Oda Russian Commercial Law 2007-1

i)petition for contesting normative and non-normative acts of Federal, regional, and municipal agencies when the rights and lawful interests of organisations and individuals in the area of entrepreneurial and other economic activities are involved;

ii)action for requesting the court to recognise transactions which were effected by Federal, regional, and local agencies, state and municipal enterprises, institutions as well as juridical persons who have Federal, regional, and municipal participation in their capital;

iii)action for requesting the court to apply the consequences of invalidity of transactions which were effected by Federal, regional, and local agencies, state and municipal enterprises, institutions as well as juridical persons which have Federal, regional, and municipal participation in their capital.

Thus, procurators may now intervene with the transactions of companies only when the companies involved have Federal, regional, or municipal participation in the capital.

The Code provides for the participation of third parties.Athird party with an independent claim regarding the contested matter is entitled to join at any time before the court renders the judgment. Such a third party is entitled to exercise all the rights of a party, but also bears all the duties attributed to a party (Art.50, paras.1 and 2). A third party without an independent claim may join on the side of either party, provided that the outcome of the case would affect its rights or duties in relation to one of the parties. A third party of this kind may also be brought into the procedure upon request of either party or upon the initiative of the court. Such a third party is entitled to exercise the rights of the parties except for major decisions such as the change of the subject matter of the case, change in the amount of claim, withdrawal, acknowledgement of claim, or settlement (Art.51, paras.1 and 2).

There is no provision in the Code which enables a group of individuals which does not form a juridical person to sue in the name of the group, as in the US class action or German Verbandsklage. In principle, in such cases, these individuals must sue jointly. However, according to certain laws, a group of individuals can nevertheless sue as a group. For example, the Law on the Protection of Environment provides that a group of individuals may present a claim in order to prevent ecologically harmful activities which cause damage to the health and property of individuals, the economy, and the environment, either to the ordinary court or the commercial court (Art.91).4 Similarly the Law on the Protection of the Rights of Consumers allows consumer organisations which are not juridical

4Law No.7-FZ of January 10, 2002.

persons to sue on behalf of speci c individuals as well as unspeci ed number of consumers (Art.17, para.3).

4THE ADVERSARIAL PRINCIPLE AND THE ROLE OF THE COURT

The adversarial system of court procedure is guaranteed by the Constitution. This system is in contrast with the inquisitorial system adhered to under socialism where the court played an active role in the procedure. An authoritative commentary de nes the adversarial system as follows:5

As a result of the adversarial system, the parties, insofar as they intend to achieve the most favourable decision for themselves....are under an obligation to inform the court of all legal facts which are materially signi cant to the case, indicate or submit evidence which supports or refutes these facts, and also to perform other procedural acts permitted by law for the purpose of convincing the court of their truthfulness.

Instead of the court playing an active role in nding the “objective truth”, now each party is under an obligation to prove the circumstances which it refers to as the basis of its claim or response (Art.65, para.1). In the past, because of the active role played by the court, the way the burden of proof was to be distributed had not necessarily been clearly determined in Russia.6 In any case, under the adversarial system, the court does not have an obligation or power to collect evidence on its own initiative, as was the case under socialism.

There are provisions in the substantive law which allow presumptions. For example, in a dispute involving the performance obligation, the debtor-entrepre- neur is liable, unless he proves that an adequate performance was impossible due to insurmountable circumstances (Civil Code Art.401). Another example is tort liability, in which the fault of the possessor of sources of increased danger to the surroundings is presumed (ibid., Art.1079, para.1).

On the other hand, the Russian adversarial system is not completely adversarial. The Code provides that the court is entitled to ask the parties and other participants in the procedure to produce supplementary evidence needed for the correct examination of the case and rendering of a lawful and well-grounded decision (Art.66, para.2). A similar provision had existed in the previous Code. Exercise of this power of the court to “take all measures for the full clari cation of circumstances which have relevance to the case” is regarded more or less

5 Iakovlev and Iukov, supra, p.41.

6Kommentarii..., supra, p.118.

as a duty of the court.7 Although the system is understood to have changed to the adversarial system where the judge is to play a passive role, “an element of activeness has been preserved”.8

The right of the parties to dispose of the subject matter of the litigation was not without restriction in the past. The predecessor to the present commercial court, the gosarbitrazh, had operated under the principle of “active intervention”, since the ful lment of the state economic plan had precedence over the interest of the parties. In the civil procedure, the court was allowed to exceed the scope of the claim and render a judgment in pursuit of the objective truth if it was necessary for the protection of the rights and lawful interests of state enterprises, other entities as well as individuals.9 Even under socialism, this provision had been criticised.

Under the adversarial principle, the court is not granted authority to interfere with the power of disposition of the parties, to take initiative in favour of either of the parties, or to exceed the scope of the claim etc.10 Still, in the 1992 Code, the court was allowed to change the grounds or subject matter of the claim on its own initiative, but this was dropped in the 1998 Code. The current Code provides that the plaintiff may change the basis or subject matter of the claim, change the amount of the claim, or withdraw the claim in full or part until the judgment is rendered. The defendant may accept the claim (Art.49, paras.1–3). The court is empowered not to accept the withdrawal, reduction of the amount of claim, or acceptance by the defendant if it is against the law or infringes the right of the others (ibid., para.5). Thus, the scope of interference by the court on these issues has been signi cantly narrowed.

5PRESENTATION OF THE APPLICATION FOR AN ACTION

The application for an action (iskovoe zaiavlenie) must be presented to the court of appropriate jurisdiction. Together with the written application, documents such as the certi cate of payment of state duty should be submitted (Art.125).

A single judge makes the decision whether or not to accept the application within ve days. The application can be rejected on procedural grounds only. If the problem is recti able, the application is returned to the applicant.

7 Ibid., p.121; Anokhin, supra, p.192.

8Iakovlev and Iukov, supra, p.230.

9Art.195 before the 1995 amendment. M.Gurvich ed., Sovetskii grazhdanskii protsess, second

edition, Moscow 1975, p.196. 10 Anokhin, supra, p.158.

The court leaves the case without further action on grounds including the following (Art.148, para.1):

i)a dispute between the same parties on the same matter and on the same grounds is pending at the commercial court, ordinary court, or arbitration tribunal;

ii)there is an agreement between the parties to have the dispute settled by arbitration, provided that either party raises this point, except in cases where the agreement is invalid, extinguished, or unenforceable;

iii)the parties agreed to have the dispute settled by arbitration in the course of the proceedings before the rendering of the nal judicial act.

The procedure is terminated on grounds including the following (Art.150, para.1):

i)the case does not fall within the jurisdiction of the commercial court;

ii)there is a judgment of the ordinary court, commercial court, or a competent foreign court on a dispute between the same parties on the same matter and on the same grounds which has taken force;

iii)there is an arbitral award in force between the same parties on the same matter and on the same grounds, except in cases where the commercial court refused enforcement of the award.

In instances where the case has been terminated, the plaintiff may not present a claim to court again regarding the dispute between the same parties, with the same subject matter and grounds (Art.151, para.3).

6SETTLEMENT

Under the previous Code, settlement could be encouraged at an early stage, but this seldom happened. The new Code of Commercial Court Procedure has introduced a new chapter on settlement. The court is to take measures for settlement and assist the parties to settle the case (Art.138, para.1).At the preparation stage, the judge explains to the parties their right to settle.According to a commentary, settlement is bene cial since it saves time and cost, and preserves business relations of the parties.11 Obviously, another consideration is the alleviation of the case load which is enormous in Russia.

Parties may settle the case at any stage of the procedure, including the enforcement procedure. Settlement may not infringe the rights and lawful inter-

11 Iakovlev and Iukov, supra, p.451.

est of others, or be against the law (Art.139, paras.1 and 3). Settlement needs to be approved by the court (Art.141, para.1).

In 2005, in total, 25,536 cases – 1.7% of all cases at the rst instance and 7% of cases involving civil law relations – were settled.

7SECURITY MEASURES

The court may take “prompt interim measures” (security measures) in order to secure the action or to ensure the property interest of the applicant (Art.90, para.1). Security measures are available at any stage of the procedure, if the failure to adopt such measures would make the enforcement of the judgment dif-cult or impossible. Such measures can be used for the prevention of signi cant loss to the applicant (ibid., para.2).

It should be noted that upon application of either party in commercial arbitration, security measures are available at the place of the arbitral tribunal, or the place of location or residence of the debtor (ibid., para.3).

The following security measures are available (Art.91, para.1):

i)attachment of the defendant’s money or other assets in possession of the defendant or a third party;

ii)prohibition on the defendant from effecting certain actions concerning the object of the dispute;

iii)imposition of a duty on the debtor to take certain acts to prevent the loss or deterioration of the state of the disputed property;

iv)transfer of the disputed property to the entrustment of the plaintiff, or a third party;

v)suspension of enforcement by ex-parte procedure;

vi)suspension of sale of property in cases where an action to release the property from arrest has been initiated.

Application for the security measures can be submitted together with the application to initiate the procedure or at any stage before the nal judicial act is rendered. The application is considered at the latest on the next day of the application. Parties are not invited to attend the consideration of security applications.12 The application is considered by a single judge who will render a decision on the availability of such measures. The application cannot be rejected if the applicant offered a counter security (Art.93, paras.1, 4 and 5). The

12 Ibid., p.320.

This is in contrast to the system under socialism, in which the court played a paternalistic role in pursuit of absolute truth.

There is a time limit for the procedure. The case must be considered by the court within one month of the day of the referral of the case to the hearing (Art.152). According to the 2005 statistics, only in 3.6% of the cases was this time limit unobserved.15

The Code does not contain detailed provisions on the manner of the hearing. There is only one provision on the “oral session”. In civil procedure, a judge reports at the hearing the substance of the claim, the response of the defendant, circumstances which support the claim and the available evidence. Thus, it is not the parties which present the case at the hearing. Although there is no corresponding provision in the Code, reportedly, the same procedure is adopted in the commercial court procedure “by way of analogy”.

The court examines evidence, hears the statements of participants in the procedure, the testimony of the witnesses, and the opinions of experts. Witnesses must be present at the beginning of the hearing, but are not allowed to be present at the hearing before their testimony and therefore, are instructed to leave the room, and then return separately to the court room to give testimony.

There is only one provision regarding the testimony of witnesses. Witnesses are summoned upon petition of the parties. The court may, upon its initiative, summon witnesses, but this is now limited to cases where the witness was involved in pre-paring documents examined by the court, or producing tangible evidence (Art.88, paras.1 and 2). Testimony of the witness is not regarded as evidence, if the witness failed to disclose the source of information (ibid., para.4).

UnlikeAnglo-American law, the parties do not have a constitutional right to question witnesses.

9EVIDENCE

Evidential rules are sparse. This is more in line with the Franco-German system.

The Constitution has an explicit provision which prohibits the use of evidence that has been unlawfully obtained (Art.50, para.2). This is reproduced in the Code (Art.64, para.3). The court determines the relevance, permissibility, truthfulness and the mutual relation of the evidence in its totality. The judge is to evaluate the evidence by their “internal conviction”, based upon its all-sided, complete, objective and direct examination (Art.71, para.1).

15 VVAS 2006 No.5, p.27.

There is a nascent system of disclosure. Parties and other participants in the procedure must disclose the evidence which they quote as the basis of his claim or response before the beginning of the hearing session. Only such evidence which other participants in the procedure had studied in due time can be quoted in court (Art.65, paras.3 and 4). This is based upon the idea of adversary system and is one of the novelties in the new Code. The problem is that the concept of disclosure is not clari ed in the Code. Copies of documents can be exchanged, but how corporal evidence, testimony of witnesses, and expert opinions can be disclosed is not clear and has to be developed in practice.20

10 JUDGMENTS AND DECISIONS

The proceeding of the rst instance ends with either a judgment or a decision of the court. When the case has been heard on its merit, the court renders a judgment. At the end of the hearing, after the nal words by the parties, the judge(s) retire(s) to the anteroom and prepares the judgment. The judges, after deliberation, may decide to reopen the hearing if there is a need to examine further evidence, or to continue clarifying the circumstances relevant to the case. In such cases, the procedure is renewed (Art.168). Otherwise, judges prepare the judgment, return to the courtroom and the presiding judge announces the judgement (Art.176). The court does not need to declare the entire judgment at this stage – it may choose to delay the announcement of the entire judgment up tove days (Art.176, para.2).

The judgment of the commercial court takes effect after one month of its adoption unless it is appealed, except for judgments of the Supreme Commercial Court and the judgments of the commercial court on the legality of normative acts, which take effect immediately (Art.180, paras.1 and 2).

11 APPEAL AND OTHER PROCEDURES

Russia has a rather peculiar system of appeal in civil and commercial procedure. There is an extensive possibility of reviewing judgments which have taken force.

In the commercial court, the parties have a right to one appeal against judgments which have not taken effect. The appeal is lodged via the court of rst instance which rendered the judgment in question (Art.257, paras.1 and 2).

20 Ibid., p.226.