Assignment of Claims Invalidated After Payment to New Creditor: Analysis of the Supreme Court's New Position

On 31 January 2024, the Russian Supreme Court issued Ruling No. 305-ES22-10624 in Case No. A40-79008/2021 which explained that the debtor shall not be held liable for the negative consequences of a dispute between the assignor and the assignee regarding the invalidity of the assignment. In the said case, the assignment agreement was declared invalid after the borrower had fully repaid its obligations. The debtor knew about the dispute between the parties to the assignment and paid the debt after the appellate court declared the agreement valid.

Thus, the debtor had a court order that had obviously entered into force, which confirmed the rights of the new creditor to collect the debt from him. Meanwhile, the cassation court subsequently overturned this decision, declaring the assignment invalid and, therefore, calling into question the future of the debtor’s obligations. The TV&P lawyer Ekaterina Schmitt explained in her commentary to the “Advokatskaya Gazeta” (Russian Advocacy Newspaper) that the Supreme Court correctly emphasized that in such a situation, it is possible to demand that the debtor repay the debt only when there is evidence that he knew about the illegality of the assignment from the beginning.

In the current dispute, on the contrary, the debtor relied on a court order that had entered into legal force. Therefore, the debtor cannot and should not guess whether higher authorities will cancel the judicial act. Otherwise, it may lead to the situation that everyone will stop executing judicial acts that have entered into force, waiting for the expiration of all possible terms of review.

“Advokatskaya Gazeta” (Russian Advocacy Newspaper) is the official body of the Russian Federal Bar Association (published since 2007). The Newspaper’s publications are devoted to the most important legal topics, case law, as well as legal practice and issues of advocacy.