Judicial conflict of competencies

The existence of two main branches of the Judicial (arbitration and courts of general jurisdiction) together with legal uncertainty in the competency matters causes judicial competency conflicts.

Expert’s commentary

Vladimir Starovoytov, Associate of the Law Firm "YUST"

The matter of jurisdiction of the cases may be studied at the example of procedural uncertainty during the settlement of the disputes that arise out of “golden parachute” payments to former company heads. As a rule, the former heads resort to general jurisdiction courts demanding the relevant exactions, and the companies (or shareholders) – to courts of arbitration demanding that the agreement on payment on dismissal be ruled invalid due to the breaches of approval procedure.

Both the courts of general jurisdiction and the courts of arbitration consider such cases in their merits, but pass judgments following opposite ways of reasoning. For example, the HCA of Russia has recently stressed that if an employment contract contains a provision on a higher monetary compensation, the failure to pay such compensation to the employee, provided the latter conducted no guilty actions, on the basis of which he could be dismissed, is a breach by the employer of the dismissal procedure and violation of guarantees stipulated by Article 279 of the LCRF (Determination No. 5-KG 12-61 of the HCA of Russia dated 14.12.2012). Similar position was expressed in the Resolution No. 3-P by the Constitutional Court of Russia dated 15.03.2005.

The courts of general jurisdiction dismiss the employers’ requests to rule the compensation agreements invalid, since labor law does not stipulate the possibility to rule an employment agreement invalid (Determination No. 5-B09-158 by the SC of Russia dated 23.04.2010). In their own turn, if the courts of arbitration ascertain that the “golden parachute’ agreement was executed with breaches of the provisions on approval of transactions with interest or large transactions and that such transaction caused losses, they will rule the respective clauses of the employment agreement invalid (Determination No. VAS-14757/12 by the HCA of Russia dated 15.11.2012).

Collision between legal provisions is the cause of said uncertainty. The courts of arbitration claim clause 3 of Article 69 of the Federal Law No. 208-FZ “On joint-stock companies” dated 26.12.1995. They believe that that Law prevails over the LCRF norms, and that an employment agreement may be ruled invalid if the procedure of its execution was not observed. The courts of general jurisdiction are of the position that the Law No. 208-FZ regulates the procedure of approval of transactions by the company, and the employment agreement is not a transaction. Therefore, civil law and labor law have different subjects and regulation methods. That is why many specialists will be grateful for the respective amendments to the LCRF and the Law No. 208-FZ, which would resolve the collision taking into account the interests of both the employees and the companies (shareholders).

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