Constitutional Court of the Russian Federation: Russian Federal Tax Service interpretations that are regulatory acts are subject to judicial challenge

The website of the Constitutional Court of the Russian Federation (CC RF) includes the court’s judgement of 26 February in the OJSC Gazprom Oil case. The CC RF ended the question about the legal status letters and clarifications of state bodies that have the characteristics of regulatory acts. The CC RF concluded that, since those acts have an impact on social relations, impact rights and duties of an indefinite number of people, and are subject to a variety of applications, they are legal acts that are subject to challenge.

According to the appellant, the letter of the Russian Federal Tax Service (FTS), dated 21 August 2013, No. AC-4-3-15165, About the mineral extraction tax, established taxpayers’ obligations that do not appear in tax legislation and recalculated tax liabilities for mineral extraction for past fiscal periods, after the taxpayer had fulfilled all obligations.

In 2013, the appellant brought the case before the CC RF to challenge the letter, arguing that the document was obligatory, therefore, it was a regulatory act. However, the CC RF refused to accept the argument, pointing out that the contested letter did not meet the formal requirements of a regulatory act. The court also held that challenges to the actions of the FTS fall under the jurisdiction of the arbitrazh courts.

The appellant brought a similar action before the Supreme Arbitrazh Court (SAC RF), which dismissed the case because the letter did not satisfy the obligatory requirement of a regulatory act. The court held that the letter was only “a clarification of the application of the tax authorities. 

Gazprom then applied to the CC RF, arguing that Paragraph 1, Article 342, of the Tax Code, and Paragraph 1, Part 4, Article 2, of the law About the Supreme Court of the Russian Federation, make the CC RF competent to hear the case. The appellant claimed that the current interpretation essentially restricts the right of the courts to challenge FTS’s letters and other interpretations, which should not be considered regulatory acts. The lawyers for Gazprom argued that the letters and other interpretations are formal understandings that serve as guidelines for all branches of the FTS and are not legal de jure acts.

In their judgment, the CC RF judges held that the contested provisions contradicted the constitution of the Russian Federation because they created legal uncertainty about the basis and conditions for challenging the FTS with respect to its decisions that have regulatory characteristics and explain tax legislation. Judicial refusal to protect taxpayers for not complying with these documents is a violation of the constitutional guarantees of the right to judicial protection. The CC RF dismissed the question of the constitutionality of Paragraph 1, Signature 3, Part 1 of Article 342 of the Tax Code because it did not apply in the specific case involving the applicant.

The CC RF clarified that it only is possible to challenge interpretations that state bodies issue when they have regulatory characteristics, that is, acts that impact social relations, contain provisions involving the rights and duties of an indefinite number of people, and apply in multiple instances. An applicant may not be entitled to judicial protection if an act is “an adequate interpretation of the provisions of the tax law” and “does not entail a change in the legal regulation of relations.”

The court stated that “Russian legislation does not contain clear provisions about the competence, conditions, and procedure for challenging state body decisions with regulatory characteristics.” Therefore, it is necessary to amend the existing legislation for future cases. However, the legal gap cannot be grounds for the courts not to accept claims that challenge decisions with regulatory properties. Therefore, in the absence of amended legislation, the courts shall take up cases challenging regulatory acts. Finally, the CC RF noted that the courts must reconsider the Gazprom case.

Not all the judges agreed with CC RF judgment. In particular, Judge G. K. Zhilin, who was directly involved in the Gazprom Neft complaint, issued a dissenting opinion, noting that the CC RF, in essence, was correct but that, according to the law, the court should not have considered the complaint. First, the applicant did not have the right to request a review of the constitutionality of the FAS decision because it did not apply to a specific case. Second, the decision only established rules about jurisdiction and not a procedure for considering cases challenging the interpretations of the FTS, so it is not a provision that allows for the judicial consideration of a certain category of cases.

Judgment no. 6-P/2015, of the Constitutional Court, is available here.

The Russian-language version of this posting is here.