Execution Upon Rights (Claims) Relating to Unfulfilled Liabilities

      In compliance with Article 128 of the Civil Code of RF, from the viewpoint of objects of the civil law, the property rights which comprise the rights (claims) relating to unfulfilled liabilities are attributed to property in terms of their status.

      Subject to paragraph 1, Article 59 of the Federal Law On Executory Process the attachment and sale of property of the debtor-entity which is not directly engaged in production are carried out as a first priority. The rights (claims) relating to unfulfilled liabilities are not the property involved in production. Therefore, their attachment and exercise must be carried out as a first priority, too.

      The procedure for attachment and exercise of rights (claims) relating to unfulfilled liabilities is defined in the Interim Instruction on the Procedure for Attachment and Exercise of Rights (Claims) Vested in the Debtor As Creditor for Unfulfilled Liabilities of Third Parties to Pay for Products Actually Delivered, Work Accomplished or Services Rendered (Accounts Receivable) in Execution upon Property of the Debtor Entities approved by the Order of the Ministry of Justice of RF dated July 7, 1998, No.76 On Measures of Improvement of the Procedure for Execution upon Property of Entities.

      Subject to para 1 of the Interim Instruction execution upon accounts receivable consists of attachment (inventory and prohibition to dispose) of the accounts receivable, and if necessary – suppression from the debtor of the documents confirming the existence of the accounts receivable and surrender of the same into custody, as well as the disposal of the accounts receivable.

      Subject to para 3 of the Interim Instruction the accounts receivable are attached by a bailiff or the Russian tax police body (persons carrying out execution) against a respective execution document.

      The accounts receivable attached are disposed of on the basis of the contract with the person in charge of the execution, by the Federal Debt Center under the Government of RF or by specialized agencies identified on a competitive basis (para 15 of the Interim Instruction). The Federal Law On Executory Process does not contain any special requirements to specialized agencies involved in the disposal of the property attached. Such approach is confirmed in the commentary to the Federal Law On Executory Process: any business entity engaged in trade, which is invited by a bailiff and/or the Federal Debt Center to dispose of the property attached becomes a specialized agency.

      Para 16 of the Interim Instruction stipulates that the accounts receivable attached are to be sold by auction, according to the regulations set forth by Articles 447-449 of the Civil Code of RF and the Interim Instruction. In this case, if the accounts receivable have not been sold by auction, they must be sold on a commission basis.

      Since the sale of the attached property by specialized agencies involves problems related to the period of sale and evaluation of the property to be sold, the Ministry of Justice of RF issued Order No. 166 dated November 12, 1998 On Improvement of the Work Aimed at Selection of Specialized Agencies for the Sale of the Property Attached. In compliance with the Order it was suggested to the heads of territorial subdivisions of the Ministry of Justice of RF to check the legality of the contracts of property sale through specialized agencies, on the one part, and to involve in the sale of the property attached the organizations accredited with the Federal Debt Center under the Government of RF more actively.

      After that the Decree of the Government of RF dated April 23, 1999, No. 459 On the Disposal of the Property Sequestrated and Attached authorized exclusively the Federal Debt Center to be in charge of the disposal of the property sequestrated and attached pursuant to judgments/awards or acts of other bodies (para 1). Simultaneously para 3 of the Decree stipulates that evaluation and disposal of the property on the internal and external markets are carried out by specialized agencies chosen on a competitive basis and under the contracts signed by the Federal Debt Center with such agencies. These provisions are also fixed in the Statute of the Federal Debt Center under the Government of RF approved by the Decree of the Government of RF of January 6, 1998, No. 6 (with subsequent amendments).

      The Decree of the Government of RF dated December 21, 2000, No. 980 On Assignment of the Functions of the Federal Debt Center under the Government of RF to the Russian Federal Property Fund closed down the Federal Debt Center. Simultaneously it was established that the latter’s functions for the disposal of the property were assigned exclusively to the Russian Federal Property Fund, its territorial subdivisions, and representatives chosen on a competitive basis.

      In order to sum up the results of the competition for selection of its representatives, the Russian Federal Property Fund was allowed to invite for evaluation and sale of the property the organizations engaged in such activities in accordance with para 3 of the Decree of the Government of RF dated April 23, 1999, No. 459 On the Disposal of the Property Sequestrated and Attached.

      The Ministry of Justice of RF, the Ministry of Taxes and Levies of RF, the State Customs Committee of RF, the Federal Security Service of RF, the Federal Border Service of RF, the Federal Tax Police of RF, the Ministry of Interior of RF, and the State Fishing Committee of RF were directed to sign within one month an agreement with the Russian Federal Property Fund which would stipulate the procedure and terms and conditions of their cooperation in sale of the property sequestrated and attached.