Russia: Unjustified Executive Pay Hikes Can Be Annulled, Court Says

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By Sergei Blagov

Executive pay hikes that lack legal and economic justification can be annulled, the Russian Supreme Court ruled May 10 (Ruling No. 307-ES17-491 in connection with Case No. A56-46020/2014 of the St. Petersburg Arbitration Court).

Following Evrosib Bank's bankruptcy filing in 2004, the Russian Deposit Insurance Agency, acting as interim manager, filed a lawsuit seeking annulment of increases in compensation awarded Evrosib Bank's executives shortly before its bankruptcy. The St. Petersburg Arbitration Court ruled in favor of the interim manager, and in 2015 Evrosib executive Roman Kozin appealed, arguing that the increase in his compensation was not at variance with the applicable laws. The Arbitration Court denied the appeal and was upheld by the appellate courts.

Kozin petitioned the Supreme Court to reverse these rulings, claiming wrongful annulment of his right to compensation.

In Ruling No. 307-ES17-491, the Supreme Court held that the significant increases in compensation awarded Evrosib Bank's executives, which took place one week before the withdrawal of Evrosib's banking license and its subsequent insolvency, lacked legal and economic justification and should be annulled in accordance with Articles 10 and 168 of the Russian Civil Code.

To contact the reporter on this story: Sergei Blagov in Moscow at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For More Information

The full text of Ruling No. 307-ES17-491 is available in Russian here.

For more information on Russian HR law and regulation, see the Russia primer.

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