Bankruptcy of foreign companies in Russia: a discussion on inexpediency and its criteria
Pravo.ru compiled a list of high-profile bankruptcy disputes considered by the Supreme Court over the past year that were of note to the legal community.
Senior Associate Yury Knyazev drew attention to the case involving the Cypriot company Westwalk Projects Ltd. (Ruling № 305-ЭС23-15177 dated 08.02.2024 in case № А40-248405/2022) which became one of the hottest topics of discussion for 2024 and made waves at practically every conference this year. However, the implications of this case are usually misconstrued as the Supreme Court allowing the bankruptcy of foreign companies as a general rule, with the expectation of a wave of foreign companies going bankrupt to follow. In our opinion, there is much more nuance in the meaning behind the Supreme Court’s position and the significance of this case.
In fact, the Supreme Court systematized the previously formed criteria for the bankruptcy of foreign companies in Russia and summarized the established judicial practice. The Supreme Court confirmed the general rule on the inadmissibility of considering a bankruptcy case of a foreign company in a Russian court yet formulated the criteria under which the court can still consider the case. If the exceptional criteria are not met, however, then the general prohibition remains in force - as a general rule.
In April 2024, after the Ruling of the Supreme Court, the Arbitrazh Court of Moscow City is considering the case again and terminated proceedings in the Westwalk Projects Ltd. Case. The court formed an even stronger “pro-debtor” position asserting that the formal indicators of insolvency ought not lead to being declared bankrupt. “The mere presence of debt is not a basis for introducing a monitoring procedure without taking into account other signs of bankruptcy provided for by law.”
Yury also noted that the floodgates of bankrupt foreigners never burst open as these cases were few and far between. In general, foreign bankruptcy cases are considered in a fairly routine manner and are not usually distinguished by fierce fights (challenging transactions, subsidiary liability, battles for assets, etc.).
Please find more details on the article at the link.