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Litigation in Russia - Myth or Reality?

Litigation in Russia - Myth or Reality?

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In the first half of 2021, we at VEGAS LEX completed a survey among 100+ foreign lawyers to reveal myths concerning dispute resolution in Russia. In most questions, the respondents were asked to choose “True” or “False” on the proposed statements.

The average score reflecting knowledge of Russian litigation specifics achieved by foreign practitioners is 44 out of 100, with a peak of 73 scores.

Find the detailed survey results and up-to-date factual and statistical data below.

Q1.   Holding court hearings via video conference is a rare situation. Technologies are not common in Russian courts. Is it True or False?

62%
of respondents clicked “True” and believe that the courts use video conferencing
(hereinafter – the VC) very rarely

The right answer is “FALSE”. As a matter of fact, the VC appeared in Russia pretty long ago – in 2002. It was first used in criminal proceedings, in order to secure the right to judicial protection for the accused from remote areas. Later, commercial courts started using the VC as well.

According to statistics of the Supreme Court of the Russian Federation, there are over 8,000 court premises and rooms today available for conducting remote hearings in Russia and abroad, which are equipped by VC devices. Courts carry out more than 1.5 thousand court sessions every day by VC throughout the country. Commercial courts conducted over 11.5 thousand of such hearings during the first half-year of 2020.

The coronavirus pandemic also boosted development of online technologies in legal proceedings. In addition to VC, commercial courts carried out online-sessions using web conferencing and messenger platforms. Case participants got an opportunity to enter the session from any premises and by using any device. Despite the fact that initially it was planned to use web conferencing only for hearings of urgent cases, this format was highly appreciated by participants and by courts. Therefore, it came into use in ordinary court proceedings as well. Ninety-nine commercial courts have already ensured the possibility of web conferencing.

The development of e-justice is one of primary objectives of the court system today. Parties have already had a chance to submit documents to commercial courts and courts of general jurisdiction in electronic form, and have gained online-access to case files. It is expected to complete the development of the ‘Online Justice’ automated system in the next five years. The service will automatically determine the jurisdiction over a dispute; it will enable payment of a state fee, filing of documents and online participation in a hearing.

Q2.   In certain cases, a court may issue a final judgement that lacks a reasoning part and consists of the ruling part only. Is it True or False?

69.2%
of interviewees answered “True” and think that a court may issue a “short” judgment

The right answer is “TRUE”. Generally, courts shall declare a ruling part of a judgment in a hearing, which ends the proceedings. After that, courts have from 5 to 10 days to draw up a written legal reasoning of the judgment.

However, there are several exceptions. The first one is related to a magistrate judge. The law expressly provides that a magistrate judge is entitled to pass a judgment without a reasoning part. The reasoned judgement is required only when the participants in a dispute or their representatives file an application accordingly.

The second exception involves cases examined by commercial courts and courts of general jurisdiction in a simplified manner. Judges prepare reasoned judgments only: (i) following statements submitted by parties to a disputes, (ii) in the event of filing an appeal, (iii) on their own initiative.

Q3.   It is a common situation that court hearings last 5 minutes, and the court’s final judgement takes 1-2 pages. Is it True or False?

53.8%
of respondents answered “False” and believe that this is a myth

This question has no simple answer – it depends on specifics of a certain case.

Actually, there are cases, which are heard no longer than five minutes, and the reasoning part of the decisions is given on 1-2 pages. This most often refers to low-complex cases. Duration of semi-complex and high-complex case hearings may vary from half an hour to several hours and it depends on number of participants in the case, quantity of procedural documents filed, number of witnesses/professionals/experts and stages of judicial proceedings.

Such limited time for hearings is associated with high workload of judges. For instance, workload of a judge in the Commercial Court of the City of Moscow in 2020 was 266 cases per month. By contrast, average workload of US judges is 29 cases a year (2-3 cases per month). Because of such a high caseload, there are obviously days when a judge has no possibility of hearing a case for more than five minutes. Sometimes, several hearings are scheduled for the same time or, without exaggeration, even a minute apart (e.g. at 09:00, 09:01, 09:02, 09:03, etc.).

Q4.   Russian courts tend to rely on court precedents in similar cases. Is it True or False?

62.6%
of respondents answered “False” and assume that this is a myth

The right answer is “TRUE”. Most likely, when answering the question the respondents took into consideration the fact that Russia belongs to the Romano-Germanic legal system, which does not generally treat court precedents as sources of law. Nevertheless, giving negative replies to a question that Russian courts do not consider decisions of other courts while hearing  a case, the respondents are mistaken.

The Russian judicial system comprises two courts, which legal viewpoints are mandatory for inferior courts:

  • The Constitutional Court of the Russian Federation. When administering justice, courts should take into account resolutions of the Constitutional Court of the Russian Federation regarding interpretation of provisions of the Russian Constitution applicable in a certain case and recognition of laws and regulations listed in clauses a, b, c of part 2 and part 4 of Article 125 of the Constitution of the Russian Federation, which parties use as a basis for their claims or statements of defense, as compliant or non-compliant with the Constitution.
  • The Supreme Court of the Russian Federation. Courts are obliged to consider resolutions of the Plenum of the Supreme Court of the Russian Federation adopted based on Article 126 of the Constitution of the Russian Federation and containing explanations of issues that have arisen in judicial practice in application of rules of substantive law and procedural law, which are applicable to the case in question.

Opinions of lower courts (courts of appeal, courts of cassation) are not legally binding. However, in practice, courts quite often take into account legal positions taken by other courts in similar cases; they consider tendencies of application of particular rules of law by other courts. That is the reason why lawyers analyze judicial practice on certain issues and incorporate it intoprocedural documents – this increases chances of court’s application of a rule of law by analogy with other cases.

Q5.   Commercial litigation in Russian state courts is expensive. Is it True or False?

61.5%
of respondents clicked “False” and believe it to be a myth

The right answer is “FALSE”.

State fees for applying to courts are more than affordable for the public. For example, in the courts of general jurisdiction, the minimum fee is 150 RUB. For legal entities, the maximum court fee for filing a claim amounts to 200,000 RUB. Electronic document exchange with courts is free of charge.

Key expenses comprise those associated with engagement of qualified lawyers to represent parties to a dispute and experts in order to receive expert opinions on issues that require specific knowledge. For example, an average cost of court representation in a court of first instance in 2018 was about 400,000 RUB.

Q6.   Russian courts tend to deny applications for recognition and enforcement of foreign arbitral awards and foreign judgments in Russia. Is it True or False?

57.7%
of respondents answered “True” and think that courts generally refuse to deny such applications

The right answer is “FALSE”. Statistics prepared by the Russian Arbitration Association show that only 36% of all the applications for issuing writs of execution to put into effect foreign arbitral awards were dismissed by courts. The most common reasons for the dismissal consist in non-compliance of the arbitral awards with public policy of the Russian Federation and procedural violations committed by courts ad hoc

According to courts, the most often-observed procedural violations include improper notification of a party, against which a decision to form the arbitral panel and to consider the arbitral dispute is issued, and non-compliance of the arbitral panel or procedure with an agreement between the parties or with the federal laws.

Q7.   A Judicial Assistant position is a prestigious and a well-paid job. Is it True or False?

52%
of respondents clicked “True” and believe that this position is prestigious and well-paid

The right answer is “FALSE”. In fact, monthly salary of a judicial assistant amounts to 5,160 RUB. With supplements and benefits, newcomers receive about 15,000 RUB. Clearly, what makes it attractive for newcomers to work as judicial assistants is an opportunity to gain experience and to raise to the bench in a couple of years, rather than the financial aspect.

Q8.   Russia has the system of specialized intellectual property courts. Is it True or False?

55%
of respondents answered “True” and believe that there are courts/jurisdictions for intellectual property rights in the Russian legal system

The right answer is “TRUE”.

Pursuant to the Law on Commercial Courts, an intellectual property court is a specialized commercial court that handles  cases associated with IP protection in Russia within its competence as a court of first instance and a court of cassation.

In the ICC report on specialized IP jurisdictions worldwide, it is underlined that among 24 countries surveyed, 19 have SIPJs: Belgium, Brazil, the United Kingdom, Germany, India, Spain, China, Mexico, Peru, Portugal, the Republic of Korea, Russia, the United States, Thailand, France, Chile, Switzerland, Sweden and Japan. In these countries, SIPJs may bear different names even if they are established to fulfil essentially the same function and achieve the same goals.

Meanwhile, Albania, Costa Rica, Guatemala, Honduras and Ireland do not have specialized IP jurisdictions/courts. However, respondents from the first four countries expressed the view that there is a need for, and interest in, establishing SIPJs. In Albania, for example, it was reported that the current system provides different courts with jurisdiction over IP disputes with unclear and sometimes overlapping subject matter as the basis for determining jurisdiction.

Q9.   Russian courts may not oblige the party to disclose the documents that are relevant to the issues in dispute to the other party. Is it True or False?

74%
of respondents answered “True” and think that this is the reality of the Russian legal system

In fact, the issue is quite controversial. There are two approaches of courts available.

Some courts grant a motion for disclosure and compel a party to provide disclosures and discoveries as requested by another party. Courts refer to provisions of the Commercial Procedural Code, according to which a court is obliged to assist parties in obtaining evidence, which the parties cannot receive independently, by themselves. Courts request evidence from a party in a dispute if such evidence is significant for dispute resolution. In addition, courts refer to Article 125(2) of the Commercial Procedural Code which directly entitles the claimant to compel discovery or disclosure of evidence by a defendant or a third party in the moment of filing a statement of claim.

Courts take into consideration that both the Commercial Procedural Code and the Civil Procedural Code contain rules that prescribe liability for non-submission of documents. The consequences of such non-submission may be as follows:

  • Imposing a court fine. In the event of failure to submit the evidence requested by the court without reasonable excuse within established deadlines, a court fine is imposed on a party that refuses to provide the evidence. The amount of the fine may vary from 5,000 to 100,000 RUB.
  • Charging total legal expenses or their part regardless of the results of the dispute to the account of the party who failed to submit documents without reasonable excuse. Courts may treat such behaviour of the party as abuse of rights.
  • Establishing facts of the case based on explanations of one party only. If a party, which is obliged to prove its claims or objections, withholds some evidence available to it and does not provide it to the court, the court may substantiate its findings using explanations provided by another party.

At the same time, other courts deny a motion for disclosure stating that a court may only suggest a party to provide extra evidence but not to demand them. Submission of documents is a right rather than an obligation of a party in a lawsuit (Article 41 of the Commercial Procedural Code). Requesting documents from a party to a dispute contradicts the principle of adversarial proceedings and equality of arms in commercial litigation proceedings.

Q10.    What is the average amount of cases a judge of the State Commercial Court considers per month in your opinion?

The respondents answered as follows:

47% – up to 30 cases
33% – 30-50 cases
24% – 50-70 cases

Less than a third of respondents came to the right answer – 50-70 cases per month.

The reality is that the average workload of a judge directly depends on the court’s instance (a first instance court, a court of appeal, a court of cassation) and the location of the court. The statistics showing monthly caseload of judges in 2020 is as follows:

  • Commercial Court of the City of Moscow – 266 cases per month
  • Commercial Court of Moscow Region – 196 cases per month, the caseload has increased by 12.9% as compared to 2019
  • Ninth Commercial Appellate Court – 106 disputes per month
  • Tenth Commercial Appellate Court – 84 cases per month
  • Commercial Court of Moscow District – 70 disputes a month
  • West-Siberian District Commercial Court – 27 cases a month

According to annual judicial statistics of the Russian Supreme Court Justice Department, caseload is trending upwards. The year 2020 was an exception. Commercial courts considered 1.5 million disputes in 2020. which is much less than in 2019 – that year, there were 1.879 million disputes heard. Most likely, the reduction is caused by the pandemic and further decrease in economic activity of businesses.

In the meantime, the number of personal bankruptcy cases has largely increased and has hit 74,600 cases against 50,700 of those a year before. In contrast, the number of new corporate bankruptcy cases reduced – from 34,800 to 27,700. The reason for it was the moratorium on bankruptcy that the state imposed during the pandemic.

Certainly, the caseload of judges, which goes up and up year by year and which is not accompanied by increase in staffing causes lower quality of justice, results in a larger number of judgments upheld by superior courts. Unfortunately, lawmakers have not suggested an efficient solution to the problem yet.

By Anastasia Cheredova, Head of Special Projects, VEGAS LEX

Russian Knowledge Partner

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