Arkady Bukh Law Firm’s attorneys have succeeded in refusing to recognize and enforce a Russian court’s decision to hold Zhanna Matsenko subsidiarily liable

The Miami-Dade County Court (Florida) has refused to enforce the decision of the Irkutsk Region Arbitration Court, according to which Zhanna Matsenko was held subsidiarily liable for the debts of ProdTrade LLC. Zhanna Matsenko’s interests were represented in court by Arkady Bukh Law Firm’s attorneys.

Case Circumstances

  • In August 2021, the Irkutsk Arbitration Court recognized Zhanna Matsenko as a “controlling person” of ProdTrade LLC and held her subsidiarily liable for the company’s debts.
  • The creditor was TD Avtomall LLC, which replaced the original creditor. It applied to the Florida court to enforce the Russian court’s decision.

American court’s claims against the Russian court’s decision on subsidiary liability

The Florida court rejected the claim, citing the inconsistency of the concept of “piercing the corporate veil” with Russian practice, due to the fact that:

  1. The plaintiff did not prove Zhanna Matsenko’s actual control over ProdTrade LLC.
  2. There is no evidence of abuse or fraud on the part of Zhanna Matsenko.
  3. Specific damages on the part of creditors have not been established.

The court separately noted that the Russian structure of subsidiary liability violates the principles of due process, since it initiates a presumption of guilt, rather than assuming the innocence of the defendant.

The non-final nature of the Russian court’s decision

The American court also considered the Russian court’s decision improper for execution, since:

  • It does not contain a final decision on the amount of claims
  • The bankruptcy procedure for ProdTrade does not have a final act establishing the amount of the debt;
  • There are discrepancies: initially 841 million rubles were declared, then 558 million rubles, which indicates uncertainty.

Legal and international aspects

  • The United States does not recognize the decisions of the Russian Federation on bankruptcy cases due to the lack of a bilateral agreement and the principle of reciprocity.
  • Russian experts emphasize that subsidiary liability in the Russian Federation is of a public-law nature and can be considered a “penalty”, which is incompatible with American standards.

Important significance for international bankruptcy

Until now, American courts have not yet considered cases on the execution of a Russian court decision on bringing to subsidiary liability, therefore, in fact, the first unsuccessful attempt of Russian creditors to collect subsidiary liability in the United States has been demonstrated.