International Estate Settlements & Cross-Border Disputes in Russia

Spotlight
22 September 2015
Author picture
Igor Taranov
CEO & Founder at Jurmatrix LLC

TL: Can you please give us a brief overview of cross-border & international estate settlement disputes as it applies to Russia?

Igor Taranov (IT): For the purposes of this interview, the term "cross-border/international estate settlement dispute" is a estate settlement matter where substantive and/or procedural relationship between the parties is complicated by a foreign, external element, such as involvement of a foreign national, offshore estate, litigants and/or other parties, evidence and other elements, as well as the matter otherwise demonstrably falling under two or more jurisdictions.
 
It is my opinion that the period of primitive accumulation of capital is now over in Russia, its beneficiaries including quite a few people whose assets constitute a rather fragmented estate, complicated both by a great many potential co-inheritors resident in different jurisdictions and by various parts of estate (movables and immovables) located not only in Russia, but also elsewhere, in Europe, the USA, Israel, etc.
 
The saddest but inevitable event in the life of an estate-leaver always gives rise to a conflict of national jurisdictions and sovereign legal traditions, particularly for large estates, which in turn results in protracted and convoluted litigation.
 
For Russian courts, international estate settlement disputes of this kind are still an oddity, which is attributed to a number of objective and subjective factors:
 
  1. There have so far been only a small number of such estate settlement disputes involving estate-leavers and estates demonstrably falling under foreign jurisdictions;
  2. Only a short time has passed since this country became internationally open;
  3. Unpopularity of Russia as a venue for the optimization of international estates - both in general and as a forum for resolving such disputes in particular;
  4. What is more, objective obstacles encountered in the adjudication of such cases sometimes give rise to head-in-the sand behaviour - to the extent that the court in the face of any real or imaginary risk of the case getting "bogged down" or more complicated opts for disregarding the matter's links to foreign jurisdictions, dealing with whatever procedural and substantive issues may arise under lex fori only.
However, such literal application of the principle of lex fori in the examination of international estate settlement disputes results leads more often than not to a new spiral of litigation and new proceedings, this time abroad, rather than to their adjudication. In this case, the task before the national adjudicator is to apply in such cross-border estate settlement disputes before local courts a thorough analysis of the international aspect of the estate settlement matter and to waive in some cases “the law of the court,” which directs the court to consider domestic legislation only and disregard any choice of law options.

TL: What are some of the more challenging aspects of jurisdiction claims by Russian national courts over estate settlement disputes?

IT: Even cross-border estate settlement litigation before a Russian court inevitably gives rise to a great many rather involved procedural issues, legal services for issuing proceedings and obtaining evidence abroad, recognition and enforcement of foreign rulings, to name but a few. In this interview, however, I would like to mention such problems only in passing.
 
The question of jurisdiction of a given court in a given country is key, determining, respectively, the law applicable to the dispute and the procedural aspects of the case, and more often than not its outcome too. In procedural terms, this is the main important question, which the plaintiff must decide and the court address. What is more, the plaintiff will identify the competent court first of all in the interests of the client, in terms of what court "fits" its client(s) in the context of a specific estate settlement dispute, with due regard to its material and procedural aspects. For the court, the answer to this question determines the application of the rules of procedure in place in the national jurisdiction and, naturally enough, the identification of applicable law.
 
Such a choice, once made by the plaintiff and the court, explicitly predetermines the availability and scope of inheritance and other property rights of the concerned party in the context of the contested estate; in other words, cross-border estate settlement disputes have a bright-line rule: “choose a court, choose the law.”
 
I want to say upfront that the Russian legislation and case law neither subscribe to nor apply the common-law doctrine of forum non conveniens, in place in the USA, Great Britain, New Zealand, Australia and Israel, i.e., renvoi is not available to the Russian court in a situation, e.g., where the body of evidence is located elsewhere, because it is contrary to the rules of jurisdiction in place.

TL: What are the key documents or provisions that will determine a solution to cross-border estate settlements in Russia?

IT: The key document governing the jurisdiction of the Russian court will be the provisions, in effect at the material time, of the Russian Federation international treaty with the foreign country where the estate is located or the estate-leaver lived, or, absent applicable rules of the treaty, the domestic choice of laws rules.
 
Note in this context that Russian Federation international treaties address the question of jurisdiction over estate settlement matters based on the principle of division of jurisdiction over inheritance rights to movables and immovables. This being the case, both states apply their own inheritance law, which eliminates the present-day challenge of identifying, interpreting and actually applying the provisions of foreign inheritance law.
 
But this approach has a shortcoming: it divides estate settlement disputes into "movable" and "immovable," multiple and actually linked processes conducted in different jurisdictions where the assets are located, with high expenses for the parties and jurisdictions in running and managing them and, as a natural consequence, ultimate judgments rendered by different domestic courts that are not infrequently contradictory.

TL: What sorts of scenarios or solutions are available during cross-border disputes?

IT: In light of the above, a cross-border dispute can follow one of the two scenarios:
 
First option: Jurisdiction over inheritance rights to movable property is vested in the authorities of the country where the estate-leaver had his last residence; to real property, in those where the property is located. Specifically, this approach is supported by the Convention on Legal Assistance and Legal Relations in Civil, Family and Criminal Cases of 22.01.1993 (hereinafter referred to as “the Minsk Convention”), the Russian Federation bilateral agreements with Azerbaijan (art. 45), Bulgaria (art. 35), Iran (art. 39), Kyrgyzstan (art. 45), Latvia (art. 45), (art. 45), Mongolia (art. 41), Czech and Slovakia (art. 43), and Estonia (art. 45).
 
However, the bilateral treaties with Azerbaijan (s. 2, art. 45), Bulgaria (s. 3, art. 35), Iran (s. 2, art. 39), Kyrgyzstan (s. 2, art. 45), Latvia (s. 2, art. 45), Moldavia (s. 2, art. 45) and Estonia (s. 2, art. 45) lay down a special jurisdiction rule, which provides that "if the entire movable estate is on the territory of a Contracting Party where the testator did not have his last domicile, proceedings relating to succession, upon petition by an heir or a legatee, and subject to the consent of all heirs, shall be conducted by the authorities of that Contracting Party." Such a provision can be described as an attempt to give the law of contract certain flexibility by closing the gap that opens where international estates are divided into movable and immovable portions.
 
Second option: Jurisdiction over movable property is vested in the authorities of the estate-leaver's country of citizenship; over real property, in those where it is located: Bulgaria (art. 35), Hungary (art. 40), Vietnam (art. 38), Democratic People's Republic of Korea (DPRK) (art. 39), Poland (art. 42), and Romania (art. 40). Accordingly, if the estate-leaver is a citizen of one of these countries, then the adjudication of disputes over the movable portion of his inheritance, wherever it is located, in Russia or other Contracting State, shall be provided by the competent authorities of the country of citizenship, except for dual citizenship, where the deciding factor is the place of residence.
 
But such a situation can be compounded if estate settlement falls under the jurisdiction of a third country that is not party to the treaty in question, for example, if the estate-leaver lived and/or had some movable therein. How will be resolved the question of jurisdiction over a estate settlement dispute where the estate-leaver, a citizen of Poland, died at his permanent residence in Russia, while in possession of various movables within Russia, Poland and, say, Latvia? Are we then required to consider the applicable bilateral treaties between Russia and Latvia and between Poland and Moldavia? And what to do if they impose rules of jurisdiction that are incompatible? For example, the Judicial Assistance Treaty between the Russian Federation and Latvia is predicated on the first option listed by us: inheritance rights to movable property fall under the jurisdiction of the authorities of the country where the estate-leaver's had his last place of residence. It is hardly possible to give a definitive answer, and analysis should be based in each case on the entire fact pattern, which will make it possible to eventually identify the country whose judicial jurisdiction is best suited for ensuring the predictability and convenience of estate settlement.
 
Note also that no choice of law rules are provided for estate settlement matters in the bilateral Judicial Assistance Treaties made by Russia with Algeria, Greece, Spain, Yemen, Cyprus, China, Tunisia and Finland.

TL: Are there instances in which Russian courts have exclusive jurisdiction over estate settlement matters?

IT: The principle of lex fori dominating in procedural issues, the question of jurisdiction of international estate settlement disputes must be addressed by Russian courts, absent applicable provisions of treaties, in light of national procedural law. Specifically, this means that Russian courts will have exclusive jurisdiction over estate settlement matters involving real property located within the Russian Federation, as well as over the establishment of matters of fact (place of estate release, kinship, dependents, etc.) where the claimant is domiciled in the Russian Federation or the matter of fact to be established originates within the RF (s. 1, pt. 1, s. 1, pt. 2, art. 403 of Civil Procedure Code of the Russian Federation (RF CPC)). Otherwise, the competent court will be identified using the general rules of jurisdiction (pt. 1, art. 402 of the RF CPC). With respect to international estate settlement disputes, an important exception to this rule is s. 2, pt. 3, art. 402 of the CPC, which allows Russian courts to adjudicate matters involving foreign nationals if the defendant has property within the Russian Federation.
 
In practice, this gives Russian courts virtually exclusive jurisdiction over estate settlement disputes where even a fraction of the estate is in Russia: it suffices that one of the defendants is an inheritor or other beneficiary in an estate settlement. It appears that this provision as it reads paves the way to forum shopping, allowing interested parties to choose the most favourable jurisdiction out of several options, which does not contribute to the stability and predictability of estate settlement. Of critical importance in choosing a competent court, where this is indeed possible, is not only and not so much the nature of the process per se and the demonstrable association of the contested estate with a given jurisdiction, but its potential effectiveness in securing the desired legal outcome for the interested party. That is why major estate settlement cases with a foreign element in practice not infrequently employ stratagems to place the matter under a specific jurisdiction favourable to the stakeholders by taking advantage of the arrangements for establishing and evidencing the required links to the jurisdiction by cutting corners in the determination of the estate-leaver's last place of residence, as well as by bending the rules for the classification of property as movable or immovable.

TL: We recently learned about your corporate social responsibility project to protect disabled children and their families. Could you tell us a bit about this wonderful initiative?

IT: At first, this project was thought of as purely informative one. In other words, the idea was to collect in one place the information about the rights of disabled children and their parents. In particular, we are talking about the rights and benefits that are supposed to be offered but are not often offered by the appropriate bodies. We have analysed all legal acts that are currently regulating the offer of benefits to disabled children. An analysis was also carried out of the existing practices in the courtrooms in relations to the unjust treatment of disabled children. This was made easy to read, put together and printed in a brochure.
 
I would like to note that the project wasn’t limited to children with Down Syndrome, but covered all the children that had a disability or have an illness that would provide for proclamation of disability.
 
A website was created where this brochure was placed in an electronic version and made available for downloading. The website became very visited without any particular marketing activities.
 
The next logical step was to create a “Legal Clinic,” a place where parents of disabled children could receive free advice. An office was set up where the public was seen. The office equipment was donated by one of the visitors and, as a result, many free consultations were carried out, as well as an analysis of common requests of the parents.
 
The Legal Clinic was only working on Thursdays but very quickly proved to be a very sought-after kind of consultation. Seeing as these parents spend most their time taking care of their children, they have very little ability to go to courts or waste their time in the offices of officials. Which meant that the logical next step was for the Legal Clinic to start functioning full time. So there was now a need for a full time renting of an office, full time staff that would care for such court cases and provide consultations on a permanent basis. The staff needed to be paid and the rent needed to be paid too.
 
Younger individuals who can be found via social media may carry out some of the work, but the volunteers cannot always carry out all the legal tasks.
 
From our side, we are ready to invest time, nerves and efforts into organizing the Legal Clinic, analysing of the materials, preparation of the court cases, etc.
 
As the website is evolving, we can publish the results of interesting cases on the website, make general responses to claims and complaints from the parents and, in the future, provide consultations over the Internet where parents who live outside Moscow and cannot come can seek help.