The Russian Supreme Court has provided explanations concerning the performance by an individual debtor of his/her obligations under credit agreements and loan agreements in the period when measures aimed at fighting the spread of the new coronavirus infec
On 30 April 2020 the Praesidium of the Russian Supreme Court approved its Review No. 2 of certain issues of case law associated with the application of the legislation and measures on preventing the spread of the new coronavirus infection (COVID-19) in the Russian Federation (“Review No. 2”).
Concerning the specifics of the performance by the individual debtor of his/her obligations under credit agreements and loan agreements in the period when measures aimed at fighting the spread of the new coronavirus infection (COVID-19) are in force, the Russian Supreme Court specifies as follows.
Federal Law No. 106-FZ dated 3 April 2020 “On amending the Federal Law “On the Central Bank of the Russian Federation (the Bank of Russia)” and certain items of legislation of the Russian Federation with regard to the specifics of the amendment of the terms and conditions of a credit agreement and a loan agreement” (“Law No. 106-FZ”), individual borrowers were provided with the opportunity to use the right to amend the conditions of a credit agreement which corresponds to the conditions of such law, which means suspending the performance of obligations under the credit agreement by a term up to 6 months. The borrower may apply with the corresponding request to the creditor not later than on 30 September 2020.
[Please be reminded that, for this to be done, the credit agreement should have been entered into before 3 April 2020, the amount of the individual borrower's income should be reduced by more than 30% compared with the monthly average income for 2019, and the amount of credit does not exceed:
- RUB 300,000 for credits for individual entrepreneurs;
- RUB 250,000 for ordinary consumer credits;
- RUB 100,000 for credit cards;
- RUB 600,000 for consumer credits for the purchase of a vehicle with such vehicle being pledged;
- RUB 2,000,000 for mortgages for individuals.
At the same time the amount of mortgages with a pledge of residential premises located in Moscow was RUB 4,500,000, and for Moscow Region, St Petersburg and constituent entities of the Russian Federation that are located in the Far Eastern Federal District such amount was RUB 3,000,000.
More detailed information about the rules for the provision of the so-called ‘credit vacation’ can be found in our reviews on our website www.pgplaw.ru in the COVID-19 section.
Irrespective of whether or not there are grounds for the granting of a beneficial period provided for by Law No. 106-FZ and whether the borrower has used his/her right to amend the conditions of the credit agreement (loan agreement) in accordance with the above law, the borrower may be released from liability under article 401 of the Russian Civil Code (the “Civil Code”) for the non-performance or improper performance of an obligation if the obligation was violated other than through his/her fault, including if performance was impossible owing to circumstances which are an emergency and are unavoidable in the existing conditions, including those connected with the established restrictive measures (for example, if the borrower could not use the system of online payments and could not make payments in the ordinary way).
Therefore, the Russian Supreme Court confirms that the non-working days established by the Russian President by Decrees No. 206 dated 25 March 2020, No. 239 dated 2 April 2020 and No. 294 dated 28 April 2020 in itself is not a ground for putting back the deadline for the performance of obligations under article 193 of the Civil Code.
At the same time, the Russian Supreme Court notes that Information Letter No. IN-03-31/32 of the Bank of Russia dated 27 March 2020 “On the deadline for performing obligations” explained that in connection with the Decree No. 206 of the Russian President dated 25 March 2020 on the announcement of non-working days from 30 March until 3 April 2020, if the last day of the deadline for the performance of an obligation by the borrower owed to a credit institution or to a non-credit financial institution, which arose in connection with a credit (loan) being granted, expires in the above period, then the expiration date for the deadline is the next working day, and the putting back of the deadline for the performance of the obligation to the nearest next working day following the period in question cannot be considered a violation of the deadline for the performance of obligations and, accordingly, does not evidence delayed payments.
In the Russian Supreme Court’s opinion, taking into account that borrowers could in good faith rely on the explanation given by the Bank of Russia, the failure to pay the payments provided for by the above credit agreements and loan agreements within the period from 30 March until 3 April 2020 is not a delay in the performance of obligations.
As for ‘non-working days’ from 4 April until 30 April inclusive the Bank of Russia has changed its position by specifying in the information from 3 April 2020 “On the work of financial institutions and ensuring the continued work of the financial sector of the Bank of Russia in the period from 4 until 30 April 2020” that the obligations under financial transactions the deadline for the performance of which expires during non-working days should be performed by the debtors on the deadline provided for by the agreement, and creditors acting in good-faith will take into account the actual opportunities of the debtor with respect to the performance of the corresponding obligation, the presence or absence of the possibility to use remote service, and if there was no such possibility, also the regime of restrictive measures that is being applied in the corresponding constituent entity of the Russian Federation and may influence the client’s possibility to visit the office of the financial institution for the timely performance of transactions.
Previously in the similar Review No. 1 dated 24 April 2020 the Russian Supreme Court expressed itself concerning the deadlines for the performance of obligations arising out of a civil law agreement in general, by specifying that under the common rule the announcement of ‘non-working’ days from 30 March until 30 April should not influence the deadlines of the performance of obligations under an agreement, i.e. including credit agreements. These provisions of Review No. 1 should be taken into account when considering disputes with other categories of borrowers.
Therefore, the Russian Supreme Court in Review No. 2 has confirmed the approach in accordance with which the establishment of ‘non-working days’ by Decrees of the Russian President does not in itself result in the putting back of the deadline for the performance of obligations under credit agreements according to the procedure of article 193 of the Civil Code; and the presence or absence of circumstances that are an emergency and unavoidable in these conditions, including associated with the established restrictive measures which resulted in the impossibility to perform an obligation in time, should be assessed in each specific case for the purposes of a release from liability under article 401 of the Civil Code.
Please note that the explanation of the Russian Supreme Court in Review No. 2 with regard to the non-payment of payments for which credit agreements and loan agreements provide within the period from 30 March until 3 April 2020 may, in our opinion, be used by other categories of borrowers who in good faith relied on the explanations of the Bank of Russia for justifying the absence of delay in the performance of obligations in this period.
What to think about and what to do
If the deadline for performing obligations under a credit agreement (a loan agreement) had been missed in the period of non-working days‘’ and/or there is a risk of performing obligations being impossible in the nearest future, we advise considering the possibility of contacting the creditor asking to suspend the performance of the corresponding obligations under Law No. 106-FZ or to restructure the debt under agreement with the creditor.
If a dispute with the creditor arises we recommend timely gathering evidence that would confirm the impossibility of performing the obligation within the deadline established by the agreement, including in connection with the impossibility to perform the obligations in an ordinary way. Such measure is highly likely to allow liability to be excluded for the non-performance or improper performance of obligations to the creditor.
Pepeliaev Group’s specialists are ready to provide complex legal support in court proceedings in commercial courts and in courts of general jurisdiction of all levels. They will provide advice on any issues arising in connection with the spread of the coronavirus infection and with the restrictions applied.