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									 Special Update on Clarifications of the
 Supreme Commercial Court on Bankruptcy Law
 14 September 2009

This Update discusses recent clarifications of the Supreme                              In this issue
Commercial Court regarding application of Federal Law No. 127-FZ
"On Insolvency (Bankruptcy)," dated 26 October 2002 ("Bankruptcy                        Resolution No. 58: Secured
Law").                                                                                  Claims...................................... 1

                                                                                        Resolution No. 59:
Resolution No. 58: Secured Claims
                                                                                        Enforcement Proceedings ....... 3
On 23 July 2009 the Plenum of the Supreme Commercial Court adopted
Resolution No. 58 "On Certain Issues Related to Satisfaction of the                     Resolution No. 60: December
Pledgeholder's Claims in Case of the Pledgor's Bankruptcy."                             2008 Amendments................... 3
According to the Bankruptcy Law, a creditor's claims which are secured by a             Resolution No. 63: Current
pledge are to be satisfied with the value of the pledged property prior to the claims
                                                                                        Claims...................................... 4
of unsecured creditors (in accordance with the rules set by the Law).

Establishment of the amount of the secured claims
The Court clarified that when establishing the amount of a creditor's secured
claims to be entered in the register of creditors' claims, the bankruptcy court
should verify a number of facts (the scope of such facts depending on whether the
creditor has already obtained a court decision on enforcement of the pledge). In
particular, if the court finds that the debtor does not possess the pledged property
(e.g., as a result of its sale to a third party), the creditor's claims will not be
considered as secured by the pledge over this property (however, the creditor will
be able to submit a claim for enforcement of the pledge against the current owner
of this property). The Court also pointed out that:

        the pledgeholder's claims are deemed secured in the full amount
        irrespective of the value of the pledged property as indicated in a pledge
        agreement; and

        the bankruptcy court should not apply the Civil Code rules limiting
        enforcement of the pledge if the debtor's default is insignificant when
        deciding that the creditor's claims are to be included in the register as
        secured claims.

No enforcement in the course of supervision
According to the Bankruptcy Law, enforcement of the pledge in the course of             Key Contacts
supervision (which is the initial bankruptcy procedure) is not allowed. Thus, the
Court clarified that:                                                                   Igor Ostapets
                                                                                        iostapets@whitecase.com
        an agreement on out-of-court enforcement of the pledge concluded after
        the date of introduction of supervision is null and void, and the               Irina Dmitrieva (Tax)
        performance of the agreement concluded before this date is not allowed;         idmitrieva@whitecase.com
        and
                                                                                        White & Case LLC
        where the pledgeholder files a claim for enforcement of the pledge before       Tel +7 495 787 3000
        this date, the court may continue to consider (provided the claimant does       Fax +7 495 787 3001
        not ask for suspension of the trial) and sustain the claim, but the
        enforcement of this decision in the course of supervision is not allowed.       www.whitecase.ru
                                                                                        www.whitecase.com


                                                                                                               WHITE & CASE          1
 Special Update on Clarifications of the Supreme Commercial Court
 on Bankruptcy Law
 14 September 2009


Enforcement in the course of certain bankruptcy procedures
The Bankruptcy Law allows the pledgeholder to enforce the pledge in court in the
course of financial rehabilitation or external management of the debtor. The
property will be sold at a public sale. The Court clarified that the proceeds from
the sale of the pledged property at these bankruptcy stages may not be used to
satisfy current claims and claims of creditors of the first and second priorities until
the pledgeholder's claims are discharged.

According to the Bankruptcy Law, if the pledgeholder does not choose to take the
above course, the pledged property will be sold at a public sale during
receivership. The proceeds from the sale will be allocated among the creditors as
provided by the Law (a portion will be used to satisfy the secured creditor's claims
and another portion to satisfy claims of creditors of first and second priorities and
cover current expenses). The Court clarified that the same rules on distribution of
the proceeds apply where the property is pledged to several pledgeholders, but
the initial pledgeholder's claims are to be satisfied (from the portion of proceeds
designated for the secured creditors) prior to the claims of the subsequent
pledgeholder.

The Court also clarified that where the pledged property constitutes part of the
debtor's enterprise, it may be sold within the enterprise as a single object. In this
case the pledged property must be separately valued and the pledgeholder will be
entitled to receive a respective portion of the proceeds from the sale of the
enterprise.

Third party pledgor
The Bankruptcy Law provides that where a third party pledgor undergoes
bankruptcy procedures, a pledgeholder is considered a secured creditor with
respect to the pledgor. The Court clarified that:

        if a supervision procedure is introduced with respect to the pledgor, the
        pledgeholder may submit a claim for enforcement of the pledge only to
        the bankruptcy court, and in this case the pledgehoder is not required to
        present a court decision on the recovery of debt from the debtor;

        if the pledgeholder has already obtained a court decision on enforcement
        of the pledge, the enforcement of this decision shall be suspended;

        the amount of secured claims as established by the bankruptcy court may
        not exceed the value of the pledged property indicated in a pledge
        agreement or in a court decision on enforcement of the pledge, if any
        (with due regard to the interested parties' arguments about changes in
        this value); and

        the pledgeholder's claims may be satisfied only with the proceeds from
        the sale of the pledged property.
                                                                                          White & Case Moscow’s Special
The Court also pointed out that a pledgeholder may not initiate a bankruptcy
                                                                                          Updates appear in the Legislative
process with respect to a third party pledgor.
                                                                                          Update section of our website. You
It also clarified that if the debtor was found bankrupt and was further removed           may also choose to receive our free
from the Unified State Register of Legal Entities, the pledge is still considered         Special Updates and Weekly
valid if the pledgeholder had filed a claim for enforcement of the pledge against a       Updates by e-mail. To subscribe,
third party pledgor by that time.
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                                                                                                            WHITE & CASE        2
 Special Update on Clarifications of the Supreme Commercial Court
 on Bankruptcy Law
 14 September 2009


Previous rules on satisfaction of secured creditors' claims
The Court also provided clarification on the application of the Bankruptcy Law
rules on satisfaction of secured creditors' claims which had been effective before
their amendment by Federal Law No. 306-FZ, dated 30 December 2008. These
comments may be of interest if, in particular, a receivership procedure with
respect to the debtor was introduced or a bankruptcy process with respect to a
third party pledgor commenced before those amendments.


Resolution No. 59: Enforcement Proceedings
On 23 July 2009 the Plenum of the Supreme Commercial Court adopted
Resolution No. 59 regarding application of the Enforcement Law where the
debtor undergoes bankruptcy procedures.

The Bankruptcy Law provides that after the supervision procedure is introduced
with respect to the debtor, all the claims against the debtor may be submitted only
in accordance with the rules set by the Bankruptcy Law. The Court pointed out
that:

        this rule applies equally to creditors' claims confirmed by the enforcement
        documents;

        the debtor's satisfaction of claims of certain creditors (including on the
        debtor's own initiative) would be in conflict with the Bankruptcy Law; and

        a bank which receives an enforcement document for direct debiting of the
        debtor's account after the introduction of supervision with respect to the
        debtor may perform this enforcement document only if it relates to
        (i) current claims or (ii) claims specifically listed in the Law.

Under the Bankruptcy Law and the Enforcement Law, the introduction of
supervision, as well as financial rehabilitation and external management, entails
the suspension of the performance of enforcement documents (save for a few
exceptions). The Court clarified that if an enforcement document is submitted to
the bailiffs' service after the introduction of supervision, bailiffs must refuse
initiation of enforcement proceedings.

The laws also provide that introduction of receivership entails termination of
enforcement proceedings (save for a few exceptions). In this case bailiffs transfer
enforcement documents to a receiver. The Court clarified that upon receipt of the
enforcement documents, the receiver must notify the creditors whose claims are
confirmed by the enforcement documents of the need to submit those claims to
the bankruptcy court for their entry in the register of creditors' claims.

The Court also clarified a number of issues relating to application of interim
measures with respect to the debtor (e.g., attachment of the debtor’s property) in
the course of bankruptcy procedures.


Resolution No. 60: December 2008 Amendments
On 23 July 2009 the Plenum of the Supreme Commercial Court adopted
Resolution No. 60 regarding application of amendments to the Bankruptcy
Law introduced by Federal Law No. 296-FZ, dated 30 December 2008.

The Court provided clarifications relating to amendments to the Bankruptcy Law
introduced by Law No. 296-FZ (discussed in our Special Update

                                                                                      WHITE & CASE   3
 Special Update on Clarifications of the Supreme Commercial Court
 on Bankruptcy Law
 14 September 2009


of 23 January 2009).

In particular, it pointed out that as a result of the amendments claims under
monetary obligations which arose before commencement of the bankruptcy
proceedings do not qualify as current claims irrespective of their maturity date
(more details on the current claims are provided below).

The Court also clarified certain issues relating to the filing of a bankruptcy petition
and submission of claims for their entry in the register of creditors' claims;
discharge of the debtor's obligations by third parties (e.g., payment of the tax
debts by its shareholders); and appointment and activities of bankruptcy
managers.


Resolution No. 63: Current Claims
On 23 July 2009 the Plenum of the Supreme Commercial Court adopted
Resolution No. 63 "On Current Claims under Monetary Obligations in a
Bankruptcy Case."

Under the Bankruptcy Law, the current claims are creditors' claims under
monetary obligations which arise after the date the court accepted the bankruptcy
petition ("relevant date"). They are not included in the register of creditors' claims
and are to be satisfied prior to other claims that arose before the relevant date.

The Court clarified that the following claims do not qualify as current claims:

        the claim for interest due under an obligation which arose before the
        relevant date (the amount of interest accrued is to be added to the
        amount of the loan or credit and this total amount is to be included in the
        register of creditors' claims);

        the claim for payment of damages and penalties for violation of the
        obligation which arose before the relevant date; and

        the guarantor's claim against the debtor for the reimbursement of
        payments made under the bank guarantee after the relevant date, if the
        bank guarantee secures an obligation which arose before the relevant
        date.

Further, the obligations are deemed to arise as follows:

        the obligation to repay the debt under a loan or credit agreement arises as
        of the moment when funds are provided to the borrower;

        the surety's obligation to be liable for the debtor's debt arises as of the
        moment when the suretyship agreement is executed; and

        the obligation created under (i) a novation agreement or (ii) an amicable         This update is a general summary of

        settlement agreement is deemed to arise as of the date of the initial             recent legislative developments and
        obligation (which is terminated by the novation agreement or restructured         should not be treated as legal
        by the amicable settlement agreement).                                            advice. Readers should seek the
                                                                                          advice of legal counsel on any
The Court also pointed out that the assignment of claims does not affect their
                                                                                          specific question. All translations of
qualification as current claims.
                                                                                          terminology in this update are
The Resolutions are mandatory for lower commercial courts when                            unofficial.
considering similar issues.                                                               © 2009 White & Case LLC.



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