This trend has elicited significant public attention and vigorous debate. Key questions arise: How can businesses safeguard themselves against this trend, widely known as "deprivatization"? What risks are associated with the state s recovery of privatized property, and what implications does this practice hold for the nation s investment climate? Yuri Pustovit, an attorney and the Managing Partner at Advocates Bureau Yug, offers insights on these critical matters.

– Mr. Pustovit, the business community expresses considerable concern regarding the issue widely referred to as "asset deprivatization." Given that this term lacks a specific legal definition, could you clarify what is generally understood by this concept?

– While not a formal legal term, "deprivatization," in the context of litigation pursued by the Prosecutor General s Office, typically pertains to challenges based on alleged irregularities or violations of protocols during the privatization process of assets previously held in state or municipal ownership. Crucially, the applicability of this concept is not limited to property acquired exclusively under specific privatization statutes; the decisive factor is simply that the property was at some prior point owned by the state. One can readily grasp the significant threat this poses, particularly considering that a substantial portion, if not virtually all, of the property within the country was historically under state control. Compounding this concern, lower courts are currently declining to apply statutes of limitation to these claims. Should this practice of disregarding time limits persist and this concerning trend continue unchecked, it is arguably only a matter of time before such actions could potentially impact a wide range of privately held assets.

– It is understood that a significant majority, reportedly 90%, of these legal challenges are initiated by the Prosecutor General s Office. Are we observing an acceleration of this trend? What inherent risks does this present, particularly considering the ostensibly positive effect on state revenue?

– Indeed, these claims are predominantly lodged by the Prosecutor General s Office. This fact inherently creates apprehension among defendants and the judges presiding over these cases. A judge receives a statement of claim bearing the signature of a high-ranking official such as the Deputy Prosecutor General of Russia; many judges, even those with extensive careers, have not previously encountered cases of this nature. While I do not have precise statistics on whether the frequency of these cases is increasing or decreasing, reports of new claims filed by the Prosecutor General s Office seeking the transfer of assets to state ownership surface on an almost monthly basis. You are correct that, when viewed superficially, satisfying these claims appears to replenish the state treasury, and to my knowledge, the cumulative value of these assets reclaimed by the state currently reaches several trillion rubles. However, this perspective overlooks the other side of the equation: the disruption of stability in civil commerce and the significant deterioration of Russia s investment climate. Few investors would be inclined to risk capital in assets that face the potential for uncompensated reversion to state control at any juncture.

The subsequent performance of these reclaimed assets under state stewardship remains an open question: it is unclear whether they maintain comparable levels of success and profitability, continue to produce goods of equivalent or superior quality, contribute equivalent tax revenues to various budgetary levels compared to their private ownership period, or benefit from continued investment in modernization. Furthermore, by ruling in favor of such claims, courts appear to contravene fundamental principles of civil law and procedure, as well as long-standing judicial precedent developed over a quarter century. Does this ultimately benefit Russia s economy and its citizens? I would contend that it does not.

– What are the salient characteristics of these lawsuits filed by the Prosecutor Generals Office? What arguments are typically employed to challenge previous privatization acts?

– The most striking characteristic of these lawsuits is the speed with which they are processed and frequently decided in favor of the plaintiff. It is important to note that I refer to processing rather than examination, as in none of the cases in which our firm has been involved have we observed, at the lower court level, a discernible willingness to thoroughly investigate the substance of these claims or the basis upon which they are founded. Decisions in these cases are rendered with remarkable swiftness, often within a timeframe ranging from a few days to approximately a month. This rapid process frequently implements stringent interim measures, such as seizing the assets at issue, and occasionally extends even further.

The core arguments typically converge on alleged procedural errors during privatization, specifically asserting that the property was managed by an incorrect level of government, for instance, by a municipality when it should have been handled by regional authorities, or by a region instead of federal governmental bodies. The plaintiff asserts that these discrepancies were purportedly discovered only recently during specific supervisory proceedings, the findings of which are frequently not even appended to the case materials.

– What has been the stance of the courts regarding this matter?

– To my profound regret, as previously noted, lower courts have largely acquiesced to and granted the demands of the Prosecutor General s Office, frequently without undertaking a substantive evaluation of the defendants  counterarguments. This practice appears to contravene fundamental principles of civil procedure, particularly concerning adversarial proceedings and the equality of parties. Defendants are typically impeded from introducing evidence into the case, as courts often decline to admit such submissions; defendants are frequently limited to merely submitting a written response.

Numerous motions filed by defendants are routinely denied, while concurrently, whatever the Prosecutor General s Office requests is expeditiously satisfied by the court, again often without proper assessment of the defendants positions.

Thus far, it is primarily the Supreme Court that has, in many instances, provided a more objective and impartial evaluation of the Prosecutor General s arguments, leading to the overturning of lower court decisions and the remanding of such cases for new consideration.

Recent rulings from the Constitutional Court—specifically concerning anti-corruption lawsuits (Ruling No. 49-P of October 31, 2024) and deprivatization lawsuits (Ruling No. 3-P of January 29, 2025)—have introduced further complexities and raised additional questions regarding the adjudication of this category of cases. However, I will not elaborate on the specifics of these judicial acts at this time to remain within the scope of our interview.

– The Prosecutor s Office is reportedly challenging transactions dating back 20 or even 30 years. Given the lengthy timeframe, why does the statute of limitations seemingly not apply in these circumstances?

– The current stance regarding statutes of limitation in these cases is profoundly concerning. In response to defendants  arguments citing the applicability of statutes of limitation, the Prosecutor General s Office advances three distinct, and arguably mutually exclusive, contentions: (i) that the statute of limitations has not expired, asserting that the prosecutor s office only recently became aware of the alleged violations through specific oversight activities; (ii) that while the statute of limitations may have expired, its application should be denied because the defendant is attempting to introduce illegally acquired property into civil circulation, which purportedly constitutes an abuse of rights; and (iii) that statutes of limitation are simply not applicable to the Prosecutor General s Office s claims because these actions are filed in defense of what are deemed intangible public interests, to which such limitations purportedly do not apply.

As I noted, lower courts are currently not applying statutes of limitation in cases brought by the Prosecutor General s Office.

The Constitutional Court, in its Ruling No. 49-P dated October 31, 2024, addressed anti-corruption lawsuits, indicating that statutes of limitation are neither applicable nor necessary in that context. This creates a rather paradoxical situation: a statute of limitations exists for criminal prosecution regarding corrupt acts, and according to both the legislature and the Constitutional Court, this limitation does not encourage the commission of such crimes. Yet, concerning civil lawsuits seeking the seizure of property acquired through corrupt means, no such restrictions apply. Conversely, according to the Prosecutor General s Office and the Constitutional Court, involving a statute of limitations in these civil cases would encourage corruption. Following this logic, such a civil claim could theoretically be successfully pursued a century later against the heirs of an individual alleged to have engaged in corrupt practices, rendering a defense virtually impossible. Document retention periods would long have expired, even for official archives, making any reconstruction of events from decades past utterly unfeasible. However, specifically regarding deprivatization lawsuits, the Constitutional Court s Ruling No. 3-P of January 29, 2025, did permit the application of statutes of limitation. It also outlined a mechanism for potentially providing an equivalent land plot or compensation for its value, including for legally constructed buildings. The ruling, however, proposed a highly complex approach to calculating the statute of limitations period and notably stipulated that these actions do not constitute expropriation for state needs, thereby negating the requirement for preliminary and equivalent compensation.

– Russia currently lacks a specific law governing nationalization. In your view, would the enactment of such legislation be beneficial or necessary to regulate this issue of "deprivatization"?

– In my estimation, any form of nationalization sends a detrimental signal to the market and constitutes a significant impediment to investment and economic growth in Russia. However, if I were to consider the choice between two undesirable outcomes, enacting such a law would arguably be preferable to the current, unregulated situation.

Article 35 of the Constitution of the Russian Federation stipulates that compulsory alienation of property for state requirements may only be effected subject to the condition of prior and equivalent compensation. Nevertheless, the state appears disinclined to provide compensation, preferring to seize assets without remuneration. Furthermore, it attributes violations ostensibly committed by the state itself to ultimate bona fide acquirers of the assets – individuals and entities who bear no responsibility for such transgressions.

– Which categories of assets and types of companies face the most significant risk under the current circumstances?

– It is challenging to identify a clear pattern in this trend. The legal actions initiated by the Prosecutor General s Office seeking the nullification of privatization over the past several years have targeted a diverse range of assets. These include, but are not limited to, stakes in agricultural enterprises, strategic defense companies, wineries, health resorts (sanatoriums), infrastructure facilities, as well as land parcels and private residences, even in instances where these properties served as the sole dwelling acquired by ordinary citizens through mortgage financing. This suggests that such claims are not exclusively directed at prominent figures or large corporations. They can also be brought against ordinary citizens, who find themselves similarly vulnerable and often lacking adequate defenses against the demands presented by the Prosecutor General s Office.

– What measures can be taken to mitigate the risk of losing property? What defense strategies, if any, might prove effective in the current environment?

– Regrettably, in the face of deprivatization lawsuits initiated by the Prosecutor General s Office, there appears to be no genuinely effective defense. As I noted previously, the customary legal mechanisms and guarantees afforded by law seem to cease functioning in these specific proceedings.

The available recourse is limited: one can prepare a comprehensive response, endeavor to introduce the maximum possible volume of evidence into the case file, file motions for the discovery of evidence and the commissioning of expert examinations (though these are typically denied), argue that the statute of limitations has expired, diligently appeal unfavorable lower court rulings, and prepare for potential consideration before the Supreme Court. It is at the Supreme Court level that these arguments might potentially receive a proper legal assessment, provided the case is subsequently accepted and transferred to the relevant judicial panel. Unfortunately, the current outlook for defendants regarding lower courts to consider these cases remains decidedly unfavorable. Moreover, it is crucial to understand that these cases proceed expeditedly. Therefore, it is imperative to secure and present all relevant evidence beforehand and commission pre-trial expert examinations, as one cannot anticipate any procedural assistance from the court. In the response to the lawsuit, one should describe in maximal detail the content of the evidence being presented and the findings of any pre-trial expert examinations, notwithstanding the extremely high probability that these may not ultimately be formally admitted into the case file by the court.

– Are there established legal mechanisms offering protection for the rights of bona fide purchasers in instances where assets were transferred in contravention of the law, yet the current owners acquired them in good faith?

Yes, the Constitutional Court, in its relevant rulings, has acknowledged that under specific circumstances, bona fide owners who were not involved in corrupt arrangements or irregularities in the privatization process may be permitted to retain the property or receive compensation for its value. However, the fundamental challenge lies precisely in the consistent assertion by the Prosecutor General s Office, and subsequently echoed by the courts, in virtually all cases where we have represented clients, that all defendants are acting in bad faith, alleging they knew or should have known about the purported violations, yet failing to provide substantive evidence to support these claims.

– Official government circles have reportedly denied that this issue represents a systemic problem. Nevertheless, the President has directed the Government of Russia to prepare legislative proposals by April 1, 2025, specifically addressing statutes of limitation pertinent to "deprivatization" proceedings. Could you comment on this?

– The Russian Union of Industrialists and Entrepreneurs has developed a draft law to clarify the methodology for calculating the ten-year statute of limitations applicable to "deprivatization" lawsuits. Their proposal suggests initiating this calculation from the date of state registration of the transfer of ownership rights for real estate in a privatization transaction, or the date documents confirming the transfer of other forms of property to the acquirer in such a transaction were signed. While I view these proposed changes as positive technical clarifications, they do not address the core issue that arises when the Prosecutor General s Office, and consequently lower courts, contend that the statute of limitations is inapplicable because claims are purportedly filed to protect intangible public interests, or when claims for the recognition of the absence of ownership rights are asserted without sufficient basis.

– In your view, what are the most effective solutions to this problem?

– I believe the Supreme Court should provide clarity through an appropriate plenary session ruling or a comprehensive review of judicial practice concerning "deprivatization" lawsuits. Furthermore, the practice of initiating such claims ought to be discontinued, as the negative repercussions in the medium and long term are poised to substantially outweigh the short-term budgetary gains derived from their successful prosecution. Naturally, this issue must not be ignored. We intend to address this topic at the upcoming Legal Forum of Southern Russia, an event that has become traditional and which we co-organize.

– Could you provide some details about this forum?

– Our Advocates Bureau Yug and the legal portal Pravo.ru have been co-organizers of the Legal Forum of Southern Russia for many years. The inaugural forum was held in 2008, and consistently over the years, we have observed sustained interest in the event from both participants and partners.

Recently, the forum has attracted growing interest from in-house counsel, including senior management from major corporations and state-owned enterprises. They participate not only as attendees but also frequently as speakers, often presenting perspectives that contrast with those of external consultants, thereby contributing to more substantive and incisive discussions. The forum consistently includes a well-organized cultural program that appeals not only to participants but also to accompanying guests. Furthermore, the sailing regatta has become a distinctive hallmark of the forum, featuring a competitive race with professional judging, complete with medal ceremonies and awards provided by the organizers and forum partners. The business agenda for the 2025 Legal Forum of Southern Russia is still being finalized as of the time of this writing. Nevertheless, the agenda will traditionally address the most pressing legal subjects currently impacting the business and professional communities. These will include the latest developments and trends in judicial practice, the implications of sanctions and their potential gradual easing, bankruptcy proceedings, matters related to law firm management, and, as is increasingly the case at contemporary forums, questions surrounding "deprivatization" driven by lawsuits from the Prosecutor General s Office.

– Mr. Pustovit, Advocates Bureau Yug is celebrating its 30th anniversary this year. Would you say that, like fine wine, a business, or perhaps a legal practice in this instance, only improves with age?

– Achieving 30 years represents a significant milestone, particularly within the context of the Russian business landscape, although it s worth noting that legal practices are not strictly defined as businesses in the conventional sense. Over this period, our firm has navigated a considerable trajectory: from its establishment, engaging in highly complex legal projects, achieving initial recognition in both Russian and international legal rankings, developing key practice areas, and generating substantial revenue. We have cultivated an effective team of legal professionals to whom our clients entrust the resolution of exceptionally intricate legal issues. Attorneys within our bureau have received recognition from numerous prominent Russian and international ranking organizations, including Chambers and Partners, Best Lawyers, Pravo-300, Rossiyskaya Gazeta, and Kommersant Publishing House, among others. The legal sector is exceptionally competitive, and placements in rankings offer valuable insight into one s standing relative to peers, identifying areas of strength and where further strategic effort is warranted.

Upon our establishment, the bureau s primary clientele consisted of international corporations actively entering the Russian market, particularly within the Krasnodar region. Currently, we continue to provide legal counsel to international enterprises that have established manufacturing facilities in Russia over recent years and, notwithstanding current events, remain committed to operating within the Russian market. For the most part, these companies are presently reticent to publicize their presence, concerned about attracting unwelcome scrutiny from their respective regulators or risking inclusion on sanctions lists. Nevertheless, their strategic focus remains on preserving their position in the Russian market and pursuing future growth within the country.

Domestic national and regional Russian companies now operate at a highly respectable level and, in specific sectors, demonstrate the capacity to compete effectively with international counterparts. Our client base spans a diverse range of sectors, including agriculture, banking, electric power, industry, tourism, transportation, media, and numerous others. A cornerstone of our practice involves the resolution of highly complex judicial and arbitration disputes, which represents a primary reason clients seek our expertise.