The presidium of the Supreme Court of Arbitration has set an important precedent for privatization, according to Kommersant.com, ruling that the three-year limit on suits over privatization deals does not apply if the suit was filed before the legal amendment setting the limit was passed. That ruling opens up the possibility that privatization deals that courts refused to annul because of the expiration of the statute of limitations can be challenged anew. The Constitutional Court may still complicate matters: Should it declare the retroactive application of the amendment unconstitutional, any privatization deal from the last 10 years will be open to dispute.
The presidium of the Supreme Court of Arbitration for the first time considered a case involving the application of the three-year statute of limitations on privatization deals. The amendment to article 181 of the Civil Code to reduce the time limit from 10 to three years went into effect last July 26, giving rise to uncertainty about suits filed before that date but coming to trial after it. The court ruled that the new deadline does not apply to them.
The case brought before the court concerns the privatization of real estate in Moscow. ZAO Mini San bought a space that it had been renting from Moscow city authorities for 1.125 million rubles (US$42,000). On May 5, 2005, the deputy prosecutor of Moscow filed suit to have the purchase-sale agreement overturned, citing violations of the privatization law. The Moscow arbitration court ruled on August 12, after the amendment had taken effect, that the purchasing firm did not have the right to buy the state property it was renting, but refused to satisfy the prosecutors, saying that the statute of limitations had expired.
The amendment was meant as a compromise between the state and business, which was concerned over the possibility of having privatization deals reversed. Legal experts warned immediately that the law was poorly formulated and could be interpreted variously. The arbitration court plenum attempted to make a resolution on the controversial points in the amendment last autumn, but failed to reach an agreement, so lower court rulings were left in force and court practice began to be contradictory, even within Moscow, where the amendment was originally taken to be retroactive.
The court noted that the amendment is not specified as retroactive and that the suit in question was filed within the limit in force at the time. Deputy head of the Private Law Research Center Alexander Makovsky called decision “correct and in conformance with the principles of private law.” Lawyer Konstantin Sklovsky said that “if the suit was filed before the end of the statute of limitations under current legislation, there can be no retroactive application of the amendment.”
The courts decision may affect the dispute between the Russian Federal Property Fund (Rosimushchestvo) and the Domodedovo Airport Complex on the annulment of transfer of federal property to the latter in 1997. Rosimushchestvo filed suit on July 26, 2005, and the suit was rejected by the Moscow Region arbitration court on August 2 and refused an appeal on November 15, citing the new statute of limitations.
The Constitutional Court has accepted a number of appeals and enquiries on the matter. The constitutional question is considerably wider. “If the Constitutional Court does not acknowledge the retroactive force of the amendment, that may provide ground for a large number of new disputes, including on privatization,” Sklovsky said.
