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The Constitutional Court of the Russian Federation published a review of its second quarter of 2015

29 july 2015

On 16 July 2015, the Constitutional Court of the Russian Federation (CC) issued On the approval of the review of the Constitutional Court of the Russian Federation for the second quarter of 2015. The overview contains judicial decisions on the most important issues and is divided into four parts: the constitutional foundations of public law, the constitutional foundations of labor legislation and social protection, the constitutional foundations of private law, and the constitutional foundations of criminal justice. Several regulations are of interest to businesses.

In its ruling of 2 April 2015, No. 583-O, the CC interpreted the decision of the Commission of the Customs Union (CU) titled On the application of exemptions from customs duties on the import of certain categories of goods in the single customs territory of the Customs Union. The uncertainty and varying interpretations of Paragraph 4 of the order became the basis of the case in the CC. According to Paragraph 4, the goods imported from third countries that are the contribution of a foreign partner to a business in the CU shall be exempt from customs duties. However, a foreigner who withdraws from the partnership has an obligation to pay customs duties because that foreigner had taken advantage of tariff preferences, specifically, the elimination of customs duties. This procedure concerning the exit of a foreign legal entity from a business organization dates to the 2011 approval of the Commission of the Customs Union, which includes Russia, Kazakhstan, and Belarus.

The CC, having examined the submissions, found no grounds for the case and concluded that the possibility of granting retroactivity to Paragraph 4 already had come before the CC. Behind the inquiry to the CC was a similar dispute with another applicant. The Court of EuroAsian Economic Community (EurAsEC) admitted that “failure to attach the principle of retroactivity does not mean that legal relations that arose in the past remain unchanged and are not subject to new regulations in a new environment.” However, the CC found that, according the constitution, a law harming the interests of citizens and legal persons cannot be retroactive. The revision of the procedure for granting concessions for the period before 2011 harms the interests of citizens and legal entities, which is contrary to the constitution.

This act is of great importance. The CC found that, despite the priority of generally recognized principles and norms of international law over the judicial acts of domestic courts, the CC has the right to determine the extent of their compliance with the principles of Russian law, which it can use to assess the acts of international courts.

In its order of 18 May 2015, No. 10-P, the CC recognized Paragraph 2, Article 211, of the federal law On state registration of legal entities and individual entrepreneurs as unconstitutional. The contested provision stipulates that, if a legal entity has all the attributes of an inactive entity (an organization that did not submit documents and statements to the authorities and had no activity in at least one bank account for twelve months), the registering authority shall exclude it from the register.
As part of the complaint, the CC found that the applicant had confirmed in court the right to initiate bankruptcy proceedings against a debtor, and the court began its investigation. Nevertheless, since the debtor was an invalid organization, it was excluded from the register, according to Paragraph 2, Article 211 of the act. The debtor’s status resulted in the termination of the bankruptcy proceedings, and accordingly, the lender lost the opportunity to present their demands. The applicant then appealed to the CC, referring to the discrepancy between the provision and Article 46 of the Constitution.

The CC found that Paragraph 2, Article 211 of the federal law On State Registration of Legal Entities and Individual Entrepreneurs contradicts the constitution of the Russian Federation because the registering authority’s exclusion of the legal entity from the register prohibited the bankruptcy proceedings and restricted the rights of the creditor to attempt to claim their property.

The problem of evading debts long has been an issue. Since the introduction of “administrative closing” more than ten years ago, the “cleansing” of the registry and bankruptcy have been ineffective ways of tackling companies running their businesses only “on paper.” Now, with the adoption of this judicial act, business lost the opportunity “to be liquidated with debts,” and now the creditors have another means defending their legal interests.

The CC expressed an important legal position in its resolution of 8 June 2015, No. 14-P. The basis for the complaint was the uncertainty of Paragraph 1, Article 256, of the Code of Civil Procedure of the Russian Federation, according to which a citizen is entitled to apply to the court to challenge the actions and decisions of government agencies and officials within three months from the day after becoming aware of a violation of rights and freedoms. An ambiguous interpretation of rules resulted in rejecting a compensation claim for nonpecuniary damages filed after the entry into force of a court’s decision, which established the facts dealing with the violation.

Having considered the complaint of T. Romanova, regarding noncompliance with the provision of the constitution of the Russian Federation, the CC pointed out that the cases regarding public interaction do not require a person to apply to the courts for nonpecuniary damages and to demand that the court recognize the actions of the authorities and their officials as illegal at the same time. This procedure now is enshrined in the Code of Civil Procedure of the Russian Federation, and it is similar to that outlined in the Code of Administrative Procedure of the Russian Federation, which will come into effect in early September of this year. Consequently, the current procedure does not preclude a person from applying for compensation for nonpecuniary damages after having received a ruling on a case recognizing the actions or inactions of governments and their officials as illegal. Moreover, the CC noted that the statute of limitations does not apply to claims for compensation for nonpecuniary damages, by virtue of Article 208 of the Civil Code. The legislature provided no special terms in this situation.

The CC found that the provision enshrined in Article 256 of the Code of Civil Procedure of the Russian Federation cannot be grounds for refusal, due to an omission in the claim, if another court established that there was a violation of rights and freedoms.

Of course, this Regulation will improve the mechanism for protecting the rights of citizens by providing them with more opportunities to defend their interests.

The review can be found here.