Oda Russian Commercial Law 2007-1
.pdf
82 |
BASIC PRINCIPLES AND RULES OF PRIVATE LAW |
jurisdictions when the state is involved in commercial activities. The US and UK statutes on sovereign immunity as well as the European Convention of State Immunity have taken this position. The United Nations International Law Commission has prepared a draft treaty to the same effect. It is now more or less accepted by the Russians that the restrictive doctrine is the commonly adopted approach in other countries. The draft Russian Law on Sovereign Immunity is said to take the same line as this draft treaty.
Recently, the Supreme Commercial Court has explicitly adopted the restrictive doctrine:
An information agency, Televizionnaia sluzhba novostei (“the Agency”), brought an action against an inter-governmental broadcasting company, “Mir” (“the Company”) for the return of 3.3 million US dollars worth of assets of which 1.57 million was for the value of the equipment and 1.73 million for the shares of a third party which were transferred to the Company in 2002. The Company was established by the CIS countries in 1992.An agreement signed by the participating states provided for the immunity of the Company from judicial interference and enforcement.
Despite the argument of the plaintiff that in the contract of sale, the parties had agreed on the jurisdiction of the commercial court in Moscow for potential disputes, the rst instance court dismissed the claim on the ground of sovereign immunity. The appellate court as well as the cassation court upheld this decision.
However, the Supreme Commercial Court quashed this decision. The plaintiff’s argument for the supervisory instance was that the Articles of Incorporation of the Company limited the application of immunity to activities of “professional nature” whereas in the present case, the Company was abusing immunity to avoid obligations emanating from a commercial contract. The plaintiff also argued that by signing a contract with a clause agreeing to the jurisdiction of the court, the Company had waived the immunity. The defendant contended that the contract of sale in question had been concluded within the scope of its professional activities.
The agreement of the participating states did confer privileges and immunities to the Company. On the other hand, the same agreement granted immunity to the Company in their country “which is needed for the ensurance of business in accordance with the tasks set out in theArticles of Incorporation”.According to the court, this means that “the Company’s immunity bears a functional (limited) nature and extends only to activities for the carrying out of tasks determined by the Articles of Incorporation for which the Company was set up”. The court found that the dispute had emerged from commercial activities of the Company and that although the Agency performed its part of obligation, the Company had failed to do so.
In the end, the court remanded the case to the rst instance court to examine which part of the transaction would be covered by immunity.52
52Decision of the Presidium of the Supreme Commercial Court, January 20, 2004, Case 1311/03.
CHAPTER 3 |
83 |
5OBJECTS OF CIVIL LAW RIGHTS
The Civil Code lists “things including money and securities as well as other property including property rights, works and services, information, results of intellectual activities including exclusive rights on them (intellectual property), and non-material values” as objects of civil law rights (Art.128).
Things can be divided into immovables and movables. Immovables denote pieces of land, elds of sub-soil, demarcated sections of water, and other thingsrmly attached to the land. The latter includes multi-year plants, buildings and structures. In addition, aircraft, ocean going ships, inland water ships, and satellites are treated as immovables. An enterprise in its entirety as a “proprietary complex” is also regarded as an immovable (Art.132). Things which are not immovables, including money and securities, are movables.
Ownership rights and other real rights over immovables, restriction on such rights, emergence, as well as assignment and termination of such rights are subject to state registration on the Uni ed State Register (Art.131). The Law on the State Registration of Immovables and Related Transactions was enacted in 1997.53
It is important to note that enterprises are now made an object of civil law rights. Enterprises are proprietary complexes used for performing entrepreneurial activities. They can be objects of sale, pledges, leases, and other transactions related to the establishment, assignment or termination of real rights (Art.132, para.2). Enterprises in this context not only means speci c forms of commercial organisations such as unitary enterprises, but is much broader and means companies as a “going concern (predpriiatie na khodu)”.54
Currency valuables are also “things”. These include foreign currencies, securities denominated in foreign currencies, precious metal and stones except for jewellery. The Law on the Control of Foreign Currency Transactions regulates transactions on foreign currency (Art.141).55
Securities also fall within the category of “things”. The Civil Code has a separate chapter on securities. Under socialism, available securities were limited to government bonds, bearer’s savings books etc. Cheques were also used for settlement of payment between juridical persons. With the transition to the market economy, the scope of securities has signi cantly broadened. The Code de nes securities as a document which certi es in an established form and by following mandatory requirements, proprietary rights, the exercise or
53Law No.122-FZ of July 21, 1997.
54Braginskii ed., Nauchno-prakticheskii kommentarii...., supra, p.240.
55Law No.173-FZ of December 10, 2003.
84 |
BASIC PRINCIPLES AND RULES OF PRIVATE LAW |
assignment of which is possible only by its presentation (Art.142). The Code lists the following securities (Art.143):
i) government bonds, ii) corporate bonds,
iii) promissory notes (veksel’), iv) cheques,
v) certi cates of deposit and savings, vi) bearer’s bank account book, vii) bills of lading,
viii) shares,
ix) privatisation securities,
x) other documents designated as securities by law
The Civil Code only accommodates basic provisions on securities. The details are left to other laws such as the Law on the Securities Market, the Statute on Bills of Exchange and Promissory Notes, the Law on Joint-Stock Companies etc. Bills of lading are covered by the Merchant Shipping Code.
The Civil Code also has a provision on “non-documentary securities”, i.e. securities without documentary embodiment, which “developed countries, including Western European countries, began to accommodate from the early 1980s”.56 In cases provided for by law or by procedure established by law, licensed persons may xate rights in bearers’or non-bearer’s securities including those in a non-documentary form (with the assistance of “electronic-computing technology” etc.). Persons who are responsible for xating rights in this form are under an obligation to issue a document certifying the rights on request of the right-holder (Art.149, para.1). Under the Law on Joint Stock Companies the issue of non-documentary shares is allowed.57 The Law on the Securities Market also allows the issue of nominal securities in a “non-documentary form”.58
Soviet civil codes used to accommodate copyright law and patent law in them. The 1990 Fundamental Principles of Civil Legislation of the USSR also contained some provisions on intellectual property. Since then, various special laws such as Patent Law, Copyright Law, Trademark Law, Law on Semiconductor Topography, and Law on the Protection of Computer Programmes were
56Braginskii ed., Nauchno-prakticheskii komenntarii..., supra, pp.258-259.
57G.S.Shapkina ed., Postateinyi kommentarii k federal’nomu zakonu “Ob Aktionernom Obshchestve, second edition, Moscow 2000, p.85. E.N.Tkachenko, Komentarii k zakonu ob aktsionernom obshchestve s postateinymi sudebnoi materiarami sudebnoi praktiki, Moscow 2003, p.335.
58Braginskii ed., Nauchno-prakticheskii komenntarii..., supra, p.259.
CHAPTER 3 |
85 |
enacted in this area. However, Part Four of the Civil Code which was adopted in 2006 and is to take effect from January 1, 2008, will replace all these laws.59
“Information” referred to as an object of civil law relations in the Civil Code, denotes business and commercial secrets. The Code provides that information is a business or commercial secret if it has existing or potential commercial value due to the fact that it is unknown to a third party, there is no legitimate free access to the information, and the holder of the information has adopted measures to protect its con dentiality. Those who, by unlawful means, obtain information which comprises business or commercial secrets, are liable for compensation (Art.139).
Concerning “non-material values”, the Code lists “life and health, personal dignity, honour and good name, business reputation, inviolability of personal life, personal and family secrets, the right to free movement, choice of the place of stay and residence, the right of a name, an author’s moral rights, and other personal non-proprietary rights and other nonmaterial values which belong to physical persons by birth or by law and which are inalienable (Art.150, para.1).
6JURISTIC ACTS
1)General
The Russian Civil Code belongs to the Civil Law system which developed out of the French Code civil. One of the fundamental concepts in this system is the concept of juristic acts (acte juridique, Rechtsgeschäft). The concept was already known during the Tsarist period. In a book published in 1907, A.M.Guliaev de ned the juristic act (iuridicheskii akt) as an expression of will which is aimed at causing specific legal effects. According to the author, juristic acts comprise two factors: will and its expression.60 The concept was retained under socialism, but under a different name – transaction (sdelka). The present Civil Code continues to use the term sdelka. Sdelka (hereinafter, “juristic act”) is de ned, in an identical way to the 1964 Code, as an act of a physical person or juridical person directed at the establishment, alteration, or termination of civil law rights or obligations (Art.153). It is an intentional act; it has a legal meaning only when it is externally expressed in
59Law No.231-FZ of December 18, 2006.
60A.M.Guliaev, supra, pp.62-63.
86 |
BASIC PRINCIPLES AND RULES OF PRIVATE LAW |
an objective manner.61 It is common for the civil codes to provide for basic rules concerning the form and validity of juristic acts in the general part.
Juristic acts can either be unilateral, bilateral, or multilateral. Examples of unilateral juristic acts are the waiver of ownership rights (Art.236) and the granting of a power of attorney (Art.185). Bilateral and multilateral juristic acts are basically contracts.
2)Forms of Juristic Acts
Under the socialist civil law, there were strict requirements with regards to the form of juristic acts. Notarisation was required on various occasions to enable the state to supervise transactions between state enterprises. Non-compliance with the requirements made these juristic acts absolutely void. Since 1990, there have been signi cant changes. The formality of juristic acts became less stringent.
Juristic acts may be effected orally or in writing.As a rule, juristic acts which, by law or by the agreement of parties, are not required to be in writing, can be effected orally (Art.159, para.1). Juristic acts which may be effected orally are also deemed to have been effected, if, from the behaviour of the person, his intention to effect the juristic act is apparent. On the other hand, silence is regarded as an expression of will only when so provided by law or the agreement of the parties (Art.158).
Juristic acts in a written form can be in a “simple written form” or in a notarised form. The following juristic acts are required to be in writing (some acts may need notarisation as well):
i) juristic acts between juridical persons or between a juridical person and a physical person;
ii) juristic acts between physical persons with the amount not less than 10 times the minimum monthly wage and other instances provided by law.
If a juristic act was not effected in writing although written form is required, as a rule, juristic acts which fail to comply with the requirement of written form are not void, unless it is expressly provided by law or provided as such in the agreement between the parties. The Code speci cally provides that foreign trade transactions always have to be in writing, and the non-ful lment of this requirement results in the transaction being void (Art.162). In case of non-compliance,
61 Sadikov ed., Kommentarii..., rst edition, supra, p.200.
CHAPTER 3 |
87 |
the parties will simply be deprived of the possibility of referring to witness statements in order to prove that the given juristic act has taken place with speci c contents in litigation. Only written evidence, physical evidence and expert opinion can be quoted.
Some juristic acts are subject to notarisation. Notarisation is necessary when the law so provides, or when it is required by agreement of the parties (Art.163). Non-compliance with the requirement of notarisation makes the juristic act null and void.
Certain juristic acts are subject to registration. Juristic acts involving land and other immovables must be registered (Art.164, para.1. The scope of immovables is provided in Art.130, para.1).
3)Defective Juristic Acts
Juristic acts are based upon the expression of will by the parties in civil law relations. A corollary is that if the expression of will is defective in one way or another, it affects the validity of the act. Juristic acts can be voidable, or null and void in such cases. In cases where the act is null and void (nishtozhnyi), the act does not have effect even without the recognition to that effect by the court. An action by an interested party is not needed. In contrast, the effect of voidable (osporimyi) juristic acts can only be denied on the initiative of the interested parties, but once avoided, the act is deemed not to have had any effect from the outset (Art.167, para.1).
The new arrangement in the present Civil Code is based on the Civil law system, but is said to be closer to French Law (relative invalidity and absolute invalidity) than German Law.62 This distinction did not exist in the 1964 Civil Code. Under socialist law, defective juristic acts had, in principle, no effect (nedeistvitel’nyi). This is understandable, since in voidable acts, it is left to the party, and not to the state, whether or not to take an action to void the act. This could not be tolerated under socialism.
It should be noted there that although null and void acts do not have any effect even without a court action, in order to have the consequences of the invalidity applied, i.e. to restore the status quo ante, a court action by an interested party is needed (Art.166, para.2). The Code provides that in case of invalidity, each party is under an obligation to return what it has received from the other in the transaction (mutual restitution), and if returning the subject matter of the
62A.Solotych, “Das neue russische ZGB aus rechtsvergleichender Sicht”, in F.-C.Schroeder ed.,
Die neuen Kodi kationen in Russland, second edition, Berlin 1999, S.35.
88 |
BASIC PRINCIPLES AND RULES OF PRIVATE LAW |
transaction in nature, its value should be returned. Thus, if the act is null and void, there is no need to apply to court for denying the validity of the act, but in order to have the property returned, a court action may be needed.
Tomsk Neft’ brought an action against Gazprom in the Moscow City Commercial Court asking for the consequences of the invalidity of a juristic act to be applied. In the light of the agreement on the redistribution of ordinary shares of Tomskgaz which was contested by Tomskneft’, Vosotchnaia neftnaia kompaniia (which later became Yukos) and Gazprom and was found as null and void by another court, the plaintiff demanded the return of the Tomskgaz shares distributed to Gazprom. Therst instance court acknowledged the claim of the plaintiff. However, the appellate court quashed this judgment on the ground that return of the shares and the change of registration were impossible, since, when the litigation was initiated, the disputed shares had already been assigned to an individual. In such cases, in accordance with Article 167, para.1, although the shares cannot be returned, the value of the shares must be reimbursed. This was upheld at the cassation instance and subsequently by the Supreme Commercial Court.63
There is no time limit for asking the court to recognise a certain juristic act as null and void. This is because the act is regarded to have been void from the beginning even without the involvement of the court. However, an action for applying the consequences of invalidity can be initiated only within 10 years of the day when the performance of the act had started. Concerning voidable acts, actions for avoiding such acts must be brought to court within one year of the termination of the violence or threat under which the act has been effected, or the day from which the plaintiff became aware, or should have become aware of the grounds for voiding the act (Art.181).
The government of the Republic of Khakasiia brought an action to the Commercial Court of the Republic against power utilities, Joint Stock Company UES and the Saiano-Shusehnskaia Hydropower Company, asking the court to apply the consequences of the invalidity of the decision of the State Committee for theAdministration of State Property. The decision concerned the transfer of a hydropower plant to the UES which then set up the Saiano-Shushenskaia Hydropower Company as a subsidiary. The plaintiff demanded that the assets of the Hydropower company be returned to the Federal Government. The claim was based upon the argument that the privatisation of the power company was against a presidential decree of 1992 and the Privatisation Law of 1991 in that privatisation was carried out without the allocation of state property between the Russian Federation and the Republic of Khakasiia, while the latter should have been consulted.
63Decision of the Presidium of the Supreme Commercial Court, September 30, 2003, Case 6802/03.
CHAPTER 3 |
89 |
The court of rst instance and the appellate instance court both dismissed the claim on various grounds, including the ground that the claim of the plaintiff was barred by prescription. The court of cassation quashed the decision of the appellate court and ordered the UES and the Hydropower Company to return the assets to the state.
Concerning the period of prescription, the cassation court ruled that since the plaintiff became aware of the infringement of its rights in 1993, the prescription period had not expired when the plaintiff brought an action.
The Supreme Commercial Court quashed the decision of the cassation court on the following grounds. The prescription period for claiming the application of the consequences of invalidity of a juristic act starts when the performance of the given act has started (Art.181, para.1). In this case, it does not ow from the date of the registration of the subsidiary, the Power Company, as ruled by the court of cassation, but from the date of the transfer of the assets to the UES. Therefore, the plaintiff is barred from action.
The Court further pointed out that in any case, the privatisation was not against the presidential decree or privatisation law, since the consultation procedure had been carried out and various measures were adopted for the bene t of the Republic.64
Null and void juristic acts include:
i) Acts effected with the purpose against the basic principles of the legal order and good morals (Art.169);
ii) Acts against the law and other legal acts, unless the law provides that it is voidable or provides for other consequences (Art.168)
iii) Fictitious acts and acts which conceal another act (sham acts) (Art.170); iv) Acts effected against the requirements concerning the form, so long as the law
provides that the non-compliance entails such a consequence (Art.162, paras. 2 and 3; Art.165, para.1);
v) Acts effected without state registration where it is a prerequisite (Art.165, para.1).
Voidable acts include:
i) Acts of a juridical person in excess of its legal capacity (Art.173); ii) Acts in excess of the limitation of power (Art.174);
iii) Acts effected by mistake (Art.178);
iv) Acts effected under duress, violence, threat etc. (Art.179).
64Decision of the Presidium of the Supreme Commercial Court, October 19, 2004, Case 5905/04.
90 |
BASIC PRINCIPLES AND RULES OF PRIVATE LAW |
4)Primary Categories of Null and Void Juristic Acts
(1)Juristic Acts against the Law or other Legal Acts
Juristic acts which do not comply with the requirements of laws or other legal acts are null and void, unless such law or legal act does not provide that they are voidable or provides for other consequences (Art.168). For example, creditors are not allowed to require of the debtor that title to the collateral be transferred to the creditor in case of default of the debtor (Art.349, para.1).Acontract which contains such an arrangement is null and void.
A typical case is where the transaction is in breach of privatisation legislation:
Asaving bank, Buriatskii Territorial’nyi Bank brought an action against a joint stock company, Sapozhok claiming repayment of the loan of 200 million roubles plus interest and penalty. The defendant submitted a counterclaim, arguing that the loan agreement and the contract of hypothec should be recognised as null and void on the ground that the general director of the company had exceeded his power in concluding these contracts. The court of rst instance accepted the claim of the plaintiffand dismissed the counterclaim. This judgment was upheld by the higher courts.
However, upon protest, the Supreme Commercial Court quashed the judgment and remanded the case to a new hearing. The Court ruled that the contracts had been signed by the general director of Sapozhok. The company had been founded on the basis of a studio. Special provisions on the legal status of joint stock companies founded in the process of privatisation are applicable to this company.According to the model statute of open joint stock companies approved by a presidential decree, disposal of more than 10% of the assets fall within the exclusive competence of the shareholders’ meeting. Investment and borrowing decisions of the same amount had to be adopted by the board of directors. The creditor was aware, or should have been aware of this.
Since the value of the property hypothecated exceeded 10% of the value of the assets, the decision should have been adopted by the shareholders’ meeting. The shareholders’ meeting has not approved the transaction or subsequently rati ed it, and therefore, the contract of hypothec is null and void by virtue of Article 168 of the Civil Code. The board of directors did not approve or ratify the loan agreement. Thus, this agreement is also against Article 168 and therefore, null and void.65
In another case, a contractual clause which provided for disputes to be settled by arbitration was found to be null and void on the basis ofArticle 168 on the ground that matters involving privatisation could not be dealt with through arbitration.
65 Decision of the Presidium of the Supreme Commercial Court, March 4, 1997, Case 3326/96.
CHAPTER 3 |
91 |
The Privatisation Law explicitly provides that such matters should be handled by court.66
The court also ruled that a major transaction without the authorisation of the shareholders’ meeting as required by the Law on Joint Stock Companies was null and void:67
Shareholders of an open joint stock company Razvitie and the chairman of its board of directors brought an action to the Krasnogorod City Court against a closed joint stock company Volga Kredit Holding, asking the court to recognise the transfer of the company Razvitie as a property complex to the holding company. With the transfer of jurisdiction to the commercial court, the case was transferred to the Commercial Court of the Moscow Province. The rst instance court terminated the procedure on the ground that the bankruptcy procedure regarding Razvitie had been completed. The appellate court quashed this judgment and remanded the case to the rst instance court. The First instance court then dismissed the claim of the plaintiffs due to the absence of the ground to recognise the transaction as null and void. The appellate court quashed this judgment on the ground that the transaction in question was a major transaction as provided by the Law on Joint Stock Companies, but the procedure required by the Law was not observed. Besides, the protocol of the transfer of the company was signed by an unauthorised person. The court of cassation quashed the judgment of the appellate instance court.
The Supreme Commercial Court quashed the judgment of the court of cassation. According to the facts established by the lower courts, Razvitie signed an agreement with the Holding in order to repay the debt owed to the holding by transferring its assets up to the amount of the debt. In execution of this agreement, assets worth 20,623,867 roubles were transferred to the Holding. The appellate instance court, on the basis of the balance sheet, found this to be a major transaction, since it exceeded 50% of the value of the assets. The Joint Stock Company Law requires such a transaction to be approved by the shareholders’meeting. In accordance withArticle 168 of the Civil Code, such a transaction without the approval of the shareholders’ meeting is null and void, since the Joint Stock Company Law does not provide that it is voidable. Furthermore, while the agreement had been signed by the general director of Razvitie, the resolution of the shareholders’ meeting which appointed this person was found to be invalid, since the meeting did not reach the quorum. The court of cassation instance ruled against the plaintiff, since, with the liquidation of Razvitie, the plaintiffhad ceased to be a shareholder and therefore, lost the standing. However, in the view of the Supreme Commercial Court, the plaintiff had already brought an action to court before the liquidation of the company.
66Decision of the Presidium of the Supreme Commercial Court, April 10, 2001, Case 3515/00.
67Decision of the Presidium of the Supreme Commercial Court, July 20, 2004, Case 3826/04.