On 31 May 2011, the Presidium of the Supreme Arbitrazh Court of the Russian Federation (the "SAC") published informational letter No. 145 "Reviewing the court practice of considering claims to recover damages caused by governmental bodies, local authorities and their officers" (the "Letter").

In the Letter, the SAC has demonstrated a number of rather progressive approaches that may have a positive effect on protecting businesses from illegal administrative practices. Specifically, the Letter directs the courts towards limiting instances when governmental bodies may avoid compensating for damages relating to the actions of third parties.

For example, if a governmental body confiscates property during proceedings relating to an administrative offence, and the body transfers the property to a third party for safekeeping, the governmental body will still be responsible for this property, and the owner of the property may seek recovery of losses (actual damages and lost profit) caused by its improper storage. A similar approach applies with respect to property arrested and confiscated during enforcement proceedings, with the government compensating for any loss of or damage to such property.

Damage caused by a unitary enterprise when carrying out an unlawful administrative act will be compensated by the governmental body that adopted the unlawful act rather than the enterprise. As stipulated in Article 1080 of the Civil Code of the Russian Federation, when damage has been caused by the joint action of several persons, one of whom is a government official, the damage should be compensated jointly and severally. Consequently, a victim is entitled to seek full compensation of damages from the state.

Damage caused by the unlawful application of provisional measures during proceedings relating to an administrative offence will also be compensated by the state budget. As follows from the Letter, the following provisional measures will be deemed unlawful: (i) those that were not necessary in particular circumstances; (ii) those that do not meet the principles of reasonableness and proportionality and that were not adopted on valid factual grounds; and (iii) those that do not correspond to the purposes of the provisional measures as prescribed by the law. The SAC's position appears progressive, as it allows for judicial review of a decision taken by an administrative body to impose provisional measures.

The Letter also provides for compensation for damages caused by a governmental official who omits an act, including a court bailiff who is responsible for enforcing a court decision. For example, the collecting party had informed the court bailiff that the debtor had a certain amount of funds on his/her account that could partially cover the adjudicated amount. However, the bailiff ignored this information and took no steps to arrest and seize the funds. Later, the debtor withdrew the cash from the account and the enforcement proceedings were terminated because the debtor no longer had sufficient funds. In the SAC's opinion, in this situation, the bailiff, not the debtor, should be held liable for the damages caused to the collecting party. The damages are equal to the funds that the debtor had on the account and the bailiff did not seize.

Consequently, the SAC's stance should strengthen the ability of the courts to protect the rights of businesses dealing with public administrators. In particular, the position that damages caused by governmental bodies and officials may be compensated is a positive sign for businesses in general.