BGP Litigation senior associate Evgeny Polyakov speaks with about the problem of the loss of the pledge right of a creditor that obtained attachment prior to bankruptcy

"The matter at issue in this case is much more important than it may first seem, agrees Evgeny Polyakov, a senior associate at BGP Litigation. "If it is decided that the pledge should be preserved in the bankruptcy, this will increase the active creditors' chances of  having their claims satisfied and prompt them to initiate recovery sooner", says Polyakov".

Evgeny Polyakov added that consequently the emphasis will automatically shift to procuring interim measures, which in turn will lead to more disputes surrounding the courts' refusal to grant such measures. The Supreme Court will have to resolve this extremely challenging issue, which for now is essentially being ignored and leads to a situation where legal defenses can be ineffective or even result in a financial loss.
If the Supreme Court cancels the 'compulsory' pledge in the bankruptcy proceeding, says the BGP Litigation senior associate, it will be depriving the creditor of a functioning debt-recovery mechanism without having provided any alternative. From the standpoint of the development of Russian law this is very dangerous, because, as some colleagues have quite rightly noted, disregarding the priority of pledge would be dealing a serious blow to the maturity and progress of Russia's legal system. 
Practising lawyers, says Evgeny Polyakov, expect that the Supreme Court will decide to preserve this legal instrument that allows for actual recovery of indebtedness and not to rule in favor of the debtor.  
If one takes a highly formalistic approach to the issue, says the legal expert, then according to Art. 334(5) of the RF Civil Code a pledge right arises at the moment when the judicial decision ordering attachment enters into force. In turn, the moment of attachment is of relevance only for the purpose of determining the order of priority of the pledge holders: who is first and who is next. Therefore, a pledge arising by operation of Art. 334(5) of the RF Civil Code cannot disappear from the moment a debtor is declared bankrupt, because creation of the pledge depends on the entrance into force of the judicial act and is not connected with either actual attachment in the framework of enforcement proceedings or consequences of the debtor's being declared bankrupt.

The full article (in Russian) is available here: "П. 5 ст. 334 ГК: ВС решил проблему залогового приоритета при банкротстве".