Protection of the rights of entrepreneurs by the court of general jurisdiction

Jul, 13 2021

Contents:

Providing growth of country’s GDP mostly falls on shoulders of business community, but, how practice shows, not in all cases government is ready to protect business-subjects, gives guarantee of absence administration barrier in conducting business or shield from unreasonable claims from tax authority, MIA and investigation authorities.

Protection guarantee 

Should be considered, that right to engaged in entrepreneurial activity is guaranteed by Constitution of Russian Federation, but the biggest part of government authorities stand on position that all isn’t allowed is illegal. That’s why businessmen often become a victim of administration arbitrary. The President repeatedly has been paid his attention on this disbalance in judgement practice, changes constantly are included in laws and acts, administration barriers are reduced, checks are limited, but in most cases business forced to defend their position in judgement. Protection of rights of entrepreneur general jurisdiction is under the law.

A businessman in Russia works for his own risk, and his activity is aimed at benefiting society, in particular, to create new jobs, to pay taxes, at the expense of which schools are built, unfortunately, not everyone understands this yet. We have to introduce separate concepts in the legislation and practice, for example, ensuring the interests of the businessman, protection of entrepreneur’s rights. It is understood as a set of means and methods proposed by the legislator in a number of normative acts for the protection of violated interests, and their implementation is carried out with the help of the state enforcement apparatus, including its structures, authorities of subjects of the Federation and specific officials.

Arbitration court

In most cases, disputes between firms and problem situations arising during their interaction with state authorities are resolved in arbitration courts. But there are a number of situations where these issues are considered in civil proceedings, in courts of general jurisdiction. According to the APC RF, the competence of arbitration courts includes the following issues:

  1. Ensuring restoration of violated rights of business entities, if the violation arose in the course of their economic activities.
  2. Adoption of measures contributing to the strengthening of the rule of law.

Accordingly, most of the problematic issues arising in business entities are to be resolved within the system of arbitration courts established within each subject of the federation and at the level of judicial districts. But in the work of business subjects arise issues not related to business, for example, labor disputes, and their resolution falls within the jurisdiction of courts of general jurisdiction. Their competence includes labor and civil disputes, administrative and criminal proceedings. Deciding the issue of attributing a case to the jurisdiction of courts of general jurisdiction, the Supreme Court of the Russian Federation, in its generalizations of practice, recommended using the following criteria:

  • nature of the relationship; 
  • the subject composition of the dispute.

Accordingly, the protection of entrepreneurs’ rights by courts of general jurisdiction is possible, if the cases are not related to the implementation of this type of activity, but arise from administrative, labor and other types of interactions.      

Ways of protecting the rights of entrepreneurs

The legislator has offered business entities a wide list of ways of successful interaction with inspectors, their classification in accordance with the general theory allows to identify the following ways:

  • preventive; 
  • restorative.

Some researchers suggest to consider additionally a punitive way, but it is not applicable specifically in the framework of protection of the rights of a business entity, it is used as a mechanism to ensure public interests, except for the situation when a public authority by court decision is forced to compensate losses caused by its illegal actions of an organization. The protection of the rights of entrepreneurs by the court of general jurisdiction, is designed, among other things, to compensate for losses.

Preventive ways are various, they are aimed at stopping the action that hinders the work of a businessman, for example, imply the cancellation of a non-normative legal act or the recognition of its invalidity, the termination of the prescription of the inspection services.

Restorative ways are designed to defend the violated right or infringed interest, to restore the status that existed before the violation. There is a wide list of restorative methods:

  • recognition of the right, for example, for owners of securities;
  • obligation to eliminate the violation;
  • requirement to make changes in regulations.

As already mentioned above, the punitive method is used very rarely, it is associated with forcing the authority to act to compensate for the losses caused by its illegal actions to the business entity. Most often it is expressed in the payment of interest for the misuse of funds, for a certain period.

A judicial method of protection is fundamental, but along with it, non-judicial methods, such as administrative appeals, are also admissible.

Forms of protection of entrepreneurs’ rights

It is worth taking into account that the variety of extrajudicial forms, according to which the protection of entrepreneur’s rights is provided, is quite large, and recently the appeal to the assistance of a business ombudsman has acquired significance. This public institution is created under the President of the Russian Federation, it has no power of its own, but by its actions it ties the hands of unscrupulous inspectors, it can apply to various instances to initiate the resolution of specific issues, to draw attention to specific significant or disputed situations.

The law assigns a number of tasks to the commissioner:

  • protection of the rights of business entities, both Russian and foreign, on the territory of the Russian Federation;
  • control over the activities of government agencies interacting with business entities;
  • participation in the development of civil society institutions expressing the interests of the business community;
  • participation in the creation and implementation of the state policy related to business support;
  • ensuring communications between economic entities, the State and society.

A complaint by a businessman to the Ombudsman becomes an effective mechanism of interaction with government services. After examining the appeal within the timeframe established by law, the Ombudsman has the opportunity to take one of the following decisions:

  • prepare an explanation on how a business entity can ensure its safety from illegitimate actions;
  • forward the appeal to the appropriate jurisdiction;
  • file a lawsuit in court on its own behalf;
  • to appeal a court decision.

In practice, the institution of business ombudsman is not used by so many organizations, more often it is just a mouthpiece expressing their interests. The main problem haunting business – inspections by numerous agencies and the legislator is gradually solving it by making changes in regulations aimed at protecting the interests of business entities.

Peculiarities of protection of entrepreneurs’ rights during state control (supervision)

The law on the procedure for conducting inspections of organizations has been amended more than once, often for a long period of time a ban on inspections of certain types of business subjects has been introduced. State control is expressed in periodic inspections of the work of companies by various state bodies, from the prosecutor’s office to Roskomnadzor. 

Law №294-FL provides for two types of inspections – regular and unscheduled. The first ones are carried out once in three years with obligatory publication of the forthcoming check with its terms and objectives on the website of the agency and prosecutor’s office. Extraordinary ones may be organized only in cases that require an immediate response, for example, when the activity of a business entity threatens the life and health of citizens, but only with the consent of the prosecutor’s office.

Procedures of control measures are regulated as much as possible, their results, expressed in acts, may be appealed. It should be noted that in relation to small businesses, as well as in the period of the pandemic, regular on-site inspections were cancelled for a certain period of time.

Principles of implementation

Analyzing all the mechanisms proposed by the legislator, according to which the rights of entrepreneurs are protected, it is possible to identify the following principles of their implementation:

  • inspectors are obliged to summarize the bona fides of the company;
  • all information relating to the inspection, its purpose and timing must be available, and the business entity must be notified of unscheduled inspections within the timeframe prescribed by law;
  • it is prohibited to go beyond the authority of the inspecting executive body;
  • in case of violation of the requirements of the law and the regulations for conducting inspections, the responsible officials shall be held liable.

In the process of carrying out acts of control, a business entity may use certain opportunities given to it by the legislator. Among the main ones are:

  • to monitor the course of control actions, to be present at all control activities;
  • to request and receive all necessary information on the subject matter, scope and timing of the control measures;
  • state the comments and explanations in the final act;
  • contest the results in accordance with the procedure established by law;
  • Involve the business ombudsman to protect their interests;
  • Involve the business ombudsman.

It is important to understand that by giving a company the opportunity to protect itself, the legislator has significantly expanded the range of permissible actions, it can use the possibility of administrative appeal, appeal to a court or the business ombudsman. When applying the administrative mechanism, acts or actions of officials are appealed to a higher authority, and it should be taken into account that in some cases the judicial procedure will not be possible until the means of administrative settlement have been exhausted. If this is not foreseen or the administrative procedure of appeal is not successful, it is possible to file a claim to court, the advantage of this mechanism will be the possibility to recover damages caused by the illegal actions of employees of any agency.

But it should be understood that there are also obligations, when a business entity is obliged not to allow violations of RF legislation. In this case he will be able to use the whole range of possibilities provided to him by the state, including the protection of the rights of entrepreneurs by a court of general jurisdiction, to the fullest extent.

Author of the article
Protection of the rights of entrepreneurs by the court of general jurisdiction
Valentina Khlavich
Managing Partner
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