Fourth Judicial Review of the Supreme Court of the Russian Federation

 

One month after adopting Practice Review No. 3, the Presidium of the Supreme Court on December 23, adopted the next (fourth) review for the year 2020. Along with other issues, the review explains the positions of the Supreme Court in bankruptcy cases, as well as contractual disputes. Below are the positions we recommend pay attention to.

 

Bankruptcy cases

 

• Shareholder of a joint stock company has the right to file claims to challenge transactions in the general order on the grounds provided by the Civil Code and the law on joint stock companies, despite the bankruptcy proceedings of the company. The Court did not find any political and legal motives for restricting the right of a shareholder to file claims to challenge the debtor's transactions, since the shareholder's interests in returning the property to the bankruptcy estate coincide with the interests of the other participants in the bankruptcy case, and they have common aims in satisfying their own claims against the debtor¹.

• During bankruptcy proceedings, the bankruptcy trustee has the right to lease the debtor's pledged property, the payment for which must go to the debtor's special pledge account.  The income from the lease is subject to distribution among the pledged creditors after the payment of VAT².

• In a group of companies, in order to evade taxes, a business model was implemented in which the debtor received revenue in a much smaller amount, which he was entitled to expect, and most of the profit was distributed in favor of other companies in the group. The Supreme Court, considering the issue of bringing controlling persons to subsidiary liability, found such actions to be unfair and abuse of the corporate form, due to which "profitable" companies may be liable for the obligations of "unprofitable" companies as co-executors without having a formal status of a controlling person³.

• A claim for subsidiary liability cannot be used to resolve corporate conflicts of the debtor's controlling persons, who at the same time are not prevented from using the remedies provided for by corporate law, rather than bankruptcy law⁴. 

• As a general rule, the founders and shareholders of a debtor participate in bankruptcy proceedings by choosing their representative (clause 1 of Article 35 of the Bankruptcy Law). The corporate conflict significantly complicates the procedure of selecting a single representative. The Supreme Court pointed out that in such a case, the shareholder's ability to get involved in the case and independently defend his interests and realize the rights provided for the persons involved in the case⁵.

 

Contractual disputes 

 

• The Supreme Court once again reminded that a guarantor under a bank guarantee has no right to refuse the beneficiary to satisfy his claim if the documents attached to such a claim correspond to the terms of the guarantee according to external signs. The Court also drew attention to the need to proceed from a literal interpretation of the terms of the guarantee when resolving the issue of the scope of the guarantee to the secured obligation⁶.

• A participant of share construction has the right to demand compensation for abstract losses from the developer in case of repudiation of the contract caused by improper performance of obligations. Such measures are designed to compensate for different losses of the creditor, do not cross each other and, due to the principle of full compensation for losses (restorative nature of civil liability) should be recovered along with each other⁷.