administrative Procedure Code will be successfully applied because the results will be determined to a considerable extent by the interpretation of new provisions of the law developed by law enforcement practice.
2. The adoption of Federal Law No. 382-FZ on Arbitration (Arbitration Proceedings) in the Russian Federation of December 29, 2015
A law reforming the system of arbitration proceedings was adopted and published at the very end of 2015.
One of the key novelties of the law is that it has become considerably more difficult to form arbitration courts. Permanent arbitration institutions can now be created only at nonprofit organizations and will be able to engage in their activity only provided those organizations get the right to act as a permanent arbitration institution granted by an act of the Russian Federation Government. Such an act will be adopted on the basis of a recommendation of the Council on Arbitration Development.
As compared to the Federal Law on Arbitration Courts in the Russian Federation, the new law regulates in more detail the procedure for considering arbitration disputes, changes the procedure for appointing arbitrators, and clarifies the requirements to arbitrators, in particular, by setting an age requirement of 25.
The law expressly provides that the state courts in a number of cases exercise not only oversight, but also provide assistance to arbitration in performing certain functions. For example, a party to arbitration proceedings may file applications with a state court to grant the recusal of an arbitrator or stating that the arbitration court does not have competence; the arbitration court or party to the arbitration proceedings, with the consent of the arbitration court, may file a request for assistance in obtaining evidence, etc., with the competent court.
It is extremely important that simultaneously with this law amendments were made to a number of other legal acts (Federal Law No. 409-FZ on Amendments to Certain Legislative Acts of the Russian Federation and Repealing Article 6(1)(3) of the Federal Law on Self-Regulatory Organizations in connection with the adoption of the Federal Law on Arbitration (Arbitration Proceedings) in the Russian Federation dated December 29, 2015).
Specifically, the relevant amendments are being made to the RF Commercial Procedure Code. For example, Article 33 of the Code, which establishes the rule of special jurisdiction of cases under commercial courts, is being amended. As soon as the law enters into force it will determine the list of disputes that cannot be referred to an arbitration court for consideration.
Rules are also being introduced to the Commercial Procedure Code regulating the procedure for providing assistance to arbitration courts, in particular, concerning the fulfillment of requests to obtain evidence, to consider matters of the recusal, appointment and dismissal of an arbitrator.
Similar amendments connected with the reform of arbitration procedure are being made to the Russian Federation Civil Procedure Code, as well as to the Law on International Commercial Arbitration and other regulatory acts.
Both of the above-mentioned laws enter into force on September 1, 2016.
3. Amendments to the Federal Law on Insolvency (Bankruptcy) in the Russian Federation about personal bankruptcy
Federal Law No. 154-FZ on the Regulation of the Specifics of Insolvency (Bankruptcy) on the Territories of the Republic of Crimea and the City of Federal Significance Sebastopol and Amendments to Certain Legislative Acts of the Russian Federation of June 29, 2015 amended the Federal Law on Insolvency (Bankruptcy) in the Russian Federation. Paragraph 1.1 regulating the procedure for personal bankruptcy in detail was introduced to the Bankruptcy Law.
These amendments entered into force on October 1, 2015, and, thus, as of that date it became possible for individuals who do not have the status of sole proprietor to be declared bankrupt.
The process of personal bankruptcy consists of two main procedures: debt restructuring and sale of property. The process of selling property starts if the commercial court renders a decision declaring the person bankrupt. A third procedure is also provided for: the amicable settlement agreement.
It has been determined that a debtor may also file a bankruptcy petition, and formally an individual is not only entitled but also required to file a petition themselves if they meet the relevant bankruptcy criteria.
Any creditor may also file a petition; however, generally to do this the creditor needs a court decision that has entered into force, and the debt amount must be at least RUB500,000. Some creditors may file a petition even without a court decision, such as banks under loan agreements, and also creditors under monetary obligations which the debtor acknowledges but is not discharging, etc.
The bankruptcy procedure itself can impose quite serious restrictions on the debtor. For example, the individual is required to provide a financial manager, at its request, with any information about the individual’s assets, the location of those assets, the makeup of the individual’s obligations, creditors and other information relevant to the personal bankruptcy case within 15 days of receiving the request. If the individual is declared bankrupt, the court may issue a ruling temporarily restricting the person’s right to exit Russia.
When selling the individual’s assets, the financial manager manages the individual’s funds on accounts and deposits with lending institutions in his or her name, and also handles cases concerning his or her property rights in the courts. That said, the individual is required to hand over all of their bank cards to the financial manager not later than one business day after the decision declaring him or her bankrupt is rendered.
Once the bankruptcy procedure is over, the debtor is released from further settlements with creditors. However, this rule has a number of exceptions such as, for example, personal debts, debts over the application of the consequences of invalid transactions challenged on the basis of the bankruptcy law, etc.
It is important that almost immediately after the law entered into force Resolution No. 45 of the Plenum of the RF Supreme Court on Certain Issues Connected with the Introduction of Procedures Applicable in Cases of Personal Insolvency (Bankruptcy) of October 13, 2015 was adopted. That resolution clarifies many arguable points that may arise in connection with considering personal bankruptcy cases.
4. The adoption by Federal Law No. 409-FZ of December 29, 2015 of the new version of Article 225.1 of the RF Commercial Procedure Code with respect to the arbitrability of cases in corporate disputes (the amendments enter into force as of September 1, 2016)
The new version of Articles 225.1 and 33 of the RF Commercial Procedure Code are worthy of separate attention as part of the reform of arbitration proceedings. The clarifications made are intended to resolve an issue that has provoked many disputes: the issue of whether it is permissible to refer corporate disputes to an arbitration court.
Lawmakers have approached the issue of the arbitrability of such disputes on a case-by-case basis. On the whole, a general rule is provided that it is possible to refer them to an arbitration court; however, a number of disputes are expressly prohibited. For example, the following disputes cannot be referred to an arbitration court:
disputes related to challenging non-regulatory legal acts, the actions and decisions of public-law authorities (and quasi-public bodies which have certain authorities), and the activity of notaries to certify transactions involving participatory interests;
- disputes over convening a general meeting of participants of a corporation;
- disputes over excluding participants of legal entities;
- disputes concerning the activities of strategic business entities;
- disputes related to the acquisition and purchase of shares by a joint stock company and the acquisition of more than 30 percent of the shares of a public joint stock company.
In addition, for the majority of disputes (other than disputes over the ownership of shares and participatory interests of a corporation and disputes related to the activity of securities holders registrars), the possibility of referring a corporate dispute to an arbitration court for resolution is dependent on complying with a number of terms and conditions.
Firstly, the parties to the arbitration clause must be the legal entity itself, all of its participants, and also all other participants of a specific corporate dispute. Secondly, only a permanent arbitration institution with its seat of arbitration in Russia which, in addition, has adopted and published on its website special rules for adjudicating corporate disputes may be an arbitration court.
It is important that the amendments are intended to eliminate the previous uncertainty and ambiguity of court practice on this issue. Also, the possibility of using arbitration proceedings for business participants was expanded, and special rules and restrictions were provided by lawmakers and intended to eliminate abuses in that area.
5. The adoption of new rules for out-of-court debt collection via a notary’s writ of execution (Federal Law No. 391-FZ on Amendments to Certain Legislative Acts of the Russian Federation of December 29, 2015)
Starting December 29, 2015 new rules have applied in the Russian Federation for the collection of debt, recovery of property and out-of-court foreclosure on collateral on the basis of a notary’s writ of execution. These amendments were made to the legislation by Federal Law No. 391-FZ on Amendments to Certain Legislative Acts of the Russian Federation of December 29, 2015.
It is important that in Article 12 of the Federal Law on Enforcement Proceedings amendments have been made classifying any notary’s writ of execution as an enforcement document, while the previous version could be interpreted as treating only a notary’s writ of execution for foreclosure on mortgaged property as such a document.
As compared to the regulation that was previously in effect, the procedure for obtaining the writ of execution is now described in more detail. In order to do this the recoveror needs to submit to the notary such documents as an estimate of the debt under monetary obligations, a copy of the notice of debt sent to the debtor at least 14 days before applying to the notary, and a document confirming that the notice was sent. If performance of an obligation is dependent on an event or a deadline occurring, then the recoveror also needs to submit confirmation that the event has occurred or the deadline has fallen due.
The notary is required to tell the debtor about a writ of execution not more than three days from when it was made. The content of the writ is also regulated in more detail. For example, in addition to the name and address of the recoveror and the debtor, the following information must be stated for those persons: if it is a legal entity, then the physical address, main state registration number, date of registration and taxpayer identification number; however, if it is an individual, then the recoveror’s passport data and, if such information is available, the debtor’s passport data and place of work.
Now it is no longer required to submit an extract from the unified state register of rights to real estate and transactions in order to make a writ of execution to foreclose on mortgaged real estate.
It is important to note that according to the amendments to the Federal Law on Enforcement Proceedings, now it is not mandatory to have an agreement on out-of-court foreclosure on mortgaged property to initiate enforcement proceedings on the basis of a notary’s writ of execution.
Thus, considering the amendments that have been made, the possibilities of using a notary’s writ of execution as a tool for out-of-court collection of debt, recovery of property or foreclosure have been considerably expanded. At the same time, the very procedure of making the writ of execution has been regulated in more detail.
6. A new basis for relief from the burden of proof in the Russian Federation Commercial (Arbitrazh) Procedure Code: confirmation of the facts by a notary when a notarization has been done
Federal Law No. 391-FZ of December 29, 2015 introduced to Article 69 of the RF Commercial Procedure Code (grounds for relief from the burden of proof) a part five, according to which facts confirmed by a notary if a notarization has been done do not need to be proved, if the authenticity of the notarized document has not been refuted by filing an application concerning falsification of evidence, or if the notarization has not been canceled according to the procedure of Chapter 37 of the RF Civil Procedure Code (consideration of statements of completed notarizations or refusal to complete them). The law entered into force on December 29, 2015.
The establishment of a new ground for relief from the burden of proof, a notary’s confirmation of the relevant fact if a notarization has been done, is a legislative reinforcement of the presumption that a notarization is credible. This presumption is contained in the Basic Principles of the Latin Notary System and the notary community has long and actively promoted its enshrinement in the Russian legislation. As a result, on January 1, 2015, a similar provision was introduced to the RF Civil Procedure Code (Article 61(5) of the RF Civil Procedure Code), and one year later the new ground for relief from the burden of proof appeared in the RF Commercial Procedure Code.
When analyzing Article 69(5) of the RF Commercial Procedure Code, first of all one should note the limits of evidentiary effect of the notarization. Based on a literal interpretation of the law, the parties are relieved from proving all circumstances confirmed by a notary if a notarization has been done.
Nevertheless, in our opinion, the literal interpretation of that provision of law is questionable, and in future we should expect clarifications from the higher courts and, first of all, from the RF Supreme Court on limiting the scope of facts confirmed by a notary which the parties can be relieved from proving.
The literal interpretation of this provision of the law is flawed because, when doing a notarization the notary confirms many facts, but not all of them should be considered circumstances that do not need to be proved.
The circumstances which the parties are relieved of proving should only include those facts that were personally witnessed by the notary as a qualified witness, in particular:
- the date and place where the act was drawn up;
- the fact that the parties were present, their identities, the fact that they signed the document;
- the fact that the parties made certain statements;
- the fact that amounts of money, things and other property were transferred.
It is important to note that these circumstances do not need to be proved either in court proceedings in which the parties present before the notary take part, or in proceedings with other parties.
Therefore, the limits on the parties that are typical for other circumstances that do not need to be proved according to Article 69 of the RF Commercial Procedure Code (circumstances established by a judicial act shall not be proved when considering another case only if the same parties participate in it) should not apply to that category of circumstances.
On the contrary, circumstances established by a notary as a result of checking, for example, the authority of the representative, or that the seller owns the property, etc., may be refuted according to the general rules, because Article 69(5) of the RF Commercial Procedure Code should not apply to them. This is because a notary has limited authority when doing a notarization, and because the notary acts only within an indisputable jurisdiction.
7. The adoption of Federal Law No. 297-FZ on Jurisdictional Immunities of a Foreign State and Property of a Foreign State in the Russian Federation of November 3, 2015 and the relevant amendments to the procedural codes (the introduction of Chapter 33.1 to the RF Commercial Procedure Code and Chapter 45.1 to the RF Civil Procedure Code)
Federal Law No. 297-FZ on Jurisdictional Immunities of a Foreign State and Property of a Foreign State in the Russian Federation of November 3, 2015 entered into force on January 1, 2016. In accordance with this law Russia enshrined in its legislation its refusal to apply the model of absolute jurisdictional immunity in favor of the model of limited (functional) immunity.
The key difference between the two existing approaches is that absolute jurisdictional immunity supposes that it is possible to join a foreign state to litigation in the Russian courts, to apply injunctions to it and to enforce court awards against it only if such state agrees. The model of limited jurisdictional immunity, for its part, supposes that it is possible to refuse to grant a foreign state immunity from prosecution in the courts, from injunctions and the enforcement of court awards in certain cases.
One of the most important innovations is the proclamation of the principle of reciprocity in matters of applying jurisdictional immunity in the Russian Federation, in accordance with which the jurisdictional immunities of a foreign state may be limited if it is determined that limitations concerning the jurisdictional immunity of the Russian Federation and its property exist in that foreign state.
This law also discusses cases where immunity is not granted to foreign states, in particular, with respect to disputes connected with participation in civil-law transactions, entrepreneurial and other economic activity, labor disputes, disputes for compensation of harm, disputes related to intellectual property or property rights.
Immunity against injunctions and enforcement of a court award is granted to a foreign state in all cases other than situations where the foreign state clearly expressed its consent to injunctions and/or enforcement of a court award, and if the foreign state set aside (designated) property in the event of injunctions and/or if the court were to grant a claim.
In connection with the adoption of the above-mentioned federal law, new chapters were added to the RF Civil Procedure Code and the RF Commercial Procedure Code. These chapters set forth the specifics of proceedings involving foreign states (Chapter 33.1 of the RF Commercial Procedure Code and Chapter 45.1 of the RF Civil Procedure Code). Other than those that were borrowed from Federal Law No. 297-FZ of November 3, 2015, we may name among the key features of court proceedings involving foreign states the need to translate the statement of claim into the official language of the foreign defendant state, resolving the issue of whether there is jurisdictional immunity at the preliminary court hearing, and the inability to apply court fines to foreign states.
We note that Russia’s refusal to apply jurisdictional immunities to relations not directly connected with a foreign state’s exercise of its sovereign authority is not unique. The United Nations Convention on Jurisdictional Immunities of States and Their Property adopted in 2004, to which the Russian Federation is a signatory, set forth similar cases in which immunity is not granted. However, it should be noted that the convention has not yet entered into force because there are not enough states party.
8. Amendments to the rules of the RF Civil Procedure Code about jurisdiction of individuals’ disputes with search engine operators over exercise of the “right to be forgotten”
The Federal Law on Amendments to the Federal Law on Information, Information Technologies and the Protection of Information and Articles 29 and 402 of the RF Civil Procedure Code entered into force on January 1, 2016. This law governs the substantive-law and procedural aspects of the so-called “right to be forgotten.”
This right was first enshrined in the European Union legislation. It was most fully detailed in the European Union Court of Justice ruling on the so-called case of Costeja v. Google, as a result of which an individual was granted the right to demand that a search engine operator delete search results that concern him personally, under certain conditions.
In the terminology of Russian law, the “right to be forgotten” is an individual’s request to a search engine operator that disseminates advertising on the Internet aimed at attracting consumers attention. The subject of the request that the search engine stop displaying links to pages of sites allowing access to information about the applicant. The search engine operator must grant such an individual’s request in any of the following three conditions: information about the applicant is disseminated in violation of Russian law, is inaccurate or has become irrelevant for the applicant.
If the search engine operator refuses to grant the request, the applicant may file a statement of claim with a court against the operator to stop displaying links to the information.
In connection with the appearance of a new category of claims, lawmakers have made the relevant adjustments to the RF Civil Procedure Code, namely, to the rules about the territorial jurisdiction of disputes.
For example, part 6.2 providing for the possibility to file a claim for an operator to stop displaying links with a court at the plaintiff’s place of residence has been added to Article 29 of the RF Civil Procedure Code, which governs the plaintiff’s choice of jurisdiction.
Article 402 of the RF Civil Procedure Code, which governs the jurisdiction of cases involving foreign persons, has been amended to empower Russian courts to examine cases involving foreign persons if the defendant disseminates advertising on the Internet aimed at attracting the attention of Russian consumers. Is obvious that this rule makes it possible to file claims against major foreign search operators. Moreover, if the plaintiff resides in Russia, then the plaintiff may file claims against a foreign operator with a Russian court in any event, if the subject of the claim is to stop the search engine operator from displaying links.
It is noteworthy that amendments were made only to the RF Civil Procedure Code. Likely the legislators assumed that such claims are only within the competence of the courts of general jurisdiction. Nevertheless, it will be necessary to wait for clarifications from the RF Supreme Court to finally resolve this issue.
9. The adoption of Federal Law No. 41-FZ of March 8, 2015 on amendments to the RF Civil Procedure Code, the RF Commercial Procedure Code and the Federal Law on Enforcement Proceedings regarding the possibility of issuing and sending enforcement documents electronically
The adoption of Federal Law No. 41-FZ of March 8, 2015 was intended to improve the procedure of enforcing judicial acts and is one of the stages of implementing the program to develop the judicial system.
The main innovation is the ability for a court to issue and send enforcement documents (writs of execution, court orders, decisions on administrative offense cases) for execution in the form of an electronic document with an enhanced electronic signature. In particular, the court has received such an opportunity within civil, criminal and administrative procedure. At issue are mainly those instances where the judgment creditor is petitioning for the court to send an enforcement document for execution.
The new ability to send enforcement documents electronically does not supersede the right to receive and submit enforcement documents in hard copy. Sending an enforcement document electronically is the prerogative of the court and is considered an alternative form of presenting enforcement documents for execution. An enforcement document in hard copy will not be issued when an enforcement document is sent electronically.
Rules enabling the parties to enforcement proceedings to exchange documents electronically were added to the legislation on enforcement proceedings with the adoption of this act.
Now the parties to enforcement proceedings are entitled to file petitions, explanations, recusals and complaints to an official of the court bailiff service in the form of an electronic document signed with an electronic signature. Banks and other lending institutions are now required to promptly execute an order freezing the debtor’s funds and to report to the court bailiff in writing or in the form of an electronic document signed by the relevant official using an enhanced electronic signature the details of the debtor’s accounts and the amount of the debtor’s funds frozen on each account.
The above-mentioned amendments are intended to speed up document flow and, as a consequence, the efficiency of enforcing judicial acts. However, we note that a number of procedural issues related to the technical part of using electronic document flow (for example, recording the sending of electronic documents, the procedure for recalling enforcement documents sent in electronic form, etc.) remain open at this time. It should also be borne in mind that not all courts have the technical capability to send electronic enforcement documents at this time. Therefore, some time will be needed for the electronic document flow system to fully operate in the enforcement proceedings system.
10. The introduction of a number important amendments to the Federal Law on Enforcement Proceedings intended to provide additional guarantees to the judgment creditor and to increase the efficiency of the court bailiffs. In particular, the possibility of a court bailiff limiting a debtor’s right to drive vehicles has been provided
Federal Law No. 57-FZ of March 8, 2015 made a number of amendments to the Federal Law on Enforcement Proceedings. Some of the innovations clarify the procedure for executing enforcement documents if the debtor is granted performance in installments or a deferral.
For example, the new version of Article 21(9) of the Law on Enforcement Proceedings expressly provides that the judgment creditor has the right to present an enforcement document for execution only the day after the deadline for complying with the requirements expires (if the debtor was given such a deadline), or the day after the deadline granted to the debtor as a deferral or installments expires. This limitation does not affect enforcement documents for the recovery of a fine imposed as punishment for a crime. If an enforcement document is presented for execution prematurely, a court bailiff shall issue a decision refusing to initiate enforcement proceedings.
However, it should be borne in mind that if the debtor on more than two occasions has not complied with some of the requirements contained in the enforcement document for which it was granted installment payments, the effect of Article 21(9) of the Law on Enforcement Proceedings shall not apply. In practice, the lack of detailed regulation of the issues described above previously led to the appearance of additional disputes that were not always clearly resolved.
Another part of the important amendments to the Federal Law on Enforcement Proceedings was intended to increase the efficiency of court bailiffs and to reduce the number of disputed situations when levying execution on assets and funds. For example, part 14.1 was introduced to Article 30 of the law, according to which in the decision to initiate enforcement proceedings the court bailiff orders the debtor to submit documents confirming that it has assets and income on which execution cannot be levied, including funds on accounts, in deposits or being kept by banks and other lending institutions, as well as the property that is the collateral.
The next group of amendments to the Law on Enforcement Proceedings introduced by Federal Law No. 340-FZ of November 28, 2015 is intended to create additional incentives for debtors to pay off their debts on time. Now, if a debtor fails to comply with the requirements of an enforcement document the court bailiff may issue a decision temporarily restricting the debtor’s exercise of a special right until the requirements of the enforcement document are met in full, or until grounds for canceling the restriction appear (Article 67.1). This means restricting the debtor’s right to drive vehicles (motor vehicles, aircraft, boats and river craft, etc.).
These restrictions apply when, for no good reason, a debtor does not respond on time to claims for collection of support payments, to pay compensation of harm caused to another person’s health, to pay compensation in connection with the death of a breadwinner, property damages and/or moral damages caused by a crime, claims of a non-financial nature connected with the raising of children, and also to claims to collect an administrative fine imposed for violating the procedure for exercising a special right.
The law clearly sets forth the list of cases in which restriction on the debtor’s exercise of a special right cannot apply, for example, if establishing a restriction deprives the debtor of his or her main source of funds or the amount of the debt is not more than RUB10,000.
In light of these amendments, special rules were also added to the RF Code on Administrative Offenses establishing liability for violating a temporary restriction on the exercise of a special right.