11.08.2014 Alina Kozmina, associate at Maxima Legal

The Plenum of the Higher Arbitrazh Court of the Russian Federation Pronounces on the Subject of Freedom of Contract

An interpretation of one of the basic principles of civil law – the principle of freedom of contract – was proposed by the Plenum of the Russian Federation Supreme Arbitration Court (hereinafter the SAC) in its Resolution No.16 of 14.03.2014 “On Freedom of Contract and its Limitations” (hereinafter the Resolution). The main thrust of the Resolution was the need for a purposeful interpretation of norms with the aim of clarifying the intentions of the legislator in the establishment of a particular norm – this is how, in the opinion of the SAC, the real character of the norm (imperative or dispositive) can be discovered.

Besides the fact that the prohibition on changing the provisions of the law by the parties to the contract may follow directly from the text of the norm, it may also lapse as the result of interpretation of that norm. So even a direct indication in an article of the law that “something else may be stipulated by agreement between the parties” does not mean that a norm will be considered as dispositive by a court.

In the opinion of the SAC, the criteria for deducing the imperativity of a norm or the limitation of the dispositivity of a norm, besides its textual content, are:

• the necessity of safeguarding particularly significant interests protected by the law (the interests of the weak party to the contract, third persons, public interests, etc.);
• the necessity of preventing flagrant violations of the balance of interests of the parties;
• the essence of the legislative regulation of a specific type of contract.

One can therefore draw the conclusion that a norm is acknowledged to be fully dispositive when it contains a clearly expressed prohibition on the establishment of a different condition in the contract by agreement of the parties and no criteria of imperativeness or limitation of the dispositivity of a norm are indicated in the SAC Resolution.

Moreover, the SAC notes that in considering each specific case a court should, of course, indicate in what way a particular criterion of imperativeness is manifest in each specific instance, i.e., for example, to elucidate the necessity of safeguarding which especially significant interests protected by law led the court to conclude that the norm was of an imperative character.

It is also stipulated that in a case where norms concerning individual types of contracts are applied to an unnamed contract by analogy with the law, the application of imperative norms concerning individual named contracts is possible in exceptional cases. The SAC also considers infringements of one of the above mentioned criteria as exceptional cases. However, the SAC also notes that an objective interpretation of a norm may lead to a conclusion not only concerning its imperativeness, i.e. concerning the restriction of the parties’ liberty, but, on the contrary, a conclusion concerning the limitation of the scope of an imperative norm, i.e. concerning an increase in the scope of the parties’ discretion. In addition, in its Resolution the SAC allows for competition of legal actions where there are conditions in a contract that substantially violate the balance of interests of the parties which cannot be altered by the weak party at the negotiation stage. In these cases the SAC proposes three legal bases for such an action: Articles 10, 169, clause 2 and Article 428 of the Russian Federation Civil Code.

Each stance taken by the SAC in its Resolution is accompanied by examples of the interpretation of various norms which give an idea of how these stances will be used in judicial practice.

See: Resolution No.16 of 14.03.2014 of the Plenum of the Russian Federation Supreme Arbitration Court “On Freedom of Contract and its Limitations”