On July 9, 2019 the Plenum of the Supreme Court of the Russian Federation approved the Resolution. № 4 “On the application of private international law by the courts of the Russian Federation” (hereinafter — the Resolution). The Resolution contains clarifications on most practical issues regarding the procedure of the choice of applicable law by courts while resolving disputes complicated by a foreign element. The Resolution, particularly, explains the following issues:
1. The concept of a foreign element
The Resolution specifies that the list of foreign elements given in para 1 Art. 1186 of the Civil Code of the Russian Federation is not exhaustive. —In particular an act committed abroad or occurrence of an event (legal fact) outside the Russian territory might be considered as foreign element.
2. The principle of «the closest connection»
In general, if it is impossible to determine the applicable law, it shall be the law of the state which the relationship complicated by a foreign element is most closely related to. The Resolution establishes the following criteria for the courts to determine «the closest connection»:
- territorial connection between the elements of the relations and the law of the state (e.g., residence of the parties, location of object of the relations, the place to perform the obligations) and
- the ability to implement the generally recognized principles of civil law and its particular institutions in the best way (e.g., protection of a bona fide party, inadmissibility of taking advantage from the misconduct, interdiction of abuse of law, protection of a weak party, preference to preserve the transaction validity, the prohibition of unjustified refusal to perform the obligation).
3. Law applicable in case of conflict between general and special rules
In general, the provisions of a specific international treaty prevail over the provisions of a general treaty, regardless of the list of its participants and the date of adoption. At the same time, if no treaty contains an applicable conflict-of-laws rule, the court shall be guided by the conflict-of-laws rule of the Russian legislation.
4. Imperative Norms
Para 10 of the Plenum explains the procedure for the application of imperative norms given in the Art. 1192 of the Civil Code. It is specified that the imperative norms are only those rules that, due to their indication or their special importance, including enforcement of rights and interests protected by law of parties to business transactions, regulate the relevant relations regardless to the law to be applied. In addition, some examples of imperative norms are indicated, which include:
- provisions limiting the negotiability of certain objects of civil rights;
- the rules that determine the circumstances preventing the conclusion of marriage by a foreign citizen in the territory of Russia;
- provisions on the carrier’s liability for personal injury of the passenger, loss or damage of goods and baggage or delay in delivery.
5. Cases in which personal law does not apply
In general, the legal status of individuals and legal entities in relations regulated by the private international law is determined in accordance with their personal law.
However, the Russian and foreign legal entity forfeit the right to refer to the restrictions established by its personal law if:
- at the time of the transaction, the body or representative of the legal entity is located outside the territory of the state whose personal law applies to the legal entity; and
- this limitation is not known to the law of the state in whose territory the body or representative made the transaction; and
- the other party to the transaction did not know and should not have known about this restriction.
6. Law applicable to property law
According to Art. 1205 of the Civil Code of the Russian Federation, the title to real estate and movable property is determined by the law of the state where the property is located. The same rule applies to certificated securities and uncertificated securities (for the uncertificated securities — it is the state where the rights to such securities are recorded).
At the same time, the parties are entitled to choose the applicable law regarding movable property. For this purpose, a special agreement on the applicable law shall be concluded. This fact does not affect third persons: they have the right to lay claims at the location of the property.
7. Possibility to choose the applicable law by the parties to the contract
The parties may choose as the applicable law:
- instruments that are not treated as laws (e.g. INCOTERMS, UNIDROIT, European principles of contract law, Model rules of European private law)
- «Neutral» law which is not connected with the parties and with the subject matter of the contract
- different law for different parts of the contract
8. Criteria for determining implied agreements
According to the Resolution the existence of an implied agreement may be evidenced by:
- references in the text of the contract to certain civil law regulations of a certain state,
- the parties’ references to the same applicable law in substantiating their claims and objections, close connection between two contracts to which the same persons are participants, in case when one of such contracts contains a reservation on the applicable law and the later concluded contract does not
9. Conditional (alternative) agreement on applicable law
This is an agreement in which the choice of the applicable law depends on the choice of the party who will be the plaintiff in the future litigation. In this case, the applicable law will be determined at the time of filing the first claim, and the risk of uncertainty of the applicable law before the filing of the first claim is borne by the parties themselves.
10. Law applicable to the relations with consumers
Application of Russian law to Consumer’s protection is possible provided that one of the following conditions are met:
- the seller carries out his/her activities in the state of consumer’s residence , and the contract between the seller and the buyer is related to the activities of the seller;
- the seller delivers the goods or by any means directs his/her activities to the territory of the state of consumer’s residence or the territory of several countries, including the territory of the state of consumer’s residence and the contract is connected with such seller’s activities . Russian citizen purchases goods on websites on the Internet, if the content of the website of the online store evidences its orientation on Russian consumers.
A website on the Internet can be considered as oriented on Russian consumers subject to one of the following criteria:
- Russian language is one of the languages used on site;
- prices are denominated in Russian rubles;
- contact phone numbers with Russian codes are indicated;
- there are other similar evidences (for example, the owner of the site ordered services oriented on ncreasing the citation of his site among Russian users of the Internet).
11. Law applicable to non-contractual obligations
The procedure for determining the law applicable to non-contractual relations by the courts can be illustrated with the following scheme:
| Obligations arising from the injury | |
|---|---|
| Facts | Applicable law |
| place of injury is situated in different states | the law of the state where the injury occurred(+condition: the injurer foresaw or should have foreseen the occurrence of injury in this state) |
| parties have a residence/main place of activity in the same state | the law of this state(not the law of the statewhere wrongdoing or harm took place) |
| parties have a residence/main place of activity in different states but are citizens or legal entities of the same state | the law of the statethe citizens or the entities of which the parties are |
| circumstances of the case imply that the obligation arising from the injury is closely related to the contract between the victim and the injurer | the law prescribed in the contract |
| Unjust enrichment | |
| Iunjust enrichment arose in connection with the existing or alleged relationship under which the property was acquired or preserved | the law of the statewhich was or could be applicable to this legal relationship |
| parties have not entered into an agreement on the choice of applicable law and the applicable law cannot be determined | the law of the statewhere enrichment took place |
| unjust enrichment is expressed in the form of wire transfer of funds | the law of the statewhere the Bank (its branch, division), holding the funds’ recipient’s account was located |
| Obligations arising from unfair negotiations | |
| In general | the law chosen by the parties during negotiations even though the other conditions of non-concludedcontract were not agreed upom |
| If there was no agreement about applicable law | the court is guided by the type of civil contract that was intended to be concluded by the parties and applies the default rules on the definition of the applicable law in the absence of an agreement of the parties |
Thus, the new Resolution of the Plenum of the Supreme Court contains important explanations for law enforcement practice regarding the procedure for the choice of applicable law by the courts. In particular, the Resolution expands the concept of a foreign element, establishes additional criteria for determining the principle of «the closest connection»: (territorial connection of the elements of legal relations with the law of the state, the ability to implement the generally recognized principles of civil law and its individual institutions in the best way), clarifies the procedure for choosing the law applicable to contractual and non-contractual relations.
The practical application of the Resolution of the Plenum of the Supreme Court will contribute to the elimination of uncertainty in disputes between Russian and foreign persons, as well as between Russian persons regarding actions committed abroad, the decrease in legal conflicts and the formation of uniform judicial practice on application of rules of the international private law in resolving disputes complicated by a foreign element.