Free Advice

+7 495 775-16-37

info@zuykov.com

 

The participation of the third party, who does not assert the independent claims regarding the subject of the dispute at entering into a settlement agreement

March 6, 2019

The institution of the settlement of disputes by carrying out conciliation procedures is actively used by the Russian courts. Since the institution of conciliation is inter-branch, a settlement agreement has both common features and peculiarities, depending on a particular kind of the court proceedings.

The arbitration and civil proceedings, as well as the administrative proceedings refer to a unified type of the civilized proceedings.

Thus, in accordance with Paragraph 2 of Article 138 of the Arbitration Procedural Code of the Russian Federation (hereinafter referred to as the APC RF), the Parties may settle a dispute by entering into a settlement agreement or using other conciliation procedures, including a mediation procedure, unless this is contrary to the Federal Law.

In the Civil Procedural Code of the Russian Federation (hereinafter referred to as the CPC RF), the independent norm, which expressly states that the parties can settle a dispute by entering into a settlement agreement, is absent; the legislator obviously thought that the parties participating in the case should have learned about such right from Article 173 of the CPC RF, which is called “The Plaintiff’s Refusal from the Statement of Claim, the Recognition of the Statement of Claim by the Defendant and a Settlement Agreement of the Parties.” This article is most likely written not for the participants to the dispute, but for the Court, since it describes the actions of the Court after the plaintiff’s statement on the refusal from the statement of claim, the recognition of the statement of claim by the defendant or the petition of the parties on entering into a settlement agreement.

It is also worth noting that the Code of Administrative Court Procedure of the Russian Federation (hereinafter referred to as the CACP RF) stipulates a possibility of a peaceful settlement of a dispute. Thus, in accordance with Paragraph 3 of Article 137 of the CACP RF, the Parties may settle a dispute by entering into an agreement on the conciliation of the parties.

It is rather interesting that there is also a possibility of the conciliation of the parties to the criminal proceedings. Thus, in accordance with Paragraph 2 of Article 20 of the Criminal Procedural Code of the Russian Federation (hereinafter referred to as CPC RF), the criminal cases on the crimes stipulated by Articles 115, 116.1 and 128.1 of Part One of the Criminal Code of the Russian Federation shall be considered to be the criminal cases of private prosecution, they shall be initiated not otherwise than upon the statement of the victim, his legal representative, except for the cases stipulated by the Fourth Part of this Article, and they shall be subject to be dismissed in connection with the conciliation of the victim with the accused person. Conciliation shall be allowed prior to the moment the Court retires to a consultation room for sentencing, and in the Court of Appeal – prior to the moment the Court retires to a consultation room for sentencing in the case. It is worth noting that, according to Paragraph 3 of Article 20 of the CPC RF, The criminal cases of private and public prosecution shall be initiated not otherwise, but only by a statement of the victim or his legal representative, but they shall not be dismissed due to the conciliation of the victim with the accused person.

In the Code of Administrative Offences of the Russian Federation, the institution of conciliation is absent at all.

In this article, I shall consider the conciliation of the parties by entering into a settlement agreement in the arbitration proceedings, and more specifically, this issue will be analyzed as to a possibility of the participation of the third parties, who do not assert the independent claims regarding the subject of the dispute, at entering into a settlement agreement.

I would like to start my article with a definition of what a settlement agreement is.

According to the definition given in the Wikipedia Internet Encyclopedia. A settlement agreement (amicable transaction) is a bilateral or multilateral transaction, by which the parties (or their representatives) finish a civil dispute. In the Roman Law, the settlement agreement was called “transactio.”

In accordance with Paragraph 9 of Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation No. 50 of July 18, 2014 “On the Conciliation of the Parties to the Arbitration Proceedings” (hereinafter referred to as Resolution No. 50), A settlement agreement is an agreement of the parties, that is, a transaction, and therefore, in addition to the norms of the Procedural Law, the norms of the Civil Law on agreements, including the rules on the freedom of agreements (Article 421 of the Civil Code of the Russian Federation) shall be applicable to this agreement being one of the means of protection of subjective rights. The parties shall dismiss the dispute (in whole or in part) by such agreement, if it is approved by the Arbitration Court, on the basis of a voluntary settlement of the mutual claims and the approval of the mutual concessions ... .”

So, we have gained an insight into the definition of a settlement agreement concept. Now it is necessary to find out, who is entitled to enter into a settlement agreement in the arbitration proceedings and to be a participant to them.

In accordance with Part 4 of Article 49 of the APC RF, the parties may dismiss the case by a settlement agreement.

The parties to the arbitration proceedings shall be a plaintiff and a defendant (Part 1 of Article 44 of the APC RF).

In this regard, it turns out that no one except for a plaintiff and a defendant can be a participant to the settlement agreement, can they?

The answer to this question we get in Paragraph 2 of Article 50 of the APC RF, which states that the third parties, who assert the independent claims regarding the subject of the dispute, shall enjoy the rights and bear the obligations of a plaintiff, except for the obligation to comply with a claim or other pre-court procedure for the settlement of the dispute, if it is stipulated by Federal Law for this category of disputes or by an agreement.

As it can be seen from the above norm, the right of the third parties, who assert the independent claims regarding the subject of the dispute, to conclude a settlement agreement is not excluded, in connection with which we make a conclusion that they have the right to participate in entering into a settlement agreement.

Indeed, our assumption is confirmed by the position set forth in Paragraph 11 of Resolution No. 50, which states that the third parties, who assert the independent claims regarding the subject of the dispute, taking into account the provisions of Paragraph 2 of Article 50 of the APC RF, shall be entitled to participate in entering into a settlement agreement as a party, to refuse from the statement of claim, as well as to recognize the circumstances, which are the grounds for the claims or objections by one or another party, to enter into an agreement according to the circumstances of the case.

Now, I suggest that we should analyze Paragraph 2 of Article 51 of the APC RF, which states that the third parties, who do not assert the independent claims regarding the subject of the dispute, shall enjoy the procedural rights and bear the procedural obligations of a party, except for the right to change the grounds or a subject of the statement of claim, to increase or decrease the amount of the claims, to refuse from the statement of claim, to recognize the statement of claim or to enter into a settlement agreement, to file a counter-claim, a claim for compulsory execution of a judicial act.

Furthermore, it is stated in Decision of the Constitutional Court of the Russian Federation No. 1436-O of June 23, 2015  “On the Refusal to Consider the Complaints of the Limited Liability Company “Orlovsky District Heating Company” regarding the violation of the constitutional rights and freedoms by Part 2 of Article 51 of the Arbitration Procedural Code of the Russian Federation,” that Article 46 (Part 1) of the Constitution of the Russian Federation, while guaranteeing to everyone the right to judicial protection of his rights and freedoms, does not establish directly any particular procedure for the implementation of this right and does not imply a possibility for a citizen, an organization to choose a method and a procedure of the judicial challenge at the own discretion. In accordance with Article 71 (Paragraph “o”) of the Constitution of the Russian Federation, they are determined by the Federal Laws, which include the Arbitration Procedural Code of the Russian Federation, Part 2 of Article 51 of which provides to the third parties, who do not assert the independent claims regarding the subject of the dispute, all procedural rights of a party, except for, in particular, the right to enter into a settlement agreement. Since entering into a settlement agreement shall be a disposal of the rights and obligations arising from the alleged disputable substantive relationship being a subject of the judicial proceedings, only the subjects of this relationship being the parties to the judicial proceedings shall be entitled to implement this legal relationship.

Having reviewed Paragraph 2 of Article 51 of the APC RF and the position of the Constitutional Court of the Russian Federation, in principle, it would be possible to end this article with the words that since the legislator has restricted the rights of the third parties, who did not assert the independent claims regarding the subject of the dispute, to enter into the settlement agreements, it is obvious that they can not take part at their being entered into ...

... However, that is very much not the case what it seems at the first glance, and here is why.

Paragraph 12 of previously said Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation No. 50 of July 18, 2014 “On the Conciliation of the Parties to the Arbitration Proceedings” states that, in accordance with Part 2 of Article 51 of the APC RF, the third parties, who do not assert the independent claims regarding the subject of the dispute, shall not be entitled to refuse from the statement of claim, to recognize it or to enter into a settlement agreement. Moreover, such parties shall be entitled to act as the participants to the settlement agreement, for example, in the cases, when they bear the execution of the obligations or they are the persons authorized to accept the execution.

If the said persons are not the participants to the settlement agreement, they shall be entitled to submit the arguments on the violation of their rights and legitimate interests by a settlement agreement, what shall not prevent the Arbitration Court from approving the settlement agreement, if such arguments are not confirmed in the course of the consideration of this issue by the Court.

By implication of Paragraph 1 of Article 313 of the C.C.R.F., the execution of the obligation may be imposed by a debtor on a third party, if it follows from the law, other legal acts, the terms of the obligation or its essence that the debtor is obliged to execute the obligation personally. In this case, the creditor shall be obliged to accept the execution offered by the third party instead of the debtor. Thus, the parties to the dispute may agree that the third party will transfer the funds to the plaintiff, what will, for example, remove the defendant’s further recourse claims to the third party.

It is obvious that such possibility of the third party, who does not assert the independent claims regarding the subject of the dispute, to act as a party to the settlement agreement is aimed at observing the principle of the procedural economy.

It is worth noting that the legal position set forth in Paragraph 12 of Resolution No. 50 has not become a new law regarding the possibility of the third parties to participate in the settlement agreement.

Thus, even in the first edition of Federal Law No. 127-FZ of October 26, 2002 “On Insolvency (Bankruptcy)” (hereinafter referred to as the Law on Bankruptcy), it was stipulated that the participation in the settlement agreement of the third parties, who assumed the rights and obligations stipulated by the settlement agreement, should be allowed (Part 3 of Article 150 of the Law on Bankruptcy).

The participation in the settlement agreement of the third parties shall be allowed, if their participation does not violate the rights and legitimate interests of the creditors, whose claims are included in the register of creditors' claims, as well as the creditors, whose claims have arisen after the date of accepting an application for declaring the debtor a bankrupt and the period of execution of which has become due before entering into the settlement agreement (Part 1 of Article 157 of the Law on Bankruptcy).

By implication of the explanation contained in Paragraph 8 of Information Letter of the Presidium of the Supreme Arbitration Court of the Russian Federation No. 97 of December 20, 2005 “The Review of the Practice of Consideration by the Arbitration Courts of the Disputes Related to Entering into, Approving and Terminating the Settlement Agreements in the Cases on Insolvency (Bankruptcy)” the conditions on a debt transfer and imposing the execution on a third person shall be allowed to be included in the settlement agreement.

Thus, the possibility of the participation of the third parties, who do not assert the independent claims regarding the subject of the dispute, in the cases on insolvency (bankruptcy) exists and the courts have been using it for already long enough.

In addition, in this article I can not ignore the method of conciliation stipulated in Paragraph 33 of Resolution No. 50, which is quite often used by the Intellectual Property Court in the cases on challenging the decisions of the Federal Executive Authority on Intellectual Property to satisfy the objections to granting legal protection to a trademark on the grounds that the legal protection of the trademark has been granted in violation of the requirements of the civil legislation due to the lack of a consent of the Authority or the person, whose consent is required in the cases stipulated by Paragraphs 2, 4 and 6, Subparagraphs 1 and 2 of Paragraph 9 of Article 1483 of the C.C.R.F., as well as in course of the consideration of the cases on challenging the decisions of the Federal Executive Authority on Intellectual Property to refuse to satisfy the objections to the refusal of the state registration of the trademark.

As it is indicated in Paragraph 33 of Resolution No. 50, taking into account the principles of disposition and voluntariness of conciliation in the course of the consideration the case by the Arbitration Court, other agreements between the individual persons may also be a result of conciliation, if such agreements actually lead to a settlement of the dispute.

If the said consent of the relevant person (including the one brought to the participation in the case as a third party without the independent claims regarding the subject of the dispute) is obtained in the course of the consideration of the dispute by the Court, including by entering into an agreement between the party to the dispute and this person, then such consent (agreement) can not be qualified by the Court as a settlement agreement as it has been entered into not between the parties to the court dispute.

However, in the context of the provisions of Article 138 of the APC RF, this consent (agreement) is a result of the conciliation of the party to the case and the person, whose consent to granting legal protection to the trademark in necessary in accordance with the requirements of the civil legislation.

This consent (agreement) shall be a ground for reversal of the decision of the Federal Executive Authority on Intellectual Property and compelling it to reconsider the objection that has served a ground for making by this Authority a decision challenged in the Court.

In this Paragraph, the highest court specifically makes a clause that such consent (agreement) can not be qualified by the Court since the settlement agreement has been entered into not between the parties to the court dispute.

At the same time, I believe that in this case it is not very important what the name of this document is, but sooner what it implies.

Obviously, such agreement is primarily aimed at the elimination of a disputable situation that has arisen between the applicant and the third party, while the Federal Executive Authority on Intellectual Property becomes a participant to this dispute only because its decision does not satisfy one of the disputing parties.

Thus, at the end of the article it can be concluded that the participation of the third party, who does not assert the independent claims regarding the subject of the dispute, at entering into a settlement agreement is possible.

Поделиться
Отправить
Линкануть

Author of article

Roman Larshin

Roman Larshin

Lawyer