Our progress / Hot Topics

Corporate and contract law


Back to Media

New Supreme Court: Expectations

08.08.2014 16:08 / Vedomosti

The structure of the supreme judicial body and the make-up and rotation of the panels affect the quality and effectiveness of courts. These are the factors that define the extent of independence and objectivity of courts in respect to all litigation, particularly business lawsuits.

The new Supreme Court, active since yesterday, received the powers of the now-defunct Supreme Arbitrage Court. Going forward, the SC economic dispute board will act as the superior arbiter for cases between market participants and the state vs business. It will be responsible for clarifications and amendments to court practice, also handling the most difficult cases. The new judicial branch structure could affect property rights protection guarantees and Russia’s investment climate in general.

Critics of the SC-SAC merger have argued that the takeover of the arbitration court by the Supreme Court could have a negative effect on business due to different constructions of the principle of equality and objectivity in litigation with the state. Stats show that in 2009-2012, arbitrage courts ruled in favor of companies in 60% of tax refund cases. The taxman won a mere 40% additional charge lawsuits. Annually, courts of general jurisdiction review millions of Federal Tax Service claims for additional charges from private individuals and rule in favor of FTS in 90% cases.

Changes have not affected the entire arbitrage system yet, however, red flags are up. The new economic dispute board headcount is a mere 16 instead of 53, with only 8 former SAC judges remaining. The Chairman is Oleg Sviridenko, a staunch opponent of pro-transparency former SAC Head Anton Ivanov.

There is currently a number of plausible scenarios, say St Petersburg European University experts. The best-case is turning the key role over to district arbitration courts, preserving the status quo. Another possibility is that the new board will attempt to tweak the arbitrage practice to comply with the SC vision, without interfering with current arbitrage courts practice. A third scenario is an attempt to make arbitrage courts accountable to regional courts of general jurisdiction. This would effectively mean the end of a qualified business dispute resolution, prompting business to flee from the official conflict mediation system to outside arbiters and jurisdictions.

Corporate and contract lawProject Group №2