This content is from: Local Insights

Russia

The Russian government has enacted ambitious new legislation designed to strengthen the enforcement of judicial orders. The new rules are to apply to orders issued by all Russian general courts, the Constitutional Court, the Supreme Court, the High Arbitration Court, all arbitration courts and foreign courts, as well as orders of certain other government bodies. At present, Russia's Civil Procedural Code, and the procedural rules of the various court systems, govern enforcement procedures, including the conversion and seizure of property to satisfy court judgments. In the emerging Russian market economy, identifying, seizing, and converting assets under a court order is often tedious, time-consuming and expensive. Results vary widely. Officials themselves concede that enforcement practices are weak. The new legislation seeks to address these problems by enforcing compliance with court orders and government decisions and clamping down on delinquent debtors.

The new legislation is set forth in two new laws, both set to come into effect on November 5 1997. These are the Law on Government Execution Procedure (Law 119-FZ) and the Law on Officers of Justice (Law 118-FZ), both dated July 21 1997. Together, these new laws seek to strengthen the existing mechanisms for executing court orders. For example, Article 45 of Law 119-FZ introduces "conversion of property by seizure and sale; conversion of wages, pensions, stipends, and other means of income; and conversion of property located in other entities". These methods were not generally used under the prior legislation. The new laws also require, under threat of penalty, that banks, credit organizations and tax officials assist in the seizure of monetary and other assets. While many banks have been partly performing these roles already in practice, their duties to do so are now clearly spelt out in the law for the first time.

In a measure that is possibly more important than that laying down the new methods for execution of orders, the new laws also establish "officers of justice-executors" to ensure compliance with court orders and decisions. As new "administrators" of justice, these officers will wear uniform, and will take a solemn oath to uphold the Constitution and other laws of the Russian Federation. More substantively, they will be empowered to conduct searches for missing debtors and their property. The costs of the search are to be paid by the debtor, and a penalty of 7% of the seized sum or property will be charged when an order has not been honoured. An officer of this type will have authority far exceeding that of a simple court bailiff; for instance, his jurisdiction will extend to the execution of orders of government bodies "with established legal authority to impose duties on citizens, organizations or budgets to transfer money or other property to other citizens or organizations".

Foreign companies or individuals investing or doing business in Russia are hopeful that these new laws will enhance the enforcement framework for foreign court judgments and arbitral awards. Previously, foreign investors could look for such protection only to the June 21 1988 decree of the USSR Supreme Soviet, to the relatively few bilateral treaties that provided for mutual recognition of court judgments (eg with Greece, Italy, Cyprus and Poland), to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and to the 1993 Russian Law on International Commercial Arbitration. Although helpful in theory, these legal recourses in practice added very little to the weak domestic framework for enforcing awards. Now, Law 119-FZ expressly includes foreign arbitral awards and court judgments in the list of executory documents enforceable by a justice-executor officer.

In fairness to debtors and owners of property, the new laws also provide some protection against belligerent seizure. In addition to Constitutional protections, the new laws limit the permissible places and times of enforcement actions, and the circumstances in which causes of action can be brought. However, these provisions may in turn impair the effectiveness of interlocutory remedies such as ex parte seizures and other orders not requiring notice to the debtor.

Robert Wood and Elena Zharikova

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