Attorney’s services: losses or expenses?

Dmitry Manuylov, Associate of the Law Firm "YUST"

Corporate Lawyer, No. 7, 2013.

It would seem that the expenses incurred by a person in connection with payment for the attorney services in a court of arbitration are losses mentioned in clause 2 of Article 15 of the CCRF, even more so that protection of breached rights is one of the objectives of arbitration proceedings. However, this provision should not be interpreted in such a straightforward manner.

It is that pursuant to part 1 of Article 110 of the APCRF the litigation costs incurred by the case participants, for whose benefit the court act has been made, are exacted by the court of arbitration from elsewhere. And the expenses of payment for the attorney services incurred by the case participant, for whose benefit the court act has been made, are exacted by the court of arbitration from the other case participant (clause 2 of Article 110 of the APCRF).

Therefore, the APCRF as well as the CCRF contains a provision, pursuant to which the expenses of payment for the attorney services may be exacted from the losing party. For the purposes of the APCRF, such expenses are litigation costs, and their distribution is done according to the rules fixed by Article 9 of said Code (“Litigation costs”).

It would seem, therefore, that there are two ways to compensate the expenses of payment for the attorney services, but the analysis of the arbitration court practice shows that the request for compensation of those as losses if ineffective but for some exceptions.

First of all, this is explained by the legal approach of the Board of the HCA of Russia to the application of the considered provisions of the civil and arbitration procedural legislation, in connection with which the litigation costs of payment for the services of advocates and other persons acting as attorneys in the courts of arbitration are to be exacted pursuant to Chapter 9 of the APCRF (clause 1 of the Information letter No. 121 of the Board of the HCA of Russia dated 05.12.2007) (hereinafter – the “Information letter”).

Hence, the arbitration court practice acts on the premises that the expenses that arise in connection with reading the case by an attorney of the organization cannot be exacted on the basis of Article 15 of the CCRF, because such expenses are litigation costs incurred by the case participants, which are compensated pursuant to special rules fixed by Article 110 of the APCRF.

However, such approach to the exaction of attorney services payment is not indisputable. For example, the Constitutional Court of Russia explains that the expenses of court representation and legal services are included in the losses that are to be compensated under Article 15, 16 of the CCRF (Determination No. 22-O by the Constitutional Court of Russia dated 20.02.2002) (hereinafter – “Determination 22-O”). The fact that the Determination 22-O was issued, when the APCRF of 1995 was in force (expired in 2002), which did not stipulate compensation of attorney services expenses, cannot be a motive for a refusal to compensate for such expenses as losses, including for the following reasons. <…>

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