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Civil Law Issues and Procedural Clarifications in Russia’s Supreme Court Third Review of Cases in the Context of COVID-19


 
On February 17, 2021, The Presidium of the Supreme Court approved the Review on certain matters of judicial practice in the context of measures to combat the spread of COVID-19 No.31 (“Review”). This is the third review by the Supreme Court containing legal positions on the application of law during a difficult sanitary and epidemiological situation.
 
I. GENERAL QUESTIONS
 
1. Suspension of proceedings
 
The Supreme Court reminded that under the first review, the courts might suspend the proceedings if because of the introduced measure the parties are limited in their ability to be present in court hearings. At the same time, the Supreme Court in the Review pointed out that the inability to be present at the hearing of a witness, specialist or expert in connection with the adopted restrictions is not a reason to suspend proceedings on the basis of paragraph 2 of Article 216 of the Civil Procedural Code, paragraph 4 of Article 144 of the Administrative Procedural Code and paragraph 3 of Part 3 of  of Article 191 of the Commercial Procedural Code. Thus, the Supreme Court has defined the range of participants in the process, whose absence at the hearing is a ground for suspension of proceedings. 
 
2. Suspension of enforcement proceedings
 
The Supreme Court noted that the inability to perform enforcement actions due to restrictive measures is an independent ground for suspending enforcement actions and the use of enforcement measures in accordance with Article 38 of the Federal Law "On Enforcement Proceedings," which allows suspension for up to 10 days. Moreover, if necessary, the enforcement proceedings may be suspended by the court or the bailiff based on Article 39 of the Federal Law "On Enforcement Proceedings", if the debtor cannot participate in the enforcement actions or otherwise realize his rights.
 
II. ISSUES OF APPLICATION OF CIVIL LAW
 
3. Deferred payment of rent for a subtenant
 
In the second review, the Supreme Court explained the specifics of providing a deferral of rent payments to tenants operating in sectors of economy activities worst affected by the spread of coronavirus. However, the possibility of applying such a deferral to subtenants remained unresolved. In the Review, the Supreme Court explained that organizations and individual entrepreneurs, who are subletters of immovable property, also have the right to defer, because the rules establishing such benefits do not contain any restrictions.
 
4. Tenants have the right to request a postponement (rental payment holiday) even in the case of an agreement to reduce the amount of rent or a change in the contract by a court decision
 
As mentioned earlier, since 01.04.2020 the Federal Law No. 98-FZ "On Amendments to Certain Legislative Acts of the Russian Federation on the Prevention and Liquidation of Emergency Situations" (hereinafter - "Law No. 98-FZ") introduced an additional possibility to change the payment terms of the real estate lease agreement. Depending on the situation, the tenant is entitled to request a postponement (rental payment holiday) or reduction of rental payments. 
 
However, it remained unclear in what order such benefits could be realized. The Supreme Court pointed out that lessees are not deprived of the opportunity to request for deferred payment on the basis of Part 1 of Art. 19 even in cases where the lessor has already implemented other benefits provided for in Art. 19 of the Law № 98-FZ.
 
5. Moratorium on accrual of penalties for owners and users of non-residential premises
 
In pursuance of the Law № 98-FZ Russian Federation Government adopted a decree of 02.042020 № 424 "On the specifics of the provision of public services to owners and users of premises in apartment buildings and houses" (hereinafter - the "Decree № 424"), which provides a moratorium on charges by service providers, suppliers of utility resources and persons engaged in management of apartment buildings, penalties for late or incomplete payment for residential premises and utilities (resources).
 
Due to the ambiguity of the wording a question arose regarding the subjective composition of persons to whom such a moratorium applies. The Supreme Court explained that from the systematic interpretation of the provisions of the Decree No. 424 and the Housing Code of the Russian Federation it follows that the established moratorium applies equally to owners and users of residential premises, as well as owners and users of non-residential premises located in apartment buildings.
 
6. Recovery of the penalty from the developer
 
Resolution No. 424 also established that the period from 03.04.2020 to 01.01.2021 is not included in the period of accrual of penalties under contracts of participatory construction, provided under Part 2 of Article 6 of Law No. 214-FZ2.
 
The Supreme Court clarified that the moratorium applies to the penalties payable for the abovementioned period of delay regardless of whether the court adopted a decision on the request of participatory construction before or after the imposing of the moratorium.
 
Thus, if a court grants a penalty accrued on the basis of Part 2 of Article 6 of Law No. 214-FZ, which is payable for the period up to the day of the actual performance of the developer's obligation, then the period from 03.04.2020 to 01.01.2021 should not be included in the calculation. 
 
_____
2Federal Law No. 214-FZ of December 30, 2004 “On Participation In Share Participation Construction Of Apartment Buildings And Other Real Estate And On Amendments To Certain Legislative Acts Of The Russian Federation”
 
 
 


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