Elena Ostanina Guarantor’s Bankruptcy and Principal’s Obligations
Case Comment on the Judgments of the Chamber for Commercial Disputes
of the SC RF No. 305-ЭС18-11743, 3 December 2018, and No. 304-ЭС18-20504,
20 March 2019
In the analyzed cases, the problem was discussed — whether the principal should pay something to
the bank (guarantor) for the service of providing a guaranty. The guarantor was declared bankrupt
before the guaranty expired. The principal has ceased to pay under an agreement to provide a
guaranty. The Supreme Court decided that it was illegal. The Supreme Court insists that the
principal must pay under the contract even if the bank (guarantor) had become bankrupt. If the bank
(guarantor) has been declared bankrupt, the courts should find out the new price of the guaranty, and
the principal is to pay this reduced price. The author criticizes this interpretation and argues that after
the declaration of insolvency of the guarantor, the guaranty loses its security qualities. Therefore, the
guarantor does not fulfill the contractual obligation to provide protection. Principal has to pay for the
guaranty only if the guarantor provides protection. Therefore, the author considers that the principal
has the right to refuse further payment if the guarantor is declared bankrupt.
independent guarantee, bankruptcy, state and municipal contract, contract to provide guaranty
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Arutiun Sarkisian Foreclosure on a Sole Residence in Bankruptcy: The Search for a Balance of Values
Case Comment on the Judgment of the Chamber for Commercial Disputes of the SC RF
No. 305-ЭС18-15724, 29 November 2018
The article analyses the problem of foreclosing on the sole residence of an insolvent debtor as part
of bankruptcy proceedings through the prism of the «Fruschak case». The main issue is how to
strike the balance between interests of creditors and debtors. The author criticizes the position of the
Supreme Court of the Russian Federation regarding the incompleteness of motives and indicates a
number of practical problems: the control function of the court in a bankruptcy case; judicial estoppel
in a bankruptcy case; the purpose of initiating the bankruptcy of citizens; and the limits of immunity
in a bankruptcy case. According to the author, de lege lata it is possible to use the mechanism of
replacement housing in the case of the sale of a sole residence.
insolvency (bankruptcy), arbitrazh procedure, living quarters, property immunity, abuse of right
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Andrey Egorov Netting and Setting Off: Correlation of Concepts for Challenging Transactions in Bankruptcy
In the article, the author attempts to understand and doctrinally describe the theory of netting
(balance), with reference to which the Supreme Court of the Russian Federation, in a number of
rulings made in 2018, denied the challenge of set-off transactions under an independent contractor
agreement, despite the fact that the transactions were made right before the bankruptcy of one of the
parties to the agreement. The best explanation of this theory, according to the author, is the concept
of automatic set-off, which does not require any statements of the parties. Such set-off may occur at
a moment specified in the agreement or arising from the legal nature of the obligation, in particular,
at the time of termination of the contract.
set-off, insolvency (bankruptcy), balancing of counter claims, balance theory, disputing of preference transactions
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Sergey Budylin Did the Butler Do It? Theory of Evidence for Lawyers
This article is an attempted popular exposition of a mathematical theory known as the «evidence
theory» or the «theory of belief functions». The exposition is intended mostly for lawyers having some
interest in mathematics. The theory mathematically describes the process of fact-finding by a judge
or jurors on the basis of the evidence presented to them. The theory may be viewed as a next stage
of development compared with the better-known «Bayesian» approach to the problem.
еvidence theory, belief functions, probability, evaluation of evidence, standard of proof
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Konstantin Savryga Agency Problem in Russian Corporate Sector: Superconcentration, Conglomerates and State Control (Part II)
The fourth part of the article deals with the analysis of judicial statistics in cases against the
shareholders and management of a company. Based on this analysis, the author comes to
the conclusion that the hypothesis on the effectiveness of conglomerates is correct, since they
participate in only a small number of cases and mainly suffer from a vertical agency problem. At the
same time, the author has to acknowledge that on average, the vertical agency problem was higher
than was expected. The fifth part of the article presents proposals that can increase the efficiency
of the corporation and protection of shareholders’ rights. The first subsection proposes reforming
the fiduciary liability of controlling persons in conglomerates and entitling the beneficiary to file
claims on behalf of the corporation. The second subsection proposes some measures that will
increase the protection of minority shareholders in corporations with concentrated share capital;
in particular, the author proposes introducing the possibility of entitling minority shareholders to
file a direct claim against the majority shareholder for the recovery of losses and to request the
repurchase of shares.
corporate law, economic analysis of law, agency problem, shareholder protection, repurchase of shares
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Dmitry Ilin Corporate Opportunity Doctrine as a Cost-Effective Way to Resolve a Conflict with a Top Manager
There exists case law concerning specific situations of violation of duty of loyalty by companies’
directors (top managers). These situations are those where directors usurp companies’ business
opportunities. However, Russian courts have no uniform approach to the resolution of such cases. On
the contrary, the legislation (or case law) of foreign countries has a Corporate Opportunity Doctrine
(or the COD) which serves to help judges faced with analogous cases.
The COD is intended for the cost-effective allocation of business opportunities between companies
and their directors. The COD is a constitutive part of the duty of loyalty. Under this duty, a company’s
director has an obligation to disclose information about the acquisition of business opportunities.
Then an authority of the company (shareholders or disinterested directors) must approve or deny
such acquisition. If the authority approves a transaction, then the director cannot be held liable for any
harm to the company resulting from this transaction.
In the present article, the author analyses the COD and provides its definition, tests and the procedure
for its application. The author also provides a comparative analysis of the COD in the USA, the UK,
Germany and France. The types of CODs in the abovementioned countries differ substantively. The
difference, in particular, lies in the courts’ purpose: to choose the proper owner of the business
opportunity or to establish the fact of the violation of fiduciary duties.
A distinctive feature of the COD is that business opportunities do not per se belong to a company.
Therefore, a conflict of interests between a director and the company is not obvious.
The present article is one of three parts of the research. The author set the objective of analyzing and
explaining the mechanism of the COD, conducting a comparative analysis of the COD’s models and
describing some specific cases of application of the COD.
corporate opportunity doctrine (COD), fiduciary duties, duty of loyalty, conflict of interests, liability
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Anastasiya Nozdracheva Review of Judicial Practice on the Correlation of the Institution of Debt Forgiveness with Related Statutory Concepts
The review of the judicial practice of debt forgiveness is based on the issues faced by the courts.
The main issue is the correlation of debt forgiveness with donation. The practical significance of the
issue is due to the prohibition of donation between businessmen. The author proves that gratuitous
forgiveness of debt should not always be considered a donation, as donation implies an intention to
donate. This distinction follows from the practice of the superior courts. However, the inferior courts
still do not see this sometimes, and cancel the gratuitous forgiveness of debt, even if a businessman
indirectly benefited from it. The review provides examples of cases with three types of debt forgiveness:
(1) non-gratuitous, (2) gratuitous without intention to donate, and (3) gratuitous with intent to donate.
Other issues in the application of debt forgiveness also relate to the correlation of this concept with
other institutions. The author supports the position of the courts that the waiver of a claim does not
entail the forgiveness of the debt against which the claim was raised. The courts seek to interpret debt
forgiveness as a subtype of waiver of the right provided for by Clauses 6 and 7 of Article 450.1 of the
Civil Code of the Russian Federation. However, as shown in the article, this approach is fraught with
practical problems. For example, it turns out that citizens will not be able to avail themselves of debt
forgiveness, as the waiver of the right (and debt forgiveness as a type of such waiver) is possible only in
business relations. An alternative to debt forgiveness in business relations could be an agreement not
to enforce a debt (pactum de non petendo). The review shows that the courts treat such agreements
negatively, seeing them as a violation of the prohibition of the waiver of the right of claim. The author
considers this approach of the courts to be too strict and inadequate to the needs of business activity.
debt forgiveness, donation agreement, waiver of claim, waiver of right, pactum de non petendo
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