No ‘Gesheft’: appellate court blocks Dutch company’s attempt to bankrupt Krasnodar developer – Ekaterina Tumanova is asked to comment on the case by Kommersant

The 15th Commercial Court of Appeal refused to open bankruptcy proceedings against Krasnodar-based Gesheft LLC at the request of Dutch company Certhon Projects B.V. The claim was based on a debt exceeding €1 million, previously awarded by the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation.

While the court of the first instance supported the creditor’s application, the appellate court reached the opposite conclusion. Among its reasons were the creditor’s failure to seek enforcement through bailiffs and public policy considerations: according to the court, the creditor belongs to a group of companies financing a “hostile” state.

KK&P Trial Lawyers Senior Associate, Ekaterina Tumanova, considers the judgment controversial.

According to her, the most notable finding of the appellate court is the classification of the creditor’s conduct as an abuse of rights (Article 10 of the Russian Civil Code) solely based on its affiliation with an “unfriendly” group. At the same time, the court’s reasoning appears general and relies on references to counter-sanctions legislation without detailed analysis.

“This line of reasoning raises serious doubts as to the soundness of the judgment. At the same time, in sanctions-related disputes, such an approach is likely to be actively relied upon by Russian parties,” Tumanova notes.

A separate issue concerns the application of the public policy doctrine. Traditionally, this ground is invoked in the recognition and enforcement of foreign court and arbitral awards. However, in this case the award was rendered by the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation. Moreover, in separate proceedings (Case No. A32-25587/2024), Russian courts had already confirmed that the award did not violate public policy. Reconsidering this issue at the bankruptcy stage appears questionable.

The appellate court also criticised the creditor for not having sought a writ of execution. Tumanova notes that the law does not require prior enforcement: Paragraph 4 of Resolution No. 60 of the Plenum of the Supreme Commercial Court expressly allows a bankruptcy petition to be filed on the basis of an arbitral award without prior enforcement proceedings.

The court further referred to the creditor not having a bank account in Russia. She considers this argument formalistic: neither Russian nor foreign sanctions regimes impose an absolute prohibition on performing obligations towards foreign creditors. The absence of a bank account is a technical, but not legally insurmountable, obstacle.

Tumanova assesses the prospects of cassation appeal with cautious optimism:

“The circuit court has previously addressed the issue of public policy in the context of enforcing an ICAC award, and its position differed from that of the appellate court.”

The name of the debtor company. i.e.,  “Gesheft” (from German Geschäft, meaning “deal” or “profit”), takes on an ironic tone in this case as, at this stage, it is the debtor who remains in the advantageous position.

Full version of the article (in Russian): https://www.kommersant.ru/doc/8570510?query=ян