Proceedings with a foreign company under a supply contract in Russia

If you do business with foreign companies, then when you need to sue a foreign company, you are likely to face the following questions:

– In what case can a claim against a foreign company be filed with a Russian court?

– How do I file a lawsuit against a foreign company with a Russian court?

– What legislation will apply to the debt of a foreign counterparty?

We will consider these and other questions in our article.


1. IN WHAT CASE CAN A CLAIM AGAINST A FOREIGN COMPANY BE FILED WITH A RUSSIAN COURT?

– On the territory of the Russian Federation there are representative offices / branches of a foreign supplier (clause 8 of the Information Letter of the Supreme Arbitration Court dated 09.07.2013 N 158)

In addition, the claim must be related to the actions of the Russian representative office (confirmed by an agreement with the Russian representative office or events that occurred on the territory of the Russian Federation)

You can find out whether a foreign company has a representative office or a branch on the territory of the Russian Federation on the Federal Tax Service website at the link: https://www.nalog.gov.ru/opendata/7707329152-rafp/

According to the general rule specified in clause 2 of part 1 of article 247 of the Arbitration Procedure Code of the Russian Federation, the Russian arbitration court is a competent court if the representative office of a foreign company is located on the territory of the Russian Federation.

It is important to note that there is an addition to this rule that has been developed by the arbitration practice – you need to prove that the branch of the foreign company is connected with your claims.

This rule was created by the legislature in order to exclude competition between a Russian court and a foreign court at the location of the foreign company.

The fact is that the branch of the foreign company located in Russia may have nothing to do with your dispute. The subject of the dispute may arise not on the territory of Russia, and then the competent court will be the court of the corresponding foreign state.

– The foreign company does not have an official representative office in the Russian Federation, but conducts a permanent commercial activity (Clause 9 of the Information Letter of the Supreme Arbitration Court dated 09.07.2013 N 158)

The fact is that in Art. 1 and clause 10 of Art. 247 of the Arbitration Procedure Code of the Russian Federation there is a clause "... in the presence of another close connection of disputed legal relations with the territory of the Russian Federation." On the basis of this clause, a Russian court can also consider a claim if the case contains evidence that the foreign company is conducting a permanent commercial activity in the Russian Federation without registering its representative office.

Examples of evidence that a foreign company is conducting permanent business in the Russian Federation:

☑ long-term sale of goods / implementation of services on the Russian market,

☑ concluding transactions by employees in an office located in Russia,

☑ paying for goods / services in Russia,

☑ a Russian-language site registered in the "RU" domain zone,

☑ indicating the address of the Russian office on the website in the "Contacts" section.

Thus, it can be concluded that the absence of an official representative office of a foreign company in Russia is not an unsolvable problem, because you can prove in court the fact a foreign company does permanent business in the territory of the Russian Federation. If you choose the right evidence, you can get a case against a foreign company to be considered in a Russian court.

- There is an agreement between a Russian company and a foreign counterparty on the dispute consideration on the territory of the Russian Federation (agreed jurisdiction).

It is common when participants in international trade sign an agreement in which they agree to have their disputes considered by a Russian arbitration court.

Such an agreement establishes the exclusive jurisdiction of the court chosen by the parties. For example, in the jurisdiction agreement, the parties agreed that the disputes will be considered by the Moscow City Court, this means that the location of a foreign company on the territory of a foreign state will not matter, since only the Moscow City Court will have exclusive jurisdiction to consider the claim.

At the same time, for some categories of disputes, the jurisdiction agreement still does not apply by virtue of the exclusive jurisdiction established by Art. 38 of the Arbitration Procedure Code of the Russian Federation. Therefore, the following disputes cannot be referred to a foreign court:

✗ dispute about real estate located on the territory of the Russian Federation,

✗ dispute about a ship or aircraft registered on the territory of the Russian Federation,

✗ dispute related to the transportation of goods, passengers, baggage, if the carrier is located in the Russian Federation.


2. HOW DO I FILE A LAWSUIT AGAINST A FOREIGN COMPANY WITH A RUSSIAN COURT?

The process of filing a claim in court against a foreign company is more complicated than the usual procedure for filing against a Russian company. It has a number of features that the plaintiff encounters already at the stage of filing a claim with the court.

– You need to establish the status of a foreign legal entity. To do this, you need to submit to the court an extract from the trade register of the foreign company’s home country. An extract from the foreign register must be drawn up by the competent authority of the corresponding state and be legalized (apostilled or with consular legalization). After that, the legalized extract must be translated into Russian and the translation must be notarized. Such requirements are established by Art. 255 of the Arbitration Procedure Code of the Russian Federation, and if you do not meet them, the court will not be able to consider a claim against a foreign counterparty.  

– Submission of foreign documents and evidence to a Russian court. In a dispute with a foreign company, you can often find that the documents serving as evidence are either drawn up on the territory of a foreign state, or the text is made in a foreign language. Such documents will also have to be apostilled and the translation will have to be notarized.


3. WHAT LEGISLATION APPLIES IN A DISPUTE WITH A FOREIGN COMPANY (APPLICABLE LAW)?

During the litigation, the issue of applicable law in a dispute with a foreign company gives rise to a lot of disagreements, since the legislation in different countries may differ dramatically and the outcome of the entire litigation may depend on the choice of applicable law.

There are several ways worked out by judicial practice to determine the applicable law:

– The law determined by an international treaty applies. International agreements or conventions can be concluded between the countries where the counterparties are registered. These agreements will take precedence over national civil legislation insofar as they directly regulate relations. For example, in the international supply of goods, the United Nations Convention on Contracts for the International Sale of Goods applies. In this case, they will apply the norms of national law to the extent not regulated by international treaties.

– Contractual law. The parties to an international transaction can determine in the contract which law will apply to their legal relationship. The direct indication of the applicable law in the contract forms the obligation of the parties to the contract and the court to follow the law specified in the contract. In this case, international treaties and national law will not apply.

In addition to the listed methods, we know other mechanisms for determining the applicable law, for example, the application of a law by the location of the goods, by the transaction execution place, causing harm place, etc. In each situation, one needs to act individually and apply the most appropriate method.


In our company, international disputes are handled by individual litigators who are experienced in applying international law and protecting the interests of clients in disputes with foreign companies. We begin our work by studying the client's situation, so if you have not found the answer to your question, have a chat with our specialists:
Tel: +7 909 961-19-09
Email: legalsolutions@inbox.ru
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