The Supreme Court of the Russian Federation (further the “Supreme Court”) published on October 27, 2021 a review of case law on disputes related to leasing agreements.

The Supreme Court has provided clarifications on the qualification of leasing agreement terms, the conditions that can be included in leasing agreements, in which case property cannot be taken away from the lessee, how to correctly determine the leased asset, the consequences arising from the breach of obligations by the lessee, whether it is possible to collect lease payments from the seller of low-quality goods, the cases where property cannot be taken away from the lessee, etc. (Review of Case Law on Disputes related to Financial Lease (Leasing) Agreements approved by the Presidium of the Supreme Court on October 27, 2021 (further the “Supreme Court Review”)).

The Supreme Court Review provides a total of 39 clarifications on various aspects of this topic.

Articles 2 and 19 of Federal Law N 164-FZ dated October 29, 1998  On Financial Lease (Leasing) (further the “Leasing Law”) provide that the lessor under a financial lease (leasing) agreement undertakes to acquire ownership of the property specified by the lessee under the financial lease (leasing) agreement from the seller specified by the lessee and provide this property to the lessee’s temporary possession and use for a fee with the possibility of transferring the property to the lessee’s ownership upon expiration of the leasing agreement or before its expiration on the terms provided for in an agreement between the parties (further “lease buyout agreement”).

Payments under a lease buyout agreement usually include the amount of financing provided by the lessor and the fee for such financing depending on the duration of its use. These payments cannot be divided into fee for use of leased asset and its repurchase value.

Terms and conditions

If a leasing agreement provides no individual signs of the leased item, this does not point to its non-conclusion, if the leased item can be determined by generic characteristics specified in the agreement, which make it possible to identify the leased item upon conclusion of the agreement (Item 5 Supreme Court Review). For example, when buying a car, it is enough to indicate the make, model, power, engine size, and guise.

If a leasing agreement provides that the lessor’s claims for penalty are to be satisfied before repayment of the principal debt, then such provision will be invalidated and become null and void (Item 27 Supreme Court Review).

Leasing agreements may provide that the lessor is entitled to unilaterally revise the amount of lease payments due to a change in exchange rate if the lessee is made aware of the limits and grounds for such change upon conclusion of the agreement.

If a leasing agreement provides that upon termination of the agreement the lessee waives the balance of counter-representations,  such provision may be invalidated as it violates the balance of interests of the parties. The balance, according to the Supreme Court, cannot be used to offset counterclaims (Article 410 Russian Civil Code) but provides a way to determine the amount of the final payment for the parties’ mutual disbursements.

If the property interests of the parties to the agreement, the method they have chosen to satisfy these interests and the distribution of risks between the parties under the agreement are in line with the subject matter of the lease buyout agreement, then the relationship between by the parties will be governed by the provisions of the law on lease buyout regardless of the name they specified for the agreement and the names of the parties (Item 3 Supreme Court Review).

Article 22 of the Leasing Law and Articles 669 and 670 of the Russian Civil Code of the Russian Federation provide that the lessor is, as a general rule, not responsible if it is not possible to use the leased asset purchased from the seller selected by the lessee. In such cases, the lessee is not released from the obligation to make lease payments, but the lessee is entitled to present claims directly to the seller for improper contract fulfillment.

If the lessor evades assisting the lessee in filing claims against the seller for significant irreparable defects in the leased asset, such evasion may be recognized as a material breach of the leasing agreement on the grounds of which the lessee will be entitled to demand termination of the leasing agreement.


Defects in the leased asset do not usually exempt the lessee from making lease payments. In such case, the lessee may exercise consumer rights and demand that the seller eliminate the defects.

Lease payments cannot be collected from the seller as damages for the period during which the defective product could not be used. Such losses are not a consequence of a violation committed by the seller as opposed to the costs of eliminating defects renting a replacement asset. 

Contract termination

In case of termination of a leasing agreement, the financing is deemed repaid upon sale of the leased item, but no later than upon expiration of a reasonable period necessary to sell the leased item . If the leased asset is transferred to the lessor and its value is indicated in the termination agreement, the financing in the amount of this value is deemed repaid upon transfer of the leased asset.

Courts may deny the seizure of leased assets from lessees upon termination of leasing agreements if:

  • The lessee’s breach is only minor;
  • The debt amount is clearly disproportionate to the value of the seized asset and depriving the lessee from the possession and use of the leased asset could result in significant property losses for the lessee.

The termination of the leasing agreement and the seizure of the leased asset do not result in the termination of penalty accrual for late payment of lease payments.

In case of termination of a leasing agreement, the statute of limitation for claims from both the lessee and the lessor to fulfill their final obligations to each other is usually calculated from when the leased asset is sold rather than when it is taken away from the lessee. The beginning of this term can be set at a later point in time if the lessee fails to notify the sale and sale proceeds.

Leasing agreements may provide that the lessor is entitled to unilaterally revise the amount of lease payments due to a change in exchange rate, and such provisions will be valid only if the lessee is made aware of the limits and grounds for such change upon conclusion of the agreement.

Grounds for transfer of ownership

Ownership is transferred to the lessee automatically after all payments are made, and there is no need to conclude a separate sale-purchase agreement even if the leasing agreement provides that ownership is transferred in compliance with other conditions not related to the proper performance of obligations by the lessee (e.g. signing a separate sale-purchase agreement, drawing up an acceptance-transfer statement, obtaining the lessor’s consent) (Item 4 Supreme Court Review).