On April, 13-14 2011 the VII annual forum “Yuridichesky forum Rossii” which gathered heads of Russian leading law firms, representatives of legal departments of the Russian and foreign companies was held in Moscow. Moderators and participants of the forum have chosen the primary topic of discussion as follows: “Key legal issues which should be solved to develop business in 2011”.
Business and law make an integral mechanism which can only operate successfully if all components are well coordinated, and the most important condition is the desire for joint cooperation and coexistence. So what is wrong with the union of business and law in Russia? Why the priority of national law is observed in the BRICK countries, and not observed in Russia? What inhibits “modernization” and establishment of the International Financial Center in Russia? Here the forum participants outlined and discussed the main problems, having omitted corruption, the threadbare issue which all the same is one of the key problems. Dmitry Afanasiev, the chairman of committee of partners in law bureau “Egorov, Puginsky, Afanasiev and partners”, believes that an actual shrinking of domestic jurisdiction combined with obvious financial losses takes place in Russia as a result of complex faults in the Russian legal framework (to compare with the UK there legal System produces up to GDP 20 %!). The point is, the fate of the major domestic projects is sealed by English public justice and pleaded in English courts by English lawyers. It is an issue for both business and law community. National lawyers are losing money since clients are leaving for international jurisdictions, and business costs increase. What should be changed? According to participants of the Russian forum, the main problems are the following: the poor quality of justice, inconvenience of substantial law, numerous imperative norms of law, impossibility of sufficient certification of guarantees, outdated condition of many concepts of the corporate law, including the concept of “affiliate”, the lack of “shareholders’ agreement” concept, consequently “complex transactions” cannot be regulated (the reason for big business to shift to the English justice), the law isn't oriented to “fair business”, low qualification of the judicial manpower.
It should be separately noted that national law making and law enforcement are carried out in defiance of business. The law is incorrectly related to economic impact of law enforcement, these issues were vividly exposed in reports made by Ruslan Ibragimov, the Vice President for Corporate & Legal Affairs of MTS, and Konstantin Kolpakov, director of legal department of Sberbank of Russia.
To return to corruption issue, it is necessary to note the report made by Anna Goldin, the vice-president and head of the Complex (department) for legal issues of AFK “Sistema” OJSC dedicated to requirements and specifics of the new British law on combating bribery which allows one to treat as illegal some activities which previously were deemed as usual commercial practice, obliges companies to adopt a complex of anticorruption procedures, (without specifying the list of such procedures), holds the companies and their public officials to account for connivance to bribery and corruption, doesn't contain criteria of materiality as to the amount of bribe and exceptions for business promotion, can hold a company liable for activity/inactivity of its personnel, agents, subsidiary firms. The law has extraterritorial effect (applies to British citizens and companies, as well as to international companies which are deemed engaged in business in the UK) worldwide. (Too bad, foreigners are the driving force which promotes faster modernization of the Russian legal system and makes disputes involving big business return to the Russian jurisdiction because today’s Russian business and capital will hardly be easily fit into the context of the above law).
Participants of separate sessions took a more closed look at problems of modern corporate law in Russia: the necessity of changes in legislation which would enable corporate law to operate efficiently, and allow Russian lawyers to cash on applicable Russian law. Dmitry Stepanov, a partner of law bureau “Egorov, Puginsky, Afanasev and partners”, acting as a moderator of the session has initiated discussion about the draft civil code of the RF which essentially involves corporate legislation where the lawmaker stands up for more severe regulation of corporate forms, and business community, on the contrary, stands for liberalization of corporate legislation. The session participants outlined the essential aspects of law enforcement, namely, responsibility in corporate law, mandatory use of the Russian law for domestic transactions, adoption of institutes previously unknown in domestic law, i. e. presentations/warranties made at contract conclusion, irrevocable powers of attorney, security trustee, escrow accounts, pre-calculated damage, etc.
Yury Monastyrsky, the partner of the law firm “Monastyrsky, Ziuba, Stepanov and partners” delivered a report entitled “Complications in the use of corporate agreements based on the Russian law” where he outlined roadblocks on the way to use such agreements in the Russian law, he named the Russian judicial system as the main obstacle (and I absolutely agree with him in this matter). He also gave advice as to how to promote the more wide use of domestic law.
Participants of other parallel sessions have studied the issues as follows:
- Antitrust legislation; in particular, they discussed the so-called “third antimonopoly project”, which is mainly aimed to create a more transparent system of antitrust regulation for business;
- The tax laws, connected with specifics of the Russian tax system, the need for adoption of legal mechanics allowing to approve any tax schemes for main business transactions (which are currently unclear as to tax qualification) with the tax agencies;
- Legal support of IPO process; the session was moderated by Maria Shlyapina, the head of legal department of “VTB Kapital” who presented the report titled |Placing of the Russian companies on international capital markets: market trends and practical aspects of implementation”. In her report she outlined the main trends of Russian IPO market: placing Russian offshore structures in the international stock markets, expansion of international venues for listing, new formats of international listing, occurrence of the new instrument at the RDR stock market, public offering of shares of state-owned Russian companies to investors;
- Legal issues related to M&A deals; participants of the session discussed the post-crisis situation of businesses which postponed asset consolidation. Due to “sound” state initiatives aimed to privatize public assets and improve regulatory environment, the anticipated number of M&A is 50%, as compared with the last year; however, corruption, inconvenience and imperfection of laws, poor qualification of the judicial manpower still remain the main issues.
I would like to highlight the session titled “Selling legal services: trick of the trade”.
A heated discussion flared up during this session: is the legal business a sale of services conducted up to some “matrix”, or an individual “surgical operation”. Should this process be only entrusted to marketing experts, or to any lawyer/partner of a law firm? The very consumers of legal services also presented their reports, thus adding uniqueness to the session, so the lawyers could hear all the pros and cons straight from the horse's mouth. The participants remained at odds, however, it became apparent that apart from individual approach to the client, one should establish some system of sales and organization of legal services inside the company (the latter is applicable to bigger law firms). In this regard, the marketing department provides support to the partner, for more complex product presentation to clients, however, one should take into account that clients all the same tend to rely on qualification and professional assessment (advice) provided by the partner.
Aleksandra Petrova, director of legal department of OBI, described the process of choosing an advisor (as exemplified by her company). She said that great attention is actually given to how bidding companies present a “matrix” of legal services, however, one’s personal working experience, or recommendations of business partners shall prevail in decision making. Attention is paid to number of publications– comments made by lawyers in press (for instance, about changes in legislation), as to ratings, they are “reference books” used by the majority of western companies when choosing an adviser. She also said that great attention should be given to form and content of commercial offers, while an emphasis should be laid on transparency and accurate budgeting of the project, if it is a case of billing, then the accurate definition of rate and number of employees involved in the project, the client also needs intermediate meetings with advisers, first, it allows to correct tasks, payment, etc., more efficiently, second, it is a feedback, which is very important for the client.
To summarize the session, I agree that high-quality legal services are a product which should be professionally conditioned and marketed, however, such product will prove unmarketable without personal communication between an adviser and a client, especially in the context of Russia.
As to the above general problems associated with Russian law, participants of the session themed “Case-law in Russia. Evolution or revolution” discussed the possibility to apply the system of case-law, and compared classical precedent to legal views of high courts in the RF. The session was moderated by Yuly Tai, the managing partner of law bureau “Bartolius”. Participants arrived at the conclusion that the concept of “legal views of high courts in the RF” should be codified (entrenched in legislation), to use it as a precedent, also one should note, that in common law of England precedents are used to fill up existing gaps in legislation, while in Russia precedents are used to change interpretation of previous law enforcement. Moreover, there is a need for practice of joint resolutions by the Supreme arbitration court and the Supreme Court of the RF, to avoid further collisions, when opposite judgements are delivered in the same case (matter of dispute) for entities and individuals. Here the legal community reached a mutual opinion that we need a clear codified position of legal views of high courts in the RF to change investment climate, and to establish the International Financial Center in Russia.
Awards of “Legal Insight magazine were presented to law firms:
- For advances in human resources management
- For advances in free legal support of nonprofit organisations and citizens
Certificates were also presented to “Pravo.ru” 2010 rating winners.
We d’ like to thank organizers and participants for the high-quality event and, may be, today’s best venue for meetings of Russian law business leaders.