On 6 June 2014, the Supreme Commercial Court of the Russian Federation (the “SCC”) published on its website Ruling No. 27 of the SCC’s Plenum “On certain issues of the application of legislation on enforcement proceedings” dated 16 May 2014 (the “Ruling”).
The Ruling provides a number of important clarifications on practical issues that arise during the enforcement of judicial acts of Russian commercial courts.
Information contained in a writ of execution to be updated without the issuance of a new writ of execution
The Ruling points out that if, at the judgment-enforcement stage, the court issues any rulings on procedural succession (in the event of reorganisation, assignment of a claim or transfer of a debt), as well as on the correction of errors in writing, misprints and arithmetical errors, this information will be reflected in the bailiff’s ruling. In such situations, the bailiff may not demand that a new writ of execution be provided.
In the event of change of an individual’s or company’s name during enforcement proceedings, the bailiff will also update this information.
No additional restrictions to be imposed by the bailiff of their own initiative where a court ordered property to be seized
When enforcing a court order on the seizure of property, the bailiff is obliged to abide by the operative part of such an order and may not impose any further restrictions on the defendant’s rights (such as confiscating the seized property and placing it in safe custody). If such restrictions are imposed by the bailiff, the defendant is entitled, provided they won the case, to recover damages for the loss caused by the unlawful restriction of their rights from the Treasury of the Russian Federation.
Court-ordered seizure not precluding the bailiff from enforcing a judicial act against the seized property
The SCC clarified that the grant of interim measures by a court in the form of the seizure of the debtor’s property is not an impediment to compulsory enforcement against such property.
At the enforcement stage, debtors are often faced with a situation where the bailiff requires the funds awarded by the court to be paid despite the fact that an amount sufficient for the enforcement is already frozen on the debtor's account pursuant to a court order. In such circumstances, bailiffs frequently refuse to enforce the order against the funds frozen by the court and charge an enforcement fee in connection with the debtor's failure to comply voluntarily with the order.
The SCC’s clarification will allow debtors to avoid similar situations.
Russian Treasury to compensate for the execution creditors’ losses caused by the bailiff
The Ruling clarifies that, if a bailiff’s acts, or omissions to act, make it impossible to enforce a judicial act (for example, the unlawful release from seizure with the subsequent sale by the debtor of the seized property), the execution creditor has the right to sue the Russian Treasury for damages. They will enjoy a similar right if third parties with whom the property had been placed in safe custody by the bailiff lost such property.
The SCC noted that proving the exact amount of the loss in this type of action is objectively complex. It ruled that the compensation amount must be based on the principles of fairness and proportionality of liability. In particular, the loss of property due to the illegal release from seizure may be compensated for on the basis of the approximate value of the disposed item.
The SCC also pointed out that a claim for damages by an execution creditor may not be dismissed solely on the ground that there is no judicial act invalidating the bailiff’s acts (or omissions to act) that made it impossible to enforce a particular court order, decision or judicial act.
No enforcement fee to be charged to good faith debtors
The Ruling clarifies that a debtor is exempt from paying the enforcement fee if they prove that their inability to comply voluntarily is due to force majeure. In particular, the debtor may produce evidence that they have taken specific actions aimed at repaying the debt (such as transferring funds to the deposit account of a notary or court).
Comments
The Ruling addresses many practical issues arising in the course of enforcement proceedings. The SCC’s clarifications are primarily aimed at protecting the rights of debtors and execution creditors in their interactions with bailiffs, and should improve the overall efficiency of commercial enforcement proceedings in Russia.
24/06/2014
On 6 June 2014, the Supreme Commercial Court of the Russian Federation (the “SCC”) published on its website Ruling No. 27 of the SCC’s Plenum “On certain issues of the application of legislation on enforcement proceedings” dated 16 May 2014 (the “Ruling”).
The Ruling provides a number of important clarifications on practical issues that arise during the enforcement of judicial acts of Russian commercial courts.
Information contained in a writ of execution to be updated without the issuance of a new writ of execution
The Ruling points out that if, at the judgment-enforcement stage, the court issues any rulings on procedural succession (in the event of reorganisation, assignment of a claim or transfer of a debt), as well as on the correction of errors in writing, misprints and arithmetical errors, this information will be reflected in the bailiff’s ruling. In such situations, the bailiff may not demand that a new writ of execution be provided.
In the event of change of an individual’s or company’s name during enforcement proceedings, the bailiff will also update this information.
No additional restrictions to be imposed by the bailiff of their own initiative where a court ordered property to be seized
When enforcing a court order on the seizure of property, the bailiff is obliged to abide by the operative part of such an order and may not impose any further restrictions on the defendant’s rights (such as confiscating the seized property and placing it in safe custody). If such restrictions are imposed by the bailiff, the defendant is entitled, provided they won the case, to recover damages for the loss caused by the unlawful restriction of their rights from the Treasury of the Russian Federation.
Court-ordered seizure not precluding the bailiff from enforcing a judicial act against the seized property
The SCC clarified that the grant of interim measures by a court in the form of the seizure of the debtor’s property is not an impediment to compulsory enforcement against such property.
At the enforcement stage, debtors are often faced with a situation where the bailiff requires the funds awarded by the court to be paid despite the fact that an amount sufficient for the enforcement is already frozen on the debtor's account pursuant to a court order. In such circumstances, bailiffs frequently refuse to enforce the order against the funds frozen by the court and charge an enforcement fee in connection with the debtor's failure to comply voluntarily with the order.
The SCC’s clarification will allow debtors to avoid similar situations.
Russian Treasury to compensate for the execution creditors’ losses caused by the bailiff
The Ruling clarifies that, if a bailiff’s acts, or omissions to act, make it impossible to enforce a judicial act (for example, the unlawful release from seizure with the subsequent sale by the debtor of the seized property), the execution creditor has the right to sue the Russian Treasury for damages. They will enjoy a similar right if third parties with whom the property had been placed in safe custody by the bailiff lost such property.
The SCC noted that proving the exact amount of the loss in this type of action is objectively complex. It ruled that the compensation amount must be based on the principles of fairness and proportionality of liability. In particular, the loss of property due to the illegal release from seizure may be compensated for on the basis of the approximate value of the disposed item.
The SCC also pointed out that a claim for damages by an execution creditor may not be dismissed solely on the ground that there is no judicial act invalidating the bailiff’s acts (or omissions to act) that made it impossible to enforce a particular court order, decision or judicial act.
No enforcement fee to be charged to good faith debtors
The Ruling clarifies that a debtor is exempt from paying the enforcement fee if they prove that their inability to comply voluntarily is due to force majeure. In particular, the debtor may produce evidence that they have taken specific actions aimed at repaying the debt (such as transferring funds to the deposit account of a notary or court).
Comments
The Ruling addresses many practical issues arising in the course of enforcement proceedings. The SCC’s clarifications are primarily aimed at protecting the rights of debtors and execution creditors in their interactions with bailiffs, and should improve the overall efficiency of commercial enforcement proceedings in Russia.