Comment to Article 158. Invalidity of a transaction, the content of which does not comply with the requirements of the legislation of the Civil Code of the Republic of Kazakhstan  

The most important requirement for a transaction is its full compliance with the law. The commented article does not refer to all violations of the law, many of which serve as grounds for invalidating transactions by virtue of art. 159 of the Civil Code and other legislative rules. The commented article is directed against non-compliance with the law of the content of the transaction, that is, against open illegality. There may be terms of the transaction that provide for the commission of a crime, evading the mandatory rules of the law, the sale of items withdrawn from circulation to private individuals, etc.

However, the mere absence of a provision in the law allowing transactions of this kind cannot lead to its invalidity.  

Transactions that are obviously contrary to the principles of law and order and morality are considered illegal.

This provision is intended to make up for the possible incompleteness of the law in the field of protecting the most important interests of society. Therefore, when applying it, there may be no reference to which specific law was violated by the participants in the transaction, which requires special care to invalidate the transaction on these grounds. It is also necessary to prove that the participants in the transaction were well aware of its illegal or anti-moral orientation.  

Nevertheless, the norm in question is very appropriate, especially at a time when the country's legal system has not yet reached the required level of completeness and stability.  

For example, the director of a state-owned enterprise enters into a deal with a private company that is unprofitable for the enterprise, but very profitable for a company owned by a person close to the director.  

The commented article provides for a new requirement for our legislation prohibiting a legal entity from demanding recognition for selfish reasons of the invalidity of a transaction concluded by a body of a legal entity in violation of the competence established by its constituent documents. Here it is easy to trace the connection of the commented article with paragraph 4 of Article 44 of the Civil Code.

For these reasons, it is unacceptable to satisfy the claim of both an individual and a legal entity who knowingly violated the law when concluding a transaction, and then, referring to their own violation, demand recognition of its invalidity.  

For example, one of the Almaty banks opened an escrow account for a Russian company, into which a large amount of money was deposited at interest for a year. When the client tried to receive his money after the deadline, the bank stated that violations of banking rules had been committed when opening the deposit account, therefore the transaction should be declared invalid, and he (the bank) is ready to refund the client the entire amount received for crediting to the deposit account. The arbitration court rejected the bank's claim.  

The norm in question corresponds to the principle well-known to foreign law: "Do not go to Court with dirty hands" (you can not go to court with dirty hands).  

At the same time, one cannot dismiss the fact that the transaction provided for in paragraph 2 of this article may objectively violate the requirements of the law, regardless of the intentions of its participants. And this is due not only to the private interests of the participant who committed such a violation, but also to public interests.

This allows us to conclude that a transaction that violates the requirements of the law cannot be invalidated by the claim of the one who committed the violation and seeks to use the fact of violation in their own private interests. However, a violation that affects the public interest may serve as a basis for invalidating the transaction at the request of persons and bodies representing public interests (licensing authority, tax authority, prosecutor's office).  

Article 174 of the Civil Code of the Russian Federation provides a similar basis for invalidating a transaction, but with an important restrictive condition. Invalidation of a transaction made by a body of a legal entity in clear violation of its authority is possible at the request of the person in whose interests the restrictions on authority are established, only on condition that the other party to the transaction knew or should have known about such restrictions.

Paragraph 3 of the commented article establishes another rule that was not previously contained in our legislation, specifically aimed at protecting creditors whose interests have been violated by an unscrupulous debtor. A transaction may be declared invalid provided that it was made with the aim of evading a person from fulfilling an obligation, from liability to third parties or the state.

In previous years, transactions of this kind were defined as those made in circumvention of the law. Examples can be the sale, donation, or other form of alienation of property, which, as its owner fears, may be the subject of debt collection, confiscation, etc. Often the transactions referred to in paragraph 3 are made in connection with the expected initiation of bankruptcy proceedings or in order to create the appearance of bankruptcy (false bankruptcy). A necessary condition for the application of this rule is the improper behavior of another participant in the transaction (the acquirer of property). Therefore, in cases where such a participant does not know and, due to the circumstances of the case, should not know about the intentions of the alienator of the property, the transaction should not be declared invalid, because this would violate the legitimate interests of the acquirer of the alienated property.  

It also follows from the exact meaning of Article 158, paragraph 3, that a claim for invalidation of a transaction may be filed by an interested party (for example, a creditor, a competent state authority), but not by the person who sold the property. This, in turn, means that the alienator of the property has no right to demand that the transaction be declared invalid, even if his fears about possible foreclosure on such property turn out to be groundless.  

A lawsuit seeking to invalidate a transaction for these reasons is often referred to as the Paulian lawsuit (named after a Roman lawyer).

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The commentary was prepared within the framework of the scientific and practical research program of the Scientific Research Center of Private Law of the Kazakh State Law University.  

Head of the working group on the preparation of the draft Civil Code of the Republic of Kazakhstan, Corresponding Member of the Academy of Sciences of the Republic of Kazakhstan, Professor Suleimenov M.K.

Deputy head Professor Basin Yu.G.