Dispute Resolution and Mediation Newsletter (Issue 2, 2015)

New major amendments to the Civil Code of the Russian Federation

Russian President Vladimir Putin signed the Federal Law "On Amendments to the Civil Code of the Russian Federation." The amendments introduce new rules to the Civil Code and reform the existing structure of civil law. The law took effect 1 June 2015, and the changes are big.

The amendments introduce into the Civil Code new ways to enforce legal obligations: an independent guarantee (Art. 368) and the security deposit (Art. 381.1). Under an independent guarantee the guarantor undertakes to pay the beneficiary a sum of money irrespective of the efficacy of the underlying obligation. A security deposit is an amount paid by one party to the other to secure the performance of a monetary obligation in the contract, which deposit shall be offset against total amount when the performance is completed.

The amendments also recognize new types of contracts: a framework agreement, an agreement to provide the option to sign an agreement, an option agreement, and a contract with performance on demand or under an ongoing subscription arrangement.

When may official “explanations” be challenged in court?

According to p. 4, Art. 2 of the Federal Constitutional Law "On the Supreme Court," the Supreme Court of the Russian Federation acts as the Court of First Instance in administrative proceedings to challenge a normative legal act. In Russian legal practice, however, a stable definition of the concept of a normative legal act has not yet been developed.

Letters by government agencies such as the Federal Antimonopoly Service and the Federal Tax Service are not normative legal acts de jure; but, by their nature and their impact on social relations, they are similar to them. For example, the obligation of subordinate tax authorities to follow strictly the letters of the Federal Tax Service means that a letter in one case could affect the rights of a wide range of taxpayers, none of whom were parties to the matter.

In a case involving a letter by the Federal Tax Service of Russia, the Constitutional Court finally put an end to the question of the legal status of clarification letters issued by state bodies, which possess the characteristics of legal acts. Resolution No. 6-P / 2015 (31 March 2015) of the Constitutional Court stressed that not every clarification by a state body is subject to challenge, but only those that are in fact an act of a normative properties. In other words, a clarification, which has a general regulating influence on social relations, contains provisions on the rights and obligations of unspecified persons, and therefore is designed for repeated use, may be challenged as a normative legal act. On the other hand, if an act of the Federal Tax Service does not go beyond "an adequate interpretation of the provisions of the tax law" and "does not entail a change in the legal regulation of corresponding relations, the judicial review may be denied".

Code of Administrative Justice signed into law

In March 2015, President Vladimir Putin signed a law that establishes the Code of Administrative Justice, which will come into force on 15 September 2015. The new law regulates proceedings in cases arising from administrative and other public matters. The Code of Administrative Justice will simplify the production of evidence in these proceedings. A key feature will be the consideration and resolution of administrative cases based on written submissions, without oral proceedings and court records.

Enhanced role for notaries in the state registration of companies and entrepreneurs

On 30 March 2015 President Vladimir Putin signed Federal Law No. 67-FZ "On Amendments to Certain Legislative Acts of the Russian Federation with Regard to Ensuring the Reliability of the Information Submitted for State Registration of Legal Entities and Individual Entrepreneurs." This amends a number of laws governing the registration of companies and individual entrepreneurs, as well as the roles and responsibilities of notaries. It also amends the Administrative Offenses Code and the Criminal Code of the Russian Federation. The law came into force on 31 March 2015, except for some provisions that will come into effect later.

The new law clarifies the procedures governing the alienation of a share or part of a share in the authorized capital of a limited liability company. It requires that that a notary must check not only the authority of the person transferring the share, but also must confirm that the share or part of a share is fully paid. Notaries already do this under existing practice. Without this verification, notaries could not be completely sure that the transferor of the shares was authorized to alienate them. By making this a legal requirement, however, the new legislation possibly has created a significant practical obstacle to the liquidation of some companies in litigation.

The new law also establishes that in case of a reasonable doubt about the authenticity of information included or incorporated in the United Stated Register of Legal Entities, the registration authority shall have the power to inspect the validity of such data.

Administrative responsibility for violations in the sphere of state registration of legal entities and individual entrepreneurs has also been enhanced. Founders and participants of the entity are now subject to administrative liability for non-compliance.

Supreme Court explores gaps in mediation

The Supreme Court of the Russian Federation has examined, for the first time, the practices in cases in which the parties settled the dispute by means of conciliation, as well as the procedural obstacles in mediation. The Supreme Court has published its certificate regarding the application of the Federal Law 193-FZ "On Alternative Dispute Resolution Procedure Involving a Mediator (Mediation Procedure)" (27 July 2010) has been published on its official website.

The Supreme Court’s study shows that the demand for conciliation, and hence the number of cases resolved, remains low. The main reasons for the low popularity of conciliation are the high cost of mediation and a lack of awareness by the parties of mediation procedures. Nonetheless, the study observed that when the parties have recourse to this procedure, the number of cases is growing.

The Supreme Court certificate pointed out a number of gaps in the legal regulation of mediation. In particular, under a literal interpretation of Art. 106 of the Arbitration Procedural Code and Art. 88 of the Civil Procedure Code of the Russian Federation, payment for the services of a mediator does not apply to legal costs. However, based on the meaning given to the term "legal costs" by the legislation, in the list of monetary amounts to be paid to certain persons, payment for the services of a mediator should logically be included. Therefore, the Russian Supreme Court in its certificate "invites" the State Duma to consider the inclusion of payment for services of a mediator in the concept of "legal fees."

The Supreme Court also has paid special attention to mediation agreements. From the information provided by the courts, the Supreme Court noticed a complete absence of cases contesting mediation agreements, the protection of rights violated by a nonfulfillment of a mediation agreement, and cases claiming compensation for damages allegedly caused by the mediation procedure.