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Complaint Procedure and Writ Proceedings


Ivan Stasyuk, lawyer at Ilyashev & Partners

Source: Corporate Jurist

The arbitration proceedings will never be the same again. On June 1, 2016, mandatory complaint procedure will become effective. Court order, a new institution used in courts of general jurisdiction, will appear. The rules of summary proceedings will be corrected. What will the novelties bring?

Claim understatement

Now every civil dispute may be submitted to the court only after its parties take the pre-trial settlement measures, i.e. at least 30 days from the date of filing a claim. It became possible after introduction of the relevant amendments to Art. 4(5) of the Arbitration Procedure Code of the Russian Federation. While earlier the parties could “exchange” claims only if it was envisaged in the agreement. However, it remained not entirely clear whether the parties can eliminate complaint procedure and envisage in the agreement the possibility of going to court without sending a claim. The law only has a reservation that the agreement or the law can envisage a different term and procedure.

It suggests that at least some, albeit minimal, procedure must be envisaged. This interpretation is supported by a new wording of paragraph 1 Art. 148(2) of the Arbitration Procedure Code of the Russian Federation: the court dismisses leaves the claim without prejudice, if it determines that the claimant did not comply with claim or other pre-trial dispute settlement procedure, except if compliance is not provided by a federal law.

However, the courts are unlikely to observe such a strict interpretation of the said rule and, quite obviously, will permit filing lawsuits without complying with the claim procedure, if the need of its application is cancelled by the agreement.

It seems that there are no serious reasons to limit the contractual freedom by prohibiting the exclusion of the claim procedure. Further, the said procedure can be corrected in terms rather than canceled (e.g. by setting a shorter time of waiting for a response), or by the procedure for its implementation.

Whereas the law has no specific procedure for sending a claim, it is better for the parties to agree it directly in the agreement specifying the address and the method of its sending.

If the agreement has no special conditions in this regard, the claim should be sent to the address of the respondent’s location, which is specified in the Unified State Register of Legal Entities or the Unified State Register of Individual Entrepreneurs. The appropriate information can always be found in the public domain.

The claimant does not need to wait for receipt of the claim, the term will be counted from the date of its sending.

The law doe not specify how the claimant should act if the respondent does not recognize his claims in the statement of defense.

In such a situation, the claimant does not have to wait until the end of a thirty-day period, and should immediately go to court. Waiting does not make sense, because he took all pre-trial settlement measures, and the respondent, in turn, did not recognize the claim, and therefore, could not reach an agreement and there is nothing to do without a trial.

Actually, the applicant may apply to court upon obtaining any response that does not satisfy him.

For example, if in response to the claim to pay money the respondent asks for a delay, which is unacceptable for the claimant. Thereto, he is not obliged to enter into correspondence, or to make compromises. He is free to sue.

Unresolved is the question of how the court must act if the claim has been sent, but the lawsuit has already been filed, and the term for a response has not expired.

If the term was violated slightly (the claim was filed a few days before the expiry date), then such a claim must be accepted for hearing. In a preliminary hearing the court will be able to determine whether the respondent sent any statement of defense, because the term of waiting for a response will already expire by the first hearing.

If it turns out that there was no response, or the respondent did not recognize the claim, the court will consider the claim on the merits. If the respondent responded to the claim and granted it, the court costs incurred in connection with the premature initiation of the case, should be assigned to the claimant.

The courts specify that filing of the claim before the expiration of waiting period is not the ground for its dismissal (ruling of the Federal Arbitration Court of Northwestern District of October 30, 2013 in case No. A56-19778/2013, the Arbitration Court of West Siberian District of March 11, 2015 No. F04-15806/2015 in case No. A67-3998/2014).

Further, when filing a claim the claimant should act in good faith. And if it was filed just a few days after sending the claim, the claimant can not be considered bona fide, and the claim will dismissed (Resolution of the Arbitration Court of Moscow District of December 11, 2015, No. F05-17755/2015 in case No. A40-123718/15).

Non-contractual disputes

The rule on compliance with the claim procedure applies not only to all claims based on civil law relations, but also to the claims, e.g. on recovery of unjust enrichment, return of property from illegal possession, recognition of property right, or invalidation of the transaction, recovery of damages.

However, not always the respondent that received a claim can satisfy it. Thus, a disputed transaction is null and void if recognized as such by a court (Art. 166(1) of the Civil Code of the Russian Federation), and the parties can not invalidate it of their own free will.

If all parties to the transaction agree that it is subject to the grounds of invalidity set by the Civil Code of the Russian Federation, they can terminate the legal relations (terminate the contract) and restore the initial position. However, if one party does not consider the transaction null and void, sending of the claim becomes an unnecessary formality complicating access to a court.

It is possible that in the future jurisprudence will admit filing claims without complying with the claim procedure, if it will not result in extrajudicial case hearing.

Currently, however, the law obliges claimants to send claims on all matters arising out of civil law relations, except those that are envisaged directly in paragraph 1 of Art. 1 of the Arbitration Procedure Code of the Russian Federation. Failure to comply with the claim procedure entails procedural risks in terms of waiver of a lawsuit.

Procedure for approval of a court order

In accordance with Art. 229.2 of the Arbitration Procedure Code of the Russian Federation a court order is issued if:

• claims of the recoverer arise as a result of failure or improper performance of the agreement and are based on the documents establishing monetary obligations that the debtor acknowledges, but does not perform. Thereto, the price of stated claims does not exceed RUB 400 thousand;

• claim is based on the protest of a bill in default performed by the notary, non-acceptance and non-dating of acceptance if the price of claim does not exceed RUB 400 thousand;

• the applicant filed a claim to the debtor for the recovery of mandatory payments and penalties. The total amount of monetary amounts recovered should not exceed RUB 100 thousand.

Claims recognized by the debtor are those regarding which the reconciliation report is signed, or there is a statement of defense of which their recognition follows. Such evidence shall be attached to the application for issuance of a court order (clause 12 of Resolution of the Plenum of the Supreme Court of Arbitration of the Russian Federation of October 08, 2012, No. 62).

The claimant has the right not to apply for court order, but to file a claim immediately even if the amount and nature of claim permits to consider it as part of writ proceedings.

It is confirmed by the fact that Art. 129 of the Arbitration Procedure Code of the Russian Federation does not envisage a ground for return of claim such as the opportunity to consider the claim as part of writ proceedings. Case law proves that it is possible to file a claim bypassing the application for issuance of a court order (appellate rulings of the Stavropol Regional Court of December 02, 2015 in case No. 33-8828/2015 of December 02, 2014 in case No. 33-7143/2014).

It remains an open question whether the claimant is entitled to include in the application for issuance of a court order the claim on not only recovery of the principal debt, but also penalty or interest for the use of borrowed money.

The court order specifies the amount of penalty to be recovered (clause 7, Art. 229.6 of the Arbitration Procedure Code of the Russian Federation), which means the possibility of filing such a request as part of action proceedings. However, it should be noted that the amount of penalty is not specified in the reconciliation reports and, accordingly, the claim for penalty can not be qualified as the claim recognized by the debtor.

The courts of general jurisdiction are often inclined to believe that the claims for penalties (and fines) are not indisputable, also in connection with the respondent’s right to seek reduction of its amount (Ruling of the Primorsky Regional Court of November 17, 2015 in case No. 33-10648/2015).

The debtor has 10 days from receipt of a court order to submit the application (objection) for its cancellation by contacting the court that issued it (paragraphs 4, 5, Art. 229.5 of the Arbitration Procedure Code of the Russian Federation). Thereto, the ground for cancellation of a court order is the very fact of filing such objections.

The debtor is not required to provide evidence of inconsistency of claims and especially to motivate the objections to the issuance of a court order.

If for some reason the debtor missed the specified term, he can still file the objections, but justifying the reasons that did not allow him to do it in time.

The court order can also be appealed in cassation (paragraph 11, Art. 229.5 of the Arbitration Procedure Code of the Russian Federation), where the debtor will have to prove illegality of the court order. In this case the grounds for its cancellation can only be violations of procedural rules (paragraph 4, Art. 288 of the Arbitration Procedure Code of the Russian Federation, paragraph 4 Art. 288.1 of the Arbitration Procedure Code of the Russian Federation).

The cassation appeal may be submitted by the person not involved in the case, but whose rights and obligations are affected by the court order. For example, the creditors in the bankruptcy case challenging the validity of the creditor’s claims confirmed by the court order (clause 24 of Resolution of the Plenum of the Supreme Court of Arbitration of the Russian Federation of June 22, 2012, No. 35). If the court finds that the court order affects the rights of third parties, it may be canceled and its issuance may be refused (clause 4, paragraph 6, Art. 229.6 of the Arbitration Procedure Code of the Russian Federation).

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