Bankruptcy against the Constitution – Newspaper Kommersant No. 36 (7481) of 03/02/2023
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The Supreme Court of the Russian Federation (SC) will determine where to draw the line between the right of a debtor citizen to legal assistance and the interests of his creditors. The decision will be made as part of the bankruptcy case of the ex-owner of the Antipinsky Oil Refinery, Dmitry Mazurov, who paid 11 million rubles. civil litigation lawyers. The courts decided to collect this money in the bankruptcy estate. Experts note that access to qualified assistance is one of the fundamental constitutional guarantees, but bankruptcy can impose restrictions on these freedoms.
The Sun will have to find a balance between the rights of the debtor and his creditors in the course of bankruptcy. In October 2018, Dmitry Mazurov signed an agreement for 11 million rubles with the association of lawyers “Law Bureau of EMPP of the City of Moscow”. for the provision of legal services. As part of the bankruptcy of Mr. Mazurov (declared insolvent in June 2020), his financial manager decided that the transaction violated the rights of creditors, and asked the court to recognize it and payments as invalid.
The founder of the New Stream group and the ex-owner of the Antipinsky Oil Refinery, Dmitry Mazurov, has been under arrest since July 2019. He is accused of embezzlement of the plant’s funds and particularly large-scale fraud, including the theft of a loan from Sberbank for 1.8 billion rubles. In October 2021, the criminal case was transferred to court, the next meeting will be held on March 2.
The Moscow Arbitration Court rejected the claim of the manager, not finding intent in the transaction in order to overcome the order of repayment of creditors’ claims. The court also found unproven the overestimation of the cost of services. But the association protected the debtor from the claim of Debian Access Ltd for $13.9 million (910 million rubles). But the Court of Appeal allowed the manager’s claim, finding that, due to professionalism, the association knew about the insolvency of the debtor and about the purpose of harming his creditors. The Court of Cassation recognized these conclusions as correct.
The ECPP and lawyer Vasily Tregubov appealed to the Supreme Court, pointing out that such a position deprives a citizen of “the constitutional right to receive qualified legal assistance if he has signs of insolvency.” The exercise of this right cannot be called “bad faith acts aimed at causing harm to his creditors,” the applicants argue. According to them, the services were provided, and at the time of the conclusion of the contract, the debtor was solvent, which is confirmed by his tax return for 2018. The case was transferred to the Economic Board of the Armed Forces, the hearing will take place on March 27.
Last year, the SC looked into a similar issue about lawyers’ costs: the right of a bankrupt company to pay an employee lawyer to defend a criminal case. The dispute about payment of legal services for bankrupt citizens was considered for the first time.
Dmitry Savochkin, a partner at Sotheby’s law firm, admits that access to justice and the ability to protect one’s rights with the involvement of qualified lawyers “are one of the fundamental constitutional guarantees.” However, the lawyer clarifies, bankruptcy “imposes certain restrictions on the freedom of such attraction.” In this case, we are talking about the provision of legal services before the onset of bankruptcy, specifies the general director of the Union of Arbitration Managers SRO “Northern Capital” Valeria Gerasimenko: “From this position, the contract is the same as all other transactions concluded by the debtor, respectively, can be challenged if there are a number of conditions.”
In particular, it is necessary to establish whether “the services actually paid for were rendered and whether their price is too high,” Mr. Savochkin believes. Case by Case lawyer Yulia Mikhalchuk specifies that for this it is necessary to compare the price of the contract with the average market value, for example, based on expert research. At the same time, she believes that the courts should also “take into account the effect and benefit for the debtor of legal assistance.” Valeria Gerasimenko believes that “in a situation where on one side of the scale there are claims for 910 million rubles, and on the other – expenses for 11 million rubles, the economic effect for the debtor is obvious.”
Thus, the Supreme Court should clarify whether there is any “cost limit for the constitutional right to receive qualified legal assistance,” notes David Kononov, head of the bankruptcy practice at the Lemchik, Krupsky and Partners law firm, and if there is none, then how exactly to determine the “equivalence provided legal services. According to him, this will make it possible to draw a line between the abuse of the right and conscientious behavior when a bankrupt citizen pays for legal services. It is also important, Yulia Mikhalchuk believes, for the Supreme Court to clarify “whether lawyers should carefully ascertain whether the principal has signs of bankruptcy and whether they can, on this basis, refuse legal assistance to a person.”
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