The Constitutional Court of the Russian Federation acknowledged that the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation violates the right to judicial protection
On 10 December 2015, the Constitutional Court of the Russian Federation adopted Resolution number 25-E/2015, which recognized that arbitration courts wrongly applied the law and Paragraph 48 of Resolution of the Plenum of the Supreme Court of the Russian Federation (RPSCRF), No. 29, from 15 December 2004, On some issues regarding the application of the Federal Law “On Bankruptcy” (RPSCRF, No. 29 from 15 December 2004). The Constitutional Court considered the complaint of bankruptcy supervisor D. A. Tatarnikov concerning a discrepancy with the Constitution of the Russian Federation, Paragraph 1, Article 150, of the APC RF.
The dispute arose in connection with the appeal, to the arbitration court, of the interdistrict Federal Tax Agency’s Inspectorate (FTAI) of the Ivanovo Region to recognize the payments of loan debts of the bankruptcy trustee for the Municipal business management company LLC as illegal. The court partially satisfied the requirements of the FTAI. The administrator appealed the judicial act, but the Second Arbitration Appeals Court dismissed the case, citing Paragraph 1, Article 150, of the APC, and Paragraph 48, of the RPSCRF, No. 29, from 15 December 2004, which states that, if there is evidence in the corporate records of a debtor’s liquidation, the arbitral tribunal shall terminate of the review of all disputes, claims, and petitions. The arbitration appeals court dismissed the case because such a liquidation note existed for the Municipal business management company (case No. A17-4495/2010).
Tatarnikov appealed the matter to the Constitutional Court of the Russian Federation. According to him, Part 1, Article 150, of the APC, violated the right to judicial protection and the right to judicial review. Furthermore, laws cannot reduce the constitutional rights of citizens (Paragraph 1 and Paragraph 2, of Article 46; Paragraph 3, of Article 50; and Paragraph 3, of Article 55 of the Constitution of the RF). In this case, however, the meaning attached to the official interpretation and the enforcement practices of the arbitration courts, based on the norm of the APC mentioned above, eliminate the possibility of contesting the decisions of the arbitration court that impinge on the rights and duties of the bankruptcy trustee, regarding the insolvency of a legal entity and its liquidation.
The Constitutional Court found that the APC of the Russian Federation contains no provisions which prescribe a halt to proceedings if, at the time of liquidation of a debtor, there is an appeal of a decision of an arbitration court that arose during the course of a bankruptcy proceeding. In stopping the proceedings, the arbitration courts used Paragraph 48 of the RPSCRF, Number 29, from 15 December 2004.
The Constitutional Court recognized that recording the liquidation of a legal entity, because of bankruptcy, in the Unified State Register of Legal Entities (USRLE) cannot be grounds for terminating the proceedings in the appellate court in the matter of a bankruptcy trustee’s complaint about the decision a lower arbitral court, regarding rights and obligations. Otherwise, there is a violation of the requirement of an effective remedy, through the courts of justice, as well as the right to appeal. In other words, this practice makes it impossible to implement the guarantees of Paragraph 1, Chapter 2, Article 46, of the Constitution that refer to the right to judicial protection. As a result, the Constitutional Court pointed out that the norm of Paragraph 1, Article 150, of the APC, corresponds to the Constitution, so it follows that the courts wrongly applied an interpretation contained in Paragraph 48, of the RPSCRF, Number 29, from 15 December 2004, contradicting Paragraph 1, Chapter 2, Article 46, of the Constitution. In its decision, the Constitutional Court stated that court decisions, regarding the Tatarnikov, case are subject to revision. On 20 October 2015, Tatarnikov filed a petition to review the judicial act of the appeals court, based on the newly discovered evidence.
Obviously, in the interpretation contained in Paragraph 48 of the RPSCRF, Number 29, from 15 December 2004, the SAC had intended to exclude the possibility of filing claims when a debtor was in liquidation. Therefore, the arbitration courts began to apply it to other requirements, such as recognizing the actions of bankruptcy commissioners as illegal, when the applicant is not a liquidated legal entity, and in disputes when a court decision affects the rights and obligations of the bankruptcy trustee. In instances when there is a need to provide a basis for establishing damages, with the exception of self-regulatory organizations, the Constitutional Court, recognizing a clear contradiction with the constitution, protected the rights of the bankruptcy trustee.
Considering the resolution, the Constitutional Court did not seek to review the legal position of the Supreme Arbitration Court but to suppress the broad interpretation by the arbitration courts because this practice violated the rights that the Constitution of the Russian Federation guaranteed.
