The recently adopted Regulations of the Plenum of the Supreme Arbitration Court of Russia No 16 “On the freedom of contract and its limits” (the Regulations) contain conclusions generally aimed at a more liberal interpretation of the legal norms and contractual provisions, providing the courts with rather broad authoritiy in interpreting those norms and provisions.

In particular, the Regulations proclaim that the norms determining the rights and obligations of the parties to the contract shall be interpreted based not only on the literal meaning of the words and expressions of the relevant legal norms, but also by using the essence and purpose of the legal regulation (i.e. taking into account the purposes which the legislator wanted to achieve at the time of adoption of the legal norm).

Most importantly, the Regulations seem to change the old practice of interpreting all the legal norms as imperative (i.e. not allowing its application in any other way except for the way described in the law) unless the norm specifically indicates that it is dispositive (allowing another way of its application on the party’s disposal). The Regulations state that the legal norm shall be deemed as imperative only provided that it contains a specific prohibition to act in any other way. In the event there is no such prohibition, the legal norm might be deemed imperative only when:

  • based on the purposes of legal regulation, it is necessary for the protection of specially protected legal interests (e.g. a third party, the “weaker” party to a contract, public interests, etc.) or it is necessary in order to prevent a gross violation of the balance of the parties’ interests; or
  • if based on the essence of the legal regulation the norm is imperative.

All other legal norms (those not falling into one of the above categories) shall be considered as dispositive norms even when there is no direct indication of that.

Generally, in the event of a dispute as to whether the interpretation of the norm in question is imperative or dispositive, it is the court which will ultimately settle the matter.

Another important issue adopted by the Regulations is the introduction of the “contra-preferentum” rule of interpretation of legal norms. Under this rule, where there is doubt about the meaning of the contract, and it is impossible to establish the true common will of the parties taking into account the purposes of the agreement, previous relationships and correspondence between the parties, customs, as well as their subsequent behaviour, the words will be construed against the person who put them forward, i.e. the agreement shall be interpreted in favour of the counter-party and not the party which prepared the draft of the agreement in question. Therefore, unless proven otherwise, this rule applies against the party responsible for drafting or incorporating a clause for its own benefit, and when such party acts a professional organization in certain sphere (e.g. banks in credit/loan agreements, insurers in insurance agreements, etc.), there is an assumption that it is the “stronger” party in relationships and that the agreement shall be interpreted in favour of its counter-party.