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Litigation between foreign and Russian companies

Our team of lawyers has long been involved in resolving legal disputes between foreign and Russian companies, in particular, defending the interests of our foreign clients in cases arising from supply, service, or contract agreements.

In these situations, our team provides a list of legal services, ranging from advising on the prospects of the dispute, to representing the interests of the client in negotiations with the counterparty, as well as in court, ending with the actual collection of debt from the defendant or the fulfillment of his obligation.

In this article, we decided to share with our readers the main stages that foreign companies and their representatives in Russia need to go through in order to achieve real protection of their rights.

Stage 1. Study of the contract, and primary documents.

If your counterparty refuses to fulfill its obligation under the contract, for example:
- refuses to pay the debt;
- refuses to deliver the goods;
- refuses to perform work, provide services;
if all your negotiations with such a client have come to a standstill, and you understand that you need to go to court, you also need to pay attention to the following.
Is there a so-called «arbitration clause» in the agreement concluded with such a counterparty on the referral of disputes in an arbitration court and on the law applicable to this agreement?

 1.1. If there is such a clause, than any legal dispute arising from such a contract must be resolved in an arbitration court determined by the parties, using the law of the country specified by the parties.

1.2. If there is no such clause, then the dispute arising from the contract must be resolved by the russian court at the place of registration of the defendant's organization. In this case, a Russian judge will apply Russian law when resolving a dispute, which directly follows from Article 1211 of the Civil Code of the Russian Federation (Part Three) of November 26, 2001 N 146-FZ.

Stage 2. Judicial protection of your right.

Depending on the circumstances set out in stage 1, the protection of your rights may be carried out initially in Russia or abroad.

1.1. Applying to an international arbitration court is usually associated with the search for foreign (sometimes Russian-speaking) lawyers, specialists in the application of foreign law.
Our company can help you find such lawyers, and then help with the enforcement of a judgment in Russia.

1.2. If your case is to be decided in Russia, most of the time it is necessary to adhere to the following algorithm of actions.

A) Sending a pre-trial letter to the defendant (equivalent to a cease and desist letter), with the demands:
- to pay off the debt;
- deliver the goods;
- to provide services.

This letter must be made in writing (in the Russian language) and contain your demands, as well as their grounds. We also recommend that you attach documents to the letter on which you base your demands (contract, acts, invoices, consignment notes, etc.).

Documents are best sent by Russian Post (there are Russian post offices in all cities), with an inventory of the attachment and notification of delivery of the letter. In this case, you will have the necessary evidence of what documents you sent, as well as evidence of their delivery to the counterparty, which must be submitted to the court.

B) If your demands were dismissed by the counterparty, go to court.

In our country, cases involving economic disputes, including those involving foreign companies, fall within the jurisdiction of states federal Arbitration Courts. In each region of Russia, there is one such court, which resolves disputes related to entrepreneurial and other economic activities in essence as the court of first instance (primary jurisdiction).

 Courts of first instance have a name derived from the name of the region in which they are located (for example the Arbitration Court of the city of Moscow). In addition to the courts of first instance, there are courts of appeal, or the second instance, (two courts per one judicial district) and of cassation, or the third instance (one court per one judicial district). The rulings of the lower jurisdictions are appealed in the higher ones.

It is important to note that in Russia there is no requirement for mandatory participation of a lawyer in in your case. That is, the statement of claim can be drawn up and filed, for example by the Director of the organization. Meanwhile, only either a licensed lawyer (advocate) or a person with higher, legal education or an academic degree in the legal specialty can participate in the court session.

To go to court you need to:
1. Draw up a statement of claim and attach all the necessary documents to it;
2. Pay the state fee (the fee depends on the amount of the claims);
3. Send a copy of the statement of claim with the documents attached to it to the defendant through the Russian post office with a letter containing an inventory of the attachment and a notice of delivery of the letter;
4. Attach documents confirming the payment of the state fee (see clause 2) and sending the statement of claim to the defendant (see clause 3) to the statement of claim and send it to the court.
All written documents must be prepared in the Russian language, legal proceedings are also conducted in Russian, therefore the presence of a Russian-speaking lawyer or advocate is necessary.

C) Wait for the decision in your favor to come into legal force.
The time trial must be concluded is 2 months from the date of acceptance of the statement of claim by the court if there are no grounds for extending this period.       
Within this time frame, the judge must decide your dispute. This decision can be appealed within 1 month from the date of its manufacture in full.
If the decision is not appealed, then it comes into force and can be executed. If it is challenged by the defendant and appealed, you will also have to participate in the appeal procedure. After the appeal, the decision in any case comes into legal force.

Stage 3. Enforcement proceedings.

The order of enforcement of a judgment in your favor differs depending on by whom the judgment was made.

1.1. If the judgment was made by a foreign arbitration court.

In this case, after the decision by which the dispute will be resolved is made, you will need to apply to the Russian federal arbitration court with an application for the recognition and enforcement of the foreign judgment.

This application will be accepted for consideration and a court session appointed, in a judge will check whether there are grounds for refusing to enforce such a decision. Such grounds may be, in particular, the lack of proper notification of the defendant about the time and place of the court hearing, or the presence in the Russia of a dispute between the same parties on the same grounds and subject of the claims.

The result of such a consideration of an application for the recognition of a foreign decision is a judicial act - in which your requirements will be satisfied or refused. This ruling can be appealed within a month from the date it is drawn up in full.

Based on this act, you will be issued a document on the basis of which your requirements will be compulsorily satisfied.

This document is called – «writ of execution». It is issued by the at your request and must be presented by you to a special body dealing with the enforcement of such documents, the Federal Bailiff Service. It is the employees of this department who will be responsible for the real restoration of your rights.

1.2. If the decision was made by a Russian court and entered into legal force, you can apply directly for the issuance of a writ of execution in the manner indicated above.

Frequently asked questions.

Foreign clients often have a question, what to do if a Russian company does not comply with a ruling that has entered into legal force?

As a rule, there is only one way out of this situation - the debtor's bankruptcy procedure with the involvement of his director and controlling persons who will be brought to subsidiary liability. As part of the debtor's bankruptcy procedure, the court administrator is appointed. This individual actually manages the debtor's organization and has the right to challenge the debtor's transactions in order to return the funds to creditors.

Our team of lawyers also provides services in this area. We begin with a consultation on the prospects of such a case with the participation of a professional administrator, then we fully carry out the case from filing for bankruptcy to the return of assets to you.

Another question that often arises is how to check the reliability of a Russian company?

In such situations, we recommend checking:
Presence of the organization in the register of legal entities -
Presence of debts in the register of proceedings under executive documents -
presence of litigation with other organizations (including the existence of a debtor's bankruptcy procedure) -

Also we can help if you need:
Contract lawyer, corporate lawyer, arbitration lawyer, arbitration representative
legal representative, lawyer for organization, lawyer for the firm, supply contract attorney
debt collection attorney, lawyer for international treaties, registration of a limited liability company in russia, creation of a representative office of a foreign company in Russia, business registration in Russia, legal services for foreign business.

Tel: +7 909 961-19-09
Visit us: Moscow, Zubovskiy bulvar, building 4, room 308

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