Russia's Constitutional Court has agreed with the arguments of Pepeliaev Group’s lawyers and has protected utility companies in bankruptcy cases

Based on the appeal of T Plus PJSC, which was prepared by Pepeliaev Group’s specialists, the Russian Constitutional Court (the “Constitutional Court”) has declared unconstitutional the provisions of article 134(1)(2) of the Federal Law “On insolvency (bankruptcy)” to the extent that they do not provide a proper degree of certainty when establishing the circumstances entailing payment to a supplier for energy resources preferentially out of turn ahead of any other claims of creditors relating to current payments*.

We are talking about circumstances in which the termination of the energy supply or a decrease in its volume under an agreement concluded before a bankruptcy case was initiated can create a real threat of a technological and/or environmental catastrophe or result in deaths among the public. The Constitutional Court recognised that the presence of such circumstances involves paying a supplier preferentially for energy resources out of turn ahead of any other claims of creditors relating to current payments.

The federal legislature and the Russian Government are instructed to take measures to create a legal mechanism that allows it to be assessed how real the threat is of the dangerous consequences listed in article 134(1)(2) of the Bankruptcy Law. The legislature could produce wording to cover the circumstances that allow a threat to be recognised as real. But it is also possible that, in each particular case, such circumstances will be established based on an opinion drawn up by the authorised federal executive body in the field of industrial safety.

For the period before such a mechanism is developed, the Constitutional Court gave a sufficiently detailed instruction for courts, utility companies and bankruptcy receivers, noting that all unresolvable doubts as to whether or not such circumstances are present in relation to hazardous production facilities should be interpreted in favour of the circumstances being present.

The problem that has been considered by the Constitutional Court is encountered on a vast scale and affects the interests of most utility companies.

Partner and head of the bankruptcy and anti-crisis protection of business practice at Pepeliaev Group Yulia Litovtseva, who acted for T Plus, believes that the resolution issued by the Constitutional Court will allow the balance of interests to be restored and creditors to be protected when they are forced to "cooperate" with the bankrupt party to protect the public, as well as to ensure production security and a safe environment.

Vladimir Utkin, Legal Director at T Plus commented: “The decision of the Constitutional Court has made it possible to draw a line under a serious problem that afflicted an entire industry. In the matter of payments of bankrupt debtors that cannot be disconnected, there was an obvious imbalance between the rights and obligations of utility companies.

The fact that the Constitutional Court agreed with our arguments once again proves that civilised mechanisms for resolving complex legal problems are at work in our country. Victory in the Constitutional Court is, with no exaggeration, a historical event for the company.

Pepeliaev Group’s team of lawyers, headed by Yulia Litovtseva, worked at the highest level to form a legal position, strategy and tactics for this complex and multifaceted case. Today's result is a huge professional achievement! We thank our colleagues for their excellent work and their invaluable contribution to an extremely important result for the company”.

T Plus is the largest Russian private company operating in the field of electricity and heat supply in 16 regions of Russia. The T Plus Group unites 54 power plants. At the same time, T Plus Group is the leader in the national heat supply market with a share of about 8%.

*Resolution No. 4-P of the Constitutional Court dated 1 February 2022.

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