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Supreme Court against Pension Fund

INTELLECT successfully represented client in a succession of appeals over the decision of the Pension Fund of Russia.

INTELLECT successfully represented BauTex, a Russian-German venture — one of Russia's biggest manufacturers of finished glass fibre products and a leading distributor of glass fibre textiles, roving fabrics and other feed materials for the fibreglass plastics industry — in a succession of appeals over the decision of the Pension Fund of Russia to fine it for allegedly late monthly reporting in 2016.

BauTex, which is a major local employer and the Pension Fund's contributor, filed its November 2016 monthly report with the Fund on the due date. Eleven days later the company filed an amended report correcting the Pension Fund's clerical error. The fund used the late submission of the amended report as a formal pretext for fining BauTex RUB294,500 — an onerous amount for a company employing around 600 staff.

Represented by INTELLECT, BauTex contested the fine in court which held that the company had not been in breach filing the amendment 11 days later, but missed the due date by two days filing the initial report on 12 December, while the due date was the tenth day of the month, and halved the fine, ignoring the fact that the tenth day of December 2016 was Saturday (which automatically extended the deadline to Monday 12 December).

The judgement stood on appeal in the Ninth Appellate Court. BauTex, still represented by INTELLECT, appealed in cassation.

The Moscow Federal District Arbitrazh Court sitting in cassation accepted that the deadline for reporting fell on 12 December (a retroactive legislative amendment in effect as of 1 January 2017 moved the statutory due date to the fifteen day of the month) and recognized the Pension Fund's fault, but held instead that the amended report had been filed eight days past due.

Represented by INTELLECT, BauTex appealed to the Russian Federation Supreme Court whose Commercial Chamber reviewed the case "in supervision" (on certiorari) and overturned the lower courts decisions, holding, firstly, that a PF contributor's independent correction of the Fund's error and updated reporting excluded liability, and ruling, secondly, that the Pension Fund had missed the statute of repose deadline, fining BauTex past the cut-off date prescribed in the Tax Code.

Our comment:

The significance of the engagement for the client:

The fine, even halved by the court, would have been onerous for the client.

The favourable final judgement also permitted and encouraged the Pension Fund's contributors to correct clerical errors at a later date.

On the legal plane, obtaining a reversal of a trial court's judgment and two appellate opinions in the Supreme Court is quite a success per se, the more so that appealing pro-fiscal administrative decisions in Russian courts is a daunting challenge. As such, this case contributes to chipping away at courts' established pro-administrative practice favouring government authorities no matter now wrong they may be.

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