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The Ministry of Justice of the Russian Federation has presented for public discussion the draft law, which envisages the application of secondary liability of the owner of property of budgetary institution and autonomous institution to the obligations arising from a standard form contract. The amendments are expected to apply to the legal relations arisen after 1 January 2011. The draft law has been developed in pursuance of the Constitutional Court’s Ruling No.23-P dated 12 May.

Let us remind you that the RF Constitutional Court then stated that arbitration courts, when passing judgments on the impossibility of holding the owner of property of liquidated municipal budgetary institution secondarily liable for such institution’s obligations arising from a standard form heat supply contract, shall be governed, inter alia, by Clause 5 of Article 123.22 of the Civil Code, and shall consistently rely on specifics of the form of incorporation of municipal budgetary institution as a legal entity established by law. In doing so, neither general or specific purposes of establishment or important aspects of activity of municipal budgetary institution within the authority vested in it, the performance of which requires the conclusion by it of standard form contracts, nor impossibility of its counterparties to refuse to conclude or perform such contracts shall be disregarded.

“Regardless of the provision of Article 17 (Part 3) of the Constitution of the Russian Federation stating that the exercise of the rights and freedoms of man and citizen must not violate the rights and freedoms of other people, the existing approach may not ensure the proper balance between the legitimate interests of debtor and creditor, since it does not exclude the abuse of rights by the debtors, which are municipal budgetary institutions, whose property in some cases actually appears to be “protected” by their public owner against property liability to counterparties”, – the Constitutional Court has noted.

It has ruled to declare Clause 5 of Article 123.22 of the Civil Code inconsistent with the Constitution of the Russian Federation since it excludes the possibility of holding the owner of property (a founder) of liquidated municipal budgetary institution secondarily liable for its obligations arising from a standard form contract (including a heat supply contract). <...>

Yuriy Tatarinov, Counsel of Energy Practice of the VEGAS LEX law firm, noted that, according to the Report of the International Monetary Fund dated 8 March 2019, 50% of employment in the formal sector of Russian economy is secured by budgetary institutions and major companies with public ownership. 

He noted that the existing interpretation of Clause 5 of Article 123.22 of the Civil Code of the Russian Federation has resulted in the wide practice of using budgetary institutions as the “legal cover” accumulating the definitely “unrecoverable” debts, which negatively affects the quality of the “portfolio of consumers” of resource providers (RPs) and cause damage to bona fide RPs and their consumers (in the form of deterioration in the quality of services, inclusion of bad debts in tariff, etc.).

Yuriy Tatarinov noted that, for this reason, it is stated in the Constitutional Court’s ruling that the legal framework must take into account the possibility of holding the owner of property (a founder) of liquidated municipal budgetary institution secondarily liable for its obligations arising from a standard form contract (including a heat supply contract).

According to him, the amendments, if adopted, would positively affect the practice of recovery of debt for supplied resources from budgetary institutions in favour of RPs.

See the full text of the article at: https://www.advgazeta.ru/novosti/minyust-predlozhil-privlekat-v-subsidiarnoy-otvetstvennosti-uchredi...