Do not contradict yourself – this is what estoppel is about which is widely used i.a. in arbitrazh proceedings. What was the first case where the concept was applied and what the case law sees as abuse of rights – in the post by Alena Bachinskaya, S&K Vertical attorney. At the same time, one shall distinguish between bad faith behaviour and regular procedural tactics justified by peculiarities of the Russian proceedings.
Legislation and case law in the recent years see the principle of good faith as key to punishing parties abusing their rights and protecting good faith parties. In order to implement this principle local legal order often borrows foreign law concepts. One of such borrowings relates to the doctrine of estoppel. Estoppel is a traditional legal principle in foreign countries. It was born in England and then absorbed by many other legal orders.
As a general rule, estoppel means that one loses the right to refer to certain facts or circumstances in the light of his/her prior actions (denial, statement, etc.). in the essence, estoppel prohibits contradictory conduct.
Estoppel in the case law of Supreme Arbitrazh Court and Supreme Court
It was Supreme Arbitrazh Court which referred to estoppel for the first time in Russia – in the ruling by Presidium of the Supreme Arbitrazh Court of 22 March 2011 №13903/10 under case №А60-62482/2009-С7. In this case the court stated that the parties lost their right to raise new claims arising out of the basic and additional obligations with regard to which settlement was reached. The court was guided by the fact that when reaching settlement the parties aimed at terminating the dispute in full. And the fact that they had not provided for certain additional obligations or actions for either party in the settlement agreement shall mean complete termination of the civil law conflict.
Further on, estoppel or venire contra factum proprium principle was applied in other cases. At that, the courts came closely to assessing good faith of the parties to proceedings.
In the ruling №1649/13 under case №А54-5995/2009 Presidium of the Supreme Arbitrazh Court applied estoppel against respondent's objections with regard to the court's jurisdiction. The court decided that respondent had accepted the court’s jurisdiction since in course of the lengthy proceedings it had not pointed out to the lack of it but rather actively participated in the process. Therefore, respondent lost its right to object to the court’s jurisdiction. In this case the court directly called the respondent a person abusing its procedural rights and consistently described what was the for which the above abuse took.
The doctrine of estoppel was also demonstrated in the famous case of Sollers-Yelabuga OOO (№А65-30438/2012) on enforcement of an international commercial arbitration award. In the ruling №1332/14 Presidium of the Supreme Arbitrazh Court objected to the conclusion reached by the court of first instance that arbitration procedure had been severely breached – the debtor had not been informed of the proceedings. The debtor had lost its right to raise such kind of objections since its prior behaviour demonstrated consent to the powers of the person who actually received the notice of arbitration (it was the debtor’s parent company’s employee).
In another case, Supreme Court applied estoppel in response to the respondent's statement that it was an improper respondent. The court considered such an approach as bad faith since for the first time the respondent raised objections as to its procedural standing only after court acts rendered in his favor were repealed and the case was remanded for retrial (ruling by Supreme Court of 09 October 2014 under case №А51-1943/2011).
Ruling by Supreme Court of 13 April 2016 under case №А57-12139/2011 demonstrates similar approach. The court decided that the party’s argument that the case was outside the court's competence raised in the cassation court, and only at the second round, was a demonstration of bad faith conduct. Respective party was actively participating in the proceedings and was actually winning the case, but having lost the case requested termination of proceedings in the light of the court's lack of competence.
Legal basis for the application of procedural estoppel is found in s. 2 Article 9 of Arbitrazh Procedure Code (APC) which provides that case participants shall bear the risk of consequences entailed by their procedural actions or omissions. Participants shall enjoy their procedural rights in good faith in accordance with s. 2 and 3 Article 41 of APC, and shall disclose their evidence and arguments to the other party in advance (s. 3 and 4 Article 65 APC).
Abuse of rights or procedural tactics
All of the above cases evidence that procedural estoppel has come to stay in the Russian law enforcement practice, and primarily this concerns controversial behaviour of participants at different stages of the same proceedings or as compared to its pre-trial actions. At the same time, one shall keep in mind that controversial behaviour does not always arise from abuse of rights and the will to obtain some sort of benefits.
Sometimes parties build their legal reasoning on and considering case progress and granting/refusal of certain motions by the court. Procedural behaviour may be conditioned upon the possibility to win the case in the given circumstances and basing on the available evidence.
This is often due to peculiarities of the local arbitrazh proceedings. In Russia judges rarely express their views in course of proceedings which can indicate the line of their thinking. Rather often motions are decided in behind closed doors together with deciding the case on merits.
Sometimes participants choose one of the possible options of behaving or protecting in course of the proceedings. And where such turns out to be not successful such a party may change it and give a try to another option. Such a behaviour, of course, shall be distinguished from other cases where such kind of inconsistency is due to reasons well beyond good faith.
Of course, there arises the question of good faith of the party which in one case states certain facts and brings evidence in course of the proceedings and in another case acts to the contrary. This may be explained by the wish to get conclusions reached by the first court revisited bypassing the procedure set by the law.
In the light of the above, courts shall assess such procedural behaviour in different proceedings from the stand point of good faith and apply estoppel doctrine in cases where abuse of rights is obvious.
Author: Alena Bachinskaya