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. Last Updated: 07/27/2016

EDITORIAL: Subway Shop Neglected at St. Pete's Peril




St. Petersburg may be considered Russia's second city, but it's running a pretty distant second among foreign investors who have shunned the northern port town. Now Governor Vladimir Yakovlev, just back from the United States, has given them one more reason to stay clear of the Venice of the North.


During a news conference Wednesday on foreign investment, Yakovlev lashed out when a reporter asked whether he would help enforce a Russian Supreme Court ruling regarding the U.S.-based Subway sandwich franchise.


Subway officials opened their St. Petersburg restaurant in 1994, but the following year ran into problems with their Russian partner, who promptly confiscated the premises and renamed it the Minutka. An arbitration court in Stockholm upheld Subway's right to compensation, backed later by the Russian court.


To add insult to injury, Yakovlev felt inclined to announce how sick he has become of the whole issue. Reportedly turning red, he compared the $1.5 million Subway case to that of Interoccidental, a foreign real estate firm accused of running off with $2 million in money owed to St. Petersburg residents "with no reaction in America."


The main link between the events is that they both occurred in St. Petersburg. All Yakovlev succeeded in pointing out was that the city isn't safe for foreigners or Russians. The governor went on to say that Subway dominated conversation in the United States from the minute he stepped off the plane. Shouldn't that be a hint?


Russia's court system is getting better at dealing with business disputes, but the bailiff system -- which should enforce court decisions -- is still in its infancy. Foreign investors have watched the Subway case with great interest because it is one of the rare cases when one of their own has tried to put the rule of law to the test and actually collect on a court judgment. While the Russian legal system technically does not follow the practice of precedents, Yakovlev would be foolish to think that the results of Subway's efforts will not be interpreted as such.


In an ideal world, a governor shouldn't get involved in a company's legal problems. But at this crucial point in its development, Russia's bailiff system could use a little push from above. Yakovlev should move quickly to let the court's representatives know they have his support. Should the courts need assistance from the police, he should stand firmly behind all efforts to see the rule of law enforced. Russia's "window to the West" is also one of the Western world's windows to the East, and Yakovlev should take advantage of the fact that investors are looking in.