The law comes knocking

Corporate lawyers working in Russia might smile at visiting British Prime Minister David Cameron’s call for the state to apply the law fairly in business deals.

His plea comes two weeks after black-clothed Special Forces raided the Moscow offices of oil company BP as part of a dispute with prominent Russian shareholders in the joint venture TNK-BP.

To the casual observer the problem looks simple: in Russia, it seems, well-connected oligarchs can lean on politicians and call on armed force to get their way in business deals.

Cameron said investors needed to have faith that “the judiciary and the police will protect their hard work and not put the obstacles of bureaucracy, regulation and corruption in their way”.

The reality is more complex. As contributors told The Lawyer magazine’s Russia and CIS debate last week, reform of Russia’s Civil Code is progressing. This is a key step on the path to establishing Russian law as the standard in business deals.

English law, not Russian, is used to govern 80 percent of domestic deals, Dmitry Afanasiev, chairman of Egorov Puginsky Afanasiev Partners told the conference.

The Royal Courts of Justice in London echo not just to the bells of nearby St Clement’s but the voices of barristers settling disputes between Russian companies.

Back in Moscow, The Lawyer’s conference heard how some legal offices had not only bulletproofed their doors, but also located their computer servers outside Russia, so that records and data can be disconnected in the event of a raid.

However Cameron’s call for the “effective and predictable” rule of law is a distant goal and not something the Russian government could enforce tomorrow.

Corruption thrives because Russia has more than one law. Communist-era regulations often contradict modern ones. Those older regulations were deliberately vague, to be enforced or not enforced according to the whims of politics or the KGB.

Russia lacks not just clear laws but a legal culture. Clients may negotiate for hours, not over something material, but over the wording of standard legal concepts like force majeure.

They are not sure which conditions of a contract cannot be violated and what can be negotiated in court.

Only when all parties know that breaking the key terms of a contract will lead to prosecution, will contracts be taken more seriously: as more than an intention to negotiate.

Read other articles of the print issue “The Moscow News #70”

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