No. 59 Procedural Aspects in Cases of Failure to Fulfil (Duly Fulfil). Contractual Obligations
Goltsblat BLP advises that Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation No. 57 of 23 July 2009 “On Certain Procedural Aspects of Considering Cases of Failure to Fulfil or Duly Fulfil Contractual Obligations” (the Resolution) has been published.
This Resolution’s aim is to ensure uniform application of the provisions of the Arbitration Procedure Code of the Russian Federation (the APC) by state arbitration courts in cases of failure to fulfil or duly fulfil contractual obligations (cases of contractual payments) and cases of invalidation of relevant contracts, deeming the contracts non-concluded or seeking modification or cancellation of the contracts (cases of contesting contracts).
First of all, the Resolution notes that, under the APC, the parties involved in the case should exercise their rights in good faith, in particular, file counter-claims in due time. The parties should also disclose the evidence underlying their demands and objections in advance, i.e., before the court proceedings begin. These parties are subject to the consequences of taking or refraining from taking relevant procedural actions.
The Resolution provides the following explanations, in particular:
Initiation of an independent case challenging a contract does not preclude consideration of a related case on contractual payments or entail suspension of the latter case or of a judicial act’s enforcement under the case. Judicial defence of violated rights might be ensured by prompt filing of objections or a counter-claim. Also, in considering a case of contractual payments, the court should consider whether the relevant contract has been concluded and is valid.
This explanation will change the practice previously abused by bad faith debtors when state arbitration courts suspended proceedings on lawsuits seeking payments under a contract (for instance, recovery of the principal debt and a penalty) if separate proceedings were initiated challenging the contract itself.
Circumstances established by a judicial act that has come into legal force testifying that a contract has been concluded and is valid on a case of contractual payments shall not be subject to repeat proof during consideration of a case of contesting a contract involving the same parties.
No matter which particular parties are involved in these cases, the assessment of circumstances made by a court on a case considered previously shall be taken into account by the court considering the second case. Any different conclusions drawn by the court on the second case shall be accompanied by the underlying reasoning.
In considering a lawsuit contesting a contract, the court must accept for prosecution a counter-claim filed by the lender seeking payments under the contract, since the two lawsuits are interconnected and this will enable a speedier and more correct resolution of the case.
A case of contractual payments and a case of contesting a contract initiated in the same court may be consolidated on the grounds that the matters of dispute and parties involved are interconnected, if this does not entail excessive protraction of the proceedings on the first case.
A judicial act that has entered into legal force and sustained a lawsuit contesting a contract does not entail cancellation (modification) of a judicial act on collection of contractual payments, but serves as grounds for review of the latter case on the basis of newly disclosed circumstances.
The above explanations are now also applicable to consideration of cases of failure to fulfil or duly fulfil obligations under unilateral contracts and of contesting such contracts, provided this does not run counter to their essence.
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