Commercial litigation under the reformed Russian Supreme Court—what you need to know

In June 2013, Russian President Vladimir Putin unexpectedly announced the creation of a new ’super’ Russian Supreme Court that would merge the Supreme Commercial (Arbitrazh) Court and the Supreme Court. In this article, Mikhail Samoylov, senior associate at KIAP Attorneys at Law, discusses some of the features of this notable development.

Background to the reforms

Despite the fact that the reform was described as a ‘merger’, most lawyers viewed the development as the abolition of the Supreme Commercial (Arbitrazh) Court. These reforms could have been the subject of consultation amongst the Russian legal community, but there were no such discussions before the announcement in June 2013. In fact, the Russian legal community, including the judiciary, could not understand the reasons for the abrupt reform of the Russian court system. Nevertheless, the amendments to both the Constitution of the Russian Federation and Russian law were quickly adopted and finally entered into force on 6 August 2014.

How did the commercial courts operate before the reforms?

Mr Justice Simon in the English High Court provided the following sound explanation of the structure of the Russian commercial courts in Yukos Capital:

'The present case is primarily concerned with decisions of Arbitrazh courts, including the Supreme Arbitrazh Court. These courts consider commercial disputes, in contradistinction to courts of General Jurisdiction which consider criminal and civil cases concerning disputes of a non-commercial (or non-economic) nature. There are four levels of Arbitrazh courts: (1) 81 local first-instance Arbitrazh courts (for example the Moscow Arbitrazh court); (2) 20 Arbitrazh Appellate courts (for example the Ninth Arbitrazh Appellate court) which review the legality and soundness of decisions of the first-instance courts, by way of re-examination of the decided facts, and any new facts advanced; (3) 10 Federal Arbitrazh courts (including the Federal Arbitrazh court of the Moscow District), which examine subordinate decisions on cassation appeals to ensure compliance with the substantive and procedural law; (4) the Supreme Arbitrazh Court, which may review any judicial decision of subordinate courts in the exercise of its supervisory powers.'

The activities of the Supreme Commercial (Arbitrazh) Court, in general, were focused on:

reviewing the most important commercial cases by the Presidium of the Supreme Arbitrazh Court. Approximately 450 cases have been reviewed by the Presidium every year
analysing judicial practice and preparing clarifications for lower courts, and
the promotion of e-justice. A huge step has been made with e-justice since 2005/2006. In summary, information about all cases (except cases containing commercially sensitive information/business secrets) is available on the internet as well as all the decisions, audio recording of court sessions, broadcasting of sessions of the Presidium of the Supreme Commercial (Arbitrazh) Court on YouTube (and other matters)

These and other steps made the commercial courts more transparent than the courts of general jurisdiction, including the Supreme Court of Russia. The gap between the Supreme Commercial (Arbitrazh) Court of Russia and the Supreme Court of Russia was clearly noticeable. Perhaps this gap was a real reason for abolishment of the Supreme Commercial (Arbitrazh) Court.

How do the courts operate post-reform?

On 6 August 2014, the new Supreme Court began hearing cases. However, a number of judges of the Supreme Commercial (Arbitrazh) Court, including some very experienced judges, remain outside of the Supreme Court for various reasons.

The reforms have transformed a four level system of commercial courts into a five level hierarchy. The competence of courts of first-instance, courts of appeal and courts of cassation have not changed. The most important changes are connected with a structure of the Supreme Court.

The Supreme Court

The Supreme Court consist of seven chambers including the chamber on economic disputes (the Chamber), which mainly deals with commercial litigation. In addition, there is the Presidium of the Supreme Court (the Presidium). Both of these courts have the right to re-examine commercial cases. The Chamber acts both as a court of first-instance (in a limited number of cases) and as a court of cassation. In Russian, it is called a court of second cassation.

Commercial litigation cases move through the Russian court system as described as follows. A vast number of cases are resolved by courts of first-instance and such cases are usually resolved within four months. There is one opportunity to appeal (on law and fact) and also recourse to a court of cassation (law only) as of right. As a rule, a judgment of a court of first-instance may be appealed within one month of being rendered.

Cases at second instance (ie courts of appeal) are subject to review on the law and facts, ie a trial de novo. However, such retrial is limited to the cases when the parties have the right to present new evidence. A court of appeal has to review a case within two months from the date when an appeal was accepted by a court of appeal. A decision of a court of appeal comes into force immediately after it is rendered.

Both a judgment of a court of first-instance and a decision of a court of appeal may be appealed within two months to a third instance, namely a court of cassation. Cases at third instance are reviewed only to ensure compliance with the substantive and procedural law. A court of cassation has to review a case within one month and these instance does not retry a case or re-evaluate the evidence.

In accordance with the above amendments to the procedural law, a dissatisfied party has a right to petition both the Chamber and the Presidium to re-examine a decision of a lower court. It is unclear whether a party has a right to petition the Chamber after a decision by a court of appeal or only after a court of cassation has delivered its decision.

Nevertheless, a petition may be made within two months and a judge of the Supreme Court has a discretion either to order that the case is re-examined by the Chamber or to dismiss the petition. However, if the judge decides to dismiss the petition then the dissatisfied party has the right to petition to the Chairman or a Deputy-Chairman of the Supreme Court and the Chairman or the Deputy-Chairman of the Supreme Court, who have the right either to confirm the judge`s decision to dismiss or to disagree with the judge`s decision and to order the re-examination of the case by the Chamber.

The Chamber re-examines cases on the grounds of significant breaches of either substantive or procedural law which influenced the outcome of litigation and entail a violation of the rights and legitimate interests of the parties. The case shall be re-examined by the Chamber within three months.

Moreover, after the Chamber, a dissatisfied party has the right to petition to re-examine a case by the Presidium:

a party has the right to petition the Supreme Court to have a case re-examined by the Presidium within three months of the Chamber sitting. Such petitions are examined by a judge of the Supreme Court and the judge has a discretion either to allow re-examination by the Presidium or to dismiss the petition. However, if the judge decides to dismiss the petition, the dissatisfied party has the right to petition to the Chairman or a Deputy-Chairman of the Supreme Court and the Chairman or the Deputy-Chairman, who have the discretion either to confirm the judge`s decision to dismiss the petition or to disagree with the judge`s decision to dismiss and to order re-examination of the case by the Presidium.
a party has an independent right to petition the Chairman or a Deputy-Chairman of the Supreme Court directly after the Chamber sitting within four months if fundamental breaches of either substantive or procedural law were allegedly committed by the lowers courts. Interpreting the procedural law these petitions should be examined by the Chairman or the Deputy- Chairman of the Supreme Court, who have the exclusive ability to either disagree with the petition or to agree and to prescribe re-examination of the case by the Presidium.

Finally, the Presidium shall re-examine the case within three months.

In accordance with the procedural law, all these courts, except a court of appeal, are able to hear cases anew (subject to court of cassation review on points of law only) as well as to send the case to a lower court for another hearing.

Some conclusions

A number of cases have been examined by the Chamber since 6 August 2014. However, in the same time no cases have been examined by the Presidium of the Supreme Court. There is no doubt that the system of re-examination of commercial cases by the Supreme Court looks very complicated and may be a little unclear for practitioners. Moreover, it both lengthens and complicates the process of commercial litigation in Russia.

Nowadays, the system of re-examination of commercial cases shares features with the system of re-examination of cases coming from the courts of general jurisdiction (civil cases between citizenships, administrative cases and so on) by the Supreme Court too. But, recently, the European Court of Human Rights has criticized Russia for the system of re-examination of cases by the courts of general jurisdiction.

It is possible that the system of re-examination both of commercial cases and cases of general jurisdiction will be modified to comply with the ECHR provisions too. Currently, a draft of new civil procedural code is being developed.