The reform of procedural legislation is underway

Pepeliaev Group advises that, on 20 November 2018, the State Duma passed a law amending the Civil Procedure Code, Commercial (‘Arbitration’) Procedure Code, the Administrative Procedure Code and other legislative acts[1]. The Law was initiated by the Supreme Court.

The provisions of the Law, which in legal circles has been dubbed a “procedural revolution”, come into force starting from 1 October 2019.

Only lawyers will be able to provide representation in court

Only persons who have a degree in law are permitted to represent a party in commercial courts and courts of general jurisdiction. Before the Law was adopted, this restriction was contained only in the Administrative Procedure Code.

The requirement that a degree is compulsory does not extend to cases examined by magistrates and district courts in civil proceedings. Nor does it apply to patent attorneys, administrative receivers or trade unions.

In commercial proceedings, provision is made for a person to take part without a duly executed power of attorney if, in a court hearing, the client (principal) asserts that such person is participating as his or her representative.

Let the statement of reasons stand

Arguably, the greatest discussion and argument surrounded the Supreme Court's proposal that incomplete judicial decisions can be prepared, without a statement of reasons. The Supreme Court's opinion is that this amendment would allow the judiciary to optimise its work and would lift a superfluous burden on judges.

The legal community's reaction to this proposal has been extremely sharp and negative, because it would lead to a contravention of the fundamental principles of litigation. In the end, the legislature decided to reject this idea and the court’s obligation to prepare a statement of reasons has been preserved.

However, the Law makes provision for various cases in which a commercial court is entitled to prepare a decision in a case without a statement of reasons:

• when the defendant admits a claim, the statement of reasons in a court decision may refer only to the admission of the claim and the court’s acceptance of it;
• when a lawsuit is rejected because the limitation period has been missed, the statement of reasons in the court's decision may set out only that the court has established this circumstance.

Competence replaces jurisdiction

One of the key new developments is the replacement of the definition of ‘jurisdiction’ by a definition of ‘competence’. With the Law's entry into force, only the institution of the court's competence is retained in procedural legislation. It will be used to transfer a case from one court to another.

Initially, the draft proposed to prohibit the possibility of including a condition in a contract whereby a dispute would be referred to a specific court for consideration (contractual jurisdiction). The justification for such proposal lay in the extensive burden on particular courts, such as those in the city of Moscow, the centre of Russia's business life. However, during discussion of the draft law, it was decided to leave the rule on contractual jurisdiction unamended.

New rules for considering recusals in commercial proceedings

By analogy with the Civil Procedure Code, a new procedure has been enacted in commercial proceedings for the institution of the recusal of a judge. The issue of the recusal of a judge considering a case sitting alone will be resolved by that same judge. Where a panel is considering the case, the bench will resolve the matter.

The legislature, guided by the principle of procedural economy, has compounded the problem of the institution of the recusal of a judge in proceedings. What this new development presupposes is that a judge should admit his or her personal interest, if there are grounds for doing so, at the outset of a case. In practice, this is a scant possibility.

Restriction on time for addressing a court hearing

A court will be entitled to restrict the time for which a participant in court proceedings addresses the court. Such a restriction is possible only if such participant infringes the rules established by the court for addressing it.

New deadlines in commercial court proceedings

The Law increases the maximum timeframe for a first instance court to consider a case. This will now be six months rather than three.

The deadline for filing an application to recover court costs, on the other hand, has been reduced from six months to three.

Comments on the minutes of a court hearing can now be submitted within five days rather than three, as was previously the case.

Optimising the process: expedited proceedings and summary proceedings

To solve problems associated with the burden on courts, the legislature continues to expand the boundaries of expedited proceedings.

The law provides for a procedure of resolving cases using expedited proceedings in a commercial court case involving legal entities if the amount in issue is no more than RUB 800,000 or involving individual entrepreneurs if the amount is RUB 400,000 or less. In a civil court case, the limit remains unchanged at RUB 100,000.

A unified threshold of RUB 500,000 has been set for cases considered by order, in commercial and civil proceedings.

Appeals in a new light

Fundamental amendments have been made to the Commercial Procedure Code in terms of considering cases and the procedure for constituting the bench in appeal courts.

The general principle is that a single judge sitting alone will consider appeals against rulings. An exception will be the consideration of appeals filed against judicial decisions handed down in insolvency (bankruptcy) cases. For such cases, an appeal-level commercial court will be constituted with a panel of judges.

In cases considered under an expedited procedure, appeal and cassation courts will consider appeals unilaterally without a court hearing and without notifying the parties. However, if complications arise when the arguments of the appeal are considered, the judge will retain the right to hold a hearing to which the parties are summoned.

In civil proceedings, appeal courts will be vested with the right to refer a case back to be considered in the first instance court. This is possible if the latter did not consider a comment on the minutes of the court hearing or on an application for the restoration of the term for filing an appeal, or for an additional decision to be handed down, and also if it did not produce the part of the decision stating the reasoning.

Help from your adviser

Pepeliaev Group's lawyers are ready to advise on the provisions that have been adopted as well as to provide integrated legal support during proceedings in commercial courts and courts of general jurisdiction at all levels.