How to apply anticoronvirus legislation in practice? We consider replies of the RF Supreme Court to the most important issues for the business community
On 21 April 2020, the Presidium of the Supreme Court of the Russian Federation (“Supreme Court”) approved clarifications on issues related to the application of legislation and measures to counter the spread of COVID-19 in the Russian Federation.
The review of the Supreme Court consists of parts devoted to the application of procedural, civil, bankruptcy, administrative, and criminal legislation.
Most interesting and important for the business community are the explanations provided by the Supreme Court regarding the following issues of application of civil legislation (questions 5-8 of the overview):
Postponement of obligations
Declared by Presidential Decrees No. 206 of March 25, 2020 and No. 239 of April 2, 2020, non-working days from March 30 to April 30, 2020 are among the measures established to ensure the sanitary-epidemiological well-being of the population and, as a general rule, are not grounds for postponing the term of performance of obligations based on the provisions of Article 193 of the Civil Code of the Russian Federation. Otherwise, it would mean suspension of all civil obligations for a long period of time and significant limitation of civil turnover as a whole, which does not meet the objectives of the Presidential Decrees of the Russian Federation.
Suspension and restoration of the limitation period
If the measures taken by public authorities and local governments to prevent the spread of COVID-19 prevented a claim from being brought because it was a force majeure for the plaintiff, such measures can be considered grounds for suspending the limitation period.
Missed period of limitation may be restored on the basis of Article 205 of the Civil Code of the Russian Federation, if the restrictive measures taken prevented citizens from bringing a claim to court (due to the regime of self-isolation, the inability to address due to age, health, or other circumstances).
Treating an epidemic, restrictive measures or self-isolation regime as a force majeure circumstance
In the opinion of the Supreme Court, the recognition of the spread of coronavirus infection as a force majeure circumstance cannot be universal for all categories of debtors, regardless of the type of their activity or the conditions of its implementation, including the region in which the organization operates. Therefore, the existence of force-majeure circumstances should be established individually (not automatically) taking into account the circumstances of a particular case (including the term of performance of the obligation, the nature of the unfulfilled obligation, reasonableness and good faith of the debtor’s actions, etc.).
The commentary of the Supreme Court on the possibility of recognizing the debtor’s lack of money as a force majeure circumstance is important – despite the fact that historically courts’ practice has not recognized the debtor’s lack of the necessary funds as a basis for exemption from liability, in case their absence is caused by the established restrictive measures, in particular, prohibition of certain activities, establishment of the self-isolation regime, etc., – it may still be recognized as a basis for exemption from liability. As an example, the Supreme Court cites the admissibility of the exemption from liability in connection with a significant decrease in profit due to the forced closure of a restaurant / cafe for an open visit. In this connection, it cannot be ruled out that the courts will apply the above rules mainly to organizations belonging to the industries most affected by the coronavirus spread.
The explanations also state that if force majeure circumstances and/or adoption of acts of state authorities/local authorities resulted in total or partial impossibility to fulfill the obligation, this obligation shall be terminated in full or in the relevant part on the basis of Articles 416 and 417 of the Civil Code of the Russian Federation.
Change of terms or termination of contract
The Supreme Court very cautiously commented on the possibility of changing the terms of the contract or its termination by the court for reasons related to the introduction of restrictive measures, the regime of self-isolation or epidemiological situation, quoting the general rules of Article 451 of the Civil Code of the Russian Federation on a material change of circumstances. The Supreme Court stressed that in order to satisfy a claim to change the terms of the contract, the courts must indicate which public interests are in conflict with the termination of the contract or justify the significant damage to the parties from the termination of the contract.
At the same time, the Supreme Court referred to the possibility of withdrawing from the contract or changing its terms in accordance with other norms of Russian law – in particular, according to Article 328 of the Civil Code of the Russian Federation (failure to fulfill a counter obligation under the contract) or Article 19 of the new Federal Law of April 1, 2020 № 98-FZ “On Amendments to Certain Legislative Acts of the Russian Federation on the Prevention and Elimination of Emergency Situations”.