Civil Actions and Procedures.

a. Description of the Court System.

(i) General discussion.

The Constitution provides for creation of two systems of courts: federal courts and courts of subunits of the Russian Federation. Today both systems are functioning.

Detailed regulation of the structure of federal courts and general description of the system of courts of subunits is implemented by the Federal Constitutional Law On the Judicial System of the Russian Federation, dated December 31, 1996 (as amended). Only the state bodies vested with judicial powers by the law On the Judicial System of the RF are the parts of judicial system of the Russian Federation.

(ii) Federal Courts.

The Constitutional Court has a status of its own in the justice system. It is the supreme judicial body, which does not belong to either of the judicial branches. It plays a very important role in the Russian legal system as the only (according to its own decision) judicial body competent to strike down legislative acts for noncompliance with the Constitution. The Constitutional Court is also competent to interpret the Constitution, and also to invalidate acts of the executive bodies for noncompliance with the Constitution.

Jurisdiction and procedures of the Constitutional Court are governed by the Federal Constitutional Law No. 1-FKZ dated 21 July 1994 On the Constitutional Court (as amended).

The two principal branches of the federal courts system are courts of general jurisdiction and arbitrazh courts. The system of courts of general jurisdiction includes a stand-alone chain of military courts that are competent to consider the same type of cases as courts of general jurisdiction, but only if the cases involve military personnel. The activity of military courts of the Russian Federation is governed at present by the Federal Constitutional Law On Military Courts No. 1-FKZ dated 23 June 1999.

Organization and activity of the courts of general jurisdiction is governed by 1981 Law of the RSFSR on the Organization of Judiciary, as amended. These courts are competent to consider disputes between private individuals, private individuals and organizations, private individuals and state bodies, appeals by private individuals against government acts, hear administrative and criminal cases.

The system of the courts of general jurisdiction includes three levels of courts: lower courts, circuit courts, and a higher court. The Supreme Court (Verkhovnyj Sud) is the highest court for the courts of general jurisdiction and military courts.

Arbitrazh courts have jurisdiction over economic disputes between organizations and solo businessmen, appeals by organizations and solo businessmen against government acts, disputes between the companies and their shareholders. These courts were created in 1991-92 on the basis of the Soviet system of the state arbitrazh, which was the administrative agency for resolving disputes between public enterprises. Organization and activity of the courts of general jurisdiction is governed the law on the Arbitrazh courts, No. 1-FKZ, 28 April 1995.

The system of arbitrazh courts includes four levels of courts: lower court, court of appeal, circuit court, and a higher court. The Higher Arbitrazh (Commerical) Court (Vyshshii Arbitrazhniy Sud) is the highest court for the system of arbitrazh courts that consider business and certain administrative claims.

(iii) Courts of the Subunits.

There are two types of courts of subunits of the Russian Federation. The first type are charter courts, which are the constitutional courts for subunits. The charter courts consider cases regarding conformity of laws of the subunit, decisions of administrative bodies of the subunit, and bodies of local self-governance with the charter (constitution) of the subunit. They are also competent to interpret the charter of a subunit. Decisions of a charter court are final and cannot be appealed.

Peace justices (so-called “mirovye sudiu” in the Russian language) are another part of the justice system of subunits of the Federation. Peace justices are competent to hear certain civil (“small claims”), criminal, and administrative (misdemeanor) cases as the judge of original jurisdiction. Their competence and procedure are governed by laws of the subunits of the Russian Federation and by the Federal Law on Peace Justices (Federal Law No. 188-FZ of 17 December 1998). Appeal from judgments of the peace justices may be brought before lower courts of the general jurisdiction. Until the appointment or election of the peace judges in the subunits of the Russian Federation their functions are fulfilled by the lower courts of the general jurisdiction.

b. Jurisdiction of courts.

(i) Subject matter jurisdiction of branches of judicial system.

The Constitutional Court is competent to hear several categories of cases.

A. It interprets the Constitution of the Russian Federation.

B. It reviews, after the complaints of private citizens and requests of the courts, compliance with the constitution of a law applied or to be applied in a concrete case. This is the only category of cases where the proceedings in the Constitutional Court may be initiated by private parties, as opposed to state bodies.

C. It reviews compliance with the constitution of (a) federal laws, normative acts of the President of the Russian Federation, the Council of the Federation, the State Duma, the Government of the Russian Federation; (b) constitutions of republics, charters, and also the laws and other normative acts of the subunits of the Russian Federation on the issues of the federal jurisdiction or joint jurisdiction; (c) the treaties concluded between the bodies of state authority of the Russian Federation and the bodies of state authority of the subunits of the Russian Federation, the treaties concluded between the bodies of state authority of the subunits of the Russian Federation;(d) international treaties and agreements of the Russian Federation which have not come into force.

D. It reviews disputes on jurisdiction: (a) between the federal bodies of state authority; (b) between the bodies of state authority of the Russian Federation and the bodies of state authority of the subunits of the Russian Federation;(c) between the higher bodies of state authority of the subunits of the Russian Federation.

Courts of general jurisdiction decide criminal and administrative offence cases. They also consider family and labor disputes, as well as general civil (private) law cases, provided that at least one of the parties to the dispute is a private individual (except for the cases, which are to be considered only by the arbitrazh courts according to the Art. 33 of the Arbitrazh Procedure Code of the RF). Courts of general jurisdiction also sit in special proceedings to declare an individual legally incompetent or partially competent, declare legally significant fact as being true, restore the rights under bearer papers which have been lost, declare an individual missing or dead. The third important category of cases within the competence of these courts are appeals against acts and actions of government and other bodies which infringe upon the rights and freedoms of individuals.

Arbitrazh courts have jurisdiction over economic disputes, arising from the civil, administrative, and other of legal relations between organizations and/or solo businessmen between the Russian Federation and subunits of the Russian Federation and between the subunits of the Russian Federation. In particular, arbitrazh courts hear cases on modification and termination of contracts; on non-performance or improper performance of obligations; on recognizing of the ownership right; on compensation of losses; on declaring non-normative and normative acts of state, local self-government and other bodies entirely or partially invalid.

The Arbitrazh Procedure Code of the RF (Art. 33) provides for the list of cases, which are exclusively reserved to the arbitrazh courts, such as the cases (1) on insolvency (bankruptcy); (2) on formation, reorganization and termination of legal entities; (3) on refusals of state bodies to register a legal entity or an individual entrepreneur; (4) between the joint-stock companies and their shareholders, other commercial organizations and their participants; (5) on defense of business reputation in the sphere of entrepreneurial or other economic activities. These cases are subject matter of jurisdiction of the arbitrazh courts in all cases, even where one on mere parties to a dispute is not an entrepreneur or a legal entity.

Arbitrazh courts are also competent to hear cases on establishing the legally significant facts in the sphere of business and other kinds of economic activity. They also consider cases on administrative offences of legal entities (Art. 29 of Arbitrazh Procedure Code of the RF).

The Arbitrazh Procedure Code of the RF (Art. 27) stipulates that arbitrazh courts should consider cases with the participation of foreign organizations, of organizations with foreign investments, and of international organizations which otherwise would be referred to their jurisdiction.

Peace justices are competent to hear criminal cases, if the maximum punishment for the respective offence does not exceed three years of the imprisonment with the exception of a number of corpus delicti provided by the Art. 31 of the Criminal Procedure Code (Federal Law No. 174-FZ of 18.12.2001 as amended). Certain civil cases are also within the jurisdiction of the peace justices. Among them are cases where the writ of the court should be issued, divorce cases if there is no dispute concerning the children, disputes on the allocation of property of the married couple and other family law disputes, labor law disputes, property disputes if the price of the claim does not exceed five hundred minimum monthly wage (determined by the federal law On The Minimum Monthly Wage), as well as disputes concerning determination of the order of use of property. Misdemeanor cases are within the jurisdiction of the peace justices with the exception of the number of misdemeanors provided by the Art. 23.1 of the Code of Administrative Offences of the RF (Federal Law No. 195-FZ of 30.12.2001 as amended).

(ii) Competence of the courts of general jurisdiction.

Normally the lower courts are courts of primary jurisdiction for all cases. There are a few exceptions to this rule, specified in the Art. 26, 27 of the Civil Procedure Code of the RF.

The circuit courts consider cases (1) concerning the state secrets; (2) on declaring normative acts of the state bodies of the subunits of the Russian Federation concerning the rights and lawful interests of private individuals and organizations entirely or partially invalid; (3) concerning suspension of activity or liquidation of public organizations; (4) on declaring the acts of the election committees of subunits of the Russian Federation entirely or partially invalid.

For cases of certain categories the Supreme Court of the Russian Federation sits as a court of primary jurisdiction. These categories relate to the following cases concerning: (1) declaration of non-normative acts of the President of the Russian Federation, the Federal Assembly of the Russian Federation, and the Government of the Russian Federation entirely or partially invalid; (2) declaration of normative acts of federal ministries and agencies bearing upon the rights and freedoms of citizens entirely or partially invalid; (3) appeals against the decisions on dismissal of judges; (4) suspension of activity or liquidation of all-Russian and international public organizations ; (5) declaration of decisions and actions of the Central Electoral Commission of the Russian Federation in the preparation and conducting of referendums of the Russian Federation, elections of the President of the Russian Federation and deputies of the State Duma (with the exception of decisions made regarding appeals against decisions and actions of district electoral commissions) entirely or partially invalid; (6) disputes on competence between the state bodies of the RF and bodies of subunits of the RF or between the state bodies of subunits of the RF, directed for the consideration of the Supreme Court of the RF by the President of the RF (according to the Art. 85 of the Constitution of the RF).

(iii) Competence of arbitrazh courts.

Normally all cases are considered by the arbitrazh courts of lower level. Only two categories of cases are referred to the competence of the Higher Arbitrazh (Commerical) Court of the Russian Federation. These categories are (1) the economic disputes between the Russian Federation and the subunits of the Russian Federation, and between the subunits of the Russian Federation; (2) disputes on declaring normative acts of the President of the Russian Federation, the Government of the Russian Federation and federal executive bodies entirely or partially invalid; (3) disputes on declaring non-normative acts of the President of the Russian Federation, of the Federation Council and of the State Duma of the Federal Assembly of the Russian Federation, as well as of the Government of the Russian Federation entirely or partially invalid.

(iv) Territorial jurisdiction.

Generally the proper venue for the action is the court having jurisdiction over the locality where the defendant, if an individual, has its residence, or, if a legal entity, has its management office or branch (Art. 28 of the Civil Procedure Code, art. 36 of the Arbitrazh Procedure Code of the RF).

But there are some exceptions from this rule (the contract venue, the exceptional venue, the venue at the plaintiff’s option). For instance, in case when a residence of an individual or a legal entity is unknown or is situated abroad, the dispute should be considered by the arbitrazh court of the region where the property (movable or immovable) of the defendant is located. For claims arising under the contract specifying the place where performance has to be rendered, the plaintiff has an option to file the case at the court located at such place.

The Civil Procedure Code of the RF (Art. 29) provides for a number of other optional venues for particular categories of claims, for instance, consumer claims, claims for personal injuries, claims against the employer may be filed at the place of plaintiffs residence; claims for damages to property may be filed at the place where the damage was caused.

The Arbitrazh Procedure Code of the RF (Art. 36. 38) also stipulates a list of optional venues for particular categories of claims, for instance, bankruptcy claims, claims for payment damages, etc.

Prorogatory agreements establishing the jurisdiction of a particular court (contractual venue) are enforceable in Russia, with the exception of matters for which the exclusive venue is prescribed by the law. The exclusive venues are provided for the following categories of cases: (1) disputes over the title to real property must be filed at the court where it is located; (2) disputes under a contract of carriage where a carrier is named as a principal or co-defendant must be filed at the place of location of the carrier agency;

Claims against state bodies and against local self-government bodies of subunits of the Russian Federation which arise from the administrative legal relations must be filed with the arbitrazh court of the corresponding subunit of the Russian Federation.

c. Depositions.

The Russian procedural law does not provide for compulsory pre-trial depositions. Voluntary depositions are possible, since the law does not prohibit anyone from taking or giving voluntary statements, regardless of nationality of the witness, provided that the information contained in the statement is not a state secret and will not adversely effect the state’s institutional or individual interests. Russian law does not specifically regulate the procedure by which such voluntary depositions are obtained. Voluntary statements are recognized as “written evidence” regardless of the presence or absence of an attorney during the testimony process. However, such statements yield to the testimony given at the hearing: a witness must testify in person before the court on all matters including those covered by his statement wherever this is feasible. All witnesses and expert witnesses are heard and questioned during a trial before the court in accordance with provisions of the chapters 6 and 15 of the RF Civil Procedure Code and chapters 6 and 12 of the RF Arbitrazh Procedure Code.

In case where a danger exists that it will be impossible to interrogate the witness in the forthcoming litigation, a procedure of “securing” the evidence by the notary may be employed (Art. 102, 103 of the Fundamentals of Legislation on Notarial Activity of 11 February 1993 No. 4462-1). In such a case the questioning of witness is carried out in the presence of all parties concerned which are summoned to participate in such proceedings. Examination of a witness is carried out pursuant to the rules provided for examination of witnesses in a courtroom under the Civil Procedure Code. A printed record of a testimony is prepared which is signed by the witness and certified by a notary.

The procedure of securing the evidence may be conducted only for future legal proceedings. The notary may not secure evidence relevant to existing legal proceedings pending before the court. In such ensuing actual proceedings the court may make a recourse to such records only in case where it is impossible to examine the witness in person.

d. Discovery.

In a litigation, a party may obtain the evidence in possession of third persons by requesting a court order (subpoena) (Art. 66 Arbitrazh Procedure Code, Art. 57 Civil Procedure Code). A judge preparing the hearing on a civil case doesn’t have the right to perform pre-trial activities to collect and secure evidence at his own initiative. His functions during this stage are limited to the following: clarifying for parties a right to submit evidence, ascertaining whether they have all the evidence needed and assisting in collecting additional evidence. These activities may include interrogation of the plaintiff and defendant and issue of subpoenas to third parties.

Rules compelling production of evidence are included in some other laws as well. Such rules are usually restricted to particular types of evidence in possession of a defined category of persons. For instance, the RF Federal Law On Activity of Advocates and Advocatura in RF of 28 October 2003 (Art.6) provides that an advocate has the right to submit requests for production of documents to state bodies and public organizations, which are obliged to furnish such documents.

The procedure of discovery of evidence in practice works as follows. There is no penalty for the failure of a party to a lawsuit or any other person to satisfy subpoena for production of documents or other pieces of evidence made by a party to a lawsuit itself. A party willing to obtain a piece of evidence which is in the possession of the other party or third persons must make a motion. The motion sets out the reasons why a party could not obtain the evidence itself, location of the evidence and circumstances can be confirmed or disproved by these evidence. Application can be considered by a court at the stage of preparation for the trial or during the trial itself. Copies of this application should be forwarded to the participants of litigation and to that person who possesses the evidence requested. Arbitrazh courts have discretion to collect evidence at his own initiative only if it refers to administrative or public legal relations and state (municipal) bodies refuse to provide evidence themselves.

Written evidence requested by court from the other party shall be forwarded directly to the court or to the claimant, if the judge has allowed the moving party to receive a document for subsequent transfer to the court.

RF law stipulates liability for failure to fulfill the court’s request to produce the evidence in question. If the party does not inform the court about the reasons for the impossibility of presenting written evidence or if the reasons for failing to give evidence were not respectful, the party becomes liable for a penalty. In case of subsequent violations of the same kind the penalty is increased twofold.

e. Statutes of Limitation.

Limitation period is the period of time during which a violated right can be protected by a court. In Russia it is related to the body of substantive law, not procedural law. The general limitation period is three years. After the expiration of the limitation period, a creditor can still bring an action before a jurisdictional body. However, the opponent may plead the statute of limitations as a defense. If the court finds that the circumstances for the application of the statute of limitations are present, the claim is denied. On the other hand debtor, who has voluntary tendered the performance after the expiration of the limitation period is not entitled to claim back such performance. Compulsory enforcement of the right after expiration of the limitation period is, however, barred by statutory provisions. Under the current Russian law, the statute of limitations can be invoked only upon an application of one of the parties. Limitation periods and rules for their calculation are mandatory. They cannot be modified by agreement of the parties (Art. 198 of the RF Civil Code). Special provisions on duration and commencement of limitation periods are set out in the RF Civil Code and in other legislation (Federal Law On the Federal Railway Transport, the Federal Law On the Protection of Consumers’ Rights and so on).

There are certain claims to which the period of limitations does not apply:

• claims for the defense of non-economic rights;

• claims of depositors to a bank for the return of deposits;

• claims for compensation for personal injuries and wrongful death;

• claims of an owner or other possessor for the elimination of any kind of violation of its rights, even if these violations were not connected with the deprivation of possession; and

• other claims in cases provided by a statute.

The general rule is that the statute of limitations begins to run when “a person knew or should have known of a violation of his right” (Art. 200 clause 1 of the RF Civil Code. In certain cases specifically provided for by legislative acts adopted by parliament, the period of limitation starts after the negative outcome or expiration of time allotted for alternative dispute resolution of a dispute by parties without application to a court.

Commencement of limitations period for contractual claims is defined separately for obligations with a fixed time of performance and for obligations for which a period for performance is not set out. If the period of performance is defined, the limitation period starts running at the end of the period specified for performance. For the obligations for which the period for performance is not defined or is defined as the time of demand, the running of the limitation period starts from the time when the right arises for the creditor to make a demand for performance of the obligation (Art. 200 of the RF Civil Code).

In certain cases, the period of limitation can be interrupted, suspended or reinstated. The law provides for a limited number of causes for suspension and interruption. After interruption the limitations period shall be calculated anew, and, in contrast to this, after suspension the limitation period continues to run for the balance period which was remaining before interruption. Reinstatement of a limitation period is allowed only for claims of individuals where “compelling grounds” exist to allow reinstatement, such as serious illness or illiteracy, etc. Such reasons are only valid as grounds for reinstatement if they have arisen or existed during last 6 months of the period.