Pre-trial dispute settlement

Jan, 16 2020


Today there are two main ways of dispute settlement in the Russian legal system. The main and most frequently used method is a trial settlement of conflicts. However, for a variety of reasons, the second method – pre-trial dispute settlement, is gaining increasing popularity.

Each company while carrying out it’s business activities, at some stage has to face a situation where it’s interests conflict with the interests of contractor, partner or provider. Due to the inability of resolving the existing contradiction, claims and disputes often arise. These disputes mainly end with lengthy lawsuits.

A few years ago, compliance or non-compliance of pre-trial dispute settlement was applied at the discretion of the parties: as a rule, the contract provided for the possibility of pre-trial settlement. However, today, due to amendments to the Russian civil legislation, the pre-trial (or claim) procedure has become mandatory for resolving a few categories of cases. Moreover, non-compliance with this order leads to the return of the claim by the court.

Cases of mandatory pre-trial dispute settlement

In Russian civil law, the provisions on the mandatory claim (pre-trial) dispute resolution procedure are enshrined in the Arbitration Procedural Code of the Russian Federation (APC), the Civil Procedural Code of the Russian Federation and the Code of Administrative Judicial Procedure (CJP). The condition of mandatory pre-trial procedure may also be provided by the contract between the parties.

The provisions of Art. 4 APC of the Russian Federation provide the following case categories, which do not require compliance with the pre-trial procedure:

  • for establishment of legally important facts;
  • for awarding compensation for violation of reasonable time limits of legal proceedings or enforcement of judicial acts;
  • bankruptcy cases;
  • corporate cases;
  • for protection of the rights and interests of a group of persons;
  • writ proceedings disputes;
  • disputes related to the performance by arbitration courts of the functions of assistance and control in relation to arbitral tribunals;
  • cases on the recognition and enforcement of foreign courts and arbitration awards;
  • when applying to the arbitration court of a prosecutor, state bodies in defense of public and legal interests and the rights of organizations and citizens in the field of business and other economic activities.

At the same time, obligatory pre-trial settlement is provided for a broad category of disputes. Among them the most common are the following cases:

  • on the collection of obligatory payments and sanctions;
  • Recovery of fiscal sanctions (fines, penalties) from individuals and legal entities (if a pre-trial procedure is not allowed);
  • Recovery of custom duties, special, anti-dumping, countervailing duties, interest and penalties;
  • litigation to appeal decisions (requirements, acts) of the tax authority;
  • disputes while the contract is signed mandatory;
  • disputes upon amendment, termination of the contract, including lease and rent contracts;
  • disputes on termination of bank account agreement;
  • disputes on the protection financial services consumers rights.

At the same time it is stated that non-compliance with the pre-trial procedure entails the return of the statement of claim by the court (Art. Art. 129, 135 of the Code of Civil Procedure, Article 129 of CJP) or leaving the statement of claim without consideration if accepted for production (Art. 148 of the Arbitration Procedural Code, Art. 222 of the Code of Civil Procedure, art. 196 of the Code of Administrative Judicial Procedure).

Pre-trial dispute settlement

The essence of the pre-trial procedure for resolving conflicts is the avoidance of lengthy lawsuits and the associated financial, time and other costs for both parties. There are several types of pre-trial dispute settlement between the parties:

  • mediation (use of intermediary.);
  • arbitral tribunal;
  • claim (pre-trial) dispute resolution procedure.

Mediation is a pre-trial settlement procedure when a mediator is used to reconcile the parties and resolve the dispute. The law requires individuals to be appointed as mediators. They do not take sides of any party, without providing this party with consulting or legal assistance. This procedure is regulated by Federal law №193-FZ dated 24.07.2010 on the Alternative Dispute Resolution with the Participation of an Intermediary (Mediation Procedure).

The arbitration tribunal is another form of conflict settlement without the involvement of state judicial bodies. An arbitration tribunal is a court created by a society of entrepreneurs in order to resolve disputes arising. The activity of arbitration tribunals is regulated by Federal law №102-FZ dated 24.07.2002 on «About reference tribunals in the Russian Federation».

Pre-trial settlement procedure is one of the most used forms of compulsory pre-trial settlement of disputes in civil proceedings. Claim procedure of disputes settlement may be provided both by current legislation and a civil law agreement between entities.

As a rule, the terms of the contract prescribe the obligation of the party to send a written claim to the other party, containing the requirement for proper performance of obligations, a refund, etc. In addition, the direction of the claim entails the resumption or interruption of the limitation period in case if the debtor recognizes the debt or non-fulfillment of contractual obligations in response to the claim.

In some cases, the contract does not specify a deadline for fulfillment of obligations, and in order to determine the start date of the delay in fulfilling the obligation, it is necessary to send a claim (par. 2 Art. 314 of the Civil Code of the Russian Federation), in fulfillment of which the debtor is obliged to fulfill the obligation within seven days after its receipt. Moreover, the delivery of such claim does not exempt the party to the contract from the need to comply with the requirements of Art. 4 of the APC of the Russian Federation on the need of taking measures in resolving the conflict.

Pre-trial dispute resolution in judicial practice

Currently, there is no single definition of a claim in legislation. However, based on judicial practice, we can conclude that claim is a requirement of an interested party headed directly toward counterparty to settle a dispute between these parties by voluntarily applying the method of protecting violated rights provided for by law (order of the AC of the West Siberian District of 06.12. 2016 No. F04-6126 / 2016 in case No. A75-7089 / 2016). In this case, the claim should be made in writing and contain clearly formulated requirements, the amount and their calculation.

As the First Arbitration Court of Appeal pointed out in a resolution dated 03.02.2017 in case No. A43-28926 / 2016, a claim that does not contain the amount of the claim, as well as the periods of arrears, is most likely not to be accepted by the court as evidence of a pre-trial procedure for the settlement of the dispute. Therefore, when preparing a claim, the interested party must carefully approach its preparation, describing as much as possible its essence, the total amount claimed, calculate it and send it to the other party in writing.

Please note that in case when the claim settlement is provided for by the law, and when it is carried out on the basis of the concluded contract, the resolution of the conflict is submitted to the court only after observing its procedure in accordance with paragraph 5 of Article 4 of the Arbitration Procedure Code of the Russian Federation and Article 132 of the Civil Procedure Code of the Russian Federation. Moreover, the procedure is not always established by the Federal Law; it is often regulated by legislative acts for a specific industry.

Address and method of filing a claim

The Russian law do not contain regulation on the address of the claim. Thus, it can be sent to the party to the contract in any possible way, ensuring its receipt. It can be sent: by Russian Post, courier service or by courier. In accordance with established practice, the valid address of the claim is the address of the party specified in the Unified State Register of Legal Entities or the Unified State Register of Individual Entrepreneurs, as well as the address specified in the contract.

When the claim is sent by mail, the best option would be to make a list of enclosures. The fact is that the court may consider that if there was no list of documents, then it is impossible to establish which papers were sent. Thus, in this case, it will be extremely difficult to prove the fact that the requirements are sent to the responding party. In this case, there have been cases (Resolution AC of the Moscow District dated February 9, 2017 No. F05-1104 / 2017 in case No. A41-59746 / 16) when the court did not consider the inventory to be necessary. In any case, a registered letter with the inventory will help to quickly clarify this issue in court.

The best option is to hand the defendant claims personally with signature.

Evidence and timing of pre-trial dispute resolution

In cases where the settlement of the dispute in the pre-trial claim procedure failed, the parties pass to the judicial plane of conflict resolution. At this stage, the plaintiff will need to prove to the court that the claim was forwarded to the other party to the contract.

Today, generally, a statement of claim filed without evidence of compliance with the claim procedure attached to it is left by the court without movement in accordance with Art. 126 and Art. 128 of Arbitration Procedure Code of the Russian Federation. In this case, if the court accepted the production of the statement of claim without relevant evidence, but later it will be established that the pre-trial procedure for the settlement of the dispute in the civil process was not observed, at the request of the party or on its own initiative, the court has the right to leave the statement of claim without consideration in accordance with Art. 148 of Arbitration Procedure Code of the Russian Federation.

The deadlines for responding to a claim are provided for by the art. 4 of the Arbitration Procedure Code of the Russian Federation: disputes from civil matters are transferred to the arbitration court only after the adoption of measures for pre-trial settlement, specifically, after 30 calendar days from the date the opponent was directed to the demand, unless a different deadline and (or) pre-trial procedure for the settlement of the dispute in the contract or in law.

As evidence of compliance with the claim procedure for the settlement of the dispute, information on the consideration of the claim by the defendant in the form of a written response, or the expiration of the response to the claim, can be considered. Thus, before filing a statement of claim, it is necessary to verify not only the correctness of the preparation and submission of the claim, but also the observance of the deadlines stipulated by the contract or law for an answer to it.

VALEN lawyers will analyze your situation, help you study and analyze documents on a controversial issue, conduct a comprehensive analysis of the conflict situation based on documents and information submitted by the client, and develop the best conflict resolution. We will draw up the body of text of the demand for the other party or recall on it, form the legal position and speak in negotiations with the counterparty.

Our company specializes in the settlement and resolution of economic, corporate, tax and other disputes, we help organizations and individual entrepreneurs successfully resolve conflicts with counterparties and customers both in court and in claims.

Author of the article

Pre-trial dispute settlement
Alexander Krylov

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