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Author
Roman Larshin

Senior lawyer

17 May 2022

Legal claim as a way to save time and money

In 2016, Federal Law No. 47-FL dated 02.03.2016 “On Amendments to the Arbitration Procedure Code of the Russian Federation” was adopted, which, among other things, amended Part 5 of Article 4 of the Arbitration Procedure Code of the Russian Federation, establishing mandatory compliance pre-trial dispute settlement procedure.


Thus, the said norm was worded as follows: “A dispute arising from civil legal relations may be submitted for resolution by the arbitration court after the parties have taken measures for pre-trial settlement after thirty calendar days from the date of sending the claim (requirement), if other terms and ( or) the procedure is not established by law or by agreement, except for cases on establishing facts of legal significance, issues on awarding compensation for violation of the right to legal proceedings within a reasonable time or the right to enforce a judicial act within a reasonable time, cases of insolvency (bankruptcy), cases on corporate disputes, cases on the protection of the rights and legitimate interests of a group of persons, cases on the early termination of the legal protection of a trademark due to its non-use, cases on contesting decisions of arbitration courts. In addition, economic disputes arising from administrative and other public legal relations may be referred to an arbitration court after the observance of the pre-trial dispute resolution procedure if it is established by federal law.


Thus, the legislator provided that before going to court, the plaintiff must send a letter of claim to the alleged defendant, wait 30 days, and only after this period, if the dispute cannot be resolved, he can go to court.


Many perceived this rule negatively, believing that it would prevent the speedy resolution of the disputed situation since they considered the claim an ineffective dispute resolution tool.


It should be noted that the previous version of part 5 of article 4 of the Arbitration Procedure Code of the Russian Federation provided for a mandatory pre-trial procedure only if such a procedure is established by federal law for a particular category of disputes or an agreement provides for it.


For the most part, the introduction of a mandatory claim procedure has affected cases related to the presentation of material claims, in which claims are made for the recovery of funds (debt, penalty, compensation, etc.).


At the same time, since I mainly specialize in disputes on the protection of intellectual property rights, I cannot fail to mention that clause 5.1 of Article 1252 of the Civil Code of the Russian Federation provides that if the copyright holder and the infringer of the exclusive right are legal entities and (or) individual entrepreneurs and the dispute is subject to arbitration, before filing a claim for damages or payment of compensation, the right holder must file a claim. At the same time, a claim for damages or payment of compensation may be brought in the event of a complete or partial refusal to satisfy the claim or failure to receive a response to it within thirty days from the date the claim was sent, unless the contract provides another period.


In addition, Federal Law No. 147-FL of July 1, 2017, "On Amendments to Articles 1252 and 1486 of Part Four of the Russian Federation Civil Code and Articles 4 and 99 of the Arbitration Procedure Code of the Russian Federation”, which amended Article 1486 of the Russian Federation Civil Code (hereinafter – the Russian Federation Civil Code, the Code), establishing a mandatory pre-trial procedure for settling a dispute in cases of early termination of trademarks legal protection due to their non-use.


So, following paragraph two of paragraph 1 of Article 1486 of the Russian Federation Civil Code an interested person who believes that the right holder does not use the trademark concerning all goods or part of the goods for the individualization of which the trademark is registered sends such a right holder a proposal to apply to the federal executive body for intellectual property with an application for waiver of the right to a trademark or to conclude with an interested person an agreement on the alienation of the exclusive right to a trademark in respect of all goods or part of the goods for the individualization of which the trademark is registered (hereinafter referred to as the offer of the interested person). The offer of the interested person is sent to the right holder at the address specified in the State Register of Trademarks or the corresponding register provided for by an international treaty of the Russian Federation.


At the same time, if within two months from the date of sending the proposal of the interested person, the right holder does not submit an application for waiver of the right to a trademark and does not conclude an agreement with the interested person on the alienation of the exclusive right to a trademark, the interested person within thirty days after the expiration of the specified two months has the right apply to the court with a statement of claim for early termination of the legal protection of a trademark due to its non-use (paragraph four of paragraph 1 of Article 1486 of the Russian Federation Civil Code).


On the one hand, the establishment of a mandatory pre-trial procedure entails an increase in the time for consideration of cases.


One of the reasons for introducing a mandatory claim procedure, it seems to me, was that the number of cases considered by the courts is steadily growing every year. This is seen from the statistics given on the courts' websites and published on the website of the Supreme Court of the Russian Federation.


So, for example, according to the information on the results of the work of the Moscow Arbitration Court for 2009, the average monthly workload per judge (excluding claims received by the bankruptcy court, applications, complaints, and petitions) in court amounted to 111 cases on received statements of claim and 96 cases - on resolved statements. At the same time, in 2008, these figures were at the level of 64 and 52 cases, respectively.


Then, as of 2018, on average, a Moscow arbitration judge already had over 170 cases. At the same time, it should be noted that such statistics are calculated based on the average of all judges; that is, they include the indicators of the chairman of the court, his deputies, as well as the chairmen of the compositions, who, under their positions, should be engaged not only in the administration of justice but also administrative and administrative functions, in connection with which they are assigned a smaller number of cases, in connection with which the share of cases considered by ordinary judges exceeded the figure of 200 cases per month per judge.


The growth of incoming claims entailed a burden on the judges and the court apparatus, which, without exaggeration, was forced to work 16 hours a day and seven days a week, which also affected the quality of the consideration of cases, and caused the parties to resent the constant delays in court hearings. And postponement of litigation for a long time, violation of the terms of production and quality of judicial acts.


At some time, they tried to compensate for the increased workload by increasing the judiciary, but, unfortunately, this measure did not have unlimited potential, since newly appointed judges had to be provided with apparatus (assistants, secretaries, specialists), and people needed to be paid salaries, to provide them with measures social support. In addition, the judges and the apparatus had to be provided with office courtrooms, which, for obvious reasons, can be done only as long as the courthouse allows.


Of course, the introduction of a mandatory pre-trial procedure was not the only measure envisaged by the legislator to reduce the courts' workload. These tools include the introduction of writ and simplified proceedings. However, the claim procedure was an additional filter, allowing the parties to the dispute to settle it without resorting to judicial protection.


The above statistics, it seems to me, indicate that people have forgotten how to talk and negotiate, find common ground and seek compromises. So, having seen in court an effective tool for resolving the conflict, business entities completely forgot that it is not always necessary to involve an arbitrator.


Many may disagree with the statement made in the subject of the article that a claim is a way to save time and money, asking: "what is the saving here?". And the savings, it seems to me, is obvious, and here's why.


So, let's consider the claim procedure as an opportunity to save time. Such an opportunity arises from the fact that your requirements will likely be satisfied by sending a well-written and motivated claim to the opponent without a court decision.


It should also not be forgotten that, if we evaluate the actual terms for considering a case in court, then they average 4-6 months when considering a case in a general manner and about 2-3 months when considering a case in summary proceedings, plus the period for one month appeal and about two months consideration of the case in the court of appeal, which increases the period for obtaining a judicial act subject to execution to 6-9 months. At the same time, the consideration and satisfaction of the claim may take from several days to a month, depending on the specific dispute.


This trend is well seen in intellectual property cases.


For example, the site owner ordered the site design development from a freelancer, and it was assumed that the freelancer would use licensed content in the development. However, the developer decided to save money and take images for the site from open sources, not taking into account that their rights belong to another person. After receiving the finished work, the site owner launches it for users to access and does not assume that he violates someone's rights. At some point, the copyright holder of content illegally used by a freelancer sees that his rights are being violated and intends to protect them. Previously, the right holder would have immediately followed a claim for an obligation to stop illegal use and recover compensation. But subject to current legislation, if the copyright holder wants to recover compensation, he will first have to send a claim. So, the site owner, having received a claim and sorted out the situation, can, without waiting for the filing of a claim, agree with the copyright holder on the voluntary termination of the violation and, perhaps, even without paying compensation, thereby the parties will save their time, effort, nerves and money.


A similar situation applies to cases of early termination of the legal protection of trademarks due to their non-use. Why initiate filing a claim, initiating proceedings, waiting for the defendant to be notified of the dispute to try to buy a trademark from him or obtain a letter of consent to register his trademark if the procedure provided for by law in sending an offer of an interested person often allows the parties to resolve these questions in due course.


By the way, if we consider the pre-trial procedure in cases of early termination of the legal protection of trademarks in terms of quantitative indicators (the number of cases considered), then according to the statistics published on the website of the Court for Intellectual Property Rights, it is seen that the number of cases considered in this category in 2014-2016 averaged 430 cases, while after the introduction of the mandatory claim procedure, their number decreased and averaged 310 cases, which indicates a decrease in the quantitative indicator by 25 %. These figures indicate that about 100 potential cases per year do not reach the court, and the parties resolve the dispute through negotiations. Therefore, it seems that the statistics clearly illustrate the effectiveness of the claim procedure for this category of disputes.


If we evaluate the claim as a tool to save money, then, in my opinion, everything is obvious. On average, the cost of preparing a letter of claim in law firms is about 10-15% of the cost of preparing a lawsuit. As a rule, the cost of preparing a claim does not include services for the collection of evidence, as well as services for representing interests in the courts of appeal and cassation, which can triple the number of expenses incurred in the court of the first instance, which in percentage terms will determine the cost of preparing a claim in the amount of 3-5% of the cost of doing business. It should not be forgotten that the courts rarely collect legal costs in full, which indicates that it is extremely unlikely for the plaintiff to recover the money spent on lawyers handling the case.


Thus, in my opinion, the introduction of a mandatory pre-trial dispute settlement procedure was useful both for the courts and for the parties to the dispute.


At the same time, I consider it necessary to note that the Civil Procedure Code of the Russian Federation contains a rule that an application is filed with the court after compliance with the claim or other pre-trial procedure for settling a dispute, if this is provided for by federal law for this category of disputes (part 4 of Article 3 of the Civil Procedure Code of the Russian Federation). By the way, there are not so many such disputes; for example, they include disputes about payments under an OSAGO agreement, disputes when terminating an employment contract, eviction, and others.

At the same time, disputes in the field of protection of intellectual property rights, if the dispute is subject to consideration in a court of general jurisdiction, even though one of the requirements is for the recovery of compensation, do not require observance of a mandatory claim procedure.


However, guided by the above motives, I believe that even in cases where a mandatory pre-trial dispute resolution procedure is not provided, it is advisable to send a reasoned and substantiated claim before filing a claim, which can save you time and money. Indeed, there are many more interesting things in our world than the court, on which they can be spent.

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