From October 18, 2022, amendments to the Commercial Procedural Code of the Russian Federation will come into force, according to which the powers of the prosecutor in the arbitration process will be expanded. [1]
These amendments affect both forms of the prosecutor’s participation in the arbitration process:
- application to the arbitration court with a statement of claim (petition), when the prosecutor enjoys the procedural rights and bears the procedural obligations of the claimant;
- joining the already started case at any stage of the arbitration process in order to ensure legality, when the prosecutor uses the procedural rights and obligations of a person participating in the case.
The amendments made to the Commercial Procedural Code of the Russian Federation give the prosecutor the right to apply to the arbitration court with claims for invalidation and for the application of the consequences of the invalidity of the following transactions:
- transactions made in violation of the legislation establishing special economic measures, measures to influence unfriendly actions of foreign states;
- transactions made for the purpose of evading enforcement of the legislation on combating the legalization (laundering) of proceeds from crime and the financing of terrorism;
- transactions made in order to evade compliance with the legislation on taxes and fees;
- transactions made for the purpose of evading the execution of the currency legislation of the Russian Federation;
- transactions made in order to evade the customs legislation of the EAEU and the Russian Federation.
Also, the prosecutor will have the right to join these cases considered by the arbitration court at any stage of the arbitration process, including filing an application for review of a judicial act due to new or newly discovered circumstances.
Moreover, the participation of the prosecutor in the arbitration process by joining an already initiated case will become possible not only in those cases that the prosecutor has the right to initiate by submitting a statement of claim (petition), as was the case before making the amendments under consideration to the Commercial Procedural Code of the Russian Federation, but also in cases of the following categories:
- when considering petitions for the issuance of a writ of execution for the enforcement of an arbitration court’s decision;
- when considering petitions for recognition and enforcement of foreign courts’ decisions and foreign arbitral awards;
- if circumstances are revealed that indicate that the dispute was initiated in order to evade the implementation of tax, currency, customs legislation, anti-crisis and counter-sanction legislation, as well as legislation on combating the legalization (laundering) of proceeds from crime and the financing of terrorism, and (or) arose from a mock or fraudulent transaction made for the specified purposes;
- in the event that within the framework of an insolvency (bankruptcy) case, the housing rights of citizens, including minors, are affected.
Thus, the legislator significantly expands the powers of the prosecutor in the field of control over transactions for their compliance with anti-crisis and counter-sanction legislation, tax, currency, customs legislation, as well as legislation on combating the laundering of proceeds from crime and the financing of terrorism. Now the prosecutor has the right to challenge a wide range of transactions that violate these areas of legislative regulation, including in cases where public law entities do not participate in the transaction, and the parties to the transaction are equal business entities. In particular, the prosecutor will be able to challenge the transaction in connection with the violation of special economic measures (for example, the implementation of the transaction in the absence of permission from the Government Commission for the Control of Foreign Investments). The prosecutor is given the right to join any case at any stage of the arbitration process, if the dispute is initiated to circumvent anti-crisis and counter-sanction measures, tax, currency, customs, anti-money laundering legislation. In addition, prosecutor’s supervision will extend to the recognition and enforcement in the territory of the Russian Federation of decisions made by foreign state courts and arbitrations, as well as to the enforcement of decisions by arbitration courts and international commercial arbitrations adopted in the Russian Federation.
In view of the foregoing, we recommend that companies (especially if they interact with residents of unfriendly states) carefully evaluate their transactions for compliance with the requirements of the current legislation in order to reduce legal and financial risks.
[1] Federal Law No. 387-ФЗ dated October 7, 2022 “On Amendments to Article 52 of the Commercial Procedural Code of the Russian Federation and Article 45 of the Civil Procedure Code of the Russian Federation”
Author
Maxim Dmitriev
- Senior Lawyer
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