Approaches to establishing de facto affiliation in Russian court practice

In Russian bankruptcy and corporate disputes, determining whether parties are affiliated can have a significant impact on the outcome of a case. Depending on whether affiliation is established, courts may apply different standards of proof, evidentiary approaches and legal presumptions.

Russian court practice generally distinguishes between formal affiliation, arising by operation of law, and de facto affiliation.

Formal affiliation is usually relatively straightforward to establish and rarely becomes a matter of dispute, except in cases involving complex multi-level ownership structures, including offshore or foreign companies. De facto affiliation, by contrast, requires a more detailed assessment of the actual relationship between the parties.

How do Russian courts establish de facto affiliation?

One of the key indicators identified by the Russian Supreme Court is the ability of one person to give instructions that are binding on another (Ruling of the Judicial Panel for Economic Disputes of the Supreme Court of the Russian Federation dated 14 February 2019, No. 305-ES18-17629).

Evidence of de facto affiliation can generally be divided into two categories: evidence strongly indicating affiliation and circumstantial evidence.

The first category may include transaction terms that would not normally be available to independent market participants (Supreme Court Ruling dated 26 May 2017, No. 306-ES16-20056(6)).

Examples include effectively gratuitous transactions, transactions concluded on manifestly disadvantageous terms, arrangements in which the commercial interests of one party are compromised for the benefit of another, and transactions lacking a reasonable economic rationale.

Courts may also consider whether one party is legally, economically or factually subordinate to another. The use of the same IP addresses for filing reports or carrying out other legally significant actions has also been recognised in court practice as a potentially relevant indicator.

The role of circumstantial evidence

Circumstantial evidence may also play an important role. A single indirect factor will generally not be sufficient to establish de facto affiliation. However, several factors considered together may demonstrate an unusual degree of coordination between parties that are formally independent.

In one case, the Commercial Court of the Moscow District considered a combination of factors including a common economic interest, overlapping management, the same pledgor, common legal representatives, links to the same business sector, a common lending bank and the lease of premises at the same location (Resolution dated 14 November 2024 in case No. A40-249486/2022).

Taken together, these circumstances supported a finding of de facto affiliation.

At the same time, individual similarities between parties do not automatically lead to such a conclusion. In another case, the Commercial Court of the Moscow District refused to find parties affiliated merely because they were represented by the same lawyers. The court noted that using the same legal advisers does not in itself demonstrate affiliation where those advisers provide services to a broad range of clients (Resolution dated 15 April 2022 in case No. A40-69663/2017).

Substance over form

Russian court practice therefore focuses not only on formal corporate connections but also on the substance of the relationship between the parties.

Courts assess both direct and circumstantial evidence, looking at the overall pattern of interaction and, in particular, whether one party is effectively able to influence or direct the actions of another.

For businesses involved in bankruptcy or corporate disputes in Russia, formal independence alone may therefore not be decisive. The economic rationale of transactions, their terms, management overlaps and other patterns of interaction may all become relevant when a court assesses whether de facto affiliation exists.