June 2, 05:24 (UTC+3)

The Russian legal system as a factor in attracting investment

KEY CONCLUSIONS:

  • Russias legal system actively developing

“The perceived lack of professionalism of the Russian courts is deeply rooted with many global investors. However, this has changed a lot with our local arbitration practices,” said Alexander Afanasiev, Chairman of the Executive Board, Moscow Exchange.

“We are reforming the Civil Code – Eight blocks of amendments out of 11 have already been passed,” said Pavel Krasheninnikov, Chairman, State Duma Committee of the Federal Assembly of the Russian Federation State Building and Legislation.

“We have run a new survey <…> to identify two key trends. That is arbitration awards have been increasingly matching the general practice over the past two years,” said Boris Boltyanskiy, Editor-in-Chief, Pravo.ru.

  • Enhanced dialogue between the law enforcers and business community

“To ensure seamless contact between the business and the Prosecutor General’s Office, a dedicated web site and hotline are now in place. 800 applications have been received this year alone. We uphold nearly every fourth application,” said Yury Chayka, Prosecutor General of the Russian Federation.

  • Uptrend in Russias regulation noted by global investors

“I understand what has been said <…> about the Russian legal system developing so quickly and getting increasingly attractive to investors willing to do business locally, and I am supportive,” said Gokhan Sarac, Vice President for Legal Affairs, Central Asia, Africa, Middle East and the Commonwealth of Independent States, Unilever Plc.

CHALLENGES:

  • Many entrepreneurs still opt for the English law

 “Why do entrepreneurs still opt for the English law, not the Russian? First and foremost, that is an established business practice, like a business custom. Secondly, much of it is very professional media and marketing hype supporting the idea of better protection of your rights under the English law. That is not exactly the case, however <…> as dispute resolution in Russia is faster,” said Vladimir Gruzdev, Chairman of the Board, Association of Lawyers of Russia.

  • Poor payment discipline of local authorities

“The municipal debt owed to the business is big. That said, we have managed to recover RUB 50 billion for the business, but there is still a lot to do,” said Boris Titov, Presidential Commissioner of the Russian Federation for the Protection of Entrepreneurs’ Rights.

  • No common approach to natural monopoly pricing

“The pricing may vary a dozen-fold from region to region. That pricing includes whatever one can think of. <…> So, now we are working on a law on the common fundamentals of tariff regulation,” said Andrey Tsarikovskiy, States Secretary, Deputy Head, Federal Antimonopoly Service of the Russian Federation.

  • Unlawful arrests of businessmen still unaddressed

“We have a globally unique law that exempts businessmen from arrest at the preliminary investigation stage. But, unfortunately, this is not always applied,” said Boris Titov.

SOLUTIONS:

  • Actions to protect entrepreneursrights

“Today, we are not being reactive just waiting for applications from businessmen, but work proactively to find those in jail and check whether they have been arrested lawfully in each and every individual case,” said Boris Titov.

  • Control over natural monopoly pricing

“Natural monopoly pricing is often subject to material violations. <…> Apart from our methodologies being far from ideal, the providers often violate those. <…> This has to be addressed in every specific region to help local entrepreneurs get rid of the excessive tariff burden,” said Boris Titov.

  • Higher independence and accountability of judges

“We are drafting a whole bunch of proposals on higher judicial independence and accountability of judges. We are raising the question of amending Article 159 <…> having actually drafted a new text version, and we hope to get support from the prosecutor's office,” said Boris Titov.

  • Wider authority of the prosecutor's office in procedural action

“The prosecutor's office should have a much wider authority in procedural action <…>. This opinion is shared by business communities and many legal associations. So, we will keep promoting that on our end,” said Boris Titov.