On 14 October 2011, the Supreme Commercial Court of the Russian Federation posted an information letter on its official site reviewing the judicial practice of resolving conflicts in respect of the application of the provisions of the Civil Code of the Russian Federation (the "Civil Code") to credit agreements (the "Letter").
Specifically, the Letter clarifies that:
- a bank has the right to charge a commission in addition to the interest rate if the commission is set for rendering a separate service to a client (in all other cases, the court must evaluate whether a commission may be charged for using credit);
- a credit agreement may contain a limit on a borrower receiving other credit, issuing a suretyship and pledging its assets during the term of the credit agreement;
- the court has the right to award damages from a bank if the amount of credit has not been transferred to the borrower within the period set by the agreement and there are no obvious circumstances attesting to the fact that the amount to be given to the borrower would not be repaid within the specified period (clause 1, article 821 of the Civil Code);
- the court may rule that an increased interest rate (resulting from a borrower's event of default) is a penalty, and the court may decrease the relevant amount due based on article 333 of the Civil Code, which stipulates that if the penalty is manifestly disproportionate to the damages of the party, then the court has the right to decrease the penalty; and
- a bank must accept a third party's payment instead of the borrower.
These clarifications should be carefully considered by the banks as they may materially influence the current standard practice of entering into credit agreement with the companies and individual entrepreneurs.
[Information Letter No. 147 of the Presidium of the Supreme Commercial Court of the Russian Federation "Reviewing the judicial practice of resolving conflicts in respect of applying the provisions of the Civil Code of the Russian Federation on credit agreements", dated 13 September 2011]