The Fate of Creditors’ Claims against an Insolvent Debtor and Persons Providing Security in the Sale of a Claim for Imposition of Subsidiary (Vicarious) Liability

The paper examines whether, when a debtor sells (assigns) a claim for the imposition of subsidiary (vicarious) liability against a person controlling the debtor, the purchaser also acquires the creditor’s claim against the debtor, the rights securing the debtor’s performance of the obligation, and other rights related thereto. The study is prompted by the jurisprudence of the Supreme Court of the Russian Federation and concludes, citing the joint and several nature of the relevant claims, that the aforementioned rights transfer jointly and concurrently with the sale of the claim against the person brought to subsidiary (vicarious) liability. This approach is generally justified as necessary to resolve the problem of double liability (double recovery) that, in the Supreme Court’s view, may arise from an isolated assignment of the relevant claim. The paper criticizes the Supreme Court’s reasoning and advances an alternative position, including solutions that eliminate the risk of double liability for both the debtor and the person held subsidiarily (vicarious) liable.

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