The enforcement procedure for pledges and mortgages, covering movable and immovable property, has recently been amended to clarify and streamline the enforcement procedure, including for out-of-court enforcement, which was initially introduced by Federal Law No. 306 - FZ on December 30, 2008.

On March 7, 2012, Federal Law No.405 - FZ "On Introduction of Amendments to Certain Legislative Acts of the Russian Federation in Part on Improvement of an Order of Enforcement of Pledged Property" came into force (Law on Amendments). The Law on Amendments introduced a number of changes and clarifications to the previous legislation as described below:

  • Although the wording of the Law on Amendments is not crystal clear, the most likely interpretation of the new law is that out-of-court enforcement is now possible only upon first securing a notary's executive endorsement, which, in turn, may only be granted if the security agreement is certified by a notary. This would need to be confirmed by practice. The only exception to this law is when the collateral is held by the pledgee, in which case the notary's executive endorsement will not be required for enforcement out-of-court;
  • Pledge and mortgage agreements may now set out a detailed procedure on the levy of execution, which courts must apply;
  • It is no longer necessary to obtain the notarized consent of a mortgagor for out-of-court enforcement; and
  • The term for registering a mortgage agreement has been reduced to 15 days. If the mortgage agreement is notarized, the term for registration is 5 days.

The following are some of the key clarifications provided by the Law on Amendments:

  • Out-of-court enforcement of a participation interest pledge of a limited liability company has been expressly confirmed; and
  • The right to include several options on the procedure of sale of pledged property in a pledge agreement has been expressly confirmed.

In accordance with the Law on Amendments, the notary's executive endorsement is required to apply an out-of-court enforcement procedure to mortgage agreements concluded before the Law on Amendments came into force. However, no such requirement is provided by the Law on Amendments in relation to pledges of movable property.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.