As part of a special issue on corporate law published by the analytical portal Pravo.ru, an article by Andrei Lipin, a counsel at KKMP, was published on compensation for losses resulting from false representations under Russian law.
Andrey notes a dichotomy that has emerged in judicial practice: false representations lead to the recovery of damages, whereas compensation for losses is possible only when circumstances unrelated to a breach of obligation arise. Given this, the joint application of Articles 406.1 and 431.2 of the Civil Code of the Russian Federation is effectively limited.
However, recent rulings by the Supreme Court of the Russian Federation regarding the possibility of using the mechanism of compensation for losses to simplify holding a party liable for breach of obligation potentially create room for a reevaluation of the established approach.
“For now, it must be acknowledged that uncertainty—and to some extent, ambiguity—on this issue persists, and in practice, it is still better to avoid imposing loss compensation on representations. Instead, if necessary, other tools can be used, such as pre-assessed damages, the admissibility of which has been explicitly confirmed by the highest court. In most cases, there is no fundamental need to reinforce representations with additional provisions, since the recipient of the representations has the legal right to recover ordinary damages from the counterparty,” comments Andrei Lipin
The full version of the article is available at the link.
