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"Letter of the Law": If someone owes you money - be watchful. Recovery rules were changed

8 Mar 2011

The Law On Amendments and Additions to some Codes of the Republic of Belarus on Issues of Improvement of Economic Legal Procedure. The law establishes new rules of the game for the entrepreneurs who decided to clear up their relations in the Economic Court.

What is the procedure to observe the pretrial dispute resolution? Why has it become obligatory? Why has reconciliation been introduced in economic courts? What measures may be taken by the court in relation to the persons who fail to make any reconciliation attempts? Will it be easier to make the contractor recover a debt in accordance with the new rules?

These and some other questions were answered within the frames of “Letter of the Law”, the author program of Denis Aleinikov, Senior Partner of Law Group “Argument” by special guests of “Letter of the Law”, Head of the Chief Department of Supreme Economic Court of the Republic of Belarus Irina Belskaya and Economic Adviser of the Chairman of Supreme Economic Court of the Republic of Belarus Vladimir Abramovich.

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The host of the program is Senior Partner of Law Group “Argument” Denis Aleinikov.

Obviously, due to the name of the normative legal act, we have got the first question. The user is writing: “What are particular improvements of the economic legal procedure that the legislator introduces within the frames of the specified normative act?” The user indicates that to his opinion, it becomes still more complicated. What can you say Irina?

Irina Belskaya: In a few words, the meaning of our Law is that the reconciliation possibilities in the economic procedure shall be essentially increased, so the parties shall have more expanded legal protection instruments. In other words, it is important to create conditions for the parties to protect the infringed right by appropriate means, appropriate – from the position of their economic resource and needed optimal procedural actions conducted by the parties and by the court. Let’s give more details about the Law to clarify its essence more substantially.

Yes, let’s talk on particular amendments. It has been written in the Internet that due to this Law the duties amounts for application to economic courts have been significantly increased, haven’t they? Or may be something has been increased and something reduced?

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Vladimir Abramovich: We should probably start with Annex 16 to the Tax Code of the Republic of Belarus which directly establishes the state duty rates for application to the economic courts of the republic, containing the higher as well as the reduced rates in comparison to the existing ones. Actually, filing a statement of claim in amount of less than 100 basic units the duty established is higher and for the present moment makes up 15 basic units.

How much did it make earlier?

V.А.: Earlier it was 5% of the amount of a claim, but not less than one basic unit. If take into account the writ proceeding, the state duty rate has been reduced for the similar sum of recovery up to 100 basic units. Currently it is reduced up to two basic units. Evidently, we should explain to the user who has asked this question, what the reason was.

During the years under discussion prior to adoption of the Law, in fact, a quarter of all applications within the frames of the action proceedings have been indisputable claims in substance up to 100 basic units. Such applications in their essence have not contained any issue in law. However high state duties for writ proceedings in comparison to the lower ones for the action proceeding have motivated the entities to apply to the action proceeding. The situation required some adjustments and creation of more favorable business conditions for effectiveness of rights protection. And it has been done, to our mind.
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Let’s perform some comparative analysis: what shall be more bounce to the ounce – to apply to the writ or to the action proceeding if the claim amounts under 100 basic units?

V.А.: It is worthwhile to apply to the writ proceeding today. We await thousands of undisputable claims per year, which are based, let us say, upon delivery of goods, and shall be transferred to that simplified procedure both for the parties and for the court.

How does it look like in figures?

V.А.: A hundred of basic units makes three and a half million. Speaking of the action proceeding, the state duty rate shall make 15 basic units or 525 thousand rubles. As to the writ proceeding for the similar claim amount (3.5 ml) – it is merely 2 basic units or 70 thousand rubles.

I.B.: I would like to mention that as to the amount of state duty increase for the action proceeding, it has not been taken “out of thin air”. The amount of 525 thousand rubles fits the costs borne by the state to ensure the solution of the case in action proceeding. We have made preliminary calculations. It is namely the exact state duty amount needed to cover the state’s costs.

The user is asking: “What for has the right to file a claim under 100 basic units been remained if it is evident that the duty for consideration of such applications in the writ proceeding is actually 10 times lower?”

V.А.: For the purpose of having a choice.

I.B.: We are talking about expansion of legal protection tools. The parties shall by no means be restricted in anything. If the dispute is really based on principle even for three kopeck, they can apply to the action proceeding and dispute the case in accordance with all established rules of the whole procedure. But according to ideas of the Law developers, the undisputable and insignificant cases shall be transferred to the writ proceeding because it will be worthwhile for them, and as far as it goes to actually disputable ones, they shall remain in the action proceeding.

B.A.: It is worth thinking that rendering of ruling on court order may be denied. So one shall need to determine the state duty rate for applying to action proceeding. The corresponding rate has been established even for such cases inclusively.

Thank you. So, it turns out that people have a simpler and a more advantageous possibility for small undisputable claims today than it has been previously, and protecting their rights in accordance with the procedures stipulated by the Economic Procedure Code.

I.B.: Denis, you are quite right to have mentioned that the writ proceeding is first of all economical (cheaper), secondly, it does not presuppose participation of the parties in the court proceeding (business trip savings), thirdly, the procedure terms are short to the extent possible. It is the same 20 days.

Our concept of the efficient protection way is that if the claim shall not be argued and has been documentally confirmed, which takes place in practice, then one should apply to the writ proceeding and obtain the court ruling for the short term with insignificant costs. The action proceeding shall serve complicated disputes and cases.

The Law has significantly developed the possibilities of the writ proceedings. Previously they were limited to certain case categories. Now the sphere of the writ proceeding is expanded to the extent possible and the grounds for its exclusion are also established. The number of the latter is rather big; nevertheless, the entities are offered more opportunities to recover the money in a simplified proceeding. It is worth mentioning that if the entities do have the issue in law, they may at any moment proceed from the writ proceeding to the action proceeding. Thus the law has established a simplified procedure for such transition.

Are there any other advantages of the “new” procedure of the writ proceeding over the “old” ones that you could mention?

I.B.: Previously the fundamental circumstance was that the applicant’s claims had to be admitted by the debtor. Besides, we believe that the disadvantage of that legal proceeding type was that the debtor could previously make unmotivated objections, in other words, to declare to the court that he disagreed with the writ proceeding and that’s all. In such a way he abused his procedural right and delayed the debt recovery term creating additional complications for the recoverer. The debtor reserves the right to object the recovery of cash assets today, but such an objection has to be supported by the documents. That means that the objections have to be motivated.

Earlier we could apply to the writ proceeding only if the documents about acknowledgement of the debt by the debtor were at hand, such as reconciliation act or any other document indisputably certifying acknowledgement of the debt. As far as I understand, the situation is changed at present. Even if the documents on acknowledgement of the debt are missing then according to definite requirements we may file an application in accordance with the writ proceeding procedure, is that true?

I.B.: You got it right. The reconciliation act was key element in the court practice and was needed to exercise one’s rights in the writ proceeding. Today there may be any list of entitling and debt acknowledging documents. Our Law does not impose any restrictions on it. Surely, any documents acknowledging unexecuted obligations of the debtor may be efficient according to the assessment of the court in each separate case.

If you are raising a claim fewer than 100 basic units, the document acknowledging the debt by the debtor shall not be required from you. The claim shall be considered and it shall be the debtor’s obligation to prove by submitting the corresponding documents that your claim has been unreasonable or already met.

So, the court will consider the evidence adduced by the debtor, won’t it?

I.B.: Yes, the so-called objection. It may be stated that by virtue of this Law the legal nature of the writ proceeding has been somehow changed. We have made the first step towards transition to documentary ways of legal proceeding. But consideration of claims and disputes in simplified procedure is a common international tendency manifested in simplifying procedures and protection methods. That is why it is quite normal and peculiar to the international practice. The Law has expanded the possibilities of the entities in simplified types of legal proceeding.

If you don’t mind, I would ask you some questions about the writ proceeding we received on our portal. The user is asking: “Will it be possible for non-residents, in view of the amendments, to file applications on initiation of writ proceeding in relation to the debtor who is a resident, if there had been an arbitral agreement, but there is a written acknowledgement of the debt by the debtor?”

I.B.: The answer is lying beyond the scope of our Law; it is in the sphere of application of international agreements. For example, our residents may not file an application on writ proceeding to the economic court of the foreign person. It has been caused by the circumstance that enforcement of the court ruling in relation to the foreign person, as a rule, shall take place in the territory of a foreign state. The enforcement procedure has been regulated by the international agreements. The existing international agreements do not contain enforcement possibilities for any other court rulings other than court decisions. So, for the entity to have the legal base for enforcement abroad, obtaining the court decision falling within the scope of the international agreement shall be needed. The simplified legal proceedings without participation of the parties in the court proceeding shall not fall within the scope of the above specified agreements.

May the non-resident file an application on initiation of the writ proceeding to the Economic Court of the Republic of Belarus, if he has an arbitration agreement in the contract?

I.B.: Arbitration agreement stipulates commercial arbitration after all.

Yes. And the resident is saying: “Sorry, I do not apply with the claim, I have an application on a special procedure, please consider this one.”

I.B.: If an arbitration agreement is available, it does not prevent from applying to the Economic Court. Actions of the debtor do matter in this case. If he does not raise any objections against applying to the Economic Court in any way, including by means of writ proceeding, the court has no any barriers to render a court ruling in relation to the resident of the Republic of Belarus.

Irina, I would like to ask you now, what has interested business most of all. Some amendments to the Civil Code have been introduced, and according to them, presentation of a claim towards contractor prior to going to the court with an action, shall be mandatory, if, though, the laws or the contract do not stipulate otherwise. What for has it been done?

I.B.: Such a claim was mandatory in the Soviet period. Moreover, scientific researchers cite data that significant number of disputes had been resolved during that period without court and without applying to the state arbitration court for commercial cases. The figure amounts to 80%. As we understand now, not everything that was used in the Soviet period was so bad; the same is for the legal institutes that we later refused.

The provision built into the Civil Code today is just saying about the claim proceeding, but the idea itself is a bit wider, subject to the proviso that you have just named. The idea is that the parties shall make any independent attempts to resolve the dispute prior to going to the court. That is why the proviso is that the parties may exclude the claim proceeding.

Frankly speaking, some additional instruments of assessment of their actions and influence upon the will of the parties shall be imposed upon the court. The court shall have the possibility to consider all actions of the parties aimed at willful resolution of the dispute prior to applying to the court.

First of all, shall the court come to the conclusion that the dispute might have been resolved by the parties independently and the dispute as such does not represent an issue in law, the court may fix the guilty party with the court costs, including the party that have won the case. For this purpose we have an old regulation of Article 133 of the Economic Procedure Code.

Secondly, the court shall be granted the right to take these facts into account in reducing the declared penalty (art.314 of the Civil Code).

I wonder in what way that will be taken into account in view of article 314. I would try to simulate the situation. Let’s assume, the lawyers have changed the agreements and established that the claim proceeding shall not be mandatory. Nevertheless, if an entrepreneur applies to the court without such claim proceeding, then according to article 314, the court may reduce the penalty appealing to the fact that the claimant has neglected the claim proceeding. Am I right?

I.B.: In the given example, in relation to the person who failed to exercise the granted right to pretrial regulation.

Or the imposed duty?

I.B.: The regulation has been developed in a quite unusual way for our understanding. The law stipulates a mandatory requirement and at the same time it is assumed that the agreement may exclude it. I would add to your situation that even if the parties have excluded the claim proceeding, it is likely that the provision on negotiations shall remain. It is known that almost each commercial agreement contains a provision on conducting negotiations in case any disputes arise. That means that initially the customs of trade and business ethics apply independent actions of the parties aimed at resolving the disputes arisen between them. And only in case the disputes fail to be resolved, applying to the court shall be established. Unfortunately, these contractual provisions, as a rule, also fail to be complied with today.

Sorry, then I would ask you a certain question. If the agreement stipulates “the negotiation way” instead of “the claim proceeding”, shall the court find out whether the negotiation procedure had been observed? Shall the action be shelved if the above procedure had not been observed?

I.B.: If the agreement excludes the claim proceeding and another procedure, for example, negotiations has been chosen, it shall be complied with. The court shall shelve the action in case the pretrial procedure of dispute resolving has not been observed. Any pretrial resolving procedure may be used: negotiations, out-of-court mediation. The action shall be shelved in case the court decides that any contractually stipulated pre-trial procedure has not been observed.

I would like to draw your attention that apart from the claim proceeding, the parties stipulate any other pre-trial resolving methods, such as negotiations, out-o-court mediation. Again, the Law recommends to comply with the claim proceeding. Moreover, you can use the supplement to the Economic Procedure Code stipulating the procedure and form of the claim. You can even not think of how to execute the claim and the terms for its observation. The supplement contains clear instructions about that. The Law is providing an alternative and various choice options for the parties that suit them. And for the court – the right to assess what actions shall be conducted by the parties to independently resolve the dispute.

If I fail to specify in the agreement that the claim shall be executed in free form, does that mean that I am obliged to comply with the sample recommended by the Economic Procedure Code?

I.B.: If the procedure settled by the Supplement to the Economic Procedure Code has not been excluded by the agreement, then it shall be observed. If it has been excluded, you can establish your own.

A set of claim related questions has been received at the portal. The user is asking: “A claim has been sent to the contractor, but no copies of the documents and no extracts from the letter have been attached. Shall it be considered as observance of the pre-trail dispute resolving procedure or shall the court shelve the action?”

V.A: The concept of improvement of the economic legal proceeding also assumes exclusion of the formal approach. At bottom, if the second party sending the claim has originals of these documents, say, shipping documents, that is enough. Then the copies may not be sent. The claim proceeding will is being observed in this situation. It is important to indicate that in case of submitting the application on initiation of the writ proceeding, the claim proceeding shall not be subject to mandatory observation. This regulation has been provided for only for action proceeding.

I.B.: There is a number of case categories that shall not be subject to mandatory claim submission. For example, upon cases with participation of the prosecutors, and on invalidation of the shareholders’ decision, on expulsion of the company’s member, on invalidation of acts and others, if direct applying to the court has been settled by the respective legal regulation. The Economic Court has to assess this circumstance in each particular case. The claim proceeding is aimed at the so-called calculation-related disputes arising from civil relations; this is a limited sphere.

The user is asking: “If such a letter of demand has been sent but it has not been named by the word “claim” and has any other name or has no name at all. The essence of the letter is that the writing has claim nature and payment is demanded, otherwise they wpold apply to the court.” Shall it be regarded as observation of the pre-trial proceeding or not?

I.B.: It shall. Let’s recall such a civil turnover and code approach as rationality approach. Vladimir has already said that formal approach towards assessment shall not be applied. Supreme Economic Court makes emphases on that for the parties and the economic courts to pay attention to.
So, you may call this document in any way, but just use the given tool correctly. One may get away to the theoretical debates that the claim consists of recoverer’s material requirement on execution of an obligation. But we won’t do that. From practical point of view we would give the following answer: if the parties have chosen a special order and have given it a special name, for example, a suggestion on dispute resolving, such a circumstance shall be recognized by the court as action or made attempt aimed at pre-trial conflict management.

Is it a must for the person to get an answer to this claim in order to have possibility to apply to the court?

I.B.: No, it is not a must. The Law is saying the same. If within the determined terms (according to the law, within one month, or the parties may stipulate another term in the contract) no answer has been received, it shall not prevent the plaintiff from going to the court. The court shall consider it as plaintiff’s compliance with the pre-trial order.

I shall recall you that according to the law, submission of a claim shall suspend running of limitation period of action. Such a guarantee shall be set forth in order not to be afraid of expiration of the term for judicial protection.

I have examined that serious novel of the law is introduction of the conciliation procedure. Let’s have a talk about that. Previously we have had mediation procedure as an alternative way of justice, now the conciliation procedure is introduced. Why has the mediation procedure been substituted by the conciliation procedure?

I.B.: I would not say that the institutes have changed. The mediation procedure is a conciliation procedure in its essence, or one of conciliation procedure types. By the way, negotiations may also be considered as conciliation procedure. Conciliation procedure, reconciliation of the parties, agreement, mediation or intermediation are synonyms. Change of terminology has been attributed to several circumstances. From practical standpoint this terminology has been chiefly conformed to the phenomenon which has been existing in economic courts by applying mediation.

Mediation result is, as a rule, conclusion of an amicable agreement and extension of cooperation between the parties on that ground. Additional circumstance is that it is intended to develop the law in out-of-court mediation. So we have made the first step to differentiate the notions and made a choice answering our purpose. But the essence of the notion has not been changed. We may just say that the mediation sphere has been expanded, if the parties have it easier to understand that way today. Now the conciliation procedure may be appointed both on the stage of preparation of the case and during examination of the case by the Economic Court of the first instance, as well as in appellate, cassation and enforcement proceedings.

The parties may apply for its appointment in each of the above stages. I would like to draw your attention to the fact that voluntariness of the procedure has remained, even more, it has been secured as its principle. The parties shall show their readiness to accept the courts’ drastic suggesting to preserve their business relations and resolve the dispute by reconciliation, because it is important for business and economics to demonstrate stability of business relations between partners.

Previously the court might have appointed mediation procedure (conciliation procedure) in case of disagreement between the parties. As I understand, such a procedure may be appointed now at the courts’ discretion, mayn’t it?

I.B.: Not exactly. First of all, as I have already said, the voluntariness has remained. Secondly, the court’s initiative had existed earlier, it had just been differently arranged, if we may say so. To appoint the mediation procedure earlier the court had to preliminary clear up both parties’ will. And only after written application the procedure could have been appointed. It resulted in ineffective use of the term for preparing the case prior to direct preparatory meeting, if there was a real possibility for the parties to meet the judge (in case the parties appeared). The procedural economy approach has been applied in all stages and by all institutes. That is why the appointment order was changed namely in the stage of preparing the case for preliminary trial proceeding. If the court, having a certain experience in applying mediation, has an opinion that the conciliation procedure is applicable for the dispute while initiating proceeding upon the case, it can appoint that procedure by means of rendering its ruling.

Is the court obliged to ask the parties’ opinion?

I.B.: It shall inform them on appointment of the procedure. Each party has right within seven days to make written objections both against the conciliation procedure and against the certain reconciliator. In case any objection has been obtained, the court’s obligation is to set aside the ruling on appointment of the conciliation procedure, or to substitute the reconciliator for the other one, chosen by the parties.

Does that mean that if there is an objection of any party the conciliation procedure shall be removed?

I.B.: The ruling shall be set aside similar to the writ proceeding. The mechanism is the same. In all further instances an application of one or both parties on appointment of the procedure is necessary. By doing so, if any of the parties is applying for, the court shall clarify the other party’s will. In other words, the voluntariness of the procedure is being ensured.

V.А.: I would point out that it had been previously stipulated that in case of reconciliation upon conciliation procedure 50% of state duty was to be returned. At present moment in case of the mutually agreed application on conciliation procedure attached to the statement of claim, the plaintiff has right to pay a half amount of the state duty. In case the conciliation fails to be reached and it shall be necessary to switch to the action proceeding, the state duty shall be subject to additional charge.

I.B.: In such a way the economic effect has been initially laid. It is also possible to make a 50% state duty payment for filing a claim instead of 100% payment, which enables to reduce the funds extracted from the turnover. The debtor is thus interested in the possibility to discuss the costs of the state duty paid by the plaintiff during the conciliation procedure. It is possible to share them. This is the will of the parties to determine them.

Irina, tell us please who will act as reconciliators then? Everybody is eager to know the answer. Will it be pretty much the same, exclusively the economic court personnel? Or will there be any steps towards involving any other reconciliators, working in places other than economic courts?

I.B.: The answer is “yes” to both parts of your question. The appointment procedure for the court officials has been preserved. Such practice has proven its value and it won’t be altered. But we understand that due to the fact that the conciliation procedure sphere has substantially expanded, today’s resources of our mediators are on the verge, so the possibility of involvement of other persons as court mediators, other than officials of the Economic court, is under consideration. Retired judges in case of their additional preparation as well as other experienced lawyers enjoying authority of the economic court and having efficient qualification are being considered. For example, work on a pilot project is being finished now, which covers the possibility of involving out-of-court mediators for fulfilling the obligations of the court mediators. Naturally, under the economic Court’s control. The topic of the pilot project should be discussed separately, with participation of the competent persons and out-of-court mediators. Let’s put it aside for the future.

It is actually intended to involve private persons, isn’t it?

I.B.: One should not suppose that any private persons shall be admitted to the court activity, say, any lawyer wishing to do that. The key conditions shall be special qualification of the lawyer and his high authority in the legal community. The conditions for involvement are assumed to be determined by the resolution of the Plenum of Supreme economic Court.

I would like to ask you the question that took my interest. I read in the law that “certain documents may be submitted to the court in electronic form due to the order settled by the law”. The regulation is very progressive. What does it mean, are we moving towards electronic justice?

I.B.: Denis, you have caught it quite right. This is the first legislative step towards electronic justice. We have a whole program on implementation of the electronic justice to the economic legal proceeding. There are some possibilities for applying to the court by means of electronic communication even today, i.e. prior to entering the Law into force. The program is a translational one, and in some time, again, for the comfort of the parties it will be provided for to form an electronic case, which will be accessible via Internet to become familiar with. Video-teleconferencing is used today for considering the dispute between the parties staying in the territory of different regions. In the future, one may participate in the process via his own computer. It is supposed to use electronic signature. Consequently, any statement of claim with electronic signature filed on our site shall be considered as filed in due order at the moment of its filing. Electronic justice is a topic for the whole program; it can also be discussed separately.





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