In the business activities of an organization, cases may arise when the parties cannot reach an agreement, and, accordingly, become participants in litigation.
The company can defend its case in court both in disputes with counterparties and in disputes with tax authorities, and even with its own employees.
Quite often the costs for the services of lawyers and notaries, experts and specialists, etc. and so on. amount to significant amounts.
In accordance with clause 1 of Article 110 of the Arbitration Procedure Code of the Russian Federation, legal costs incurred by persons participating in the case, in whose favor a judicial act was adopted, are recovered by the arbitration court from the losing party.
If the claim is partially satisfied, legal costs are borne by the persons participating in the case in proportion to the amount of the satisfied claims.
For income tax purposes, in accordance with paragraph 10, paragraph 1, Article 265 of the Tax Code of the Russian Federation, such costs can be taken into account as part of non-operating expenses.
Companies using the simplified tax system for income minus expenses can take such expenses into account as expenses that reduce the tax base in accordance with paragraph 31, paragraph 1, article 346.16 of the Tax Code of the Russian Federation.
In our article we will consider the provisions of the current legislation regulating the procedure for reimbursement of legal expenses, as well as the procedure for recognizing such expenses for tax accounting purposes.
What expenses are included in legal proceedings?
In accordance with the provisions of Article 101 of the Arbitration Procedure Code of the Russian Federation, legal costs consist of state fees and legal costs associated with the consideration of the case by the arbitration court.
The amount and procedure for paying state duty are established by the provisions of Chapter 25.3 of the Tax Code of the Russian Federation.
According to Article 333.16 of the Tax Code of the Russian Federation, a state duty is a fee levied on legal entities and individuals when applying to government bodies authorized in accordance with the legislation of the Russian Federation:
- for the performance of legally significant actions in relation to these persons.
The amount of the state fee depends not only on who files the claim (legal entity or individual), but also on the subject of the claim.
Thus, according to Article 333.21 of the Tax Code of the Russian Federation, in cases related to property disputes* considered in arbitration courts, the state fee is paid in the following amounts:
- up to 100,000 rubles - 4 percent of the claim price, but not less than 2,000 rubles;
- from 100,001 rubles to 200,000 rubles - 4,000 rubles plus 3 percent of the amount exceeding 100,000 rubles;
- from 200,001 rubles to 1,000,000 rubles - 7,000 rubles plus 2 percent of the amount exceeding 200,000 rubles;
- from 1,000,001 rubles to 2,000,000 rubles - 23,000 rubles plus 1 percent of the amount exceeding 1,000,000 rubles;
- over 2,000,000 rubles - 33,000 rubles plus 0.5 percent of the amount exceeding 2,000,000 rubles, but not more than 200,000 rubles;
*When filing a claim of a property nature, subject to assessment, at the price of the claim.
According to Article 103 of the Arbitration Procedure Code of the Russian Federation, the price of the claim is indicated by the applicant. Based on Article 106 of the Arbitration Procedure Code of the Russian Federation, legal costs associated with the consideration of a case in an arbitration court include:
- sums of money to be paid to experts, specialists, witnesses, translators,
- costs associated with on-site inspection of evidence,
- expenses for the services of lawyers and other persons providing legal assistance (representatives),
- expenses of a legal entity for notification of a corporate dispute if federal law provides for the obligation of such notification,
- other expenses incurred by persons participating in the case in connection with the consideration of the case in the arbitration court.
In accordance with paragraph 5 of the Resolution of the Plenum of the Supreme Court of the Russian Federation dated September 26, 1973. No. 8 “On judicial practice on the application of legislation on the collection of procedural costs in criminal cases”, other costs related to procedural costs should be understood as:
- expenses of the bodies of inquiry, investigation and court incurred during the proceedings, directly related to the collection and examination of evidence of the defendant’s guilt and provided for by the Code of Criminal Procedure of the Russian Federation.
In particular, these may include:
- compensation for the cost of things damaged or destroyed during investigative experiments or examinations;
- costs for reimbursement of expenses to persons presented for identification (except for the accused),
- and so on.
As can be seen from the above rules, the list of legal costs is “open”; accordingly, such costs can include all costs that are directly related to the consideration of the case by the court.
According to Article 107 of the Arbitration Procedure Code of the Russian Federation, experts, specialists, witnesses and translators are reimbursed for the expenses incurred by them in connection with their appearance in the arbitration court:
- for travel,
- for renting residential premises,
- related to living outside the place of permanent residence (daily allowance).
In addition, experts receive remuneration for the work they performed on behalf of the arbitration court, if this work does not fall within the scope of their official duties as employees of state forensic institutions.
Specialists receive remuneration for work performed by them on behalf of the arbitration court, unless they are advisers to the staff of a specialized arbitration court.
The amount of the expert's remuneration is determined by the court in agreement with the persons participating in the case and by agreement with the expert.
The translator receives remuneration for the work performed by him on behalf of the arbitration court.
The amount of remuneration for the translator is determined by the court by agreement with the translator.
Working citizens summoned to the arbitration court as witnesses are retained the average earnings at their place of work during their absence due to their appearance in court.
Witnesses who are not in an employment relationship receive compensation for their diversion from normal activities, taking into account the actual time spent, based on the minimum wage established by federal law.
In accordance with Article 108 of the Arbitration Procedure Code of the Russian Federation, money to be paid to experts and witnesses is deposited into the deposit account of the arbitration court by the person who filed the corresponding petition.
If the said petition is submitted by both parties, the required sums of money are contributed by the parties in equal parts.
Amounts of money due to experts, specialists, witnesses and interpreters are paid upon the performance of their duties.
Amounts of money due to experts and witnesses are paid from the deposit account of the arbitration court.
If the appointment of an examination and the calling of a witness were carried out on the initiative of the arbitration court, then (clause 3 of Article 109 of the Arbitration Procedure Code of the Russian Federation):
- payment for the services of a translator or specialist involved by the arbitration court to participate in the process,
- payment of daily allowances and reimbursement of expenses incurred by them in connection with their appearance in court,
- payment of sums of money to experts, witnesses,
is carried out at the expense of the federal budget .
As mentioned above, the provisions of Article 110 of the Arbitration Procedure Code of the Russian Federation provide for the reimbursement of legal costs to the person in whose favor the judicial act was adopted at the expense of the losing party.
If the claim is partially satisfied, legal costs are borne by the persons participating in the case in proportion to the amount of the satisfied claims.
It is necessary to take into account that, according to clause 2 of Article 110 of the Arbitration Procedure Code of the Russian Federation, the costs of paying for the services of a representative incurred by the person in whose favor the judicial act was adopted are recovered by the arbitration court from another person participating in the case, within reasonable limits .
As the Constitutional Court of the Russian Federation indicated in its Ruling dated December 21, 2004. No. 454-O:
“The obligation of the court to recover the costs of paying for the services of a representative, incurred by the person in whose favor the judicial act was adopted, from another person participating in the case, within reasonable limits, is one of the legal methods provided for by law, aimed against the unreasonable overestimation of the amount of payment for the services of a representative, and thus thereby - to implement the requirements of Article 17 (Part 3) of the Constitution of the Russian Federation.
That is why Part 2 of Article 110 of the Arbitration Procedure Code of the Russian Federation is essentially about the duty of the court to establish a balance between the rights of the persons participating in the case.
At the same time, when making a reasoned decision to change the amount of amounts collected to reimburse the relevant expenses, the court does not have the right to reduce it arbitrarily , especially if the other party does not object and does not provide evidence of the excessiveness of the expenses collected from it.”
In paragraph 3 of the Information Letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated December 5, 2007. No. 121
it is reported that:
“A person demanding reimbursement of expenses for the services of a representative proves their amount and the fact of payment; the other party has the right to prove their excessiveness.
At the same time, if the amount of the stated claim clearly exceeds reasonable limits, and the other party does not object to their excessiveness, the court, in the absence of evidence of the reasonableness of the expenses presented by the applicant, in accordance with Part 2 of Article 110 of the Arbitration Procedure Code of the Russian Federation, reimburses such expenses within reasonable limits, in its opinion , within."
Thus, the limit of “reasonableness” of the amount of expenses is determined solely by the court on the basis of the value judgment (opinion) of this very court.
It should be noted that the actual costs incurred by the winning company for the services of a law firm are not always accepted by the courts as “reasonable”.
At the same time, the Presidium of the Supreme Arbitration Court of the Russian Federation, in its Resolution dated July 24, 2012. No. 2598/12 came to the conclusion that the equality of the amount of expenses for protecting the interests of society to the amount of the protected property interest, or its excess does not indicate unreasonableness or excessiveness of such expenses , since the amount of the property interest is not a factor that in itself indicates reasonableness or excessiveness expenses incurred to defend it.
According to clause 3 of Article 110 of the Arbitration Procedure Code of the Russian Federation, the state duty, from payment of which the plaintiff was exempted in the manner established by the Tax Code of the Russian Federation, is recovered from the defendant to the federal budget in proportion to the size of the satisfied claims, if the defendant is not exempt from paying the state duty.
When the persons participating in the case agree on the distribution of legal costs, the arbitration court assigns legal costs to them in accordance with this agreement.
Unpaid or incompletely paid expenses for the examination are subject to recovery in favor of the expert or the state forensic institution from the persons participating in the case, in proportion to the amount of satisfied claims.
Please note: Legal costs incurred by persons participating in the case in connection with the consideration of the appeal and cassation complaint are also distributed according to the rules established by Article 110 of the Arbitration Procedure Code of the Russian Federation.
As established by Article 111 of the Arbitration Procedure Code of the Russian Federation, if a dispute arose as a result of a violation by a person participating in the case of a claim or other pre-trial procedure for resolving a dispute provided for by law or agreement, including:
- violation of the deadline for submitting a response to the claim,
- leaving a complaint unanswered,
the arbitration court assigns legal costs to this person regardless of the results of the consideration of the case.
The arbitration court has the right to attribute all legal costs in the case to a person who abuses his procedural rights or fails to fulfill his procedural duties, if this leads to:
- to disrupt the court hearing,
- to delay the legal process,
- to obstruct the consideration of the case and the adoption of a lawful and justified judicial act.
At the request of a person participating in the case who is entitled to reimbursement of legal expenses, the arbitration court has the right to reduce the amount of compensation if this person provides evidence of their excessiveness.
According to Article 112 of the Arbitration Procedure Code of the Russian Federation:
- issues of distribution and attribution of legal costs to a person who abuses his procedural rights,
- other questions about legal costs,
are resolved by the arbitration court in the same judicial act that ends the consideration of the case on the merits, or in a ruling.
If this does not happen, then a statement on the issue of legal costs incurred in connection with the consideration of the case:
- in the arbitration court of the first, appellate, cassation instances,
- consideration of the case by way of supervision,
may be filed with the arbitration court, which considered the case as a court of first instance , within six months from the date of entry into force of the last judicial act, the adoption of which ended the consideration of the case on the merits.
If the deadline for filing such an application is missed for a valid reason, it may be restored by the court.
The application on the issue of legal costs is considered according to the rules provided for in Article 159 of the Arbitration Procedure Code of the Russian Federation for consideration of the application.
Based on the results of consideration of such an application, a determination is made that can be appealed.
As can be seen from the above rules, not all amounts of expenses are reimbursed by the losing party.
In the Information letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated December 5, 2007. No. 121 states, for example, that bonuses to a representative who is an employee of an organization cannot be reimbursed at the expense of the losing party:
“The costs of paying a bonus to a representative working under an employment contract in the organization whose interests he represented in court are not subject to reimbursement, since they do not fall under the concept of legal expenses distributed in accordance with Article 110 of the Arbitration Procedure Code of the Russian Federation .”
In paragraph 10 of the same letter of the Presidium of the Supreme Arbitration Court No. 121, it is stated that the presence of one’s own legal service does not in itself prevent the reimbursement of legal expenses for the services of representatives.
At the same time, the services of lawyers for the pre-trial settlement of disputes do not count as legal expenses, since they are not related to the direct consideration of the case in court, and, accordingly, are not subject to reimbursement (Resolution of the Presidium of the Supreme Arbitration Court of the Russian Federation dated December 9, 2008 No. 9131/08).
The amount of payment for consultations not provided for in the agreement on representation in court is not included in court costs (clause 8 of letter No. 121).
They may also refuse to reimburse expenses for a representative if his services have not yet been paid in full, since expenses actually incurred are subject to reimbursement (clause 4 of letter No. 121).
At the same time, according to paragraph 5 of letter No. 121, the fact of payment for the representative’s services by a third party (who is not a party to the case) in the order of mutual settlements with the applicant is not a basis for refusing to satisfy the request for recovery of expenses for payment for the representative’s services.
Legal costs in connection with the consideration of an arbitration dispute in an arbitration court
During judicial proceedings, when considering a case in an arbitration court, additional legal costs may arise:
- Expenses incurred by the arbitrators when participating in the consideration of an arbitration dispute, including expenses in connection with payment of travel to the place of arbitration proceedings;
- Fees and sums of money to be paid to experts and translators;
- Expenses of arbitrators when inspecting and examining written and material evidence at their location;
- Expenses of witnesses incurred while participating in arbitration proceedings;
- Costs of paying for the services of a representative (representatives) of the parties to the arbitration process;
- Other expenses determined by the Federal Arbitration Court of the City of Moscow.
