The risks of administrative liability being imposed for the use of a land plot other than for its intended purpose
Pepeliaev Group advises of the risks related to the uncertainty of calculating the limitation period for imposing administrative liability in the area of land use.
The conclusion follows from Resolution No. 52-AD21-3-К8 of the Russian Supreme Court dated 24 February 2021. The essence of the dispute the Court considered was as follows.
An individual was found guilty of the administrative offence stipulated by article 8.8(1) of the Russian Code of Administrative Offences (the “Administrative Code”) (the use of a land plot other than for its intended purpose in line with the category of land it belongs to and/or its permitted use) and was subjected to administrative liability in the form of a fine.
As indicated in court judgments, the presumed offence was identified on 10 June 2019, while the administrative body’s resolution imposing administrative liability was dated 4 October 2019, i.e. more than 3 months after the offence was identified.
In terms of legislative technique it is a single sentence including lengthy lists. Given the great lists of various elements of administrative offences it becomes difficult at times to classify an administrative offence as an offence for which either a one-year or two-month limitation period applies. The problem is particularly acute in cases when a prohibitory rule has recently been introduced and there is no well-established court practice for it.
The district court, which set aside the resolution of the administrative authority, agreed with the above argument.
However, the Supreme Court of the constituent entity of the Russian Federation, the court of general jurisdiction and the Supreme Court disagreed with the position. The upper courts sent the case back to the district court for a new trial, and during the new trial, the resolution was upheld to impose administrative liability. The courts pointed out that the limitation period for the administrative offence stipulated by article 8.8(1) of the Administrative Code, as an administrative offence in the sphere of nature management, is one year rather than two months. Following that, the applicant was declared guilty and the resolution imposing the administrative sanction was upheld.
Meanwhile, state commercial courts appear to adhere to the opposite approach. For example, the Ruling dated 26 September 2017 in case No. A56-5983/2016 and some later decisions such as Supreme Court’s Ruling No. 308-ES20-22809 dated 8 February 2021 in case No. A32-5319/2020 state that the limitation period for the administrative offence under article 8.8(1) of the Administrative Code should be equal to two months.
The prime example of this is the practice established in Moscow.
Moscow City Law No. 15 dated 29 April 2019 which came into force on 17 May 2019 enacted article 6.7(1.1) of the Moscow Code of Administrative Offences (the “Moscow Administrative Code”), which established an administrative liability for violating the requirements and restrictions on the use of a land plot concerning the construction or reconstruction of buildings, structures and facilities on the land plot, where such requirements and restrictions were established by the laws and other regulations of Moscow, the title documents to the land plot, or design and other documentation determining the conditions for using the land plot.
An administrative fine is stipulated as a sanction for the above offence in the amount of 0.5% to 1% of the cadastral value of the land plot for individuals, of 1% to 1.5% of the cadastral value for a legal entity's officers, and of 1.5% to 2% of the cadastral value for legal entities themselves.
An approach is being established within the system of state commercial courts whereby the limitation period under the article at hand should be two months. This approach, for instance, can be found in the Resolution of the State Commercial Court for Moscow Circuit dated 24 November 2020 under case No. A40-10526/2020 and the resolutions of the Ninth Commercial Court of Appeal dated 26 January 2021 and 25 November 2002 under case No. A40-187517/2020 and case No. A40 99705/2020, respectively.
At the same time, a different interpretation of article 4.5(1) of the Administrative Code can be found in courts of general jurisdiction. Thus, the Second Cassation Court of General Jurisdiction, in cases challenging resolutions issued under article 6.7(1.1) of the Moscow Administrative Code, points out that the limitation period for the offence is one year (see, for example, the Resolution of the Second Cassation Court of General Jurisdiction dated 30 July 2020 under case No. 16-5024/2020 and the decisions of the Moscow City Court dated 6 October 2020 and dated 14 September 2020 in case No. 7-11630 and case No. 7-11501/2020, respectively).
For example, an administrative authority can adopt two resolutions imposing administrative liability under article 6.7(1.1) of the Moscow Administrative Code based on the same facts, thereby imposing a fine on the legal entity and on its CEO (as an officer).
Considering the amounts of the fines, the outcome of the case can be rather significant for both the company and its CEO.
If, as in the above case of the Supreme Court, more than two months but less than a year has passed from the starting date of the limitation period until the date resolutions are adopted, there is a risk that two contradictory court judgments will be adopted seeking to invalidate each of the resolutions if the case against the CEO is considered by a court of general jurisdiction and the case against the company is considered by a state commercial court.
The above is complicated by the fact that the legislation regulating administrative proceedings disregards prejudice, and, therefore, if a fact (such as a violation of the conditions for using a land plot in the form of the illegal reconstruction of a building which occurred many years ago) has been established during parallel proceedings in a state commercial court, this will be irrelevant for a court of general jurisdiction that considers the case against the company’s CEO in connection with the same violation. On the other hand, article 69 of the Commercial Procedure Code does not contain any indication that judgment of a court of general jurisdiction in an administrative case is binding to the extent of the facts that are established (see, for example, Resolution No. 310-AD15-7716 of the Supreme Court dated 21 July 2015 under case No. A14-9102/2014, which expressly negates the prejudicial relevance of the decisions of the court of general jurisdiction in an administrative case under article 69 of the Commercial Procedure Code).
Having regard to the above, one should be mindful of the conditions established by the documents of title, and if administrative liability is imposed, thoroughly review procedural documents and hire a lawyer to help with contesting such documents if they were issued illegally.
We are ready to provide comprehensive legal support within litigations in courts of all levels, including on issues connected with administrative liability being imposed for environmental violations and violations in the use of land.
The conclusion follows from Resolution No. 52-AD21-3-К8 of the Russian Supreme Court dated 24 February 2021. The essence of the dispute the Court considered was as follows.
An individual was found guilty of the administrative offence stipulated by article 8.8(1) of the Russian Code of Administrative Offences (the “Administrative Code”) (the use of a land plot other than for its intended purpose in line with the category of land it belongs to and/or its permitted use) and was subjected to administrative liability in the form of a fine.
As indicated in court judgments, the presumed offence was identified on 10 June 2019, while the administrative body’s resolution imposing administrative liability was dated 4 October 2019, i.e. more than 3 months after the offence was identified.
Statutory provisions
The limitation period for imposing administrative liability is regulated by article 4.5(1) of the Administrative Code. This is not the first time that the wording of this article has raised questions in court practice.In terms of legislative technique it is a single sentence including lengthy lists. Given the great lists of various elements of administrative offences it becomes difficult at times to classify an administrative offence as an offence for which either a one-year or two-month limitation period applies. The problem is particularly acute in cases when a prohibitory rule has recently been introduced and there is no well-established court practice for it.
The Supreme Court’s position
In the case above, as seen by the applicant, the limitation period for administrative liability under article 8.8(1) of the Administrative Code should have been two months. Considering the date when the offence was identified, which was three months earlier than the date of the resolution imposing administrative liability, the limitation period should have expired which would make imposing liability impossible and the resolution illegal, needing to be revoked.The district court, which set aside the resolution of the administrative authority, agreed with the above argument.
However, the Supreme Court of the constituent entity of the Russian Federation, the court of general jurisdiction and the Supreme Court disagreed with the position. The upper courts sent the case back to the district court for a new trial, and during the new trial, the resolution was upheld to impose administrative liability. The courts pointed out that the limitation period for the administrative offence stipulated by article 8.8(1) of the Administrative Code, as an administrative offence in the sphere of nature management, is one year rather than two months. Following that, the applicant was declared guilty and the resolution imposing the administrative sanction was upheld.
Meanwhile, state commercial courts appear to adhere to the opposite approach. For example, the Ruling dated 26 September 2017 in case No. A56-5983/2016 and some later decisions such as Supreme Court’s Ruling No. 308-ES20-22809 dated 8 February 2021 in case No. A32-5319/2020 state that the limitation period for the administrative offence under article 8.8(1) of the Administrative Code should be equal to two months.
Risks for land users
The differences in understanding article 4.5(1) of the Administrative Code lead in practice to it being difficult to predict the outcome of a case under the same circumstances: whether or not administrative liability will be imposed on the person against whom the proceedings were initiated. This seriously affects the level of legal certainty and increases the risks for parties involved in business.The prime example of this is the practice established in Moscow.
Moscow City Law No. 15 dated 29 April 2019 which came into force on 17 May 2019 enacted article 6.7(1.1) of the Moscow Code of Administrative Offences (the “Moscow Administrative Code”), which established an administrative liability for violating the requirements and restrictions on the use of a land plot concerning the construction or reconstruction of buildings, structures and facilities on the land plot, where such requirements and restrictions were established by the laws and other regulations of Moscow, the title documents to the land plot, or design and other documentation determining the conditions for using the land plot.
An administrative fine is stipulated as a sanction for the above offence in the amount of 0.5% to 1% of the cadastral value of the land plot for individuals, of 1% to 1.5% of the cadastral value for a legal entity's officers, and of 1.5% to 2% of the cadastral value for legal entities themselves.
An approach is being established within the system of state commercial courts whereby the limitation period under the article at hand should be two months. This approach, for instance, can be found in the Resolution of the State Commercial Court for Moscow Circuit dated 24 November 2020 under case No. A40-10526/2020 and the resolutions of the Ninth Commercial Court of Appeal dated 26 January 2021 and 25 November 2002 under case No. A40-187517/2020 and case No. A40 99705/2020, respectively.
At the same time, a different interpretation of article 4.5(1) of the Administrative Code can be found in courts of general jurisdiction. Thus, the Second Cassation Court of General Jurisdiction, in cases challenging resolutions issued under article 6.7(1.1) of the Moscow Administrative Code, points out that the limitation period for the offence is one year (see, for example, the Resolution of the Second Cassation Court of General Jurisdiction dated 30 July 2020 under case No. 16-5024/2020 and the decisions of the Moscow City Court dated 6 October 2020 and dated 14 September 2020 in case No. 7-11630 and case No. 7-11501/2020, respectively).
What to think about and what to do
Therefore, in practice, the differing interpretation of article 4.5 of the Administrative Code concerning the calculation of the limitation period for imposing administrative liability by courts of general jurisdiction, on the one hand, and state commercial courts, on the other, may cause even greater uncertainty. Specifically, two different valid court decisions can be issued based on the same facts with respect to a company and its CEO.For example, an administrative authority can adopt two resolutions imposing administrative liability under article 6.7(1.1) of the Moscow Administrative Code based on the same facts, thereby imposing a fine on the legal entity and on its CEO (as an officer).
Considering the amounts of the fines, the outcome of the case can be rather significant for both the company and its CEO.
If, as in the above case of the Supreme Court, more than two months but less than a year has passed from the starting date of the limitation period until the date resolutions are adopted, there is a risk that two contradictory court judgments will be adopted seeking to invalidate each of the resolutions if the case against the CEO is considered by a court of general jurisdiction and the case against the company is considered by a state commercial court.
The above is complicated by the fact that the legislation regulating administrative proceedings disregards prejudice, and, therefore, if a fact (such as a violation of the conditions for using a land plot in the form of the illegal reconstruction of a building which occurred many years ago) has been established during parallel proceedings in a state commercial court, this will be irrelevant for a court of general jurisdiction that considers the case against the company’s CEO in connection with the same violation. On the other hand, article 69 of the Commercial Procedure Code does not contain any indication that judgment of a court of general jurisdiction in an administrative case is binding to the extent of the facts that are established (see, for example, Resolution No. 310-AD15-7716 of the Supreme Court dated 21 July 2015 under case No. A14-9102/2014, which expressly negates the prejudicial relevance of the decisions of the court of general jurisdiction in an administrative case under article 69 of the Commercial Procedure Code).
Having regard to the above, one should be mindful of the conditions established by the documents of title, and if administrative liability is imposed, thoroughly review procedural documents and hire a lawyer to help with contesting such documents if they were issued illegally.
Help from your adviser
Pepeliaev Group's lawyers are ready to assist in assessing circumstances and facts as they apply to each specific case, and in developing a position with regard to the most reasonable conduct depending on the situation. We will also provide any legal support, including in resolving disputes, in negotiations with contracting parties, state and local authorities, and in assessing the land and town planning risks in the current crisis.We are ready to provide comprehensive legal support within litigations in courts of all levels, including on issues connected with administrative liability being imposed for environmental violations and violations in the use of land.