04.12.2015 — Constitutional Court to Control Enforcement of International Courts’ Judgments - Russian State Duma Passes Controversial Bill in Final Reading
The Russian State Duma has approved the bill that enables the Russian Constitutional Court to decide whether Russia should carry out the decisions of international courts and tribunals on protection of human rights, including the judgments of the European Court of Human Rights delivered as a result of complaints made against Russia.
According to the bill, the Constitutional Court will be able to conclude either that the ruling of the relevant international court or tribunal against Russia is capable of being enforced, or that the ruling does not comply with the Russian Constitution and, therefore cannot be enforced. The bill establishes the procedures whereby the President or the Russian Government can make a relevant application to the Constitutional Court.
The bill passed both, a second and a third reading in the State Duma. It purports to amend the federal constitutional law “On the Constitutional Court of the Russian Federation”, and therefore is also to be approved by a qualified three-forth majority in the Federation Council. We will keep our readers informed on the development of the bill.
04.12.2015 — Moscow Wins Prestigious International ‘Investment Angel’ Award: Efforts to Attract Investment Rewarded
Moscow won a prestigious international ‘Investment Angel’ award in the ‘most investment efficient subjects of the Russian Federation’ category. Sergey Cheremin, Minister of the Moscow Government, Head of the Department of Foreign Economic Relations of Moscow, received the Gold Award of the World Organisation for Development and the Diploma.
According to Cheremin, this award is an extremely high assessment of all the work carried out by the Moscow Government. He claims that over the past four years, Moscow has managed to increase the level of foreign direct investment in various areas of the city's economy by more than 4 times.
The aim of the award is to demonstrate that foreign companies continue to invest into various projects across Russia. According to Robert Abdulin, president of the World Organisation for Development, the organisation is planning to continue stimulating the development of numerous sectors of the Russian economy, and maintain the activity of both, foreign and national investors.
The winners were determined by the experts of the World Organisation for Development based on the ranking prepared by the Agency for Strategic Initiatives (ASI), the WOD-Research Agency, and official statistics. This year, awards were given in the following categories: "For contribution to achieving Sustainable Development Goals of the United Nations”, “Investor of the Year”, “Technology Investor of the Year”, “Socially-oriented Investor of the year”, “For supporting foreign investors in Russia”, “The subject of the Russian Federation with better support for small business”, “The subject of the Russian Federation with the best infrastructure and resources”, “For contribution to improvement of the Russian Federation investment climate”, “The most investment efficient subjects of the Russian Federation”.
03.12.2015 — Bonus Payment Promises to Be Honoured: Supreme Court Protects Distributors
The Russian Supreme Court ordered an Israeli company Teva Pharmacеutical Industries Limited to pay RUB 400 million of lost profits incurred by its Russian distributor CJSC “Biotek” for the refusal to co-operate under a framework agreement. The foreign company refused to sign a sale and purchase agreement for the next year and started distributing pharmaceutical drugs through its subsidiary. It follows from the Supreme Court’s ruling that it qualified the framework agreement provision on entering into a contract in the future as binding.
In 2010, Biotek and Teva entered into a framework agreement, under which the former was to distribute Kopakson (injections for the treatment of multiple sclerosis) in Russia by entering into state purchase contracts. Under the agreement, Biotek was to send Teva purchase orders, as well as draft sale and purchase agreements. In 2013, however, Teva ignored the relevant order, and it was Teva’s subsidiary that won the public tender for RUB 4.5 billion. Biotek sought to recover RUB 408 million of lost profits and went to court (case No. А40-14800/2014).
Biotek calculated its losses based on the unreceived bonus for the purchase order, which usually amounted to 16.5% from the total contract price (i.e. the price in the contract between Biotek and Teva). The cassation instance court disagreed with the said calculation method and refused to satisfy Biotek’s claim.
In the Supreme Court proceedings, Biotek alleged that Teva had breached the framework agreement, i.e. its binding obligation to accept the purchase order. According to Biotek, the framework agreement contained the main contractual terms, whereas separate sale and purchase agreements were made to facilitate customs clearance. It claimed that Teva was obliged to pay bonuses under the agreement, especially considering that they were the only source of Biotek’s profits from the arrangement. The agreement also provided for an obligatory termination procedure, which, according to Biotek, had not been availed of by Teva. It noted that Teva decided to engage its subsidiary after Biotek had helped it increase sales in Russia.
Teva objected to Biotek’s allegations, saying that the framework agreement was not binding and it was entered into solely to control the quality of the packaging carried out by Biotek. It also alleged that the unreceived bonus could not be deemed lost profits of Biotek, as it was part of the purchase price. Teva claimed that it was not obliged to use the termination procedure set forth in the framework agreement, as it had no obligation to supply goods thereunder.
The Supreme Court upheld the lower courts’ decisions, quashing the cassation instance court’s ruling, thereby satisfying Biotek’s claims.
01.12.2015 — Constitutional Court Mocks Efforts of Business to Compensate Lost Profits from Unlawful Property Arrest
The Russian Constitutional Court ruled that a provision of the Criminal Procedure Code that, according to business representatives, does not allow them to recover lost profits incurred through an unlawful arrest of commercial property, is in line with the Russian Constitution.
Two limited liability companies companies doing business in the Russian Far East, “Vostok” and “Spetzdorstroy”, asked the Constitutional Court to analyse whether Articles 133, 135 and 139 of the Criminal Procedure Code on compensation of property damage incurred as a result of actions and decisions of judicial, and investigation authorities, as well as the prosecution office comply with the Russian Constitution.
Before the companies addressed the Constitutional Court, they had tried to receive compensation of rent payments for realty and construction equipment, which had been unlawfully seized for several years. Within 2.5 years “Vostok” incurred RUB 25.2 million of losses, whereas the losses of “Spetzdorstroy” in 4.5 years amounted to RUB 108.7 million.
According to the complainants, the Criminal Procedure Code does not expressly provide for the possibility to recover damages incurred as a result of an unlawful arrest of commercial property. Therefore, in practice, incurred lost profits are not compensated by the state in similar cases. When declining to satisfy the claims, lower courts concluded that entrepreneurs are entitled to recover lost profits only in civil proceedings.
The Constitutional Court held that the lower courts’ judgments against the complainants do not directly suggest that it were the provisions of the Criminal Procedure Code that precluded recovery of property damage, therefore the said provisions cannot be deemed unconstitutional.