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Problematic Aspects of Law Enforcement Practice in Conclusion of a Power Supply Contract for Inherited Property
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Problematic Aspects of Law Enforcement Practice in Conclusion of a Power Supply Contract for Inherited Property
Annotation
PII
S231243500026208-6-1
DOI
10.18254/S231243500026190-7
Publication type
Article
Status
Published
Authors
Nadezhda A. Valentukevich 
Occupation: Lead Legal Counsel of Legal Protection Department Saint Petersburg Sales Company, JSC
Affiliation: Saint Petersburg Sales Company, JSC
Address: Russian Federation, St. Petersburg
Edition
Issue 2
Pages
79-85
Abstract

To date, the procedure for concluding a power supply contract is sufficiently detailed and rarely gives rise to questions. In practice, however, there are exceptional situations that require a more thorough analysis of both the documents submitted by consumers for concluding power supply contracts and the current laws. One such situation is the conclusion of a power supply contract for inherited property.

The article analyzes the problematic aspects of law enforcement in concluding power supply contracts for inherited property and suggests ways to address them.

For example, considering the legality of refusal to conclude a power supply contract with an heir who has applied to a power supply organization during the period of inheritance acceptance (6 months), the author states the legal uncertainty, points out the risks associated with the refusal, proposes solutions and makes suggestions on how to improve the current laws on the electric power industry.

Keywords
energy law, power supply contract, contractual regulation, universal succession, inherited property
Received
13.03.2023
Date of publication
27.06.2023
Number of purchasers
10
Views
114
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0.0 (0 votes)
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1 Nowadays the consumption of electric power is an important and integral part of everyone’s life.
2 In the Russian Federation, electric power is supplied on the basis of a contract concluded between a consumer of electric power and a power supply organization.
3 Thus, in accordance with Clause 1 of Article 539 of the Civil Code of the Russian Federation, under the power supply contract, the power supply organization undertakes to supply the user (consumer) with power through the connected grid, and the user undertakes to pay for the received power and to comply with the consumption regime established by the contract in order to ensure the safe operation of the power grids under its control and the proper functioning of the power consuming equipment and devices used by it.
4 The procedure for concluding power supply contracts for residential premises and residential buildings (estates) is established by the Rules on Providing Utilities to Owners and Users of Premises in Apartment Buildings and Residential Buildings approved by Decree of the Government of the Russian Federation No. 354 dd. May 6, 2011, [1] for non-residential buildings and premises and other power-consuming facilities is established by the Basic Regulation on the Operation of Retail Electric Power Markets approved by Decree of the Government of the Russian Federation No. 442 dd. May 4, 2012. [2]
5 In this case, in accordance with Article 540 of the Civil Code of the Russian Federation and Clauses 6, 7 and 30 of the Rules on Providing Utilities to Owners and Users of Premises in Apartment Buildings and Residential Buildings approved by Decree of the Government of the Russian Federation No. 354 dd. May 6, 2011, a power supply contract may be concluded both in writing and orally by performing implicative actions by the consumer.
6 To date, the procedure for concluding a power supply contract is sufficiently detailed and rarely gives rise to questions. In practice, however, there are exceptional situations that require a more thorough analysis of both the documents submitted by consumers to conclude power supply contracts and the current laws.
7 The conclusion of a power supply contract for inherited property is one of such situations.
8 In particular, the following issues arise in practice when concluding a power supply contract for inherited property:
9 1. The necessity to terminate the power supply contract concluded with the testator as a procedure preceding the conclusion of the power supply contract with the heir.
10 2. The issue of proper documents of title for the conclusion of the power supply contract for the inherited property during the period of acceptance of the inheritance (6 months).
11 3. The issue of legality of refusal to conclude the power supply contract with the heir who has applied to the power supply organization during the period of acceptance of the inheritance (6 months).
12 4. The transfer of inherited property into common shared ownership and related risks.
13 5. The possibility of concluding the power supply contract with the trustee of the inherited property.
14 The relevance of the chosen topic is due to its insufficient study and practical importance.
15 As a rule, immovable property serves as a power receiver (hereinafter also referred to as a power consuming facility), therefore in this article immovable property is referred to as inherited property.
16 In accordance with Article 1112 of the Civil Code of the Russian Federation, inherited property includes a set of items and other property, including property rights and liabilities, owned by the testator as of the date of opening of the inheritance.
17 In this case, according to the systematic interpretation of Articles 1113 and 1114 of the Civil Code, the date of opening of the inheritance is the date of the citizen’s (testator’s) death or the date of entry into force of the court decision to announce the citizen’s death.
18 In accordance with Clause 1 of Article 418 of the Civil Code of the Russian Federation, an obligation ceases to exist upon the death of the citizen if it cannot be fulfilled without the debtor’s personal participation or if the obligation is otherwise inseparably connected with the debtor’s personality.
19 Otherwise, the testator’s obligations are transferred to their heirs by way of universal succession (in universum jus) [3], which, in turn, implies the transfer of all rights and obligations from the predecessor to the successor in full, i.e., in an unaltered form as a whole and at the same time. [4], [5]
20 Since the obligations arising from the power supply contract can be fulfilled without the citizen’s personal participation and are not closely connected with the citizen’s personality, they cannot cease to exist upon the citizen’s death and are transferred to their heirs by way of universal succession. A similar approach is established in the civil laws of post-Soviet countries (for example, Kazakhstan, [6] Uzbekistan, [7] and Ukraine [8]).
21 At the same time, it should be noted that the obligations under a power supply contract are closely connected with the power consuming facility for which the said contract was concluded. As a result, they are transferred only to the heirs who inherited the power consuming facility or its part.
22 Thus, the unilateral termination of a power supply contract due to the inability to perform the contract (Article 416 of the Civil Code of the Russian Federation) and/or due to the consumer’s death (Article 418 of the Civil Code of the Russian Federation) is associated with a significant risk that the heirs will apply to the judicial authorities with a claim to invalidate the actions of the power supply organization terminating the power supply and to invalidate the unilateral termination of the power supply contract.
23 According to court practice, the above claims are usually satisfied in full with reference to the fact that the obligations under a power supply contract are not closely connected with the personality of the deceased and are transferred to the heirs by way of universal succession. [9], [10]
24 In view of the above, in order to minimize possible risks, the termination of the power supply contract concluded with the testator seems to be possible only after the power supply organization has received a request from the heir to conclude a power supply contract for the inherited property, together with a proper document of title for the inherited property.
25 As an alternative, it seems possible not to terminate the power supply contract concluded with the testator and, if the heir requests the conclusion of a power supply contract for the inherited property, to update the contract in the scope of information on the consumer by signing an addendum after the heir submits a proper document of title to the inherited property.
26 It should also be noted that according to the theory of universal succession, the universal nature of succession is expressed in the fact that the heir acquires not only the full range of rights and obligations of the testator, but also the liability for the testator’s debts. [11] In this case, the liability of the heir for the testator’s debts is limited by the value of the inherited property transferred to the heir in accordance with paragraph 2 of Clause 1 of Article 1175 of the Civil Code of the Russian Federation.
27 Thus, if at the time of the consumer’s death there was a debt under the power supply contract, the obligation to repay it is incumbent on the persons who became the owners of the power consuming facility.
28 In accordance with Article 1152 of the Civil Code of the Russian Federation, in order to acquire inheritance, an heir shall accept it. Accepted inheritance shall be recognized as owned by the heir from the date of opening of the inheritance irrespective of the time of actual acceptance and also irrespective of the time of state registration of the heir’s right to the inherited property, if such right is subject to state registration.
29 Inheritance is accepted by submitting to a notary or an authorized official in accordance with the law the heir’s inheritance acceptance application or the heir’s application for a certificate of the right to the inheritance at the place of opening of the inheritance (Clause 1 of Article 1153 of the Civil Code of the Russian Federation).
30 In addition, in accordance with Clause 2 of Article 1153 of the Civil Code of the Russian Federation and clause 36 of Resolution of the Plenum of the Supreme Court of the Russian Federation No. 9 dd. May 29, 2012, on the Judicial Practice in Inheritance Cases, the acceptance of the inheritance may be evidenced, in particular, by the payment of utilities (including consumed electric power) by the heir. [12]
31 According to Clause 1 of Article 1154 of the Civil Code of the Russian Federation, the general term of inheritance acceptance is 6 months. The specified term is “transitional” and the inherited property has a double status.
32 On the one hand, the accepted inheritance is recognized as owned by the heir from the date of opening of the inheritance irrespective of the time of actual acceptance and irrespective of the time of state registration of the heir’s right to the inherited property.
33 On the other hand, in fact the heir does not yet have the right to dispose of the inherited property, since they do not have a document of title to the inherited property.
34 In view of the above, it is difficult to conclude a power supply contract for inherited property during the above-mentioned “transitional” period, in particular, due to the following facts.
35 Pursuant to paragraph 4 of Clause 34 of the Basic Regulation on the Operation of Retail Electric Power Markets approved by Decree of the Government of the Russian Federation No. 442 dd. May 4, 2012, the consumer intending to conclude a power supply contract shall provide the power supply organization with documents of title for the power consuming facility.
36 However, it should be noted that an inheritance acceptance certificate issued by a notary and a certificate of inheritance rights are not documents of title for the inherited property. They only confirm the fact of acceptance of the inheritance by the heir. As already mentioned, the rights, obligations and debts of the testator are transferred to the heirs not by the fact of issuing a certificate of inheritance rights, but by universal succession.
37 At the same time, if a citizen applies to a power supply organization for concluding a power supply contract for inherited property and attaches a certificate of inheritance rights as a document of title, it is necessary to inform the consumer that they have not submitted documents of title for the power consuming facility in the manner specified in paragraph 6 of Article 39 of the Basic Regulation on the Operation of Retail Electric Power Markets approved by Decree of the Government of the Russian Federation No. 442 dd. May 4, 2012, and recommend to contact the Federal Service for State Registration, Cadastre and Cartography to register the transmission of ownership.
38 It is also necessary to inform the consumer that the current laws provide for the possibility of performance of contractual obligations by a third party (Article 313 of the Civil Code of the Russian Federation), which can be treated as the intention of the latter to continue contractual relations.
39 It should be noted that, as a rule, inherited property with a high degree of probability becomes common shared property.
40 This, in turn, results in a plurality of persons on the side of the consumer, since, in accordance with paragraph 7 of Clause 28 of the Basic Regulation on the Operation of Retail Electric Power Markets approved by Decree of the Government of the Russian Federation No. 442 dd. May 4, 2012, only one power supply contract may be concluded for one power receiver.
41 According to Clause 1 of Article 246 and Clause 1 of Article 247 of the Civil Code of the Russian Federation, the possession, use and disposal of property in shared ownership shall be carried out by agreement between all its owners, and in the absence of such agreement, in the manner determined by court.
42 Thus, in such situation, a power supply contract is concluded either with all owners of the shared property or with one of them.
43 At the same time, in order to conclude a power supply contract for inherited property that becomes shared property with only one joint owner, it is necessary to obtain the consent of all co-owners authorizing one of them to conclude a power supply contract for the inherited property on behalf of all owners. In this case, there is no plurality of persons on the side of the consumer under the power supply contract.
44 It should be noted that the aforementioned consent of the co-owners does not constitute a power of attorney. Based on Clause 1 of Article 185 of the Civil Code of the Russian Federation, a power of attorney is a unilateral transaction, while an agreement of co-owners of a shared property is a multilateral transaction that is in a way similar to a limited trust.
45 Please note that if a power supply contract for inherited property that became shared property is not concluded with all co-owners, and if the co-owners do not consent to the conclusion of a power supply contract by one of them, the said contract may be invalidated (Article 173.1 of the Civil Code of the Russian Federation).
46 Together with the heirs, the trustee of the inherited property may apply for the conclusion of a power supply contract at the time of opening of the inheritance.
47 According to Clause 1 of Article 1173 of the Civil Code of the Russian Federation, if inheritance includes property which, apart from protection, requires management (an enterprise, a share in the authorized (share) capital of a corporate legal entity, an equity stake, securities, exclusive rights, etc.), a notary acting as a trustee in accordance with Article 1026 of the Civil Code of the Russian Federation shall conclude a trust agreement for such property.
48 Thus, since from all the above-mentioned inherited property only an enterprise can act as a power consuming facility, the subject of the application to the power supply organization submitted by a trustee with respect to the inherited property may be the conclusion of a power supply contract for the enterprise.
49 It should be noted that in accordance with Clause 1 of Article 1012 of the Civil Code of the Russian Federation, the transfer of property in trust does not imply the transfer of ownership of the property to the trustee.
50 In addition, unlike the situation considered above, when a citizen applies for a power supply contract for inherited property during the opening of inheritance, in the situation when a trustee of inherited property applies for a power supply contract for inherited property during the opening of inheritance, the trustee has a document of title for the inherited property for concluding a power supply contract which is a trust agreement for the said property.
51 At the same time, the following peculiarities of concluding a power supply contract with a trustee of inherited property should be noted.
52 In accordance with Clause 2 of Article 1017 and Clause 1 of Article 131 of the Civil Code of the Russian Federation, the transfer of an enterprise as immovable property in trust is subject to state registration. In this case, a trust agreement for inherited property does not require state registration.
53 Therefore, when concluding a power supply contract with the trustee of the inherited property, it is necessary to pay attention to the state registration of the transfer of the inherited property in trust.
54 It should also be noted that in accordance with Clause 8 of Article 1173 of the Civil Code of the Russian Federation, a trust agreement for inherited property is temporary and may be concluded for a period not exceeding five years. If the heirs do not demand the transfer to them of the property held in trust, the trust agreement is considered to be extended for another five years.
55 In this case, at the time of issue of a certificate of inheritance rights to at least one of the heirs, if such certificate specifies the property held in trust, or if such certificate is issued for all of the testator’s property, in whatever form and wherever located, the rights and obligations of the trustor shall be transferred to such heir. In this case, the notary establishing the trust shall be relieved of the duties of the trustor.
56 Thus, the expiration of the period of inheritance acceptance (6 months) does not constitute a reason for terminating a trust agreement for inherited property. The heir who has received a certificate of inheritance rights may terminate the trust management and require the trustee to transfer the property held in trust, the rights to which have been transferred to the heir, and to submit a trust management report.
57 In view of the above, when concluding a power supply agreement with a trustee of inherited property, it is advisable to “tie” the term of the power supply contract to the term of the trust agreement.
58 In conclusion, it should be noted that the issue of refusal to conclude a power supply contract with an heir who has applied to a power supply organization during the period of inheritance acceptance (6 months) is the “thorniest” of all the above issues, as it involves antimonopoly risks arising for the power supply organization.
59 Thus, if the power supply organization has the status of a guaranteeing supplier in the retail electric power market, then if an heir receives a refusal to conclude a power supply contract and applies to regulatory authorities, such refusal may be treated as an abuse of the dominant position by a business entity in accordance with Clause 5 of Part 1 of Article 10 of Federal Law No. 135-ФЗ dd. July 26, 2006, on Protection of Competition. [13]
60 Liability for abuse of the dominant position in a commodity market is established by Article 14.31 of the Code of Administrative Offences of the Russian Federation [14] and includes, inter alia, a turnover-based fine.
61 Due to the fact that the current laws on the electric power industry do not contain any provisions allowing to unambiguously determine the status of the power supply contract during the “transitional” period of inheritance acceptance, it seems possible to supplement the Basic Regulation on the Operation of Retail Electric Power Markets approved by Decree of the Government of the Russian Federation No. 442 dd. May 4, 2012, with a paragraph stipulating that a power supply contract for inherited property cannot be concluded with an heir prior to the end of the period of inheritance acceptance.
62 The above provision would make it possible to eliminates the liability of the power supply organization for refusing to conclude a power supply contract for the inherited property with the heir.
63 However, it should be noted that the above provision does not constitute an obstacle to extending the validity of a power supply contract concluded with an heir for inherited property into the past.
64 In addition, it is also proposed to supplement clause 34 (1) of the Basic Regulation on the Operation of Retail Electric Power Markets approved by Decree of the Government of the Russian Federation No. 442 dd. May 4, 2012, with an additional condition allowing to exclude the qualification of electric power supply during the “transitional” period, as well as within 30 days from the end of the period of inheritance acceptance, as non-contractual consumption of electric power.
65 The above provision, together with the previous one, will preserve the balance of property interests of both the power supply organization and the electric power consumer.

References

1. Decree of the Government of the Russian Federation No. 354 dd. May 6, 2011, on Providing Utilities to Owners and Users of Premises in Apartment Buildings and Residential Buildings // Collection of Legislative Acts of the Russian Federation. 2011. No. 22. Art. 3168.

2. Decree of the Government of the Russian Federation No. 442 dd. May 4, 2012, on the Operation of Retail Electric Power Markets, Full and/or Partial Restriction of the Electric Power Consumption Regime // Collection of Legislative Acts of the Russian Federation. 2012. No. 23. Art. 3008.

3. Gaglione G. Cross-Border Succession Issues: A Comparison of Common Law and Italian Legal Systems / G. Gaglione // Journal of the Commonwealth Association of Lawyers. 2019. No. 2. P. 18–21.

4. Pokrovsky I.A. Main Problems of Civil Law / I.A. Pokrovsky. Мoscow : Statut, 2013. 352 p.

5. Shershenevich G.F. Textbook of Russian Civil Law. Inheritance Law // Science Editor V.S. Em. Vol. 2 Мoscow : Statut. 2005. 462 p.

6. Civil Code of the Republic of Kazakhstan. Special Part [Electronic resource]: approved by Law of the Republic of Kazakhstan No. 410-I dd. July 1, 1999. URL: https://online.zakon.kz/Document/?doc_id=1013880.

7. Civil Code of the Republic of Uzbekistan [Electronic resource]: approved by Laws of the Republic of Uzbekistan No. 163-I dd. December 21, 1995 and No. 256-I dd. August 29, 1996. URL: http://fmc.uz/legisl.php?id=k_grajd.

8. Civil Code of Ukraine dd. January 16, 2003 No. 435-IV [Electronic resource] // Voice of Ukraine. March 12, 2003. URL: https://online.zakon.kz/Document/?doc_id=30418568.

9. Ruling of the Seventh General Jurisdiction Court of Cassation dd. November 5, 2020, in Case No. 88-16447/2020, 2-820/2020 [Electronic resource] // Consultant Plus Reference Legal System.

10. Decision of the Svetloyarsk District Court dd. July 3, 2017, in case No. 2-416/2017 [Electronic resource] // Consultant Plus Reference Legal System.

11. Roman Private Law: Textbook for Higher Education Institutions / I.B. Novitsky [et al.]; editor-in-chief I.B. Novitsky, I.S. Peretersky. Moscow : Urait, 2023. 608 p.

12. Resolution of the Plenum of the Supreme Court of the Russian Federation No. 9 dd. May 29, 2012, on the Judicial Practice in Inheritance Cases // Rossiyskaya Gazeta. June 6, 2012.

13. Federal Law No. 135-ФЗ on Competition Protection dd. July 26, 2006 // Collection of Legislative Acts of the Russian Federation. 2006. No. 31 (Part I). Art. 3434.

14. Code of Administrative Offences of the Russian Federation // Collection of Legislative Acts of the Russian Federation. 2002. No. 1 (Part 1). Art. 1.

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