The recent decision of the Judicial Board for Commercial Disputes of the Supreme Court of the Russian Federation dated 08.02.2024 casts new shadows on the future of foreign companies in Russia (especially those linked to 'unfriendly' States).
In fact, the Supreme Court ruled that Russian courts may recognise themselves as competent to declare the state of insolvency of foreign companies that have a significant connection with the Russian Federation. Such a connection may exist where:
a company carries out economic activity in the Russian Federation on a continuous basis;
a company performs economic activity directed to natural or legal persons located in the Russian jurisdiction;
the centre of interests of the persons controlling a company is located in the Russian Federation;
the administrative body, branch or trade representation (Russian: “predstavitel’stvo”) of a foreign company is located in the Russian Federation;
the persons controlling a company have Russian citizenship, or have a temporary residence permit or residence in the Russian Federation or are otherwise connected by corporate law relations with Russian legal persons;
the controlling persons have been subject to subsidiary liability by a Russian court;
assets of the company are located in the Russian Federation, including real estate or leasehold rights to land plots;
a significant part of the company's creditors are Russian legal entities, citizens of the Russian Federation or natural and legal persons whose business activities have a significant connection with the Russian Federation;
a company has executed a significant amount of business transactions in the Russian Federation; and
evidence of the company's insolvency, as well as other evidence relevant to the proceedings, is located in the Russian Federation.
The Supreme Court expressly provided that these connecting criteria are to be understood as non-exhaustive; thus, Russian courts have discretion to determine the occurrence of the significant connection between the foreign company and the Russian Federation for the purpose of declaring its insolvency.
Such an opening poses numerous risks for foreign companies, especially in cases where they still have assets located in the Russian Federation.
Author: Avv. Andrea Barzon a.barzon@bergsmore.com
Contact: Avv. Eugenio Bettella e.bettella@bergsmore.com