ARTICLE 333 OF THE CIVIL CODE OF THE RUSSIAN FEDERATION: PROBLEMS OF ENFORCEMENT

Article 333 of the Civil Code of the Russian Federation (hereafter the CC of the RF) as amended provides the right of the courts to reduce the forfeit penalty if it is obviously disproportionate to the consequences of the breach of an obligation. Upon commencement of Part I of the above Code we can evaluate the practical application of Article 333 by the courts of general jurisdiction and arbitration courts as a stable one. This stability was ensured by day-to day explanations given by the highest Russian judicial authorities on the conditions of forfeit reduction. The position of the above courts comes down not to the right but to the obligation of the courts to reduce the forfeit taking into account various circumstances and any plaintiff's respectable interest including the circumstances which have some indirect significance for the consequences of the breach of an obligation. The forfeit could be reduced in any court without reference to the claim of a debtor even if the case had not been decided in the lower court. Such an approach to the application of the above rule of law by the courts of general jurisdiction and arbitration courts corresponded to the position of the Constitutional Court of the Russian Federation. But from 2005 to 2010 there were some fluctuations and, finally, the departure of the Supreme Arbitration Court of the Russian Federation from earlier enunciated principled stands on the application of the above Article. In contrast to this, the practice of the courts of first instance at that time could be characterized by the stability in application of Article 333 of the CC of the RF and a consistent application of the law in accordance with previous explanations. The ruling of the European Court of Human Rights (hereafter the ECHR), in the case Galich v. Russia, has obligated Russia to change the established case law as far as the terms of application of Article 333 are concerned. The ECHR states that Russian courts are theoretically empowered to reduce interests to be levied; however, application of Article 333 of the CC of the RF is the prerogative of courts but not their duty. A court has no right to reduce a forfeit unless there is an application of the defendant. The realization of the above position of the ECHR in our domestic judicial practice and its possible consequences are under consideration in the present article.