Provisions on agreements for out-of-court dispute settlement

A pre-trial procedure for settlement of disputes intended for amicable and prompt resolution of disputes is an additional guarantee that rights will be protected. Such procedure also promotes the establishment and development of business relationships among parties. If a compromise can be reached, a pre-trial dispute settlement procedure significantly reduces the time necessary to restore the violated right and results in the resolution of the dispute on mutually beneficial terms. When a dispute is settled this way, the parties do not incur additional costs for the payment of state fees and other expenses associated with the consideration and resolution of disputes in court.

The adoption of a pre-trial dispute settlement procedure is mandatory for many categories of cases considered by commercial courts, including civil law disputes for recovery of funds under claims arising from contracts, other transactions, unjust enrichment (Article 4(5) Russian Code of Commercial Procedure). The regulations on pre-trial dispute settlement procedure, as a rule, allow the parties to provide in agreements for other rules regulating such procedure (discretionary rules).

2.1 Claim consideration period

The parties may provide their agreement for short and sufficient period for claim consideration. Otherwise, the party that has sent a monetary claim arising from the agreement will have for a response for 30 calendar days from the date on which the claim was sent before it is entitled to appeal to a commercial court (Article 4(5) Russian Code of Commercial Procedure).

2.2 Possibility to send a claim by email

Submitting a claim by email shortens the pre-trial dispute settlement process and allows the parties to save on postage costs. The submission of claims by email must be expressly and unequivocally be specified in the agreement. Otherwise, it will be necessary to prove in court that emailing is common business practice between the parties and that correspondence was previously exchanged also that way (Item 13 Russian Supreme Court Ruling No. 18 dated June 22, 2021). The parties may also provide in the agreement for sending claims via social networks or messengers.

In this case, printouts (screenshots) made and certified by the parties specifying the address of the webpage printed out as well as the exact time of its receipt will be admissible proof that a claim has been sent (Item 13 Russian Supreme Court Ruling No. 18 dated June 22, 2021)

2.3 Sending a claim by registered mail with declared value and list of enclosures (if the parties have agreed to send claims by postal mail)

Sending a claim this way will help avoiding disputes about what exactly was sent by the plaintiff to the defendant (claim or other documentation).

If such condition is not provided in the agreement, the claim may be sent by registered mail unless otherwise provided by law (Item 12 Russian Supreme Court Ruling No. 18 dated June 22, 2021). Sending a claim by registered mail does not preclude difficulties in identifying the content of what is sent by postal mail.

2.4 Address for sending a claim (if the parties have agreed to send claims by postal mail)

It is worth specifying in agreements the address for sending claims if the actual address of one of the parties to the agreement (or both) is not the same as the address recorded in the State Register of Legal Entities. Specifying in agreements the address for sending claims may also be useful in case one of the parties to the agreement fails to notify the other party that its registered/legal address has changed.

Claims are made and sent in compliance with the rules set out in Article 165.1 of the Russian Civil Code (Item 11 Russian Supreme Court Ruling No. 18 dated June 22, 2021).

Article 165.1(2) of the Russian Civil Code provides that any legal communication addressed to an individual entrepreneur or legal entity is to be sent to the address recorded in the State Register of Individual Entrepreneurs or State Register of Legal Entities. Agreements may provide that legal communication related to the emergence, change, or termination of obligations under them is to be sent by one party to the other solely to the address(es) specified in the relevant agreement. In such case, it will not be deemed appropriate to send messages to another address unless the party that has sent the message knew or should have known that the address specified in the agreement is not valid (Items 63, 64 Russian Supreme Court Ruling No. 25 dated June 23, 2015).

2.5 List of documents and/or information that must be sent together with claims to comply with pre-trial dispute settlement procedure

It is worth including in agreements a list of documents that should be attached to claims to support their content and amount. The failure to provide such documents by the claiming party could result in the parties failing to reach an agreement under the pre-trial dispute settlement procedure. It should be noted that courts have also concluded that pre-trial dispute settlement procedures are deemed fulfilled even if the plaintiff/claimant has not attached a debt calculation to the claim as the law does not require attaching debt calculation to claims (Russian Supreme Court Ruling No. 307-ЭС20-20642 dated December 14, 2020 and North-West District Commercial Court Ruling No.Ф-079894/2020 dated October 01, 2020 Case No. А42-10740/2019).

Agreements may provide for the list of documents to be attached to claims depending on the nature of the legal relationship between the parties. The parties are also entitled to provide for certain requirements for the form of these documents (e.g. the sending party is to provide certified copies of documents) and the number of their copies.

Failure to send the required documents and/or failure to provide the required information, as well as providing them in an inappropriate form or quantity will evidence non-compliance with the pre-trial dispute settlement procedure (Item 17 Russian Supreme Court Ruling No. 18 dated June 22, 2021).

Having said that, if the claimant was unable to submit all the documents and/or information provided in the agreement for the pre-trial dispute settlement procedure, but the documents submitted clearly support the content and the amount of the claims, or documents are available to the debtor, then the pre-trial dispute settlement procedure will be deemed fulfilled (Item 17 Russian Supreme Court Ruling No. 18 dated June 22, 2021).

2.6 Conditions, procedure, and terms for negotiations, mediation, or other conciliation procedure (if the parties intend to provide in the agreement for a non-claim pre-trial dispute settlement procedure)

Many contracts specify only that the parties are to settle disputes through negotiations, but this is a general condition with no details, so it does not remove the need to comply with the statutory pre-trial dispute settlement procedure.

A different (non-claim) pre-trial dispute settlement procedure may be deemed established by an agreement if the agreement specifies a timeframe and procedure for such settlement. Specifying in an agreement that disputes are to be settled by negotiations cannot be considered as a change to the mandatory pre-trial dispute settlement procedure unless the agreement sets out the conditions, procedure, and timeframe for these negotiations (Item 12 Review of Practical Application by Commercial Courts of Procedural Laws on Mandatory Pre-trial Dispute Settlement Procedure approved by Russian Supreme Court Presidium on July 22, 2020). In such case, the rules set out in Article 4(5) of the Russian Code of Commercial Procedure for pre-trial dispute settlement procedure apply.

It is not important in practice to specify a deadline for submission of claims in an agreement as failing to comply with such deadline is not considered as non-compliance with the claim procedure for settlement of disputes entailing the loss of right to go to court (as a result of the non-compliance with the pre-trial procedure following the non-observance of the set deadline for submission of claims).

Article 4(3) of the Russian Code of Commercial Procedure sets out that waiving the right to go to court is invalid so the provisions of the agreement limiting the submission of claims to the period specified in the agreement from the date of violation of obligation are not applicable. In such case, when a court decides whether the procedure for dispute settlement has been observed, only the fact that a claim was sent will be relevant regardless of whether or not the claim was sent within timeframe set out in the agreement for sending claims.

According to Russian Supreme Court Ruling No. 305-ЭС20-11481 dated October 07, 2020, the period for filing a claim as set out by a contract is not preclusive and does not give rise for the parties to consequences such as the loss of the right to go to court.

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