25.11.2016 — Supreme Court: Not Only Individuals but also Companies Can Obtain Compensation for Damage to Business Reputation Caused by False Publications

The Supreme Court clarified that Russian law provides legal intruments to obtain compensation from an offender that distributed false information on a company's business activities. However, the claimant has to prove that it had an established business reputation, which was damaged by the publications, causing, for instance, the reduction of clientele. In other cases no compensation can be awarded, and a correction statement (disproof) of the allegations is the sole remedy for the injured company. 

The Judicial Panel for Economic Disputes of the Supreme Court applied this logic to a non-state university’s claim against an online media portal, which had published an article alleging that the university was violating the constitutionally guaranteed freedom of expression. The first instance court found that these allegations were false and defamatory.

However, the Supreme Court concluded that the university has failed to prove that its reputation had suffered as a result. It agreed with the court of cassation, which earlier stated that to claim compensation the university would have to prove that the number of applications filed for its educational programs decreased, or another business harm was suffered. Since the university failed to provide such evidence, its claim on recovery of 1 million RUR compensation was declined (Ruling of the Judicial Panel for Economic Disputes of the Supreme Court dated November18, 2016 No.307-ЭС16-8923).

24.11.2016 — Supreme Court: Banks Can Write Off Money From All Accounts without Debtor’s Authorization In Case of Non-Payment, if Foreseen by the Loan Agreement

The Supreme Court has upheld the legality of a contractual provision on undisputable and acceptance-free write-off of money towards repayment of a loan from all bank accounts opened in the bank. Thus, banks do not have to seek consumers’ acceptance of money withdrawal operations to cover outstanding payments, if the consumer had in advance given his consent thereto in the loan agreement.

Notably, in the case at hand, the provision on customer’s consent to undisputable and acceptance-free write-off was included both into the loan agreement and the long-term money orders issued by the customer. On this basis, the bank wrote off money from the consumer’s payroll account to cover the outstanding payments. The debtor attempted to challenge this conduct in court, but courts of all degrees, including the Supreme Court, rejected this attempt (Ruling of the Supreme Court dated 11.10.2016 No. 59-KG-16-14).

This position of the Supreme Court may be a ground for a change in court practice. Previously, courts predominantly tended to consider such acceptance-free write-off provisions invalid as a violation of consumers’ rights (Ruling of the Supreme Court dated 11.03.2016 No. 301-AD16-61 and dated 04.12.2015 No. 306-AD15-12206). 

23.11.2016 — Starting from 1 January 2017 Amount of Transferrable Losses from Previous Tax Periods for Profit Tax Purposes May Be Reduced

The State Duma has passed in the third (final) reading a bill, which limits the amount of previously incurred losses that can be counted towards losses in the current tax or reporting period. If the bill is approved by the Federation Council and signed by the President, in 2017 – 2020 companies will not be able to reduce the profit tax base by the company’s losses incurred during previous periods by more than 50%.

Currently, the tax legislation does not contain such restrictions. The amendments will affect losses which were incurred by the company since 1 January 2007.

Another major novelty is the cancellation of the existing 10-year limitation to the periods from which losses can be transferred to current periods. Thus, if the bill is passed into law, it will be possible to transfer losses for all consequent years, not only within 10 years after they were incurred, as it is currently foreseen. 

22.11.2016 — Know Your Boundaries: Building Partially Located on Non-Owned Neighboring Land Plot Can Be Demolished, Even If Overlapping is Insignificant

The Supreme Court of Russia concluded that even a tiny violation of neighboring land plot’s boundaries is a firm ground for a building’s demolition at the owner’s request. The Court reversed the decisions of lower courts, which rejected the owner’s claim stating that an overlap as small as 18 centimeters (approximately 7 inches) is negligible and does not call for the building’s demolition. 

In the case at hand, the claimant demanded that a sports club located at the neighboring land plot has to be demolished, as 18 centimeters of the building were located within the claimant’s land plot borders. Lower degree courts rejected this claim, stating that this interference was too insignificant to violate the claimant’s ownership rights.

However, according to the Supreme Court, the courts were wrong to apply the insignificant violation doctrine to land plot rights. Any violation of land plot borders, even if negligible in its dimensions, can form a ground for the building’s demolition, including at the request of neighboring landowners, if the erected building overlaps their land plots.

In this situation, the only way to avoid demolition would be to change the land plot boundaries. However, such an expansion of the land plot under the building will require voluntary consent of the owner of the neighboring land plot, which will likely be subject to considerable compensation, whether financial or land-based. 

21.11.2016 — Salary Delays May Trigger Unscheduled Inspections

The Government of Russia has adopted a Decree, which introduces new grounds for conducting unscheduled (extraordinary) inspections of companies by labor inspectorates. Among these new grounds are violation of salary payout deadlines, failure to pay salary in the full amount, and paying less than the minimum wage, even if foreseen by the employment contract.

Information on these violations will be accepted by the federal labor inspectorate not only from the company’s employees, but also from other persons and legal entities, state authorities and trade unions.

Currently, the grounds for unscheduled labor inspections are confined to reported violations of workplace safety requirements endangering the workers’ life and health; statements by employees on violation of their statutory rights, and an employee’s application on inspecting the conditions of her or his personal workplace; as well as other related allegations (see Decree of the Government of Russia dated 1 September 2012 No. 875).