Russia. Andrey Zelenin, Artem Antonov and Evgeny Lidzhiev. Lidings

Transcription

1 Russia Andrey Zelenin, Artem Antonov and Evgeny Lidzhiev 1 Treaties Is your country party to any bilateral or multilateral treaties for the reciprocal recognition and enforcement of foreign judgments? What is the country s approach to entering into these treaties and what if any amendments or reservations has your country made to such treaties? The Russian Federation itself, and as a successor to the USSR, is party to several international treaties on the legal assistance in civil and commercial matters, including the mutual recognition and enforcement of court judgments, with such countries as Albania, Algeria, Belarus, Bulgaria, China, Cuba, Cyprus, the Czech Republic, Egypt, Georgia, Greece, Hungary, India, Iran, Iraq, Italy, Latvia, Lithuania, Moldova, Mongolia, North Korea, Poland, Romania, Slovakia, Spain, Tunisia, Turkey, Vietnam, Yemen, and the Republic of former Yugoslavia. In addition, Russia has ratified some multilateral treaties that enshrine the recognition and enforcement of foreign judgments, inter alia, the Minsk Convention and the Kiev Agreement between the CIS members. In these treaties the recognition and enforcements proceedings are described in very broad terms and in most cases are similar to the provisions of the national legislation. In its turn, Russian legislation in section 1, article 409 of the Code of Civil Procedure of the Russian Federation (CCP) provides that the enforcement of a foreign judgment is possible only if such enforcement is provided by an international treaty of the Russian Federation. A similar rule for commercial disputes is stipulated in the section 1, article 241 of the Code of Arbitrazh Procedure of the Russian Federation (CAP). However, since there are no international treaties between Russia and most of the European and American countries, case law tends to expand the possibilities of the enforcement of foreign judgments in the Russian Federation based on such principles of international law as comity and reciprocity and a broader interpretation of other international treaties. For example, recently, the Presidium of the Supreme Arbitrazh Court held in the ruling of 8 October 2013 on case No. A /12, that recognition and enforcement of the court order of Great Britain and Northern Ireland could be granted based on the general provisions of the EU-Russia cooperation treaty. In the ruling of the Supreme Arbitrazh Court of 7 December 2009 on case No. A /09, the court found grounds for enforcement, substantiating it on the principles of comity and reciprocity. Moreover, the court underlined that the lack of a bilateral treaty itself is not an obstacle for recognition and enforcement. 2 Intra-state variations Is there uniformity in the law on the enforcement of foreign judgments among different jurisdictions within the country? There are no any variations in the regulation of the enforcement procedure within Russia since these matters lie with the competence of the federal government. 3 Sources of law What are the sources of law regarding the enforcement of foreign judgments? Generally, recognition and enforcement is subject to federal laws (the CCP, the CAP and the Federal Law on Insolvency (bankruptcy)) and international treaties of the Russian Federation. If an international treaty provides an enforcement procedure that deviates from the one described by federal law, the rules of international treaties prevail over the federal law due to section 4, article 15 of the Constitution of the Russian Federation. In addition to the above-mentioned legislative acts the Supreme Arbirtrazh Court has interpreted matters of application of the public policy defence in its Information Letter of 26 February 2013,No. 156, Review of arbitrazh practice on disputes on implementation of public policy as a ground for refusal of the recognition and enforcement of foreign court judgments and arbitral awards. This Information Letter is used by the lower courts as a guide (though not being obligatory) when resolving recognition and enforcement matters. 4 Hague Convention requirements To the extent the enforcing country is a signatory of the Hague Convention on Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, will the court require strict compliance with its provisions before recognising The Russian Federation is not a signatory of the Hague Convention on Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, thus, Russian courts are not bound by requirements of that Convention. 5 Limitation periods What is the limitation period for enforcement of a foreign judgment? When does it commence to run? In what circumstances would the enforcing court consider the statute of limitations of the foreign jurisdiction? According to section 3, article 409 CCP, a request for enforcement of a foreign judgment has to be brought within three years from the moment of its entering in force. The same limitation period is stipulated in section 4, article 246 CAP. The moment of the commencement of the limitation period has to be determined by the procedural law of the place of the rendering of the judgment. Generally, an enforcing court is not entitled to consider the statutes of limitations of foreign jurisdiction, unless it can be considered as a matter of public policy. 6 Types of enforceable order Which remedies ordered by a foreign court are enforceable in your jurisdiction? According to the CCP and the CAP Russian courts may recognise and enforce only final foreign judgments that have entered into force. Money judgments are probably the most wide-spread category of foreign judgments enforced in Russia. There are no restrictions under the Russian law with regard to money judgments. Orders for specific performance also may be enforced in the territory of Russian Federation as a legal remedy for the creditors rights under article 12 of the Civil Code of Russian Federation

2 Interim injunctions cannot be enforced since they are not considered as a final judgment. Nevertheless, a party to the foreign proceeding has the right to request an interim injunction in support of the case directly in the Russian courts. 7 Competent courts Must cases seeking enforcement of foreign judgments be brought in a particular court? If the dispute arises from non-commercial matters, the competent enforcing courts will be of the second instance at the place of the debtor s registration. If the dispute is between companies or entrepreneurs the enforcement will be initiated in the court of the first instance in the arbitrazh court at the place of the defendant. 8 Separation of recognition and enforcement To what extent is the process for obtaining judicial recognition of a foreign judgment separate from the process for enforcement? The terms recognition and enforcement in Russia are often used inseparably to describe the court procedure of granting exequatur for a foreign court judgment. However, for those judgments that do not require monetary or specific performance from the debtor, a simplified recognition-only procedure might take place. According to article 415 CCP, courts of general jurisdiction may recognise without any further enforcement proceedings a foreign decision on recognition of an individual as a civilian in some family matters and in other cases stipulated in federal law. This simple procedure of recognition is possible if the opponent has no objections regarding the case. The CAP rules provide that the claimant could ask the enforcement of award only together with its juridical recognition and consider these processes as parallel. At the same time certain judgments in commercial disputes (eg, to invalidate a transaction) could be recognised without the enforcement under the Decree of the Supreme Soviet of the USSR of 21 June 1988, No XI On the recognition and enforcement in USSR judgments of foreign courts and arbitration courts. Subsection 2, section 1 of that Decree provides that foreign judgments that are not subject to enforcement could be recognised if so provided by international treaty or legislation. This Decree is implemented in court practice, for instance, in the Ruling of the Federal Arbitrazh Court of Moscow district of 14 June 2012 on case No. A / Defences Can a defendant raise merits-based defences to liability or to the scope of the award entered in the foreign jurisdiction, or is the defendant limited to more narrow grounds for challenging According to the CCP and the CAP, the court is not entitled to revise the foreign judgment on its merits. A defendant can only submit objections on the limited grounds stated in the procedural law, such as public policy issues. For instance, the Supreme Arbitrazh Court stipulated in its Information Letter of 26 February 2013, No. 156 that recovery of liquidated damages that are twice more than the inflicted harm contradicts with Russian public policy, in particular with the principle of the adequacy of liability of the parties. 10 Injunctive relief May a party obtain injunctive relief to prevent foreign judgment enforcement proceedings in your jurisdiction? Russian procedural law does not contain such an institute as injunctive relief, and it is not allowed to limit the right to apply to the court since it would be in contradiction with the constitutional principle of access to justice. Instead, the defendant may suspend the process of recognition and enforcement by submitting an appropriate statement. For example, under article 143 CAP, a Russian arbitrazh court must suspend any proceedings (including the foreign judgment enforcement proceedings) in the case of impossibility of consideration of current proceedings before resolution of another case in state courts of the Russian Federation. Under article 144 CAP, the Russian Arbitrazh court may suspend any proceedings (including the foreign judgment enforcement proceedings) for the period of a trial in an international court or foreign court whose decision might be important for the current proceedings. 11 Basic requirements for recognition What are the basic mandatory requirements for recognition of Russian procedure rules do not directly provide for any basic mandatory requirements for recognition and enforcement of a foreign judgment, such as compatibility with the Russian law or proper, personal, subject matter jurisdiction. However, these issues might arise when the foreign judgment is tested against the grounds for a refusal provided in article 412 CCP and article 244 CAP. For instance, under article 244 CAP an arbitrazh court will refuse recognition and enforcement of foreign judgment completely or partly if: the judgment has not entered into force according to the law of the state where it was rendered; the defendant had no possibility of taking part in foreign proceedings because of improper notification about the place and time of court hearings or could not provide the foreign court with statements due to another reason; trial of these category of disputes is subject to exclusive competence of Russian state courts; there is a court judgment of the Russian Federation between the same parties on the same grounds and on the same subject matter that has entered into force; there are proceedings pending in Russia on the dispute between the same parties on the same grounds and on the same subject matter, which were commenced before the ones in foreign court; the limitation period for the enforcement of foreign judgments in Russia has expired; and enforcement of a foreign judgment would contradict with Russian public policy. In addition, the applicant must comply with the requirements for the application on the recognition and enforcement specified in article 411 CCP and article 242 CAP, among which include, inter alia: a notarised copy of the foreign judgment; an official document certifying the entering into force of the judgment if that does not follow from the text of the judgment itself; a document certifying the due notice of the defendant about the place and time of foreign proceedings. Foreign documents shall be presented with a notarised translation and apostille stamp or consular legalisation, where appropriate. 12 Other factors May other non-mandatory factors for recognition of a foreign judgment be considered and if so what factors? Only the Insolvency Law mentions reciprocity as a ground for recognition and enforcement of foreign judgments in bankruptcy matters. However, it should be noted that if an applicant is seeking the enforcement of an ordinary foreign judgment under the principle of reciprocity, state courts will likely examine if the respective foreign courts enforce Russian court judgments. 13 Procedural equivalence Is there a requirement that the judicial proceedings where the judgment was entered correspond to due process in your jurisdiction, and if so, how is that requirement evaluated? There are no any special requirements for due process in foreign proceedings under Russian procedural law. However, this might fall under the broad interpretation of public policy objection commonly undertaken by Russian courts. 106 Getting the Deal Through Enforcement of Foreign Judgments 2015

3 14 Personal jurisdiction Will the enforcing court examine whether the court where the judgment was entered had personal jurisdiction over the defendant, and if so, how is that requirement met? A Russian court will not check foreign jurisdiction rules, however, it will decline enforcement if the dispute in question falls under the exclusive competence of Russian courts (article 403 CCP and chapter 4 CAP), namely: disputes arising from a contract for carriage if the carrier is based in the territory of Russian Federation; disputes arising from public (administrative) relationships; bankruptcy disputes; corporate disputes according to article CAP; disputes arising from state registration; disputes arising from the activities of a depository; or disputes arising from the activities of state corporations state companies. 15 Subject-matter jurisdiction Will the enforcing court examine whether the court where the judgment was entered had subject-matter jurisdiction over the controversy, and if so, how is that requirement met? See question Service Must the defendant have been technically or formally served with notice of the original action in the foreign jurisdiction, or is actual notice sufficient? How much notice is usually considered sufficient? Under the CCP and the CAP, non-compliance with requirements of notification is the ground for the refusal of recognition and enforcement of a foreign judgment in Russia. Notice of parties is subject to international treaties, for example, the Minsk Convention and the Hague Convention on the Service Abroad of Juridical and Extrajuridical Documents in Civil and Commercial Matters of 15 November Case law of the Supreme Arbitrazh Court and lower courts mostly recognises that efficient notice is not sufficient, since Russia has made a reservation on inadmissibility of alternative methods of notice under article 10 of the Hague Convention. Thus, the notice is a crucial point in enforcement procedure against Russian parties. A court of general jurisdiction and an arbitrazh court consider the question of proper notice very carefully. However, if there is no evidence of due service but the defendant took part in the proceedings by submitting relevant motions or appointing a representative in oral hearings, it is likely that the Russian court would enforce a foreign court judgment in these cases. 17 Fairness of foreign jurisdiction Will the court consider the relative inconvenience of the foreign jurisdiction to the defendant as a basis for declining to enforce As mentioned above, Russian law does not provide any special requirement for foreign proceedings. In this respect, Russian courts may revoke enforcing a foreign judgment only in the case of substantial violation of fundamental principles of law and contradiction with Russian public policy. For instance, the Supreme Arbitrazh Court has pointed out that an imposition of a duty to pay court bail as a requirement for appeal on the party to foreign proceedings does not discriminate against parties and does not contradict Russian public policy. 18 Vitiation by fraud Will the court examine the foreign judgment for allegations of fraud upon the defendant or the court? Under Russian procedural law, a crime and criminal prosecution are not recognised as a separate ground for a refusal of the enforcement. Nevertheless, material harm and violation of the law in a foreign judgment might be considered as a violation of Russian public policy. For example, the Supreme Arbitrazh Court confirmed the rulings of lower instances that refused to enforce a foreign judgment that was based on falsified evidence. 19 Public policy Will the court examine the foreign judgment for consistency with the enforcing jurisdiction s public policy and substantive laws? A Russian court may refuse to recognise and enforce a foreign judgment under the ground of non-compliance with Russian public policy according to subsection 5, section 1, article 412 CCP and subsection 7, section 1, article 244 CAP. The Russian Civil Code provides that public policy means fundamental principles and rules of Russian legislation and basics of public order and morality. Winning parties should take into account that along with improper notification, inconsistency with public policy is the most common ground for refusal of enforcing foreign court judgments in Russia (in over 80 per cent of the respective cases, according to recent court statistics). In its Information Letter of 26 February 2013, No. 156, the Supreme Arbitrazh Court summarised major aspects and trends in the application of public policy by Russian courts. In particular, it has been stated that the court may examine the judgment on compliance with public policy without a particular request from the parties. However, if a party raises a public policy argument, it would need to substantiate the non-compliance with Russian public policy by reference to a particular legislative provision or principle that has been breached. Notably, it was mentioned in the Information Letter that lack of any specific foreign law rules in Russian law or non-approval of major deals or a misprint in a judgment are not considered as a contradiction with public policy. 20 Conflicting decisions What will the court do if the foreign judgment sought to be enforced is in conflict with another final and conclusive judgment involving the same parties or parties in privity? According to the CCP and the CAP, a competent court refuses to enforce the foreign court judgment if there is a ruling of a Russian court on the same subject matter with the same grounds and between the same parties. Even if the dispute on the same matter, grounds and between the same parties in a Russian court has not yet been resolved but the commencement of these proceedings has begun earlier than in a foreign court, the enforcement of a foreign judgment might be declined. Existence of conflicting decisions in foreign jurisdiction per se would not be considered by a Russian court as an obstacle for the enforcement. 21 Enforcement against third parties Will a court apply the principles of agency or alter ego to enforce a judgment against a party other than the named judgment debtor? Russian law does not recognise such concepts as alter ago or agency in enforcing foreign court judgments. Only the parties mentioned in the decision can be involved in the enforcements proceedings. 22 Alternative dispute resolution What will the court do if the parties had an enforceable agreement to use alternative dispute resolution, and the defendant argues that this requirement was not followed by the party seeking to enforce? Existence of a valid agreement to arbitrate or mediate the dispute is not mentioned as a ground for refusal of enforcement in the CCP or the CAP. There has not yet been any case law on this issue, however, there is some potential for this in that unless the parties have explicitly or implicitly waived their right to refer the dispute to arbitration, such a judgment might be considered as contradictory to public policy

4 23 Favourably treated jurisdictions Are judgments from some foreign jurisdictions given greater deference than judgments from others? If so, why? Judgments of Belarus commercial courts are enforceable in Russia under the national treatment regime, without any recognition procedure and examination. According to article 1 of the Treaty between the Russian Federation and the Republic of Belarus 2001 on mutual enforcement of judgments of arbitrazh courts of the Russian Federation and commercial courts of the Republic of Belarus, court judgments of Russian arbitrazh courts and Belarus commercial courts do not require a specific recognition procedure and are enforceable in the same manner as domestic judgments. Belarus is the one and the only jurisdiction in which judgments are enforceable in Russia without the exequatur. It should be noted that the Treaty has effect only on the judgments of commercial courts of Belarus. The judgments of courts of general jurisdiction of Belarus are subject to the general enforcement procedure. 24 Alteration of awards Will a court ever recognise only part of a judgment, or alter or limit the damage award? Article 244 CAP clearly provides that an arbitrazh court may refuse to enforce the judgments fully or partly. This means that if the court finds some grounds for refusal with regard to, for example, a punitive damage award that still allows the enforcement of another part of the judgment (eg, enforcement only on the decision on the merits and not the award on fees), the court will have a power to recognise a part of the judgment. However, the court, during enforcement procedure, cannot revise the merits of the case and satisfy or decline the claims based on material grounds. Hence, the court has no authority to increase or reduce the size of the satisfied claims. 25 Currency, interest, costs In recognising a foreign judgment, does the court convert the damage award to local currency and take into account such factors as interest and court costs and exchange controls? If interest claims are allowed, which law governs the rate of interest? A Russian court is not obliged under the CCP and the CAP to award a sum of money only in roubles, the national currency of Russian Federation. Thus, there is no special need to convert the award of a foreign court into roubles for enforcement. However, when performing the actual collection of money or other debtor s assets the bailiff will convert and enforce the foreign judgment in roubles if the debtor does not have accounts in foreign currency or they lack sufficient funds. Court costs incurred in Russian proceedings can be recovered under a separate ruling from the court following a respective application from the winning party. The applicant will have to prove the reasonableness of the Update and trends One of the most topical issues in dispute resolution in Russia is the constitutional reform of the courts of high instance. Under the Law of the Russian Federation on the Amendment to the Constitution of the Russian Federation dated 5 February 2014, No. 2-FKZ (on the Supreme Court of the Russian Federation and Prosecution Office of the Russian Federation), the Supreme Arbitrazh Court has been merged with the Supreme Court to create a new Supreme Court, which will consider both commercial and ordinary cases. The procedure in lower arbitrazh courts is also subject to a major change. A new stage of appeal, the second cassation, before the Court Division on Economic Disputes of the Supreme Court of the Russian Federation, has been introduced. The decision of the Court Division might then be also referred to the Presidium of the Supreme Court for a final supervisory review. The changes took effect on 6 August It is yet to be seen how these changes will affect court practice in the recognition and enforcement cases. However, it should be noted that during the transition period, all legal positions of the Supreme Arbitrazh Court remain in force and can be used as a reference in court decisions until new ones are developed by the new Supreme Court. amounts sought. The court costs in a foreign jurisdiction are recoverable as long as they are indicated in the enforced judgment. Unless otherwise provided in the foreign judgment itself, Russian statutory interest can be claimed from the debtor until the amount of debt is paid in full. The interest rate is determined as a median rate in the place of the creditor s residence. 26 Security Is there a right to appeal from a judgment recognising or enforcing If so, what procedures, if any, are available to ensure the judgment will be enforceable against the defendant if and when it is affirmed? The ruling of the first instance court in recognition and enforcement cases can be reviewed in several upper courts tiers both under the CAP and the CCP. The CCP uses the term, appeal, while the CAP refers to the revision procedure as cassation. However the ruling of the court of first instance recognising and enforcing the foreign judgment enters into force at the day of rendering. The party that seeks to enforce a foreign judgment is able to commence enforcement proceedings immediately via the Federal Bailiff Service. Execution of the foreign judgment or award is subject to the same laws and procedures that are routinely applied to execution of domestic judgments. The federal bailiff service is able to apply a wide variety of measures to ensure the enforceability of the judgment, including, but not limited to, freezing of bank accounts, restricting the debtor s ability to conduct transactions with its assets and so on. Andrey Zelenin Artem Antonov Evgeny Lidzhiev Naberezhnaya Tower Block C 10 Presnenskaya nab Moscow Russia azelenin@lidings.com aantonov@lidings.com elidzhiev@lidings.com Tel: Fax: Getting the Deal Through Enforcement of Foreign Judgments 2015

5 27 Enforcement process Once a foreign judgment is recognised, what is the process for enforcing it in your jurisdiction? After recognising and enforcing a foreign judgment in a competent state court, the applicant will receive there a writ of execution, and then apply for the enforcement proceedings in the competent bailiff service at the place of debtor s residence, registration or property location. The bailiff then undertakes measures to execute the foreign court judgment. 28 Pitfalls What are the most common pitfalls in seeking recognition or enforcement of a foreign judgment in your jurisdiction? There are two most problematic issues in enforcement procedure: application of the public policy and proper notice. Russian arbitrazh courts and courts of general jurisdiction tend to interpret the scope of public policy very broadly. As mentioned above, the Supreme Arbitrazh Court systemised the court practice of the application of public policy in its Information Letter on 26 February 2013, No. 156 and illustrated when and how the public policy defence should or should not be accepted. This has had a positive influence on the lower courts practice, however, public policy still remains one of the most common grounds to refuse recognition and enforcement of foreign judgments, and the respective objection is raised by Russian debtors in almost every enforcement case in Russia. Proper notice is also a very important question that should be kept in mind by applicants in the early stages of a foreign proceeding against parties from Russia. It is extremely important that the relevant notice is made under the Hague Convention 1965 (when applicable), because, as explained above, alternative notice mechanisms to Russian parties are not recognised by Russian courts