The teams of Pepeliaev Group’s Dispute Resolution and Mediation and Criminal Law Defence of Business practices have defended a client in the Supreme Court

The teams of Pepeliaev Group’s Dispute Resolution and Mediation and Criminal Law Defence of Business practices jointly represented a client's interests before the Supreme Court in a case based on a claim from the Prosecutor's Office.

The dispute began when monetary funds were not returned under several loan agreements which two individuals had entered into, which prompted our client to apply to the court. However, when the case was being considered, the borrower’s representative provided oral explanations to the regional Prosecutor's Office that the loan agreements were a sham; the defendant “recalled” a share sale and purchase agreement concluded with a company which, as he insisted, was affiliated with the claimant. Having artificially linked these agreements, the borrower's representative referred in the court that by entering into the loan agreements, the defendant was allegedly pursuing the goal of avoiding the payment of personal income tax, having intentionally concluded the share sale and purchase agreement at a price he knew to be too low.

As a result, the case was joined by the Russian Federal Financial Monitoring Service, the tax authority and the regional Prosecutor’s Office, which had filed independent claims to have the loan agreements classified as invalid and sham transactions aimed only at the borrower avoiding paying personal income tax. This was despite the fact that, by then, the timeframe had expired by which the Russian public purse could claw back the tax. The Russian Federal Financial Monitoring Service also pointed to certain “suspicious elements”, such as the loan agreements having the same duration, interest being linked to the Bank of Russia's key rate and the parties to the agreements being registered in different regions of Russia.

The courts of lower levels upheld the claim of the Prosecutor's Office, invalidated the agreements and set aside the claim to recover the debt under the loan agreements. As a result of these court judgments, the borrower succeeded in avoiding having dozens of millions of roubles collected from it and Pepeliaev Group's client, the lender, was in fact blamed for acting as an accomplice in the borrower's tax evasion scheme.

Pepeliaev Group’s lawyers prepared an appeal to the Supreme Court which addressed important issues of substantive and procedural law. Our team succeeded in persuading the Supreme Court's Judicial Board for Civil Law Cases to take an interest in this case by emphasising that the courts of lower levels had failed to analyse what the will of both parties to the transaction was actually aimed at and whether the loan agreements were in fact linked to the share sale and purchase agreement. Instead, those couirts had been satisfied with oral explanations from the defendant's representative about some abstract scheme. 

As a result, a stop was put to the borrower's avoiding repaying the debt by citing an alleged tax avoidance scheme and to the agreements being a sham, and the Supreme Court has referred the case to be reconsidered by the court of first instance. 

In this case, the client's interests were represented by Senior Associate of Dispute Resolution and Mediation Practice Olga Syachinova and Junior Associate Anastasia Ponomareva, as well as Maxim Koshkin, the Head of Criminal Defence of Business Practice, and Associate Evgeny Kapishnikov.