On October 18, 2009 the basic provisions of the Federal Law No. 205-FZ dated July 19, 2009 “On amending of several legislative acts of the Russian Federation” (hereinafter – “the Law”) which provide for essential amendments to the Arbitrazh Procedural Code of the Russian Federation come into force.

Let us draw your attention to the most essential amendments of procedural legislation:

1                   Special jurisdiction of cases Arbitrazh courts are dealing with is extended. Since the amendments come into force, Arbitrazh courts are entitled to hear:

§         all corporate disputes;

§         disputes arisen out of depositaries activities;

§         disputes arisen out of state corporation activity and connected with the legal status of state corporations, management of state corporations, their establishment, reorganization and winding-up or liquidation, establishment and authority of their bodies, responsibility of entities included in their bodies.

2                    The list of grounds for applying rules of joinder of parties, i.e. cases when the lawsuit can be filed by several claimants or by one claimant in respect to several defendants, is now defined more exactly.

3                    The Law enacts the rules enabling to avoid risks of parallel court proceedings and awarding of controversial judgments. The court shall:

(A)                Joint the interconnected cases according to “effective justice” principle, or

(B)                Suspend the proceedings until the parallel case is terminated.

4                    According to the amendments the authorities of a representative can be granted by a principal within the court proceedings (no formal power of attorney is required).

5                    The Law provides for the new procedural obligations of participants to the court proceedings:

(A)                The participant of the procedure is obliged to inform on change of its firm name and/or its contact details (address, telephone, fax number, e-mail).

(B)                The defendant is obliged to submit the statement of defense to the court. Failure to provide statement of defense in due time can lead to placement of judicial expenses to the charge of the defendant irrespective of the outcome of the case.

6                    Terms of procedure and their calculation are changed:

6.1               As a general rule, a dispute should be heard in the court of the first instance within the period of 3 months after the date of receipt of the lawsuit by the court.

6.2               General term of appeal procedure is extended up to 2 months.

7                    Rules on recovery of damages caused by interim measures are supplemented by the choice for the party whose rights are violated by interim measures of demands from another party who applied for interim measures: (i) to recover damages OR (ii) to pay compensation in the amount as defined by the court within the limits stipulated by the Law.

8                    The Law introduces new categories of cases and special rules of hearing them by the court:

(A)                Corporate disputes which include all disputes connected with establishment of a legal entity, its management and shareholding.

(B)                Disputes on protection of rights and legal interests of group of entities which is defined in the Law as a group of participants (numbered not less than five entities) to the relationship out of which a dispute or a claim arise. Failure to exercise the right of participant of group to join the claim may lead to loss of right of action if a claim to the same defendant and with regard to the same subject matter is treated by the court.

Amendments enacted by the Law will help to prevent abuse of right by participants of the arbitrazh proceedings. These amendments will contribute to enhancement of efficiency of justice via eliminating risks of issue of contradicting judgments, integration of the cases arising out of the same legal relationships, as well as placement of judicial expenses to the charge of the participants of the proceedings.

From our point of view after the Law comes into force, the choice of a remedies shall be made more carefully, the possibility of issue of the judgments having prejudicial character for the Client due to his participation in legal relationships with the number of participants more than 5 shall be taken into account, as well as necessity of additional expenses connected to participation in judicial disputes shall be considered.

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Head of ALRUD Dispute Resolution practice Senior Partner Vassily Rudomino [email protected]  and Partner Alexander Zharskiy [email protected].