The Russian National Committee of the International Chamber of Commerce – the World Business Organization (ICC Russia) has held another event from its ICC Russia Anti-Crisis Package series – a roundtable discussion entitled ‘Ways to Adapt Contractual Obligations. Current Problems in the Time of Crisis Seen Through the Real Estate Market’. The discussion was focused on ways to adapt contractual obligations in the current circumstances of economic instability as seen through the real estate market. The discussion was moderated by Dmitry Stepanov, a partner with EPAM Law.

The global financial crisis has significantly changed the way business is done: the inflation rate has risen, lending is no longer at reasonable rates , demand has dropped, prices for goods have consequently gone down, deadlines to meet monetary obligations are being broken. Development strategies adopted by companies at a time of stable growth did not foresee such a decline even in their most pessimistic scenarios.

As circumstances have changed, many debtors have had to adapt the terms and conditions of pre financial crisis contracts which now have to be delivered as negative consequences begin to emerge. It is no overstatement to say that in the current crisis the business community often has to deal with dispute resolutions instead of fulfilling their natural desire to develop and expand into new markets and as a result these interests are often being protected more fearlessly than ever before.

Restructuring when applied properly tends to become one of the most efficient and effective ways of protecting a business entity from the aftermath of the financial crisis and is in the interests of both debtors and creditors.

What restructuring mechanisms are provided for in the Russian legal system?

The existing regulation in article 451 of the Civil Code of the Russian Federation is one of the possible instruments to protect the interests of bona fide market players who could not foresee the financial crisis and relied on economic stability. Why are the regulations of article 451 currently not being used for the purpose of debt restructuring? Can the current crisis be considered as a significant material change in circumstances? Are there any other ways to restructure contractual relations?

The participants were asked to discuss these and other relevant issues using the example of the real estate market. In the course of the roundtable discussion the audience was presented with an up-to-date review and a forecast of developments in the real estate market, an analysis of legal regulations governing adaptation and restructuring provided for in Russian legislation and a review of the specific actions which can be taken.