Litigating professional liability disputes in Russia

1. What is the structure of the court system where professional liability disputes can be brought?

Professional liability disputes are dealt with under the general procedural rules.

The civil litigation system – when considering of PI claims – includes the civil courts (for cases involving an individual) and the arbitrazh courts (for cases involving legal entities from both sides and/or individual entrepreneurs).

The Russian civil litigation system has the following court structure:

- Civil courts: first instance, appeal court, cassation court and Supreme Court as supervisory court;

- Arbitrazh courts: first instance, appeal court, cassation court, the Board for Economic disputes at the Supreme Court as second cassation, and the Presidium of the Supreme Court as supervisory court

The typical length of time for a dispute to reach the stage of hearings after the claim is accepted by courts of first instance can be from several weeks up to two/three months (judges have the power to extend this). Although the period to deal with the case by the court is deemed to be about two months, in practice it can be difficult to follow this limit. Delays can be caused, for example, by involvement of new participants to the case and/or the need to obtain additional evidence and/or suspension of the proceedings due to any reason.

The decision of the court of first instance will become effective unless it is appealed within one month. The court of appeal usually considers the appeal within, approximately, two months of the decision having been rendered (though there is the possibility that this can be extended). The decision of the court of appeal becomes effective immediately once issued and can be reviewed in the court of cassation, if challenged within two months. The judgments of further courts also come into force at the date they are rendered.

In practice, the period for a case to be considered within the Russian court system varies depending on a case and can last from several months to several years.

At first instance, cases are considered by a sole judge. There are cases when a panel can be allowed (for example, in the case of very complex disputes), but this is the exception rather than the rule. Appeal courts review a case in a panel of three judges.

2. Can ADR be used to resolve large PI disputes?

Yes, although it is not mandatory and the courts cannot compel its use, subject to certain exceptions. The parties have the right to address a mediator, if they wish. This can be done both before and after the court/ arbitration proceedings have started. Mediation is not widely used and there are no adverse consequences if a party unreasonably refuses to mediate.

3. What are the relevant limitation periods applying to professional liability disputes?

The general limitation period, which applies to both contract and tortious disputes, is three years. The limitation period runs from the day a party becomes aware, or should have become aware, of a violation of its rights. Claims are also subject to an absolute limitation period of ten years from the date of the violation, except for claims which are not subject to a limitation period. Limitation of actions does not apply to:

- Claims for the protection of personal non-proprietary rights and other non-material matters

- Claims for compensation for harm caused to the life of health

- Claims by an owner or other possessor to cease violations of his rights, even if the violation does not result in deprivation of possession claims of bank depositors against the bank for the payout of deposits

- Other claims as provided for by the law

4. How is litigation against defendants in professional liability cases funded?

Funding of professional liability cases does not differ from the general practice on funding litigation. Litigation is normally funded by the disputing party. Therefore, initially, the party pays the court duties, lawyers' fees, and other expenses. Currently, there is no regulation of third-party funding of litigation in Russian legislation. As such, there is no direct prohibition of this funding but, in practice, third party funding is not used. Contingency fees are also allowed.

5. Can litigants with similar claims bring a form of collective action in a professional liability dispute? In what circumstances is this permitted?

Russian procedural law allows cases to be merged and parties to be joined, although such claims are not defined as "class actions" as such. The courts manage the claims collectively, but adjudicate on each claim within the group separately. The claimants may appoint a lead claimant who is entitled to support and represent the claims of the whole group.

A joint action can be brought by several claimants, defined as "procedural joint participation" if the subject matter of the claim is the same for each claimant and each claimant has the same substantive legal relationship with the defendant.

6. How long does it take (on average) for a professional liability dispute to get to judgment after trial from issuance of a claim?

In accordance with general procedural law, a case will be considered by the first instance court within two or three months from the date of acceptance of the statement of claim and initiation of the proceedings (depending on the court: that of the general jurisdiction, or the arbitrazh court).

The judgment of the first instance court can be appealed. In practice, litigation with involvement of all court levels may, on average, take from six months to a year.

7. Will the courts recognise an agreement between the parties on jurisdiction and choice of law?

Yes. Generally, the courts will take into account jurisdiction (called "prorogation"), choice of law, and arbitration agreements.

If an interested party (the defendant) wishes to challenge the jurisdiction of the court (or arbitrator), the application must be made no later than when that party submits its defence on the merits. Otherwise, the defendant will be deemed to have accepted the jurisdiction of the court in which the claim was brought.

The application of foreign law is regulated by Art. 1191 of the Civil Code of the Russian Federation (the "CC") and the corresponding procedural rules. The content of the foreign law must be proved by sufficient evidence, failing which, the court will apply Russian law. If the consequences of application of foreign law are manifestly in contradiction with the public policy of the Russian Federation (with due consideration of the nature of relationships with a foreign element), the respective Russian law provisions will be applied, if necessary. A difference in the legal, political or economic system of the respective foreign state and that of the Russian Federation (Art. 1193 of the CC) is not regarded as a sufficient reason to disapply foreign law.

It should be noted that for professional liability claims, where the professional's activities are regulated by specific Acts, issued by Russian competent authorities, and relate to activities in the Russian Federation, the court may consider non-Russian law to be irrelevant and may prefer to apply Russian law.

8. Are there any circumstances in which damages will be awarded other than to compensate the claimant for loss suffered?

The measure of damages can be for actual loss suffered or loss of profit (in certain cases). There is no cap on the amount of damages that can be recovered.

In certain cases, compensation for moral harm (including physical or mental suffering) can be granted. Moral harm should, in any case, be the consequence of a violation of personal, non-proprietary rights or infringement of other non-material rights belonging to the claimant. In determining the amount of compensation for moral harm, the court will take into account the degree of fault of the violator and other relevant considerations. The court must also consider the degree of physical and mental suffering, taking into account the individual characteristics of the complainant.

Punitive damages are not generally recognised in Russia. However, the function of punitive damages can be performed by a forfeit (or penalty) under Art. 330 of the CC. A forfeit, under Russian law, is the equivalent of liquidated damages in other common law systems, however, notably, a forfeit can exceed the amount of losses suffered, thus becoming punitive. The courts have the discretion to reduce the amount of a forfeit under certain circumstances.