Expanding the Powers of the Prosecutor's Office in Arbitrazh and Civil Court Proceedings 

October, 2022 - ALRUD Law Firm

On 7 October 2022 the President of the Russian Federation has signed Federal Law No. 387-FZ 'On Amendments to Article 52 of the Arbitrazh Procedure Code of the Russian Federation and Article 45 of the Civil Procedure Code of the Russian Federation'. The Federal Law comes into force on 18 October 2022.

The law amends the Arbitrazh Procedure Code of the Russian Federation and the Civil Procedure Code of the Russian Federation by substantially expanding the powers of the Prosecutor's Office and empowering it to interfere in economic disputes that do not formally have public nature.

1. New powers of the Prosecutor's Office of the Russian Federation

1.1 Powers in contractual disputes in arbitrazh (state commercial) courts

The prosecutor is authorized to file a claim for invalidation of transactions committed in violation of legislation establishing special economic measures, measures of influence (counteraction) to un-friendly actions of foreign states.

The law also grants prosecutors the right to file a claim with an arbitrazh court to invalidate transac-tions made in violation of legislation on anti-money laundering and countering the financing of ter-rorism, tax, currency, and customs legislation.

1.2 Powers in disputes on recognition and enforcement of foreign court judgments and ar-bitral awards in arbitrazh courts

The prosecutor is now also entitled to enter into a dispute at any stage of the proceedings, including disputes on enforcement of foreign court and arbitral awards and (or) issuance of a writ of execu-tion to enforce an arbitral award. It may take place in case there are circumstances indicating that the dispute was initiated in order to evade obligations and procedures under the legislation referred to in paragraph 1.1 of this newsletter, and (or) a sham or simulated transaction made for the abovementioned purposes.

1.3 Powers in civil court proceedings

In order to ensure the rule of law, the prosecutor, at his own initiative or at the initiative of the court, has the right to enter into a case pending before the court at any stage of the proceedings to give an opinion on the categories of disputes mentioned in clauses 1.1-1.2.

2. Consequences of introducing amendments to the procedural codes

2.1 Participation of a prosecutor in cases of invalidation of transactions made in violation of counter-sanction legislation

Now the prosecutor can potentially challenge a transaction executed by the parties due to a viola-tion of sanction restrictions, for example, in the absence of its approval by the subcommittee of the Government Commission for the Control of Foreign Investment.

Expanded powers of prosecution may lead to challenging a wide range of transactions that violate the rules in the areas of law specified in the new federal law, including when the parties to the transaction recognize its validity. The prosecutor's interference in normal economic circulation may negatively affect the stability of the business environment. At the same time, it is not clear how and in what cases prosecutors will use their new powers.

2.2 Interference of the prosecution in cases of recognition and enforcement of foreign court judgments and arbitral awards

The prosecutor's involvement in this category of cases may substantially complicate the recognition and enforcement in the Russian Federation of foreign court judgments and arbitral awards, espe-cially those of unfriendly states, as well as Russian arbitration institutions in disputes to which a res-ident of the unfriendly state is a party.

We assume that the interference of prosecutors will lead to developing a negative tendency of courts to refuse to enforce judgments and awards due to their non-compliance with the public policy of the Russian Federation.

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Note: Please be aware that all information provided in this letter was taken from open sources. Neither ALRUD Law Firm, nor the author of this letter bear any liability for consequences of any decisions made in reliance upon this information.




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