Oda Russian Commercial Law 2007-1
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which leased an adjacent building. This company closed the plaintiff’s only access to the premises. Based on Article 304, the commercial court ordered the defendant to cease the obstruction of the use of the of ce premises by the plaintiff.9
This right is also extended to possessors of properties who are not owners, e.g. state and municipal unitary enterprises which have the right to economic management or operational administration (Art.305).
2THE RIGHT OF OWNERSHIP
1)The Content of the Right of Ownership
The right to ownership is the most fundamental real right. In relation to other real rights, the right to ownership is the basic right, while other real rights are “restrictive rights” on ownership.10 Ownership has been de ned in Russia during the Tsarist period as the right to possess, use and dispose of an object. The same applied in the socialist period, the only difference being that these rights were limited in one way or another.
Under socialism, there were various restrictions on property rights (e.g. there was a limit to the number and size of the accommodation one could own). The term “private ownership” was an anathema and had been replaced by the term “individual ownership”. In contrast, the present Constitution declares that the right of private ownership is protected by law (Art.35, para.1). Every person is entitled to have property under his ownership, and possess, use, and dispose of it by himself or jointly with others (ibid., para.2). This provision is understood to include foreign nationals. Furthermore, individuals and their associations may also privately own land (Art.36, para.1). This part, however, is not applicable to foreign nationals.
The Civil Code provides that owners of property are attributed the right of possession, use, and disposal of that property (Art.209, para.1). Disposal means the freedom to decide the legal fate of the property and includes sale, gift, lease, and pledge.11 The Civil Code declares that the owner may, at his discretion, transfer the title of his property to another person, transfer the right to possess, use and dispose of the property while remaining an owner, pledge or encumber it, or dispose of it in other ways, insofar as it is not against the law or legal acts,
9D.V.Murzin eds., Grazhdanskii kodeks Rossiiskoi Federatsii s postateinymi materialami iz
praktiki VAS RF, Moscow 1999, p.300.
10Sadikov, supra, p.549.
11Ibid., p.550.
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and does not infringe the rights and lawfully protected interests of others (ibid., para.2).
On the other hand, the owner bears the risk of loss and destruction of the property (Art.211). The owner’s property may be taken to satisfy his obligations elsewhere (Art.24).
The right of ownership can be limited by law, but as is the case with civil law rights in general, it can be limited by Federal law only, and to the extent necessary for the defence of the constitutional system, morals, health, rights and the legally protected interests of other persons as well as for the defence and national security of the state (Art.1, para.2).
In addition to the Civil Code (Chapter 17), provisions on ownership and other rights on land are found in the Land Code.
2)Owners
The Constitution acknowledges private, state, municipal and other forms of ownership and provides that they are protected in an equal manner (Art.8). The Civil Code reproduces this provision (Art.212, para.1). This is in contrast with the socialist period, when the “primacy of state ownership” was the rule and the state monopolised the ownership of “means of production”, including land and other natural resources and state enterprises.
Property may be owned by individuals and juridical persons as well as the Russian Federation, constituent entities of the Russian Federation, and municipalities (ibid., para.2).
(1)Ownership by Individuals and Juridical Persons
Property which belongs to individuals or to any juridical person, except for unitary enterprises, state and municipal agencies (ucherezhdenie), is private property. Individuals and juridical persons may own any property except for those properties which, by law, they are not allowed to own. Thus, they can own various immovable properties including “enterprises as proprietary complexes”,ats and houses (Art.213, para.1). Furthermore, the Constitution guarantees private ownership of land and natural resources (Art.9, para.2, Art.36, para.1). However, despite the constitutional guarantee, private ownership over land has not fully developed. Also private ownership of other natural resources is signi cantly restricted by various laws such as the Subsoil Law and the Forestry Code.
The quantity and the value of the property which is owned by physical persons or juridical persons are not restricted except for restrictions established by
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law for the purpose of protecting the constitutional system, morals, health, rights and the legally protected interests of others, the defence of the state and national security (Art.213, para.2).
(2)State and Municipal Ownership
The Civil Code provides for state and municipal ownership as separate types of ownership. Some lawyers use the concept of public ownership to cover both state and municipal ownership; the common denominator is the “public-law characteristics” of the state and the municipality.12
Under socialism, the state monopolised the “means of production”.All land, natural resources, and state enterprises were owned by a single entity, the Soviet State. The current system is different in that i) state ownership not only means ownership by the Federal state, but also by constituent entities of the Russian Federation (state ownership), ii) municipalities (local self-governments) have also come to own properties (municipal ownership) separately, and iii) privatisation of the property owned by the state has taken place. It should be noted that while the Constitution uses the term “local self-government”, the Civil Code uses the term “municipalities (munitsipal’noe obrazovanie)” (e.g. Art.215).
Objects of state ownership are those properties owned by the Russian Federation (Federal property) and constituent entities of the Russian Federation (property of constituent entities) (Art.214, para.1). Unitary enterprises (state or municipal enterprises) do not own the property, e.g. land, factories, buildings etc. which are entrusted to them, but merely have a right of economic management or operational administration; their assets are owned by the state or municipality. The same applies to agencies (Art.214, para.4).Assets of the state which are not entrusted to unitary enterprises and establishments comprise the Federal treasury (kazna) and the treasury of the constituent entities of the Russian Federation (ibid., para.4).
The Land Code also contains provisions on state and municipal ownership of land as well as ownership of land by individuals and juridical persons. Land which does not belong to individuals, juridical persons or municipality, is deemed to be state property (Land Code Art.16, para.1). Individuals and juridical persons enjoy “equal access” to the acquisition of land. As a corollary, in principle, land under state and municipal ownership can be offered to individuals and juridical persons for their ownership (Ibid., Art.15, para.2).
12Braginskii ed., Nauchno-prakticheskii komenntarii k chasti pervoi Grazhdanskogo kodeksa Rossiiskoi Federatsi, second edition, Moscow 1999, p.338.
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Acontinuing problem with state ownership is the demarcation of ownership over assets between the Russian Federation and constituent entities. The issue emerged immediately after the collapse of the USSR, but so far, has not been solved.13 The procedure for the allocation of assets between the Russian Federation and constituent entities was supposed to be regulated by law, but no such law existed, and therefore, the 1991 decision of the RSFSR Supreme Soviet, which transferred a signi cant part of state property including state enterprises to constituent entities and municipalities, remained in force. In 1999, the Federal legislature nally managed to enact a law which sets out the basic principles of demarcating ownership, and in 2001, the Law on Demarcation of State Ownership on Land was enacted.14 However, this Law is applicable only to the relations which emerged after the Law has taken effect and does not really solve the problem.
Properties which are under the right of ownership of the city, village settlement, and other municipalities are municipal property. Agencies of municipalities exercise the ownership rights (Art.215, paras.1 and 2). As is the case with state property, assets of municipalities comprise assets consolidated with municipal enterprises and institutions, as well as assets which directly belong to the treasury.
This concept of municipal ownership did not exist under socialism; local entities did not have their own title over any assets. The process of devolution which started after the collapse of the USSR found its re ection in the management of property. By virtue of the above-mentioned decision of the RSFSR Supreme Soviet of 1991, a large part of state assets including land, enterprises, accommodations, of ce buildings and other buildings were transferred to the municipality.
State and municipal property can be transferred by its owner to the ownership of physical persons or juridical persons by way of privatisation (Art.217). Privatisation is not limited to state enterprises, but to other kinds of assets such as land, accommodation, buildings, and other properties. There is a separate Law on Privatisation of 2001.15 Provisions of the Civil Code on the manner of acquisition and termination of ownership are applied only insofar as the Law on Privatisation does not provide otherwise (Art.217). Concerning land, the procedure for providing land to individuals and juridical persons is accommodated in the Land Code (Land Code, Art.30).
13G.E.Bystrov, “Zemel’naia reforma v Rossii: pravovaia teoriia i praktika”, GiP, 2000 No.4, pp.52-53.
14Law No.101-FZ of July 17, 2001.
15Law No.178-FZ of December 21, 2001.
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It should be noted that attachment of the land and other natural resources under state or municipal ownership is allowed only when provided for by law (Art.126, para.1).
3)Acquisition and Termination of the Right of Ownership
The right of ownership over things (property) is acquired on various grounds such as the following (Art.218):
i)acquisition of ownership over a thing newly created by the person who created it;
ii)acquisition of ownership over fruits, products, and income received as a result of the use of property in accordance with the rules set out in the General Part of the Civil Code;
iii)acquisition of ownership over property which already has an owner by another person on the basis of a contract of sale, exchange, gift and other juristic acts;
iv)acquisition by inheritance, either by statute or will;
v)acquisition of property by the successor to the reorganised juridical person in case of the reorganisation of a juridical person which owns property;
vi)acquisition of ownership over property which has no owner, property whose owner is not known, or property whose owner waived the right to ownership or lost the right of ownership on grounds provided by law (arts.225-228);
vii)acquisition of ownership by acquisitive prescription.
In acquisitive prescription, a person (physical or juridical) acquires ownership of immovables if this person, in good faith, openly and without interruption possessed the property in question as his own property for 15 years. For property other than immovables, this period is 5 years (Art.234, para.1).
Aperson who acquired for value a property from a person who does not have the right to assign it may nevertheless acquire the right of ownership if he acted in good faith, i.e. the purchaser was not aware and could not have known that this person had no right to assign it (a purchaser in good faith). This applies to cash and securities as well. Exceptions arise where the owner had lost the property, the property had been stolen or otherwise alienated against the will of the owner from the owner himself or from the person to whom the owner had given possession of the property (Art.302, para.1):
The State Property Fund brought an action vis à vis a joint stock company and a limited liability company, asking the court to recognise the contract of sale of 1,500 shares by the limited liability company to the joint stock company and apply
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the consequences of null and void transactions. The State Property Fund had sold shares of a company created on the basis of a privatised state enterprise to the limited liability company, but later, this transaction was recognised by court as void, since the shares should have been distributed through a closed offer. The limited liability company was ordered by the court to return the shares to the Fund, but by the time the judgment was rendered, the company had sold part of the shares to the joint stock company.
The Fund argued that the sales contract between the companies was void, since the seller – the limited liability company – did not have the title to these shares and could not have effectively sold the shares. The lower court rejected this argument, and the Supreme Commercial Court upheld this on the ground that a claim of the owner (or an agency entrusted by the owner) to retrieve property in possession of a person who acquired it by contract as a third party should be examined under Article 302. The court ruled that this provision is applicable to securities, including shares.16
There is a problem with who quali es as an acquirer in good faith. The Constitutional Court ruled that “acquisition in good faith is possible only when the property has been acquired not directly from the owner, but from a person who was not entitled to dispose of this property”.17
Normally, in other jurisdictions, this action is available only in respect of movables, and is not applicable to immovables which can be registered.18 However, in Russia, there is no statutory restriction to this effect:
An individual entrepreneurial entity brought an action against a company with limited liability for the return of the building of a shop. The plaintiff argued that the disputed property had been sold by the plaintiff to a joint stock company (the buyer) under duress. The defendant company which purchased the property from the buyer (the third party) claimed protection underArticle 302. The contract of sale between the plaintiff and the buyer had been found null and void by the commercial court on the ground that there had been a threat of force on the plaintiff by the buyer. However, during the period of the possession of the building, the buyer pledged the building for various loan agreements with the bank. Since the buyer defaulted, the building was sold at an auction organised by the district court and the defendant in this case successfully bid for the building. The Supreme Commercial Court dismissed the claim on the ground that the defendant had purchased the property
16Information letter of the Presidium of the Supreme Commercial Court No.33 ofApril 21, 1998. Zhurakovskii and Kalinin, Kommentarii i primenenie zakonodatel’stva arbitrazhnymi sudami Rossiiskoi Federatsii, Moscow 2000, p.235.
17Decision of the Constitutional Court No.6-P of April 21, 2003.
18E.g. BGB Art.932.
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through an auction legitimately organised by a court bailiff and that the plaintiff had no right under Article 302.19
However, the fact that the property was registered would probably lead to the conclusion that the person who obtained the property should have been aware that the seller was not the legitimate owner.
Limited liability company “ART” brought an action to the Commercial Court of St.Petersburg and the Leningrad Province vis à vis state enterprise Luzhskii zavod belkovoi kolbasnoi obolochki (hereinafter, “the Zavod”), claiming the release of a non-residential building unlawfully occupied by the latter. ART argued that it was a bona de acquirer of the property. Although the rst instance court satis ed the claim of the plaintiff, it was quashed by a higher court.
The disputed property was purchased byART from a limited liability company “Mirazh” on November 10, 1993. Mirazh had purchased the property from another limited liability company, Stroikom, which, in turn, purchased it from the defendant on March 22, 1993. However, this contract of sale dated March 22, 1993 had been found to be null and void for the breach of law in the privatisation process by the court in a separate procedure. The Supreme Commercial Court ruled that because of the invalidity of the rst sale, subsequent transactions were all invalid.
What the lower courts failed to agree was whether or not the plaintiff was a bonade acquirer and was entitled to the transfer of the property. The Court ruled that according to Article 302 of the Civil Code, a bona de acquirer is a person who, at the time of the transaction, was not aware and could not have been aware that the counter party was not entitled to dispose of the property in question. In order to reach the right conclusion, the lower courts should have examined whether an un n- ished building is an immovable or not, and whether it was subject to registration. The building in question was not nished and none of the buyers of this property had it registered. On the other hand, it is obvious that the property is an immovable in the light of Article 130. According to Article 223, para.2, the title to an immovable emerges by registration. Article 551, para.1 provides that the transfer of the title to the buyer requires registration. Therefore, before registration of the title, the buyer is not entitled to dispose of the property, since the title remains with the seller until registration.
The plaintiff did not deny that when purchasing the disputed building from Mirazh, it inspected all legal documents including the contracts dated March 22, 1993 and May 4, 1996, and was aware that none of the previous buyers had registered the property, but nevertheless, proceeded to enter into a contract with Mirazh. Therefore, the plaintiff should have known that Mirazh was not an adequate seller and was not entitled to sell the property. Thus, the plaintiff is not a bona de acquirer.
19 Murzin eds., supra, pp.298-299.
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Since the plaintiff is not the owner of the property or a bona de acquirer, or is occupying or using the property, the plaintiff is not entitled to claim the property.20
The right of ownership can be terminated on the following grounds (Art.235, para.2):
i)assignment of the property to another person;
ii)waiver of the right of ownership by the owner;
iii)the loss or destruction of the property;
iv)other instances provided by law.
The Land Code provides that the right of ownership of land terminates by disposal or waiver of property by the owner, and compulsory taking away in accordance with the procedure set out by civil legislation (Art.44).
According to the Civil Code, property can be taken away in cases where it is attached as in the course of enforcement of obligations (Art.237), and also in cases of requisition (Art.242) and con scation (Art.243). Con scation takes place only when a criminal offence has been committed and on the basis of a court judgment. Furthermore, land destined for agriculture, housing and other construction can be taken away from the owner in cases where the owner has failed to use it for these purposes within three years (Art.284), has used it in violation of law (Art.285), or in cases of compulsory purchase for the needs of the state or the municipality (Art.279). The Civil Code also leaves room for a law which terminates ownership rights (Art.306). The Land Code has similar provisions involving land.
The provision for compulsory purchase of land for the needs of the state or municipality is found in the Land Code (Art.49). This takes place in exceptional circumstances when certain objects of state or municipal signi cance, e.g. installations of the Federal energy system, defence and national security, highways, as well as “lineal objects of Federal and regional signi cance which ensure the activities of the entities of natural monopoly” can have no alternative locations (Art.49, para.1).
The Civil Code explicitly provides that nationalisation may be effected on the basis of law with compensation for the value of the property and any other damage caused (Art.235, para.2). Nationalisation means the transfer of the property to the Russian Federation or its constituent entities; transfer to municipal ownership is not allowed.21 It should be added that the Foreign Investment Law
20Decision of the Presidium of the Supreme Commercial Court, December 18, 2001, Case 1125/00.
21Guev eds., supra, pp.404-405.
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of 1999 guarantees that nationalisation or requisition of the assets of foreign investors is not to take place unless based upon a Federal law or an international treaty (Art.8, para.1). At the moment, there is no law on nationalisation.
4)Joint Ownership
Property which is owned by two or more persons is deemed to be under joint ownership (obshchaia sobstvennost’). Joint ownership is divided into two categories: share ownership – a form of common ownership with the share of each joint owner determined (dolevaia sobstvennost’) and common ownership – without such shares being determined (sovmestnaia sosbtvennost’) (Art.244, paras.1 and 2). Joint ownership is presumed to be share ownership unless the law provides that the property in question be under common ownership (ibid., para.3). Examples of common ownership include matrimonial property and the property of a farming household ( fermer skoe khoziaistvo).22
The property under share ownership is disposed of by the unanimous consent of joint owners. Joint owners are entitled to sell, give away as a gift or by will, pledge or otherwise dispose of the share. If the share is to be sold to a person other than a joint owner, other joint owners have a pre-emptive right to purchase the share at the price and other conditions at which it has been offered to the other. For this purpose, the joint owner who intends to sell the share to an outsider is under an obligation to inform the other owners of the intention to sell and the price and other conditions of sale (Arts.246 and 250).
In share ownership, the property can be divided by agreement of the joint owners.Ajoint owner may demand the split of his share from the common ownership. If no agreement is reached among the joint owners on the manners and terms of the division, the joint owner who demanded the division of his share may apply to court for the withdrawal of his share in kind. If this is not possible without unreasonable damage to the property, the joint owner who intends to withdraw is entitled to reimbursement in cash (Art.252, paras.1-3).
In common ownership, owners jointly possess and use the property. For the disposal of the property, unanimous consent is needed (Art.253, paras.1 and 2). Division of the property or the withdrawal of a joint owner is possible. In such cases, the share of each joint owner has to be determined; the shares are to be equal, unless otherwise provided by law or agreed by the joint owners (Art.254, paras.1 and 2).
22 Sadikov ed., supra, p.475.
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Creditors of the joint owner in both share ownership or common ownership may request the division of the shares in cases where other assets of the joint owner is insuf cient to cover the debt. If, in such cases, division of the property is impossible without damaging it, the creditor may require the debtor to sell the share to the remaining joint owners (Art.255).
3THE RIGHT OF ECONOMIC MANAGEMENT AND OPERATIONAL
ADMINISTRATION
Under the socialist system, state enterprises and institutions were allocated state property. Since the property was owned by the state, these enterprises and institutions themselves could not be regarded as owners of the property. A new concept which is close to ownership, but not exactly that had to be invented to explain the right of these entities over the property they administered. This is the right of operational administration (pravo operativnogo upravleniia) which was conceived in the 1940s by A.V.Venediktov, a renowned specialist of economic law, in order to explain the rights of state enterprises under the system of state monopoly over means of production.23
After the collapse of socialism, the state has been distancing itself from being directly involved in production and commercial activities. The right of economic management (pravo khoziaistvennogo vedeniia) was introduced later as a “transitional form from state monopoly to private entrepreneurship”.24 These concepts are used in relation to unitary enterprises and state agencies. The number of enterprises with the right of operational management is in decrease.
The right of economic management is a right to possess, use, and dispose of assets and properties in accordance with the terms and purposes set by the owner. The owner is either the state (the Russian Federation and its constituent entities) or the municipalities and the unitary enterprises merely manage the property on behalf of the owner. Therefore, entities such as unitary enterprises are not entitled to dispose of immovables entrusted to it by sale, placement as a security, or contribution to the capital of a commercial company without the consent of the owner (Art. 295, para.2).
Therightofoperationaladministrationisexercisedbysomeunitaryenterprises and institutions, including government agencies. It is stricter than the right of economic management in that not only immovables, but properties in general
23A.V.Venediktov, Gosudarstvennaia sotialisticheskaia sobstvennost’, Moscow 1948.
24V.P.Pavlov, “Pravo khoziaistvennogo vedeniia”, in A.Ia.Sukarev ed., Rossiiskaia iuridicheskaia entsiklopediia, Moscow 1999, pp.2251-2252.