Estoppel in commercial civil procedure. By S&K Vertical attorney Alena Bachinskaya specially for

16 june 2017 2017-06-16

Do not contradict yourself" - this is the meaning of estoppel, which is widely used, in particular in the commercial civil procedure. What case was the first to apply it and what is considered an abuse of rights is discussed by Alena Bachinskaya of S&K Vertical. At the same time, she warns, unfair behavior must be distinguished from the usual procedural tactics, which is explained by the peculiarities of Russian civil procedure.

In recent years, legislation and implementation practice have attached great importance to the principle of conscientiousness of participants in civil procedure, seeking to punish abusive behavior and protect those who act in good faith. In order to implement this principle, the domestic legal system often borrows various foreign institutions. One of these borrowings was the doctrine of estoppel. Estoppel is a traditional legal principle in foreign countries. It was born in England, and then taken by many legal systems.

As a general rule, the meaning of estoppel lies in the loss of the person's right to refer to any facts or circumstances in connection with his previous behavior (negation, affirmation, etc.). In fact, estoppel prohibits the contradictory behavior of any party.

Estoppel in jurisprudence of the Supreme Court and Supreme Commercial Court

For the first time in the Russian legal system, the Supreme Commercial Court of the Russian Federation bas directly referred to the principle of estoppel in the resolution of the Presidium of the Supreme Commercial Court of the Russian Federation dated March 22, 2011 No. 13903/10 in case No. A60-62482 / 2009-C7. In this case, the court pointed out that the parties are deprived of the right to put forward new claims stemming from both the main and subsidiary obligations on which an amicable settlement was concluded. The court was guided by the fact that, by concluding an amicable agreement, individuals sought to end the existing dispute in full. And the fact that they did not envisage any additional obligations or actions in the settlement agreement that are to be performed by either party means the complete end of the civil law conflict.

Subsequently, estoppel or the principle of venire contra factum proprium (no one can contradict his own previous behavior) was applied in other cases too. At the same time, the courts approached the issue of assessing the contradictions in the procedural conduct of the person participating in the case as to their good faith.

So, in Resolution No. 1649/13 in case No. A54-5995 / 2009, the Presidium of the Supreme Commercial Court of the Russian Federation applied estoppel against the defendant's objections to the court's jurisdiction in the case. The court considered that the defendant recognized the competence of the court, since during a long trial he did not claim that the court had no jurisdiction, but actively participated in the trial. Therefore, he lost the right to object to the jurisdiction. At the same time, the court directly recognized the defendant as a person who had abused his procedural rights, and consistently described the essense of such abuse.

The estoppel doctrine was also demonstrated in the well-known case of Sollers-Elabuga LLC (No. A65-30438/2012) concerning the enforcement of the international commercial arbitration award. In Resolution No. 1332/14, the Presidium of the Supreme Commercial Court of the Russian Federation disagreed with the conclusion of the first instance court that the procedure had been substantially violated: the debtor had not been notified of the proceedings. The debtor lost the right to submit arguments as to improper notice, because from his previous conduct it followed that he recognized the authority of the person who actually received the notice (he was an employee of the debtor's parent company).

In another case, the RF Supreme Court applied estoppel in response to the defendant's statement that it was an improper defendant. The court regarded this as dishonesty, since the defendant first objected to his procedural status only after the judicial acts passed in its favor were cancelled and the case was remanded for a new consideration (Ruling of the Supreme Court of the Russian Federation dated October 9, 2014 in case No. A51-1943 / 2011).

A similar approach was demonstrated in the Ruling of the Supreme Court of the Russian Federation dated April 13, 2016 in case No. A57-12139/2011. The court considered that the argument as to the lack of jurisdiction in the dispute to be an example of unfair conduct, since the party has made it only before the court of cassation, and, moreover, on the second round of appeal. The party took an active part in the case and was initially winning, but only after the loss, it declared that the proceedings should have been discontinued in connection with the lack of jurisdiction.

The normative basis for the application of procedural estoppel is Part 2 of Art. 9 of the Code of Arbitral Procedure, which provides that the persons participating in the case bear the risk of occurrence of the consequences of the commission or failure to perform procedural actions. Participants in the process must use their procedural rights in good faith due to part 2 and 3 of Art. 41 of the Code, and also are obliged to disclose their evidence and arguments to the other party in advance (Parts 3 and 4 of Article 65 of the APC of the RF).

Abuse of rights and procedural tactics

All the cases mentioned above show that procedural estoppel quite firmly entered the judicial practice and primarily concerns the controversial behavior of the participant at various stages of one process or when compared with his pre-trial actions. At the same time, it can be noted that the contradictory behavior of the party is not always caused by the desire to abuse the rights and obtain some benefits from that.

Often, participants in cases build their legal position, taking into account the progress in the case and whether the court satisfies or rejects certain motions. The person's procedural behavior is conditioned by the possibility of winning the process in the current circumstances and on the basis of the available evidence.

The reason for this is, in part, the specifics of the Russian commercial judicial procedure. In Russia, the judge, as a rule, does not express in the course of the process anything that would show the direction of his or her thought. Often, a part of the applications submitted is resolved in the privilege of the judge’s chambers simultaneously with the final judgment in the case.

It happens that a participant in a case chooses in one particular process one of the possible ways of behavior or ways of protecting one's right. And if the result of the process was not in his favor, a person can change his behavior, try to use a different way of protecting its right. Such behavior, of course, must be distinguished from other cases, where inconsistency is caused by completely different reasons, far from the idea of a good faith.

Of course, the question arises as to the party's good faith, which during the consideration of the case declares certain facts and presents evidence, and in another case states the opposite and suddenly provides absolutely opposite evidence. This may be due to the desire to actually obtain the reconsideration of the findings in the first case that are not in favor of such a person, bypassing the statutory order.

In view of the above, courts should evaluate such procedural behavior as representing good faith in the framework of various processes and apply the doctrine of estoppel in cases of obvious abuse of rights.

By Alena Bachinskaya

Пресненская набережная, 6 строение 2 123112 Москва
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