Как экономические споры разрешаются в судах Российской Федерации сегодня? А что ждет нас завтра?
Краткий обзор от партнера Александра Ванеева, советника Ильи Сорокина, старшего юриста Максима Кузьмина и младшего юриста Антона Паткина для международного справочника International Comparative Legal Guide.
What are the main methods of resolving commercial disputes?
There are several statutorily regulated methods of resolving commercial disputes. The first of them is mediation, i.e. amicable pre-trial settlement reached by the parties with the assistance of a professional mediator (available also after the trial is commenced). Although this institute was introduced in Russia fairly long time ago, it is still rarely applied among companies and entrepreneurs.
Another resort for resolving business controversies available in Russia is arbitration (which shall not be confused with arbitrazh, i.e. commercial litigation administered by state courts – the subject-matter of this guide). The legal framework applicable to arbitration varies to certain extent depending on whether the case at hand is purely domestic or cross-border (involving a foreign party or foreign assets). Recently, the major changes were introduced into Russian arbitration law aimed at making the arbitration procedure more consistent with the best world practices and trends. However, there are certain limitations to the types of disputes which can be arbitrable under Russian law (e.g. some kinds of corporate disputes and all public procurement disputes are non-arbitrable, concession disputes are arbitrable with certain reservations).
The vast majority of commercial disputes arising in Russia are settled in state commercial (arbitrazh) courts. It should be noted, that in 2016, the mandatory pre-trial procedure was introduced into the proceedings before commercial courts in respect of certain categories of disputes – the claimant is allowed to apply to the court only after expiry of 30 days after sending a pre-trial complaint (see Section 7).
What are the main procedural rules governing commercial litigation?
The main procedural rules governing commercial litigation are as follows:
— the Commercial Procedural Code No 95-FZ dated 24 July 2002;
— the Federal Law No 229-FZ “On enforcement procedure” dated 2 October 2007;
— the Federal Law No 127-FZ “On insolvency (bankruptcy)” dated 26 October 2002.
Besides that, relevant Resolutions of Plenary Sessions of the Supreme Court (and of the Higher Commercial Court, currently merged into the Supreme Court) provide guidance on how those rules shall be interpreted and applied.
What is the structure and organisation of local courts dealing with commercial claims? What is the final court of appeal?
The system of commercial courts in Russia consists of four levels. The first instance courts are the courts of the regions of the Russian Federation, their total number is 85. Save for several exceptions (e.g. the Saint-Petersburg and Leningrad Region, the Nenetskiy Autonomous Circuit and some other) there is one such court in each republic, region, federally subordinated city, etc in Russia.
Decisions of the first instance courts may be appealed to one of the 21 Commercial Appellate Courts. Subsequently, cassation appeals may be filed with one of the 10 Circuit Commercial Courts. Since there are two cassation stages under the Commercial Procedural Code, second cassation appeal may be submitted to the Chamber on Economic Disputes of the Supreme Court.
Ultimately, decisions may be challenged on the very limited number of grounds (e.g. due to violation of certain fundamental rights and freedoms by lower courts’ decisions) before the Presidium of the Supreme Court (see Section 17).
In addition to this general structure of commercial courts, there is also the Intellectual Rights Court. That court acts as the first instance court in relation to specific categories of cases involving intellectual rights. The Intellectual Rights Court also considers cassation appeals against decisions of the first instance and appellate courts on intellectual rights disputes.
How long does it typically take from commencing proceedings to get to trial?
The statutory deadline for the whole consideration of a case is three months from the date of filing of a statement of claim. In practice, this is achievable only for simple cases and for more complex disputes the period can be extended to 4-6 months or even a year (for example, for corporate disputes).
In general, a first preliminary hearing is held one month after filing of a statement of claim. A hearing on the merits is ordinarily scheduled within one month after the preliminary hearing. However, depending on the circumstances of a case, the court may adjourn a hearing on the merits, which often happens in practice.
Are hearings held in public and are documents filed at court available to the public?
Are there any exceptions? As a general rule, hearings are public and all court decisions are placed in a special electronic system, which is publicly accessible (https://kad.arbitr.ru/). However, documents filed at court by the parties are not available to the public.
Under certain circumstances, the parties may request the court to close the proceedings to preserve the confidentiality of their relationship or prevent disclosure of a state, commercial or other statutorily secured secret (e.g. banking secret).
What, if any, are the relevant limitation periods?
The general limitation period is 3 years from the date when the claimant became aware or should have become aware of violation of its right and of the proper defendant for the claim, but in no case may a limitation period exceed 10 years from the date of violation.
The legislative acts may provide for different limitation periods in respect of certain types of claims (for example, a claim for challenging a voidable transaction may be filed within 1 year).
As opposed to some foreign jurisdictions, limitation periods cannot be changed by agreement of the parties.
What, if any, are the pre-action conduct requirements in your jurisdiction and what, if any, are the consequences of noncompliance?
After amendments adopted in 2016 and 2017, the mandatory pre-trial procedure was introduced with respect to monetary claims, except for certain categories of disputes. Before initiating court proceedings, the claimant is required to send a pre-trial complaint to the opponent and wait for 30 days, unless the other period is agreed or specified by the law.
Should the pre-trial procedure be not met, the court may refuse to consider a claim. Also, the court may direct the claimant to reimburse all costs of the proceedings.
How are commercial proceedings commenced? Is service necessary and, if so, is this done by the court (or its agent) or by the parties?
A court commences proceedings within five days after filing a statement of claim. Following that, the court officially notifies the parties by sending a court ruling by which the proceedings were commenced.
However, once such initial notification of the parties is made, it is subsequently a burden of each party to monitor the conduct of proceedings and the dates of hearings – the lack of further notifications cannot be a ground for challenging a court’s decision. Such monitoring has to be done through an online court system (https://kad.arbitr.ru/), which also allows to make electronic filing of a statement of claim, a statement of defence and other procedural documents.
How does the court determine whether it has jurisdiction over a claim?
When the court takes a decision on jurisdiction it inter alia considers whether:
(i) it has is a material jurisdiction over a claim, i.e.whether a dispute at hand is of commercial nature, but not purely a civil one with no involvement of companies and individual entrepreneurs;
(ii) it has a territorial jurisdiction over a claim.
If the court establishes that it has no jurisdiction over a claim, it refuses to commence proceedings or terminates them if a case has already been opened.
How does the court determine what law will apply to the claims?
The general conflict of law rule is that the court applies the law which was chosen by the parties of a contract. Where there is no agreement of the parties on applicable law, court applies the law of the country where, at the time of the conclusion of the contract, the place of residence or principal place of business of the party making the decisive contractual performance is located. For most types of contracts the national legislation provides which party’s performance is considered to be of decisive importance.
However, if so follows from the legislation, substance of a contract or from totality of relevant circumstances of the case, court will apply the law of the country, with which the contract has the closest connection (the doctrine of proper law).
In case a foreign law is applied, a court is obliged to establish the content of its rules in compliance with the official construction, application practices and doctrine thereof. For the purposes of the latter, a court may either use expert services or apply to the Ministry of Justice of the Russian Federation for assistance and clarification of foreign law. Also, the parties may present documents confirming the content of foreign law – in practice, expert reports of foreign lawyers are often produced by the parties.
In what circumstances, if any, can claims be disposed of without a full trial?
The Commercial Procedural Code provides for two types of procedures, which do not suppose a full trial: summary proceedings (uproschennoye proizvodstvo) and writ proceedings (prikaznoye proizvodstvo).
Summary proceedings are inter-partes proceedings which are conducted solely on documents without a hearing. They are available for claims not exceeding RUB 500 000.
Writ proceedings are ex-parte proceedings – the court issues a writ of execution within 10 days after receipt of a claimant’s application and then notifies a debtor. If the debtor files its objections, the writ of execution should be cancelled, and the claimant may initiate ordinary proceedings. Writ proceedings are available for claims not exceeding RUB 400 000.
What, if any, are the main types of interim remedies available?
Interim remedies include: (i) attachment of debtor’s assets, (ii) injunction, (iii) imposition of certain duties (duties to perform certain acts), (iv) temporary transfer of assets in dispute to the claimant or a third party, (v) stay of enforcement. This list is not exhaustive and the parties may request the court to grant any other interim measures provided they are proportionate to the amount of claim.
After a claim has been commenced, what written documents must (or can) the parties submit and what is the usual timetable?
After receipt of a statement of claim, a respondent is obliged to submit a statement of defence. The Commercial Procedural Code does not specify a deadline for this, but quit often a time limit is set by the judge.
In practice, after initial exchange of a statement of claim and a statement of defence parties often provide further written submissions clarifying their positions, either at the request of the judge or on their own initiative.
What, if any, are the rules for disclosure of documents? Are there any exceptions (e.g. on grounds of privilege, confidentiality or public interest)?
Russian procedural law does not provide for a mechanism of disclosure as in common law countries. The general rule is that each party bears a burden of proof in respect of its position, and therefore should provide the necessary supporting evidence. However, the court may order a respondent or a third party to provide a particular evidence under the party’s request if the following requirements are met:
1. the evidence is relevant to the case;
2. a requesting party is unable to get the evidence by itself;
3. location of the evidence is identified.
Such mechanism does not allow to request categories of documents and the evidence requested should be clearly specified. Generally, the confidentiality of documents does not prevent their disclosure under a court’s order, but the parties may request the court to close the proceedings due to the confidentiality reasons.
How is witness evidence dealt with in commercial litigation (and, in particular, do witnesses give oral and/or written evidence and what, if any, are the rules on cross-examination)? Are depositions permitted?
Under the request of a party, the court may call a witness to testify at the hearing. Testimony is provided in an oral form, but at the suggestion of the court a witness may provide a written statement. The procedure for examining a witness is not regulated. In practice, a witness is first examined by the judge and then by the parties. Deposition are not known to the Russian system of law.
In general, witnesses are rarely used in the commercial courts and the judges prefer to rely on documentary evidence.
Is expert evidence permitted and how is it dealt with? Is the expert appointed by the court or the parties and what duties do they owe?
Expert opinion is a commonly used type of evidence in Russian proceedings. Often parties provide expert reports to support their positions. While such reports may be accepted by the court, they do not formally qualify as an expert opinion, because under the Commercial Procedural Code an expert should be appointed by the court. Each party may provide candidates to be nominated as an expert, but the final decision is taken by the judge, who can appoint an expert even disregarding the parties’ nominations. In most cases, the courts appoint professional experts employed by experts' organisations, both state and private.
An independent expert opinion must be provided to the court in a written form. After that, an expert may be called to a court hearing to clarify his/her opinion and answer questions of the judge and the parties. By law, an expert evidence is of equal weight with other types of evidence that must be examined by the court as a whole. However, in practice the courts rely heavily on expert opinions.
Can final and interim decisions be appealed? If so, to which court(s) and within what timescale?
Final decisions (judgements) of the courts of first instance may be challenged in the appellate courts. An appeal may be submitted within one month from rendering the judgement. The appellate court may accept the appeal if it finds that the reasons for missing this deadline are justified.
Provided the case has been reviewed by the relevant appellate court or such court has refused to restore the time limit for filing an appeal, the respective appellate court’s resolution may be challenged in one of the circuit commercial courts within two months from entry into force of such resolution.
As discussed in Section 3, there are two cassation stages under the Commercial Procedural Code. Following the first cassation above, a second cassation appeal may be submitted to the Chamber on Economic Disputes of the Supreme Court within two months from entry into force of latest decision on the case. Firstly, an appeal is reviewed by one of the judges to decide whether it can be referred for consideration of that chamber. The grounds for a second cassation appeal are limited and require proving gross violation of law.
Finally, the last resort within commercial litigation proceedings is the review by the Presidium of the Supreme Court (supervision proceedings). That option is available within three months from entry into force of the latest decision on the case. Before being passed to the Presidium of the Supreme Court a motion for supervisory review is considered by one of the Supreme Court’s judges, similarly to the second cassation appeal. The grounds for appeal before the Presidium of the Supreme Court are also limited, being: (i) violation by the decision of the fundamental rights and freedoms guaranteed under the Constitution of the Russian Federation, Russia’s treaties or rules of international law; (ii) damage inflicted by the decision to the public interest or (iii) inconsistency of the decision with the uniformity of judicial practice. According to the official statistics, the Presidium of the Supreme Court has not considered a single commercial dispute during a year of 2017, although 503 motions for supervisory review have been submitted thereto.
Interim decisions of the courts may be appealed by the parties only if challenging of a particular interim decision is allowed by the Commercial Procedural Code. By way of example, the parties may appeal a decision on interim measures, a decision to stay or terminate the proceedings, a decision refusing involvement of third parties.
What are the rules governing enforcement of foreign judgments?
The recognition and enforcement of foreign judgements is carried out under the relevant international treaty between the Russian Federation and the state where the judgement was made. In the absence of such treaty, the recognition and enforcement is performed on the grounds of reciprocity, i.e. if the courts of the respective foreign state recognize and enforce decisions of the Russian сourts. Even if the reciprocity cannot be established and verified, there are cases when foreign judgements have been recognised and enforced on the basis of the principle of international comity.
The court may refuse to recognise and enforce a foreign judgment only on limited grounds which relate primarily to procedural issues (for example, such as lack of due notification of the respondent, violation of the exclusive competence of Russian courts). In exceptional cases, the recognition and enforcement can be denied if a foreign judgment contradicts the Russian public policy.
According to the recent amendments, judgments that do not require enforcement (declaratory judgments) are recognised without any special proceedings if its recognition is provided by international treaty and Russian federal legislation. However, interested parties can file objections against recognition of such judgments with Russian courts within one month after they learn of the foreign judgment.
Can the costs of litigation (e.g. court costs, as well as the 19. parties’ costs of instructing lawyers, experts and other professionals) be recovered from the other side?
Litigation costs can be recovered from the losing party in accordance with the “loser pays” principle. If a claim is upheld only partially, both parties cover the expenses proportionately. At the same time, regardless of the outcome, the court is entitled to allocate all costs of litigation on the party abusing its procedural rights. An application for recovering the litigation costs may be filed within six months from the day of entry into force of the latest decision issued on the merits of the case. Litigation costs consist of the stamp duty and other expenses connected with the consideration of the case, including witness, interpreter and expert expenses, attorneys’ fees. However, recovering the full attorneys’ fees may be difficult as they are subject to review by the court as to the reasonableness of the amount. It is rare for a party to recover 100% of its costs and the courts tend to significantly reduce the attorneys’ fees.
What, if any, are the mechanisms for joining third parties to ongoing proceedings and/or consolidating two sets of proceedings?
Third parties may be joined to the case on the court’s initiative, at the request of the parties or their own application. The criteria for joining third parties is that the outcome of the case may affect their rights and obligations. Also, a third party may intervene into the proceedings by filing its separate claim if it relates to the subject matter of the case.
Two or more sets of proceedings may be consolidated if the court finds this appropriate in case the parties and/or claims within the disputes coincide. The decisive factor for the court is to exclude the risk of conflicting judgements.
Are third parties allowed to fund litigation? If so, are there any restrictions on this and can third party funders be made liable for the costs incurred by the other side?
At this moment, there is no regulation in regard to litigation funding. Therefore, third parties are allowed to fund litigation, however due to the absence of any regulation, they are not legally recognized as funders. That being said, there are no restrictions and liabilities for the costs incurred by the other side.
What, in your opinion, is the main advantage and the main disadvantage of litigating international commercial disputes?
Compared to other jurisdictions, Russian commercial litigation is rather fast and allows to get an enforceable judgement within 6 months (the time for consideration in both first and appellate instance courts). Also, over the recent years Russian courts have developed electronic systems of filings and databases for monitoring of cases, which significantly simplifies the process.
The main disadvantage is the high workload of the judges and, as a consequence, more complex cases may not be given a required attention. Also, Russian commercial ligation still remains to be predominantly based on documentary evidence, paying less attention to the parties’ witnesses and experts. For many years Russian judges have been known for rather formalistic approach in application of law, however now the situation is changing due to the approaches and guidance of the Supreme Court.
What, in your opinion, is the most likely growth area for disputes for the next five years?
First of all, due to certain turbulence in Russian economy and negative financial factors, it is likely that the growth of insolvency litigation will continue. Thus, in each year starting from 2015 commercial courts have been taking about 12-13 000 decisions on commencing one of insolvency procedures in relation to Russian companies.
Besides that, a large amount of disputes is likely to be caused by the increased application of public-private partnership (PPP) mechanisms allowing public budgets to cut the costs of creating infrastructure by sharing those costs with private investors. However, the courts are still facing difficulties while considering PPP disputes and the development of PPP case law in nearest years is expected.
Also, recently a new category of disputes relating to crypto technologies has emerged. In 2018, the Ninth Appellate Commercial Court courts has recognized a crypto currency as an asset and included it into the bankruptcy estate of the debtor. Due to the rapid development of crypto technologies, the courts will have to further deal with various crypto technologies issues not directly regulated by law.
What, in your opinion, will be the impact of technology on commercial litigation in the next five years?
Over the last 10 years, different technologies significantly facilitated the conduct of commercial litigation:
— In 2009-2010, the Higher Commercial Court launched an electronic court system allowing parties to monitor all court cases and review judgements (https://kad.arbitr.ru/);
— At the same time, another system was launched, which provided for electronic filing of a statement of claim and other procedural documents (https://my.arbitr.ru/);
— In 2010, procedural amendments allowed to participate in the hearing in the one court through the video-conference arranged by the other court. Also, some hearings are translated publicly online.
Since recently, in relation to some cases it is possible to get an electronic access to all case materials; It is expected that the rise of modern technologies, including, first of all, digital intellect, will continue to simplify the work of the courts, especially with respect to routine operations.