23.03.2018 — Russian Central Bank Lowered Key Rate to 7.25%
On 23 March the Board of Directors of the Central Bank decided to lower the key rate from 7,5% to 7.25% per annum. The primary reason for the reduction is the stable low level of inflation in the country and the reduction of inflationary expectations. The new key rate shall be applied for the calculation from 23 March in the cases provided by law.
The Bank of Russia lowered the key rate by 25 points, and currently it amounts to 7,25% per annum (please see the Central Bank’s notice as of 23 March 2018). It should be noted that many experts expected a sharper decrease, but the Central Bank preferred to remain in a conservative trend. According to the regulator’s press release, the Bank of Russia predicts that annual inflation will remain at the level of 3-4%, which will make it possible to accelerate the transition to a neutral monetary and credit policy that will end before the end of this year.
The Central Bank noted that it may gradually reduce the key rate further at the next board meetings. The next meeting of the Board of Directors of the Central Bank where this issue will be considered is scheduled for 27 April 2018.
22.03.2018 — European Union extends sanctions against Russia for another six months
On March 12, the European Council extended the sanctions imposed on a number of Russian citizens and companies for the next six months - until 15 September 2018. According to official information of the European Council, the main reason for the extension of sanctions was the lack of improvement in the situation regarding the threat to the sovereignty of Ukraine.
Please let us remind you that the European Union imposed sanctions against a number of Russian individuals and companies in March 2014 in connection with “undermining and threatening the territorial integrity, sovereignty and independence of Ukraine”. The list of sanctioned persons included representatives of the Russian governmental officials, politicians and businessmen, as well as the leaders of the self-proclaimed Donetsk People’s Republic and Lugansk People’s Republic. The sanctions were to expire on 15 March 2018.
As reported in the press release, “an assessment of the situation did not justify a change in the sanctions regime”. At the present moment, 146 persons and 37 legal entities remain in the sanctions list. The text of official documents also emphasizes that, if necessary, the sanctions list may be updated.
21.03.2018 — Supreme Court Distributed Risk of Non-Receipt of Funds in Event Bank’s and Recipient’s Insolvency Between Parties
The Supreme Court decided whether the purchaser may recover the advance payment for undelivered goods from the supplier if after the purchaser had transferred the money to the supplier’s bank account, the bank’s license was revoked. At the same time, the entry on the money transfer was made to supplier’s account, but in practice the supplier received no money. Courts of two instances dismissed the purchaser’s claim, but the Supreme Court ruled that in such a case the respective money transfer shall be regarded as an assignment of receivables towards the bank in the respective amount, and the courts need to determine its market value and recover it from the supplier in favor of the purchaser.
In the case recently adjudicated by the Judicial Chamber for the Economic Disputes of the Supreme Court (case No. 306-ES17-17686), the purchaser claimed that his claim for the recovery of advance payment for the undelivered goods shall be included in the register of the creditors’ claims in the bankruptcy proceedings in respect of the supplier. The dispute was complicated by the fact that the license was revoked from the bank, whose clients were the supplier and the purchaser. Thus, the purchaser transferred the advance payment for the goods to the supplier, and the record on the transfer of funds was made in the supplier’s account, however, on the day the payment was made, the supplier was no longer able to freely dispose of the money due to the insolvency of the bank.
The courts of three instances ruled that in such circumstances the bank’s record on the transfer of the money does not result in the actual receipt of funds by the supplier and therefore cannot be regarded as the execution of the contract by the purchaser, and refused to include the purchaser’s claim in the register of the creditors’ claims.
The Supreme Court agreed with the findings of the lower courts, but also noted that in essence the purchaser assigned to the supplier receivables towards the bank in the respective amount. Thus, the Supreme Court concluded that since in bankruptcy proceedings in respect of the bank there is only an abstract opportunity that the creditors’ claims are satisfied, the courts need to determine the fair market value of the respective receivables and include this amont in the register of the creditors’ claims in bankruptcy proceedings. The case was remanded for a re-trial to the court of the first instance.
20.03.2018 — Court Lowered Judicial Penalty Because of Debtor’s Financial Hardship
The claimant filed an application to the court for the recovery of judicial penalty (astreinte) for the failure to execute decision of the court (during 26 months), as well as for the future periods until the decision of the court is finally executed. The courts decided that the party has the right to claim for the recovery of the judicial penalty for the past period of the failure to execute the decision of the court, but the court may refuse to recover it in full or in part. Therefore, in this case the court lowered the claimed penalty, pointing out that the claimed amount of judicial penalty will not promotion the execution of the decision of the court, but may lead to the company’s bankruptcy.
In the case at hand (case No. А45-18960/2013) the claimant filed a claim to the court on the recovery of a judicial penalty (astreinte) for failure to execute the decision of the court for the past period, and also for the future period until the decision of the court is executed. Yet, the courts decided that the claim is subject to assessment in terms of its reasonableness and fairness, as well in view of the purpose of the judicial penalty – to effectively stimulate the debtor to execute the decision of the court. Thus, taking into account the debtor’s financial position, the courts refused to collect the judicial penalty for the past period, and the penalty for the future period was reduced significantly.
It should be noted that as a general rule, in accordance with the Decree of Plenum of the Supreme Court dated 24.03.2016 No. 7 the failure to perform the obligation due to the debtor’s financial hardship, the debts to other creditors, the freeze of funds, the lack of budget financing, the counterparties’ failure to fulfill their obligations, etc. cannot serve as a basis for reducing the penalty. Thus, the position of the courts expressed in the present case may become the basis for the development of the court practice of reducing or refusing to recover the judicial penalty because of the debtor’s financial hardship.
19.03.2018 — Supreme Court: Building Owner’s Right To Privatize Land Plot Underneath It Has Prevailed Over Federal Property Management Agency’s Formalism
In the case recently adjudicated by the Supreme Court the judges examined, whether the Federal Property Management Agency’s refusal to transfer the land plot underneath the building was lawful. The Federal Property Management Agency adduced formalistic arguments, namely, it stated that the cadastral information on land plot was temporary, the plot was located within the boundaries of another land plot leased to a third party. The Supreme Court found the denial of the Federal Property Management Agency ungrounded and reaffirmed the rights of the owners of buildings to buy out the state land plots underneath them.
In the case at hand (case No. 305-KG17-18472), the building owner filed an application to the Federal Property Management Agency for the ownership title to the land plot located under his building. However, the Federal Property Management Agency dismissed the application on the ground that the cadastral records in respect of the land plot were temporary, and information about the land plot could only be used for the purposes of state registration of the right to immovable property, and the land plot was located within the boundaries of another land plot leased to a third party. The applicant challenged the administrative authority’s refusal in court.
The court of the first instance granted the claim of the owner of the building, but the appellate and the cassation courts ruled in favor of the Federal Property Management Agency and rejected the suit. Yet, the Supreme Court sided with the owner of the building, reaffirming his exclusive right to purchase a part of the land plot underneath the building and necessary for its operation. The Supreme Court noted that the Federal Property Management Agency did not dispute the legitimacy of the procedure of forming the land plot, nor the area necessary for the operation of the building. Moreover, the Supreme Court noted that the record on the rent in the Unified State Register of Immovable Property does not impede the applicant from purchasing a part of the land plot.
Thus, the Supreme Court reaffirmed once again the right of building owners to purchase the land plot underneath them that stems from the principle of the “unity of destiny” of the land plot and the objects located on it. At the same time, the formalistic arguments of the Federal Property Management Agency were dismissed by the court.