21.04.2017 — Bill On Providing Land Plots For Free To Russian Nationals All Over Country Was Introduced To State

The bill proposes to extend the regime for providing land plots for free to the Russian nationals in the Far East to be applicable all over the country.

According to the drafters of the bill, its implementation will encourage the nationals to produce agricultural products for personal needs, what is an important measure taking into account the recent decrease of the purchasing capacity. Furthermore, the bill is aimed at solving the problem of inhabiting remote areas and developing of the necessary infrastructure.

Should this bill pass, the amendments will be effective from 1 January 2018.

20.04.2017 — Contractor’s Failure To Provide Set Of Operational Documentation Is Not Justification For Refusal To Pay For Works

In the case adjudicated by the Arbitration Court of the North-Western District according to the terms of the contract the Customer was entitled to delay payment until the contractor provides a full set of operational documentation. Still, the court ruled that such a contract term is insufficient to suspend payment. Since the works had been completed and accepted without objections, the court concluded that the failure to provide the operational documentation as such cannot serve as a ground for refusal to pay for the performed works except for the cases when the absence of documentation obstructs operation of the object.  

In the case at hand the court ruled that even if after the works have been completed the contractor does not transfer the operational documentation, the customer is still obliged to pay for the performed works unless he proves that the works result cannot be used for its designated purpose because of the absence of such documentation (the Decision of the Arbitration Court of the North-Western District dated 31.03.2017 No. А56-26956/2016).

A similar approach had been upheld by the Supreme Court earlier. In particular, in the case No. А56-36308/2014 the Supreme Court ruled that the failure to transfer the operational documentation alone cannot serve as a ground for refusal to pay for the performed works if there is no evidence that the absence of documentation obstructs operation of the object (Decision of the Supreme Court dated 13 October 2015 No. № 307-ЭС15-13157).

Therefore, in practice it is recommended to the customers to ensure that the contract provides for a presumption that the absence of documentation obstructs operation of the object for its designated purpose, what is acknowledged by both parties. Moreover, it is recommended that the customer collects a body of evidence proving that he/she in fact is facing difficulties in operating the object because of the absence of such documentation.

19.04.2017 — Supreme Court: If Individual Entrepreneur Gets Paid On An Hourly Basis, Services Contract With Him May Be Qualified As Labor Contract

In one of its recent cases the Supreme Court ruled that the services contract between a company and an individual entrepreneur is in essence a labor contract, because it stipulates the working hours, and the consideration is determined on an hourly basis. Therefore, companies shall pay attention to the wording of the terms of such contracts to avoid the risk of their re-qualification as labor contracts and the imposition of liability on the company for labor law violations.

In this case the Supreme Court came to the conclusion that the working hours, stipulated in the contract, and the individual entrepreneur’s obligation to be in the office during this time evidences that the reason behind the contract was employment rather than the provision of services (Decision of the Supreme Court dated 27 February 2017 No. 302-КГ17-382).

The risk of re-qualification is also material when services contracts provide for regular provision of services with periodical payment on particular dates, when the material liability is imposed for shortages of the entrusted property and for the losses, incurred by the customer, or when there is a reference to the contractor’s occupation or profession (e.g. accountant, logistics specialist).

18.04.2017 — Failure To Receive City Development Plan For Land Plot May Be Ground For Early Termination Of Lease Contract

The Supreme Court upheld the lessee’s position, who had entered into a lease contract in respect of the public land plot with the authorities of Moscow to construct a store, but could not implement his intentions because of the authorities’ refusal to issue the city development plan, necessary for the construction. In the court’s view, not only physical, but also legal defects of the land plot, which prevent it from the use for a designated purpose, may serve as a ground for early termination of the lease contract by the lessee.

In this case the lessee entered into a lease contract with the purpose to construct a store. However, the lessee did not manage to receive the city development plan for the land plot with the necessary permitted use, stipulated in the lease contract. In accordance with the city development plan for the land plot the permitted use of the land plot was the general improvement and landscaping with no right to erect constructions.

All the lower courts dismissed the lessee’s claim on early termination of the lease contract on the above ground. Still, the Supreme Court did not agree with such view and indicated that the legal impossibility to use the land plot for the purpose, provided in the lease contract, may serve as a ground for early termination of the lease. Moreover, the lessee is entitled to claim back the part of the money paid for the right to enter into the lease contract (case No. А40-129910/14).

17.04.2017 — Ministry Of Construction Proposed To Abolish Opportunity To Legalize Unauthorized Construction And Simplify Procedure Of Its Out-Of-Court Demolition

The Ministry of Construction developed a bill on amending the civil and urban-planning legislation, which provides for the elimination of the possibility to declare title to the unauthorized construction and broadening powers of the municipal authorities in respect of their demolition in an administrative procedure without the decision of the court. The proposed amendments have been largely criticized by the expert Council on Codification of Legislation under the President, because they open doors to large-scale violations of the rights of the owners of such constructions, who will be deprived of court remedy.

According to the proposed bill, the municipal authorities shall be granted the right to compel that the owner of the land plot either legalizes the unauthorized construction or demolishes it, including in the out-of-court procedure. If the owner refuses to demolish or reconstruct the construction on the municipal authorities’ request, his/her title to the property will be terminated, and the land plot will be withdrawn to be sold in an auction.

The bill also provides for the out-of-court demolition in case the construction has been erected on a land plot in the absence of the documents confirming the title to it or if the designated land use regime does not provide for the possibility to erect such constructions. In these cases it will be possible to demolish the construction even if the title to it is registered. The authorities responsible for revealing unauthorized constructions will be Rostechnadzor and Rosreestr in the course of their inspections, this information will be further transferred to the municipal authorities.

Despite the fact that these amendments were developed by the Ministry of Construction in the pursuance of the instructions of the President on the improvement of the mechanism of the state supervision in the field of construction, and optimization of the procedure of demolition of unauthorized construction, the expert Council on Codification of Legislation under the President strongly opposed to the proposed amendments. In the experts’ opinion, the bill opens doors for the “formally compliant with law, but gross and ungrounded violation of the subjective rights of the economic agents”, what will inevitably “lead to the deterioration of the investment climate”.