On September, 15 the Board of Directors of the Central Bank decided to lower the key rate from 9% to 8.5% per annum. The primary reason for the reduction is the stable deflation in August 2017. The respective information letter of the Central Bank was published on 19 September – from this day it shall be applied for the calculation of late payment interest, statutory interest in bankruptcy, and for determining the maximum limit for the reduction of contractual penalties. 

When taking decision on the reduction of the key rate, the Board of Directors of the Russian Central Bank reviewed its inflation estimates for the end of 2017 and reduced them from 4% to 3,5-3,8%, and acknowledged the economical growth. These figures were the primary reason for the softening of the Central Bank’s monetary policy. Moreover, the Head of the Central Bank Ms. Elvira Nabiullina noted that the Central Bank may gradually reduce the key rate further in the next two quarters. 

The Economic Chamber of the Supreme Court adjudicated the case on the company’s claim to the Federal Service for State Registration, Cadastre and Cartography (Rosreestr) on declaring illegal its decision on the imposition of administrative liability. Rosreesr issued such a decision in respect of the company because the latter used the building intended for industrial use as a shopping mall. The courts of three instances assessed this violation in different manners, and the court of cassation decided that the dispute shall be resolved by the court of general jurisdiction. Still, the Supreme Court explained that the use of the land plot is closely interlinked with the company’s business activities, therefore the dispute shall be resolved by the arbitrazh court.

In case No. А56-5983/2016 in the course of unscheduled inspection of the building Rosreestr found out that the company uses the real property intended for industrial use as a shopping mall. Rosreestr imposed a fine on the company in accordance with Article 8.8 of the Code of Administrative Offences of the Russian Federation and ordered that the company shall close all the stores in the shopping mall. The company challenged Rosreestr’s decision in court.

The court of the first instance granted the claim in full. The appellate court revoked the decision of the court of the first instance, since the claimant did not use the land plot in accordance with its designated purpose. The court of cassation overturned the decisions of the lower courts and dismissed the case pointing out that the dispute shall be adjudicated by the court of general jurisdiction, since the matter in question concerns the company’s economic activities.

The Supreme Court overruled the decisions of the lower courts stating that the company violated not the ecological regulations, but the land legislation. The Economic Chamber of the Supreme Court stressed out that the use of the land plot is closely interlinked with the company’s business activities, therefore such disputes shall be adjudicated by arbitrazh courts. The case was remanded for the rehearing in the court of cassation. 

The Federal Tax Service issued clarifications that the companies do not have to pay property tax in respect of leased fixed assets. These clarifications allow companies to minimize taxes and save on the payments to the budget.

In accordance with the Russian Civil Code the property tax is charged on the movable and immovable property booked on the balance as fixed assets in accordance with the Accounting Regulations.

At the same time, in accordance with the new explanations of the Federal Tax Service the leased fixed assets shall be booked on the off-balance sheet account 001 “Leased fixed assets”. Therefore the property tax shall not be charged on the leased fixed assets booked on this account (see the Letter of the Federal Tax Service dated 15 September 2017 No. БС-4-21/18437@).

The Ministry of Economic Development initiated extensive amendments to the Civil Code concerning the legal regulation of the real property. The proposed legislative developments suggest to amend the approach to the definition of real property, and to clarify the definitions of different types of real estate (“building”, “structures”, “enterprise”, “complex of real estate items”). Besides, the bill concerns issues of formation of the real estate items and their improvement, and a number of other important aspects of legal regulation of the real property.

The bill provides that the following items are categorized as real property: land parcels, subsoil resource parcels, buildings, and in some cases, structures and unfinished constructions. Buildings and structures are categorized as real property if they are closely connected with land, that is, their displacement without disproportionate damage to their functional use is not possible, if they have an independent economic significance and may be a separate object of transaction. Moreover, the bill provides that the Russian Government will provide a list of different types of structures that are not categorized as real property. With regard to the unfinished constructions, in order to be a real property item, they must meet the features determined by the Russian Government.

In addition, the bill suggests implementing amendments to the new chapter of Civil Code on ownership and other property-related rights, introduces the definitions of these real property items and includes the definitions of “enterprise” and “asset under construction”. Furthermore, the bill concerns the issues of formation of the real estate items that are not land properties and the issues of separable and inseparable improvement of real property items.

The full text of the bill is available at the website of the Federal Portal of the Draft Laws and Regulations. If the amendments are adopted, they will enter into force on January 1, 2019.

In the case recently adjudicated by the Supreme Court the judges were to decide from what moment does the one year term for filing a claim to the surety start to elapse when the debtor goes bankrupt. In this case the loan provided by the bank to the company, was secured by the suretyship of the company’s director. Yet when the company became insolvent the director refused to repay the debt arguing that the suretyship has terminated since the one year term for filing a claim to the surety has elapsed. The decisions of the courts of the lower instances varied. The dispute was adjudicated by the Supreme Court, the judges explained that the term for filing claims to the surety starts to elapse from the day when the bank filed the application to the arbitrazh court requesting to include his claim to the register of the creditors’ claims.

In this case (case No. 74-КГ17-12) the company borrowed money from the bank, the loan was secured by the suretyship of the company’s director. The company has not repaid the loan, since the bankruptcy proceedings were initiated against it. The bankruptcy proceedings lasted all in all more than one year. When the court declared the company’s bankruptcy and compulsory sale of the company’s property was initiated, the bank intended to recover the loan from the surety. Still the director of the bankrupt company believed that since the suretyship agreement did not provide for a particular term, and more when one year passed from the moment the first bankruptcy proceeding (supervision proceeding) was initiated against the company, therefore the suretyship terminated, because the bank should have filed its claims to the surety immediately after the supervision procedure was commenced against the debtor.

The court of the first instance and the appellate court ruled for the bank and decided that the term shall start to elapse from the moment when the company was declared bankrupt by the court, therefore the bank filed his claim in time. The Supreme Court disagreed with such a reasoning of the courts of the lower instances. The Chamber for Civil Disputes of the Supreme Court pointed out that the surety’s liability before the creditor arises at the moment the debtor fails to repay even some part of the debt, consequently the one year term for filing a claim to the surety starts to elapse from the day, when the request to include all the amount of debt into the bankruptcy register of the creditors’ claims is filed. Thus, the Supreme Court ruled that the bank failed to comply with the statutory term and remanded the case. 

The professionals met the Supreme Court’s decision with a mixed reception, since it goes against the well-established practice of the former Supreme Arbitrazh (Commercial) Court and disregards the fact that if the supervision procedure was commenced against a company, its legal capacity is not limited yet and the supervision procedure does not always result in bankruptcy. Moreover, the decision of the Supreme Court will promote that the creditors file claims to the sureties in the very beginning of the bankruptcy proceedings, before the debtor is declared bankrupt by the court.