Amendments to the CAP RF: Questions & Answers
Notes to the amendments to the Code of Arbitrazh Procedure of the RF introduced by the Fedral Law №205-FZ dated July 19, 2009.
Question 1. Are the amendments capable of improving the procedures for resolution of corporate disputes?
These novels do not significantly change the corporate proceedings in view that the rules set by the Chapter 28.1 of the CAP RF are not substantively different from the rules of other types of proceedings. However, the changes introduced by the Federal Law №205-FZ set the uniform "game rules" - from now onward the venue in corporate actions is the principal place of business of organization. It is an obvious advantage as it fills the gaps of legal clarity.
Moreover, a part of these changes are made by insignificant procedural amendments, specific general rules of arbitrazh procedure applicable to any type of actions. For example, currently the Law provides provides requirements to the form of power of attorney for individual entrepreneur (paras. 6 - 7, Art. 61 of the CAP RF), previously there were disputes concerning whether this power of attorney must be notary certified or just its simple written form is admissible. Moreover, currently the CAP RF provides that submitting a statement of defense – is a defendant's obligation, not a right (para. 1, Art. 131 of the CAP RF). The rules of imposition of penalties and their amounts are more detalized (Art. 119 of the CAP RF).
Question 2. In your opinion which amendments are the most substantial? Why?
I believe that the most substantial are exclusive jurisdiction provision (Art. 38 of the CAP RF) and legal definition of corporate dispute (Art. 225.1 of the CAP RF); arbitrazh court's obligation to consolidate the related cases being tried by the same court (paras. 5 – 6, Art. 132 of the CAP RF); including introduction of a new type of action – action in pursuit of rights and legal interests of a group of persons (Chapter 28.2 of the CAP RF).
Question. Amendments introduce a notion of "corporate dispute" and list of such disputes falling into the exclusive jurisdiction of arbitrazh court. There is an opinion that preliminary qualification of dispute as being corporate and, therefore, the issue of arbitrazh court's jurisdiction over it might be arguable in view that the list of disputes provided by the CAP is rather provisional. Do you agree with this point of view?
Considering that the general level of qualification of arbitrazh court judges is apparently higher compared to that of the judges of general courts, I think it makes more sense for the parties if their objective is a lawful and well-founded.
Therefore, even if a notion of "corporate despute" is broadly construed by courts and the majority of disputes related to organizations are tried by arbitrazh court, I think there's no harm. Moreover, the Supreme Arbitrazh Court of the RF is quite active in clarifying of controversial issues of arbitrazh practice in Rulings of its Plenum and Information letters of the Presidium.
Question 4. In your opinion, what has the rule-maker miss out and what legal gaps and shortcomings of arbitrazh proceedings has he left, in particular with respect to corporate disputes?
As for the principal, the most noticeable amendments such as introduction of a new types of disputes (Chapters 28.1 and 28.2 of the CAP RF) it cannot be denied that these changes are to a large extent one-legged and even declaratory.
Thus, the CAP RF is enlarged by a new Chapter 28.1 on conduct of the corporate proceedings. However, no any substantially new rule for corporate proceedings was introduced to the CAP RF; according to para. 1 of Art. 225.2 of the the CAP RF, corporate disputes are proceeded by arbitrazh court in compliance with general rules of action proceedings, provided by the CAP RF to the extent that otherwise is not provided under this Chapter. At a first glance the scope of application of provisional remedies is somehow broadened, sum of them are explicitly provided by the CAP of the RF (injunction concerning the organs of legal person to make decisions or take any other actions being in the scope of the dispute or directly related to it; and injunction concerning the legal person, its organs or participants to enforce decisions made by the organs of this legal person). However, the grounds for provisional remedies (Art. 90 of the CAP RF) are not changed by the rule-maker, furthermore, at the same time para. 1 of Art. 225.6 of the CAP RF limited the applicability of provisional remedies providing that "issuance of the provisional remedies must not entail factual impossibility for a legal person to continue its operations, and result in violating the legislature of the RF". Consideration to these circumstances and already established practice of "very careful" and elective practice of arbitrazh courts application of provisional remedies, it is highly questionable that the examined novels will result in enlargement of the applicability of provisional remedies in corporate actions.
Even more illustrative is the regulation of proceeding of actions to compel the legal person to convene a general participants' meeting (Art. 225.7 of the CAP RF). From one side, from now and onward the CAP RF provides for rules of proceeding such actions. From the other side, according to para. 1, Art. 225.7 of the CAP RF, the organs of a legal person or its participants have right to file to the arbitrazh court an action to compel a legal person to convene a general participants' meeting in cases if only provided by the Federal Laws. And, for example, the Federal Law "On LLC" does not provide for a participant's right to compel a legal person to convene a general participants' meeting: in case if a company acting by its executive avoids to convene a general participants' meeting, the extraordinary general participants' meeting of the company may be called by the bodies or persons requesting for it to be held (para. 4, Art. 35 of the Federal Law "On Limited Liability Companies").
Specifically it should be mentioned such in principle new type of actions as "actions in pursuit of violated or contested rights and legal interests of other persons (a group of persons) being participants of the same legal relationship", provided by Chapter 28.2 of the CAP of RF.
On the basis of the list of matters which may be proceeded pursuant to the rules of Chapter 28.2 of the CAP of RF, factually actions "in pursuit of rights and legal interests of a group of persons" are limited to the corporate disputes, in other words, the rules of Chapter 28.2 of the CAP of RF somehow overlap and concur with the rules of Chapter 28.1 of the CAP of RF. The difference between a "regular" corporate action and an action being proceeded pursuant to the rules of Chapter 28.2 of the CAP of RF reduces itself to requirement for the plaintiff in case of Chapter 28.2 of the CAP of RF proceeding to be represented by at least six persons simultaneously, five out of which "join" the first person by "filing a written application by a person or decision of a group of persons being the parties to the relationship" (para.3, Art. 225.10 of the CAP of RF).
Furthermore, in view that judicial recourse "in pursuit of rights and legal interests of a group of persons" is proceeded by an arbitrazh court for a longer period of time of five months (para. 2, Art. 225.16 of the CAP RF), it is not clear what for the plaintiff would get involved in this procedure if his rights and legal interests could be restored in a shorter period of "regularly" corporate proceeding (Chapter 28.1 of the CAP of RF). Moreover, it is apparently that more persons are involved in case, more lengthy and unmanageable is its proceeding.
In fact, the only real consequence for the case of being proceeded pursuant to the Chapter 28.2 of the CAP of RF is that the binding force of the decision as to the facts of the case: the facts of the previously tried case in pursuit of rights and legal interests of a group of persons, established in decision of arbitrazh court which has entered into legal force, need not be proved again in proceeding brought to arbitrazh court by a participant of the same group against the same defendant (para. 2, Art. 225.17 of the CAP of RF). Nevertheless, the plaintiff seeking to defend his own rights, might be indifferent to rights and legal interests of other persons being parties to the same relationship (group of persons).
Therefore, I assume that the proceedings under Chapter 28.2 of the CAP of RF will be extremely rare. First of all, the scope of these rules is very narrow (specific types of corporate disputes with multiple participants); second, the rules of this Chapter do not basically provide for any plaitiff's advantage, whereby the plaintiffs are unlikely to be interested in initiating proceeding under Chapter 28.2 of the CAP of the RF.