- The National International Private Law Development: Resolution of the Plenum of the Supreme Court of the Russian Federation on the Application of International Private Law
- What Has The Year of the Rat Prepared for Accountants?
- Review of Russian Legislative Changes in 2020
- New Year – New Rules
- FAQ on Cyprus
- Ongoing Search for a Beneficial Owner of Income: Overview of Recent Court Decisions for 2019
- Special Instance, Professional Representation, Continuous Cassation and Other Changes in the Process
- There is no profit but there are taxes
- AML 5, or Nice to Meet You
The National International Private Law Development: Resolution of the Plenum of the Supreme Court of the Russian Federation on the Application of International Private Law
2019 was full of events in the legislative and enforcement spheres. Novation has affected particularly the scope of international private law: on 9 July 2019 Russian Supreme Court Plenum Resolution for the first time clarified key international private law issues (in international private law enforcement sphere). Despite the fact that this is not a full reform of international private law in Russia, the Resolution which establishes basic principles of international private law appearance may be defined as a practically significant event both for judges who are directly focused on the application of international private law and dispute resolution based on international private law rules (when disputes arises in the field of cross-border civil law circulation, and for business representatives operating on an international sphere).
The Resolution contents are the following general points:
- General Provisions.
- The law to be applied in determining the legal status of persons.
- The Applicable law to property rights.
- The Applicable law to the form of the transaction.
- The Applicable law to contractual obligations.
- The Applicable law to relationships involving consumers.
- The Applicable law to the relations of voluntary representation.
- The law applicable to non-contractual obligations.
It seems that the content was determined by some gaps and collisions in enforcement practice, which negatively affected the results of the consideration of cases that should be resolved on the basis of international private law rules. As was mentioned, legal proposition considered by the Plenum of the Supreme Court will be useful not only for arbitral or judicial authority but also become a functional “guidance” for multinational companies’ lawyers, legal consultants and advisors in contract drafting and deal structuring when exciting of international element is relevant.
As known, the rules of international private law are applicable if there is a foreign element. The list of foreign elements is given in paragraph 1 of Article 1186 of the Civil Code of the Russian Federation: foreign (economic, private) entity – subject and foreign object. The list mentioned above is not closed, the Plenum in the Resolution gives an example of non-defined foreign element: “As a foreign element, inter alia also may be considered the commission of an action abroad or the occurrence of an event (legal fact) that entails the occurrence, change or termination of a civil relationships”.
The General Provisions establish, among other things, the “priority” applying of the substantive rules enshrined in international treaties to which the Russian Federation is a party. In other words, Applicable law is not determined on the basis of conflict of laws rules in the case when the issues are fully resolved by the substantive rules mentioned above. If the legal issue is not resolved in an international treaty, applicable law will be determined on the basis of the conflict of laws rules application that are contained both in domestic state law and in the international treaties and agreements (specifically, the conflict of laws rules enshrined in international legal acts to which Russia is a party will primarily be “a guide” for Russian judges in determining the applicable law). If any international legal sources that determine the applicable law are absent, the court, as before, should apply the criteria of “the closest connection”, the main factor in which is the prevailing territorial connection of various “international” elements of legal relations.
The Supreme Court further clarifies that “the court may also take into account the application of the law of which country will best implement the generally recognized principles of civil law and the construction of its individual institutions (non-breaching party protection, proscription of taking an advantage or benefit from misconduct, proscription of abuse of right, weaker party protection, voluntary validity of contract, prohibited unreasonable refusal to perform)”.
Over and above, special attention in the Resolution is given to the hierarchy issue (of international treaties norms and rules that should be applied to legal disputes relations). In this respect The Plenum mentioned that the court determines the scope of the rules in accordance with Vienna Convention on the Law of Treaties, 1969 (Section 2, Part 3). It stands to mention that special rules enshrined in international treaties have priority over general rules (this general rule does not depend on the dates of adoption of the relevant international treaties and the number of participants, however, as an exception, the rules of such international treaties may establish otherwise). It seems that the mention of hierarchy in the Resolution is caused by the analysis of the erroneous application of the norms of international treaties, and should lead to the minimization or elimination of incorrect selection of the norms that should be applied by the Russian judges in each particular case.
For the first time in Russian practice, special rule has been established for the non-state sources use, the practical importance of which can hardly be overestimated. The parties to the contract in which the foreign element is present can fix the choice of neutral law in the agreement, as well as determine documents containing rules-recommendations for international civil relationship participants. As can be seen from the above, The Plenum of the Supreme Court recognized the right of the parties to choose non-state sources of law same as to choose any applicable national law. The use of such instruments as The UNIDROIT Principles of International Commercial Contracts (UPICC), the Model Rules of European Private Law, The Principles of European Contract Law (PECL) is possible only with the express agreement of the parties. National law (if the parties chose non-state sources of law) will be applied on a subsidiary basis and function as a regulator of issues that remain unaffected by the selected non-state sources.
Continuing lex mercatoria topic (non-state regulation, trade customs, etc.), the Plenum of the Supreme Court details the applying conditions of the Rules for the use of national and international trade terms – Incoterms: if the parties use the specific Incoterms trade terms in the contract without making a reference to the Incoterms Rules directly in the contract, the Incoterms application to relations (as amended on the date of conclusion of the contract) will nevertheless be considered as agreed by the parties (if there is no evidence of the other intention, the burden the evidence of which lies on the parties to the contract). In virtue of the primacy of the Incoterms provisions over dispositive norms of contractual status, special attention should be paid to the analysis of the consequences of Incoterms Rules applying during contract conditions structuring process.
Despite the obvious progress in the development of the “non-state regulation” rules, lex mercatoria, their application cannot be the only and comprehensive relations regulator, and shall in no case dismiss an exception of national law as a subsidiary statute to cross-border relations.
Under current conditions of cross-border civil circulation, constant development of international legal regulation of private law relations, the emergence and active use of international trade customs, transnational codifications, model laws and model contracts, national regulation of international private law relations needs to be adapted to such conditions, improved and, to an extent, interpreted and detailed. The Resolution of the Plenum of the Supreme Court on the application of international private law is the first Resolution in international private law that shows that there are the legislator’s and executor’s attention to this sphere, the desire to improve the practice of applying the rules of private international law and bring national international private law to a fundamentally new level that meets modern international trends. As noted, the legal positions considered by the Plenum of the Supreme Court represent a functional “guide” designed to draw attention to complex international private law issues in general and to become “a candle-holder” in the correct structuring of cross-border relations and in increasing the level of transparency of the relevant legal consequences.
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