Andrei Mikonin's comments to the article titled “Using Judges’ Conscience to Support the Law”
23 May 2013
Russian judges’ power to decide how best to manage the dispute on the individual facts (the so-called judicial discretion) was extended. According to the experts interviewed by “Fontanka”, today judges can not only treat the situations not defined by regulations in an arbitrary way, but de facto to ignore explicit requirements of laws. Moreover, lawyers believe that judges can declare guilty any person who committed no violations at all, invoking dishonesty as the reason for such a verdict.
Up to now, such arbitrary interpretation was most often applied in politically motivated conflicts. For instance, the court accepted materials of “Yukos” tax audit conducted by taxmen out of established deadlines periods. Last week on the St. Petersburg International Legal Forum, Igor Maydannik, Vice-President of “Rosneft” gave a proud account of how the company refused to supply Navalny with information provided for by the law, and how the arbitration court considered Navalny’s request as an abuse of rights.
Amendments to the Civil code of the Russian Federation that shall come into effect as of May, 1, stipulate that “no one is entitled to capitalize on one’s illegal or inequitable conduct”. At the formation stage, the statutory provision was opposed by corporate lawyers and the officials of the RF Ministry of Economic Development and Trade who saw the risk of uncontrolled behavior of judges. Actually, the provision gives judges the power to make decisions contrary to the law (contra legem – lat.).
According to Vsevolod Baybak, adviser at the Attorneys at Law “Egorov, Puginsky, Afanasyev&Partners”, should the principle of good faith be included in the Civil code of the Russian Federation, some controversial effects shall occur. “On the one hand, it shall extend judicial discretion when resolving disputes and increases unpredictability of proceedings. On the other, the principle of good faith promotes defense from actions which are formally lawful, but in fact are aimed at infringement of interests of the other party. For instance, a company leases its property, and both parties perform their obligations under the contract over several years. Then the lessor suddenly files a lawsuit so as to challenge the contract. Such actions are evidently unfair, but the lawsuit was filed with the formalities prescribed by the laws”, said Vsevolod Baybak.
So far, highest courts allowed deviations from statutory provisions while interpreting laws, however, they did so only in certain circumstances and only when dishonesty of an individual or an entity was proved. Even this resulted in mass campaigns against honest businessmen, initiated mainly by regulatory authorities. For instance, the law stipulates that taxes are considered to be paid from the draw-off of the applicable amount from the settlement account of a company. However, the RF Constitutional court declared the right of revenue authorities to claim for a repeated payment of taxes when funds were not received in the budget due to taxpayers’ deliberate use of services provides by “troubled banks”. Such decision encouraged tax authorities to lodge new claims (without judicial safeguards) against practically all businesses affected by bankruptcies of credit institutions, which were bound to maintain their innocence. Hundreds of St. Petersburg companies suffered from this campaign.
Currently, judges can find "evil" everywhere – in fact, they are entitled to declare any action as “unfair”. All the interviewed experts pointed out at the fact that the law doesn't contain restrictions related to application of the principle of good faith. “What we've got here is a judgmental concept, and the essence of this concept is to be determined by courts” said Pavel Ilyinykh, senior associate, the Rightmark Group. “Any restrictions for detection of abusive acts are inconceivable”, said Andrei Mikonin, head of judicial practice at the law firm S&K Vertical.
What is right and what is wrong
Lawyers provide specific examples of potential disputes; however, no one can guarantee their opinion will coincide with court’s concept of “good and evil”. So, according to Pavel Ilyinykh, avoidance of receiving correspondence might also be qualified as unfair behavior. “No wonder that Navalny’s case was cited on the forum: currently, shareholders of big companies are increasingly inclined to abuse their right to information (so-called “blackmailing”). Small-sized businesses face the same issues. For instance, a member of an open company may exercise their right to get information, or to convene an extraordinary meeting with the sole purpose to damage interests of the company or another member. In such circumstances, the only way to protect oneself is based on integrity criterion” said Pavel Ilyinykh.
“For instance, cybersquatting is a universally known abusive practice. Cybersquatting may take many different forms and has very broad interpretation, including registration of an empty domain or even using a domain (that could be commercially exploited by some other entity) to one’s personal advantage”, said Andrei Mikonin. “There are also some “less harmful” ways of a “technical” nature, such as finding an excuse for claim aiming to demonstrate such claim to respondent’s creditors or to negatively affect their reputation”.
The innovation was met with a mixed reception from market players. For instance, “Maksidom” retail chain supports the innovation, believing that it will shield the company from “consumer racketeering” cases that are becoming increasingly commonplace. Other businessmen noted the low credibility of judicial system and corruptness of public authorities which will be entitled to ignore restrictions established by law on the pretext of a company's falling in bad standing.
To chat of Juvenal occasionally...
Artem Karapetov, professor of the Russian School of Private Law affiliated to the Government of the Russian Federation, is one of the most ardent supporters of extension of the concept of judicial discretion. He is aware of the complexity of the existing situation: “Of course, the courts are involved in abuse of power, and corruption, including arbitration courts. However, in my opinion, courts of original jurisdiction always try to resolve disputes on formal grounds without assuming additional responsibility. Such courts will apply judgmental norms on their own initiative only in the most extraordinary circumstances. As the expert said to Fontanka’ reporter, “A fish recovers from the head down”: there is the case law system of practice of the Supreme Arbitration Court, and if we place confidence in it, then the possibility of retrial will prevent lower-level courts from abusing their power. So, in current historical situation everything depends on the team at the head of the highest court”.
Andrei Egorov, chief of the staff of the Supreme Arbitration Court, believes that decisions made contrary to norms of law are extremely rare, moreover, such decisions are taken “when reality drives the court into, and when the situation is unbearable”. “They literally undergo endless microscopic examinations. Sure, there is a risk that such norm will be applied too often. Excesses can occur as well, civil society has to show indignation, and inform legislators of their opinion”, said Andrei Egorov. “At the same time, is it possible to refrain from defending bona fide behavior using formal norms?”
Artem Karapetov refers to international practices. For instance, in Germany there is a common practice that the court can depart from a norm of law when a decision delivered in accordance with such norm is unbearably unjust. Moreover, in the XIX century legislation of many European countries included judgmental provisions (known as “channels”) that entitled the judges to refrain from applying formal norms, invoking dishonesty as the reason.
And Andrei Mikonin reminded me of a Cicero quote: “Claudius had a house upon the hill Gaelius, which prevented augurs from taking observations from the flight of birds. Augurs commanded Claudius to take down such parts of it as hindered their prospect. However, Claudius sold the entire house to Calprnius without notifying the latter that parts of the house should be taken down.”