Corruption out of the limitation period
31 October 2024 Russia's Constitutional Court (hereinafter «CC») issued a long-awaited Ruling No. 49-P (hereinafter the «Ruling») (https://doc.ksrf.ru/decision/KSRFDecision791923) concerning the application of limitation periods for «anti-corruption» lawsuits of the prosecutor’s office. Despite the rather heated debate in the legal community on this issue, the outcome of the examination was recognition of articles 195, 196, paragraph 1 of article 197 and paragraph 1, paragraph 2 of article 200, paragraph 2, and paragraph 2 of article 208 of the Civil Code (hereinafter «GC RF») not in accordance with the Constitution of the Russian Federation (hereinafter «Constitution»). Some details and consequences of this decision are discussed below.
Case history
The reason for the dispute was the request of the General Prosecutor’s Office of the Russian Federation (hereinafter «GP») to transfer the revenue of the Russian Federation shares of 22 business companies with a total value of more than 9 billion rubles. The basis for the claim was the acquisition of disputed property with funds received in circumvention of the prohibitions on combating corruption from the former beneficiaries of Agroconcern «Pokrovsky». One of the arguments against the position of GP, as in many other similar cases initiated by GP, was an argument for waiving the limitation period and, as a consequence, being required to deny GP satisfaction. Due to the ambiguous and somewhat controversial court practice, the case was suspended for further clarification from CC.
Position of CC
It is worth noting that the CC faced an important task - without violating the certainty of civil turnover, to find a balance between public and private interests. Moreover, the CС has previously considered the issue of limitation and stressed the importance and inalterability of the limitation periods, since otherwise «The absence of time limits would result in a detriment to the legally protected rights and interests of respondents and third parties, who could not always take into account in advance the need to collect and preserve information and facts relevant for the investigation»[1].
Despite the previous position, CC was decided on «anti-corruption» claims not to apply limitation periods. To be more precise, the CC said that the current limitation periods on its criteria, in particular the fixed time limits (3 years and 10 years respectively) are not appropriate for the protection of public interest because, among other things, Corruption is a «socially dangerous phenomenon».
It should also be noted that the most important question remained unresolved - what falls under «corruption offence»? The current legislation does not answer this question and the CC has not formulated its position on it.
Despite the previous position, CC was decided on «anti-corruption» claims not to apply limitation periods. To be more precise, the CC said that the current limitation periods on its criteria, in particular the fixed time limits (3 years and 10 years respectively) are not appropriate for the protection of public interest because, among other things, Corruption is a «socially dangerous phenomenon».
It should also be noted that the most important question remained unresolved - what falls under «corruption offence»? The current legislation does not answer this question and the CC has not formulated its position on it.
How does the CC’s position affect deprivatization?
We also have to ask whether the Ruling has established limitation periods for other claims made by GP in the last few years, particularly when challenging the privatization. Practice of the recent years has shown that the GP effectively challenged the outcome of the privatization, with reference to violations committed 20 or 30 years ago and violations identified by the GP itself following the previous filing of a claim.
It seems to us that the Constitutional Court has unambiguously determined in the Ruling that limitation periods should be applied to claims for deprivatisation. At the same time, the CC certainly did not specify from what point such limitation periods should be calculated and what criteria the courts should be guided by when calculating them. It should be noted that limitation periods were already applicable in deprivatisation claims and the problem could be, among other things, the manner in which they were calculated, for example, rather than their inapplicability in principle in a particular case.
What is also important to note is that the Ruling has come to the defence of bona fide acquirers, including ‘anti-corruption’ cases. Thus, the CC noted that ‘the interests of bona fide participants in legal relations must be ... ensured even when the property of persons who have committed acts of corruption is converted to the income of the Russian Federation’. In practice, this should mean that the rights of bona fide purchasers should be
[1] CC Ruling No. 3-P of 15 February 2016 (https://doc.ksrf.ru/decision/KSRFDecision223459.pdf)
It seems to us that the Constitutional Court has unambiguously determined in the Ruling that limitation periods should be applied to claims for deprivatisation. At the same time, the CC certainly did not specify from what point such limitation periods should be calculated and what criteria the courts should be guided by when calculating them. It should be noted that limitation periods were already applicable in deprivatisation claims and the problem could be, among other things, the manner in which they were calculated, for example, rather than their inapplicability in principle in a particular case.
What is also important to note is that the Ruling has come to the defence of bona fide acquirers, including ‘anti-corruption’ cases. Thus, the CC noted that ‘the interests of bona fide participants in legal relations must be ... ensured even when the property of persons who have committed acts of corruption is converted to the income of the Russian Federation’. In practice, this should mean that the rights of bona fide purchasers should be
[1] CC Ruling No. 3-P of 15 February 2016 (https://doc.ksrf.ru/decision/KSRFDecision223459.pdf)
purchasers. Inference, as it seems to us, is extremely optimistic, but let's see how this position of the Constitutional Court will be played out in court practice in the near future.
What inference do we draw? On the one hand – the Ruling made a certain clarity regarding the applicability, or rather, inapplicability of the limitation periods established in Russian law to anticorruption actions. Some practices have already reacted to the Ruling with comments on ‘the final nail in the coffin of anti-corruption cases’. On the other hand, in spite of this, practitioners now have an opportunity to ‘fight’ with GP on deprivatisation claims. Whether they will get this opportunity is an open question that only time will tell.