New Year, New Civil Code

Russia's new Civil Code, most of which comes into effect Jan. 1, will provide businesses with a much clearer legal basis for commercial activity, lawyers say.

President Boris Yeltsin signed Part One of the Civil Code (Federal Law No. 52-F3) on Nov. 30, setting out Russia's basic law on forms of legal entity, ownership rights and business relations.

"It's the first time since Russia came into being that they've produced a comprehensive body of civil law," said Lane Blumenfeld, director of the Center for Institutional Reform and the Informal Sector, a USAID-funded organization that worked as an adviser to the code's drafting commission. "It washes away the maze of contradictory laws and decrees from the Soviet period and since."

The preamble to the document sets out a long list of legislation that now contradicts the code and should be considered null and void, including large sections of Russia's Soviet-era 1964 civil code plus laws on property and business. The fate of other commercial legislation is less obvious, however.

"It's clear which laws have been repealed," said Eric Michailov of White & Case. "But it's still going to be difficult on a case-by-case basis. You will still need to refer to presidential decrees and government decrees."

Future legislation should be harmonized with the code, although the parliament will be able to amend it. Presidential decrees that appear to contradict the code, however, can be challenged in the courts.

The section dealing with legal entities (Chapter 4) came into effect on the date of the code's publication. Companies have until June 1 to alter their documents to conform with the provisions of the code, but will still cause some inconvenience.

"It's the second piece of legislation this year requiring companies to reregister," said Michailov. "It'll be an administrative headache for Russian companies to change their founding charters to conform with the code."

A section on land rights (Chapter 17), however, will be suspended until a land code is adopted. In both the Duma and Federation Council, members of the Agrarian and Communist factions have threatened to block the Code's passage unless the sections dealing with land were removed, Blumenfeld said.

"This is likely to give people wanting land as collateral reason to be cautious," said Blumenfeld. "The Agrarians and Communists don't want private land."

A draft of the second and final part of the Civil Code, containing chapters on law of sales, lease, bank transfers, personal injury, commercial and intellectual property should be completed early next year, Blumenfeld said.

Recent Legislation

Paying Profit Tax (Moscow Tax Inspectorate Letter No. 11-13/15475, Nov. 30) ) States that interest earned by foreign individuals and organizations from securities, bank deposits and loans is considered subject to taxation. Tax on interest is levied on foreign organizations and individuals at a rate of 15 percent.

Importing Office Equipment (State Customs Committee Directive No. 01-12/1276, Nov. 10) Allows accredited foreign companies to bring in tax free office equipment, cars and other goods necessary to run a business on condition that they are not transferred or sold to a third party. The customs service shall determine the period of temporary importation, which can be prolonged on application.

Issuing Treasury Notes (Finance Ministry letter No. 140, Oct. 21) Sets out the conditions for distribution, circulation and redemption of interest-bearing treasury notes, a security that the Finance Ministry has issued as a form of payment for government debts.

Lead and Copper Concentrate (Government Order No. 1265, Nov. 17) Establishes export quotas on lead and copper concentrates that contain precious metals. Allows the export of 17.22 kilos of gold and 36,842 kilos of silver in lead concentrates and 335.5 kilos of gold and 17,894 kilos of silver in copper concentrate in 1994-95.

Subsidizing Grain Transport (Government Order No. 1587-R, Oct. 6) To stimulate exports of barley, oats and rice, the government has ordered that producers should receive a 50 percent reduction on the cost of transporting these crops by rail to seaports.