Precedent Case

INTELLECT-S sues Russia over bailiff’s screw-up.

Andrey Tishkovsky

Andrey Tishkovsky
Former associate

INTELLECT-S's attorneys Roman Rechkin and Andrei Tishkovsky represented ZAO Ariada in its action for damages against the Federal Services of Court Bailiffs and the Russian Federation in November 2010.

The federal bailiff had unlawfully lifted the attachment on the plaintiff's defaulting debtor's land, its only liquid asset, granted by the court as an interim relief on INTELLECT-S's motion one month before in Ariada's earlier action for recovery against the debtor. Promptly after the lift which the defendant concealed from the creditor plaintiff, the debtor sold the land, making the recovery impossible. The bailiff's lift caused the firms' client damage which, under the law, was redressable by the Russian Federation.

The defense alleged that the plaintiff had never sued to challenge the bailiff's ruling to lift the attachment and, consequently, it did not demonstrate that the bailiff's action had been against the law. INTELLECT-S's counsel for the plaintiff built their case on three points: first, the plaintiff had not needed to establish the bailiff's misconduct in a separate action under the Russian Federation Arbitrazh Procedural Code; it could and must have been done within the recovery suit; second, it was up to the plaintiff to choose relief and procedure; and third, it had been pointless to challenge the illegal lift, because by the time the plaintiff became aware of it, the debtor had sold the land.

As the other defense, the defendants alleged that the debtor, although longer than a year in liquidation, was still solvent as it had outstanding receivables which could eventually, someday, cover the debt which Ariada had sought to recover. Although alleging that it would be able to pay the debt out of the receivables, the debtor, however, produced no primary records evidencing the existence of such assets.

Nevertheless, the court commissioned an expert valuation, and the expert valued the debtor's 6 million ruble book receivables at RUB600,000 at the market. The plaintiff's counsel cross-interrogated the appraisal expert in court and demonstrated that in the absence of primary records, the value of the assets was nil. The court accepted the plaintiff's case and awarded damages to the full extent as sought, RUB2,699,000.

The judgment stood on appeal and on further cassation appeal (filed each time by the bailiff, by the federal bailiff service and even by the debtor). The Federal Ural District Arbitrazh Court affirmed the judgment on December 1, 2011, and on December 15, the Ministry of Finance remitted the money to Ariada's account.

The case created a nationwide precedent of successful prosecution of a claim against the state for its officer's wrongful action: technically, the state is liable for public officers' torts, but plaintiffs exceptionally rarely succeed suing the Russian Federation. INTELLECT-S is especially proud of this accomplishment, the more so that the client had not believed in the successful outcome. Cases like this, few as they are, contribute to minimizing the risks of doing business in Russia and demonstrate that official immunity and impunity have limits.

Business Transactions, Collection Services, Enforcement of Judgment

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