Enforcement of judicial awards in russia

When disputes between shareholders and other business partners do arise, the Russian judicial system may not always be the most effective venue to resolve the matter.[i] The development of corporate law has been a recent development in the country and as a civil law system, courts are bound to rely solely on the Civil code for direction.[ii] This has caused unpredictable results because different courts have interpreted the law in varying ways, further contributing to an unstable investor market.[iii] This has been particularly concerning in regards to shareholder agreements, typically used to protect minority shareholder interests.  The reluctances of enforcement of stockholder agreements was exemplified by the 2006 West-Siberian District Commercial Court’s appellant holding in the Megafon case where the Court invalidated an agreement that anointed Swedish law as controlling.[iv] Russia’s Ministry of Economic Development realized this issue and responded by drafting the 2009 amendment to the Law on Joint Stock Companies.[v] This law recognized shareholder agreements and eliminated the possibility that courts would invalidate such agreements statutory grounds. Though the statutes expressly authorized shareholder agreements it failed to explain whether choice-of-law provisions were applicable to shareholder agreements.[vi] This lack of appreciation for freedom of contract provisions have discouraged many foreign investors and has been the rationale for Russian courts who have invalidated investor agreements.[vii] The 2010 Verny Zank case is one of the more recent examples of judicial reluctance to recognize shareholder agreements.[viii] There, the court found that the agreement violated required provisions of current legislation.[ix]

            The development of corporate law has been a rather recent development in Russian law. Moreover, the country is apart of the civil law tradition which requires courts to apply the law exclusively through their statutory interpretation. While this seems like it may provide for a simple result the opposite has generally been true. Courts interpret statues in a fashion that they deem fit, this creates a general lack of uniformity in the application of the law, discouraging investors from entering the market. Russian leadership has recently been advocating the promotion of measure that will increase investor confidence when investing in the country. Ensuring consistent and uniform judicial rulings will go a long was to luring foreign investment into the country.      

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[i]. Glusker, supra note 49, at 598.  

[ii]. Karina L. Pulec, Legal Restraints on the Use of Shareholders’ Agreements for Structuring Foreign Investment Deals in Russia, 45 Cornell Int’l L.J. 487, 488 (2012).  

[iii] Id. at 509.

[iv] Id. at 503.

[v] Federal’ nyi Zakon RF o vnesenii izmenenii v Federal’ nyi zakon “Ob aktsionernikh obshchestvakh” I Stat’iu 30 federal’ nago zakon “O rynke tsennikh bumag” [ Federal Law of the Russian Federation on amendments to the Federal Law “On Joint Stock Companies” and Article 30 of the Federal Law “On the Securities Market”], Rossiiskaia Gazeta [Ros. Gaz.], June 10, 2009, available at http://www.rg.ru/2009/06/10/akcionernys-obshestva-dok.html [hereinafter 2009 Amendment].

[vi]. See Oda, Supra note 65(Check at the end), at 360.

[vii]. Id. at 361.

[viii]. See Postanovlenie FAS Moskovskogo Okruga “Verniy Znak” ît 25 maia 2011, No. À40-140918/09-132-894 [Resolution of the Moscow District Commercial Court of the case “Verniy Znak” on May 25, 2011, No. À40-140918/09-132-894], available at http://kad.arbitr.ru/PdfDocument/fe377b20-ebf5-4e28-88e5-be5adfd1bb88/A40-140918-2009_20110530_Reshenija%20i% 20postanovlenija.pdf [hereinafter Verniy Znak Case].

[ix]. Pulec, supra note 68, at 512.