Legal Practice Guide. Litigation 2014-2015. Russia - Law & Practice

10.11.2014

CHAMBERS & PARTNERS

1. General information

1.1 Structure of the legal system

Russian civil law is a continental system, falling within Germanic Law. The German Civil Code greatly influenced the Russian Civil Code.

Decisions of the Russian Federation’s supreme courts are also a source of law, and court practice exerts a substantial impact on judicial consideration of cases.

The procedural legislation emphatically follows the adversarial model. Only in exceptional cases associated with protection of a markedly weaker party to civil relations, such as consumers, are individual elements of inquisitorial proceedings permitted.

1.2 Structure of the courts

The Russian state judicial system is divided into three branches.

The Constitutional Court considers compliance by regulatory and legal acts with the Constitution of the Russian Federation (RF).

State arbitration (commercial) courts consider disputes between legal entities, individual entrepreneurs and state bodies.

The arbitration court system has four levels: (i) courts of the first instance (trial courts – one per RF constituent entity); (ii) appellate courts (20 courts in the RF), which review trial court rulings; (iii) cassation courts (ten courts in the RF), which verify that trial and appellate courts have applied the law correctly; and (iv) the Supreme Commercial Court, which focuses on forming court practice and ensuring that it is consistent.

The general court system considers all other civil disputes and criminal cases.

This system includes justice courts and district courts, which act as trial courts. Their decision can be appealed to courts of RF constituent entities, which function as appellate courts, as well as the Supreme Court of the Russian Federation, which ensures that court practice is consistent.

The state arbitration and general courts are currently being merged into a single system.

Russian legislation permits disputes to be considered by arbitration tribunals, but this system is used very rarely because proceedings in state courts are immediately available.

Court proceedings in the RF are open, except for rare occasions relating to official secrets and the rights of minors, when the court is entitled to close the proceedings to anyone not directly related to the dispute under review.

In other cases, anyone has the right to attend the hearings.

Only case participants have access to the court filings.

1.3 Costs

The general rule is that the party that wins the dispute can claim from the defeated party reimbursement of its court costs, including attorneys’ fees.

Only the state fees paid by the winner are recovered automatically. Recoupment of other expenses requires the submission of a relevant application. In this case, the loser may file objections proving that the expenses are not associated with the case and/or are excessive.

1.4 Funding

It is prohibited by law in the RF to add contingency fees to payment for legal services.
The question of litigation funding is not regulated by Russian legislation.

2. Initiating a Lawsuit

2.1 Statute of Limitations

The general statute of limitations is three years, but is shorter for some types of dispute. For instance, a claim for the invalidation of a transaction must be filed within a year by a party to the transaction.

2.2 Filing

In the majority of cases, there are no prerequisites to filing a lawsuit, though in some cases the law dictates mandatory issue of a pretrial claim. The need for this may be established by the parties to an agreement.

2.3 Jurisdictional requirements for defendants

In both general and state arbitration courts, a suit is generally filed at the defendant’s place of residence or the location of the organisation. If the place of residence of the defendant is not known, suits may be filed in both general and state arbitration courts at the location of his/her property or last known place of residence in the Russian Federation.

If the defendant has no place of residence in the Russian Federation, a suit may be filed against him in a general court at his last known place of residence or the location of his property, whereas the suit in the state arbitration court must be filed in the jurisdiction in which his property is located.

Suits against a legal entity deriving from the activities of its subsidiary or representative office may be filed only with general or state arbitration courts at the location of the subsidiary or representative office. Suits deriving from an agreement specifying the location of its fulfilment may be filed at the agreed location. Suits deriving from collision of ships may be filed with a court at the location of the defendant’s vessel or the port where the vessel is registered.

The following rules apply to general courts, but not to arbitration courts:

  • Suits to recover alimony or determine paternity may also be filed with the court at the claimant’s place of residence;
  • Divorce suits may also be filed with the court at the claimant’s place of residence if a minor is involved or the claimant’s state of health would impede travelling to the defendant’s place of residence;
  • Suits to recover compensation for harm, injury or other damage to health or as a result of the death of a breadwinner may also be filed at the claimant’s place of residence or the place where the harm was caused;
  • Suits to restore labour, pension or housing rights, recover property or its value, connected with reimbursement of losses caused to an individual by unlawful conviction, unlawful imposition of criminal liability, unlawful detention or release into one’s own custody as a preventive measure, or unlawful administrative arrest, may be filed with the court at the claimant’s place of residence;
  • Suits to protect the rights of personal data owners, including suits to recover losses and/or moral damages, may be filed with the court at the claimant’s place of residence;
  • Suits to protect consumer rights may be filed with the court at the claimant’s place of residence or place of stay or the place of contract fulfilment;
  • Suits to recover salary and other sums due to the members of a ship’s crew for work onboard, repatriation costs and social security contributions, remuneration for assistance and salvage at sea may also be filed with a court at the location of the defendant’s vessel or the port of the ship’s registration;

Suits to recover remuneration for assistance and salvage at sea may be filed with a state arbitration court at the location of the defendant’s vessel or the port of the ship’s registration or the place where the losses were incurred;

The jurisdiction for cases may sometimes be changed by agreement between the parties.
Article 30 of the Russian Civil Procedure Code and article 38 of the Russian Arbitration Code specify cases of exclusive jurisdiction. For instance, disputes relating to real estate are to be considered by a court at the location of the property.

2.4 The initial complaint

The statement of claim must specify the claimant and the defendant, the grounds for the suit and the claims made against the defendant.

Once the document has been filed the claimant is entitled to change either the claims or the grounds for the suit at a later date. The claimant is also entitled to add supplementary arguments.

2.5 Serving proceedings

In state arbitration (commercial) courts, the claimant must send the suit and attached materials to the adversary. It is the responsibility of the court to provide notification of the start of the judicial proceedings.

In general courts, the court is fully responsible for notifying the start of the judicial proceedings and sending out a copy of the statement of claim.

A case accepted by a court for consideration in observance of the rules of jurisdiction should be decided by the accepting court on the merits, even though it might subsequently fall under the jurisdiction of another court.

The legislation specifies a number of cases that can be transferred to a different court.

A statement of claim filed with the wrong court is returned to the claimant. If the court hearings determine that the case did not fall under the given court’s jurisdiction when accepted, the proceedings are terminated.

2.6 Failure to respond to a lawsuit

Provided that the defendant has been notified of the court proceedings, if the defendant does not respond or attend the hearing, the court will consider the case in the defendant’s absence.

2.7 Class Action

Russian legislation does not provide for collective actions in the same sense as is found in Anglo-Saxon law, including class actions. In the Russian Federation, every person whose rights have been violated is identified individually.

A lawsuit may be filed by several claimants jointly (procedural co-participation) if:

  1. the dispute relates to rights and obligations common to several claimants or defendants; 
  2. the rights and obligations of several claimants or defendants have the same grounds;
  3. the dispute relates to analogous rights and obligations.

In such a case, each of the claimants is, in fact, acting independently in relation to the adversary. The co-participants may instruct one or several of their number to conduct the case.

In addition, the Public Prosecutor may file a suit to protect an indeterminate group of persons.

3. Pretrial Proceedings

3.1 Dismissing the lawsuit

A case may only be terminated once accepted if a judicial ruling has already been issued on the same dispute between the same parties or if the proceedings establish that it does not fall under the jurisdiction of the given court and should, for instance, be heard by a different court (such as a general rather than a state arbitration court).

The possibility of the case being terminated on such grounds does not depend on the stage of the proceedings.

3.2 Dispositive motions

Russian legislation does not specify which types of motion should be filed before trial.
During the court proceedings, motions may be made for increasing or reducing the claims, calling third persons to participate in the case, replacing the defendant, adopting interim relief measures, challenging the judges and others.

Such motions may also be made at any point in the proceedings.

A party may enter a petition for the case to be heard by a court with the participation of arbiters.

3.3 Joinder

Russian legislation allows third parties to join a case, either filing independent claims in relation to the dispute, or joining with the existing case.

A party making independent claims in relation to the dispute should file the relevant claims with the court that essentially comply with all the aspects of the original statement of claim.

Persons not filing independent claims may be called on the basis of an application from the plaintiff or the defendant or on the initiative of the court.

Joinder can take place at any stage of the proceedings, after which consideration of the case starts anew.

4. Discovery

Discovery of evidence before court proceedings are initiated exists in a very restricted form in the Russian Federation.

While the case is being prepared for hearing, the parties or their representatives provide one another with copies of the evidence substantiating the factual grounds for the statement of claim or statement of defence, and apply to the judges for discovery of evidence they are unable to obtain independently, without assistance from the court.

The parties usually hand one another copies of documents during the court session, or provide postal documents confirming receipt of the given documents by the other party.

Parties are also able to provide evidence at their disposal after the court has started considering the case on the merits, depending on whether they were in possession of the given evidence before the proceedings began.

The other party may not object to evidence being accepted on the basis that it was not presented at the pretrial stage.

The other party may only demand a recess or adjournment of the court session in order to study the given evidence.

Russian legislation does not provide for witnesses' testimonies to be obtained before they are questioned in court.

4.1 Legal privilege

In the Russian Federation, the only people that enjoy legal privilege are attorneys i.e. those qualified as attorneys in the manner established by law and engaged in relevant activities.

Legal privilege applies to any information connected with an attorney’s provision of legal assistance to their clients.

Attorneys may not be summoned and questioned as witnesses regarding circumstances that have become known to them in connection with requests to provide legal assistance or providing such legal assistance.

Investigative measures and actions may only be conducted in relation to attorneys (including in residential and office premises used by them for their attorney’s activities) on the basis of a court order.

Information, items and documents obtained during performance of these actions (including after the suspension or termination of attorney status) may only be used as evidence for the prosecution if they are not part of the attorney work product relating to clients. These restrictions do not apply to instruments of crime or items on transactions which are prohibited or limited by Russian law.

Legal privilege does not apply to in-house counsel or other non-attorney legal consultants.

5. Trials

5.1 Structure

Parties are usually present in court during a trial. The court opens the session and announces hearing of the case. Then it verifies the presence of the participants in the proceedings and their identity, explains any interpreter’s rights and obligations, has the witnesses withdraw from the courtroom, announces the judicial panel, explains the right to challenge its members, explains the case participants’ rights and obligations, and allows the parties to submit petitions relating to the judicial examination.

Consideration of the case on the merits begins with a report by the presiding judge. The presiding judge then determines whether the claimant supports its claims, whether the defendant recognises the claimant’s claims and whether the parties wish to conclude the case by amicable settlement or mediation.

Then the court hears the claimant and any third person participating on its side present their case, followed by other participants. The public prosecutor, representatives of state authorities, local government bodies and organisations, and individuals addressing the court in defence of the rights and legitimate interests of other parties speak first. Participants in the case may ask one another questions. The judges are entitled to question the participants at any time while they are presenting their case.

The next step is for the court to decide the sequence for studying the evidence.

Once all the evidence has been considered, the presiding judge asks the case participants and their representatives whether they have anything to add. If not, the presiding judge announces completion of consideration of the case on the merits and the court proceeds to the pleadings. These consist of speeches by the case participants and their representatives, first the claimant and its representative, followed by the defendant and its representative.

After the pleadings, the presiding judge will withdraw into the retiring room to deliberate.
Once the decision has been issued and signed, the court returns to the courtroom, where the presiding judge announces the decision. The presiding judge then explains the content of the judicial decision, the appeal procedure and time limit, and also announces any special opinions to the case participants, and their right to familiarise themselves with this and the timeline for doing so.

Jury trials are not available in civil cases in the RF.

5.2 Evidence

To be accepted by the court, the evidence must be of significance for the consideration and resolution of the case.

Case circumstances requiring, by law, confirmation by specific proof may not be confirmed by any other means of evidence (a loan, for instance, may not be confirmed by witness testimony).

5.3 Expert testimony

Under Russian law, an expert or specialist may participate in a case.

An expert or specialist is defined as someone possessing special knowledge on matters relating to the circumstances of the given case. Both experts and specialists bear criminal liability for deliberately providing the court with false information.

On the court’s instructions, an expert prepares a written opinion on the matters of interest to the court and may subsequently be questioned in court in order to clarify this opinion.
A specialist is invited to the court session as a witness, without carrying out any investigations or preparing any opinions in advance.

Expert opinion on Russian law and its enforcement are not permitted, as this is the exclusive prerogative of the court.

6. Settlement

6.1 Court approval

An amicable settlement always has to be approved by the court. For an agreement to be approved, the parties may enter a relevant application to the court at any stage of the proceedings.

The court will check whether the agreement violates the law or third party rights and, if it does not, the court will approve it.

6.2 Confidentiality

Once an amicable agreement is approved by the court a relevant judicial act is issued, containing all the conditions of the agreement. Like any other judicial act, the act is published on the court’s website, so cannot remain confidential.

7. Damages & Judgment

7.1 Rules relating to damages

Russian legislation provides for a number of instances when a party may claim recovery of default interest, a penalty or a fine.

Unless the amount involved is expressly established by law, the court usually proceeds from the criterion of it being proportional to the consequences of the breach of obligation. There are no other general rules in Russian law limiting the amount of damages.

Default interest (penalties, fines) are usually set by law in relation to individual types of civil relations, such as carriage or freight, water use, etc.

7.2 The collection of interest

Interest may be collected under Russian legislation for the failure to fulfil a financial obligation. Such interest may be charged for the entire period during which the financial obligation should have been fulfilled. The court decision may, for instance, specify accrual of relevant interest until the financial obligation is discharged, in which case the competent state bodies responsible for execution of court rulings will itself recalculate and recover the requisite sum. Even so, a separate claim may be filed for recovery of interest for non-fulfilment of a financial obligation, including after a judicial act has been issued for the recovery of the principal amount.

7.3 Non-monetary relief

Russian legislation provides for a variety of ways to restore violated rights, including non-monetary ones.
Such methods, including injunctive relief, may be applied on the following conditions:

  •  A relevant claim is filed;
  • The requested method will restore the violated rights;
  • The relevant judicial act can be enforced i.e. may be executed in reality. An example of an unenforceable decision is one to return an item that has already been destroyed;
  • The given method for restoring violated rights is not specifically prohibited by law for such relations.

A prohibition on performance of specific actions as a method for restoring rights is, in fact, very rarely used in the Russian legislation. The court may require the defendant not to impede exercise of the claimant’s rights but cannot, by its decision, prohibit the defendant from performing specific actions.

Such a prohibition on the defendant performing actions is used only as an injunctive measure during the court’s consideration of the case.

7.4 Enforcement procedure

Decisions of foreign courts, including ones approving amicable agreements, are recognised and enforced in the Russian Federation if this is provided for by an international treaty of the Russian Federation or by law.

An application or petition for recognition and enforcement of the decision of a foreign court or a foreign arbitral award must be filed with the relevant court within three years of the given decision coming into legal force.

If these three years have already elapsed but the deadline was missed for good reason, the court may reinstate the term.

A court may refuse to recognise or enforce a judicial act in the following cases:

  1. the decision has not come into legal force under the law of the country where it was issued;
  2. the party against which the decision was issued was not notified in a timely and proper fashion of the time and place of the court hearings or was unable to present its case to the court for other reasons;
  3. under an international treaty of the Russian Federation or federal law, the case falls within the exclusive competence of a court in the Russian Federation;
  4. a decision of a court in the Russian Federation on a dispute between the same parties, about the same matter and on the same grounds has already come into legal effect;
  5. proceedings are currently under way in a court in the Russian Federation on a dispute between the same parties, about the same matter and on the same grounds initiated before those in the foreign court or a court in the Russian Federation was the first to accept the hearing of the claim between the same parties, about the same matter and on the same grounds;
  6. the statute of limitations for enforcement of a foreign court decision has expired and not been reinstated by a state arbitration court;
  7. execution of the foreign court decision would contravene public policy of the Russian Federation.

A foreign court decision or foreign arbitral award is enforced on the basis of a writ of execution issued by the court that ruled to recognise and execute the foreign court decision or foreign arbitral award and in the manner specified by the legislation of the Russian Federation.

8. Appeal

8.1 Grounds for appeal

A party may appeal against an issued judicial decision before the appeals court. There are no legislative restrictions on the right to appeal.

8.2 Time limits and triggering events

A trial court decision may be appealed within one month of the full decision being prepared. If the appellant was not involved in the case, the terms runs from when they become aware of the issued judicial act.

9. Alternative Dispute Resolution

Mediation and consideration of a case by an arbitral tribunal are both permitted by law. If the parties decide to refer the case to a mediator or an arbitral tribunal, the state court leaves the claim undecided.

9.1 Relevant law

If a foreign court decision or foreign arbitral award is not fulfilled voluntarily, the successful party may apply to a state court for the decision to be recognised and enforced.
When considering such an application, the state court will only check that the arbitration clause is valid.

If an application for recognition and enforcement of an arbitral award is satisfied, the state court passes a decision on issue of a writ of execution.

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