The Higher Court of Arbitration ruled that the company may hire an attorney for its director and recover the expenses
In 2011, the Territorial Department of the Federal Service of Financial and Budget Supervision (Rosfinnadzor) of the Samara Region brought Yury Paniushin – a director of Alutech-Povolzhie LLC, a local commercial company founded by Mosbach Construction Limited of Cyprus – to administrative liability. He was charged with violations regarding the reporting of currency operations under part 6 of Article 15.25 of the AOCRF, punishable with a fine of 4 to 5 thousand roubles. A total of 31 rulings were passed against Y.Paniushin, imposing a minimum fine for each case.
Alutech-Povolzhie LLC, in order to contest the punishments, hired an attorney – Mikhail Smorodinov of the Aegis Bar Association - for its director. The agreement with the advocate, besides a fixed amount, also contained the success fee clause – 10% of the amount of the fines imposed on the principal, which the advocate will be able to contest. The attorney drew up 11 complaints on the behalf of Y.Paniushin and represented his interests in the court. M.Smorodinov only managed to win the case in the Samara Region Court, since the district court took the side of the Rosfinnadzor. The first instance court only lifted the liability from Y.Paniushin on one case, due to the insignificance of the offence.
After the victory, Alutech-Povolzhie LLC decided to recover the attorney expenses from the treasury (the case А55-13194/2012). The public officials refused to acknowledge the claim to 47 271 roubles. In court, they stated that the service had brought the official of the company to liability and not the company itself, which allegedly means that the company’s interests were not breached in any way and that the Rosfinnadzor owed nothing to it. However, the Court of Arbitration of the Samara Region was of a different opinion: it upheld the claim by Alutech-Povolzhie LLC almost completely, excluding only the case when Y.Paniushin had been exempted from liability. Judge Natalia Sharueva referred to the “fact of undue bringing to liability of an official, the Claimant, to administrative liability in connection with his performance of organizational, managing, administrative and economic functions, which has been ascertained in court”. The 11th Arbitration Court of Appeal upheld the ruling. It also added to the declaration that “the actions of an official as a body of a legal entity should be considered as the actions of the legal entity itself. This includes the receipt of qualified legal assistance to contesting resolutions by federal executive authorities”. The cassation agreed with such approach in general, only reducing the awarded sum by 12000 roubles of the success fee. According to the Board of the Federal Court of Arbitration of the Povolzhie District, its exaction is contrary to the position of the Constitutional Court and is beyond the subject matter of the agreement on rendering legal services.
For the Rosfinnadzor, there was little left to pay, but the Service still filed a request with the supervision instance. It turned out to be a good move: the three judges of the HCA – Valentin Alexandrov, Evgeny Andreev and Anatoly Berezin – decided to submit the case to the Panel for consideration. In their determination, the judges pointed out that “no administrative proceedings were initiated towards the society; the society was not brought to liability; the society’s rights were not violated”. Consequently, the judges concluded, the courts have no reason to exact losses from the administrative authority to the benefit of the company.
The experts agreed with the position of the three judges of the HCA. Associate Vladimir Starovoytov of the Law Firm "YUST" gave an example: “If the fine were imposed on the legal entity, it would have been entitled to file a claim against the general director demanding that the losses caused by undue performance of the obligations under the charter of the company and the employment agreement be compensated. And the official must pay the fines as well as the legal expenses from his own funds”. Svetlana Gromadskaya, advocate from “Yakovlev and Partners” Law Group, agreed and reminded that the Administrative Offences Code distinguishes between the subjects of administrative liability, which obligates the courts considering the matter of exaction of attorney expenses to ascertain the entity, which suffered the direct harm. She concluded: “No harm was done to Alutech-Povolzhie LLC, since it was not brought to liability. Therefore, there are no obligatory grounds for the arising of the civil law liability”.
Despite this, the Panel of the HCA took a different decision. Having listened to the short speech of the Rosfinnadzor representative (no one else came to the session) and deliberated, the judges did not agree with the determination of the three judges and left the resolution of the cassation instance – on awarding the expenses to the firm with the exception of the success fee – unchanged. Advocate Evgeny Gorbunov of the bureau “Reznik, Gagarin and Partners”, believes that the supervision may have taken into account the fact that the agreement with the advocate had not been contested as a transaction with interest and refrained from intervening into the internal relations of the company and its director. He said to Pravo.Ru: “The company has indeed bore the attorney expenses, and refusing to recover those would be unjust”. However, neither does he agree with the position the HCA has taken. E.Gorbunov explained: “This is a classical conflict of interests of a company and its official, since the director is the beneficiary under the agreement with the attorney, but the company pays for it”. He is convinced that, since the administrative sanctions were imposed on the director, it was he and not Alutech-Povolzhie LLC who had to pay for the legal assistance.
See the source of the publication here.