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. Last Updated: 07/27/2016

Moscow, Minsk Tie Knot on Arbitration

Court rulings on business disputes in either Russia or Belarus are now legally binding in both countries.

President Vladimir Putin last week signed into law a bilateral agreement on executing arbitration court decisions he reached with Belarussian President Alexander Lukashenko in January. The Belarussian parliament ratified it in May and Lukashenko signed it June 13.

While some lawyers applauded the development, many expressed concern that Russian companies may suffer under the decisions of a non-impartial Belarussian court system.

"In terms of procedure, this is very good news," said independent lawyer Sergei Belyak. "In the past, after a court decision in Russia, it would take the winner months to get the court decision carried out, first through the consulate and then the Belarussian courts. Now Russian court decisions will be fulfilled by court marshals in Belarus just like they are in Russia -- automatically."

What little experience Russian corporations have of investing in Belarus has proved that such endeavors are risky.

Last year, No. 1 brewer Baltika provided Belarussian brewer Krinitsa with $10.5 million in financing in exchange for a promise by the Belarussian government to sell it a controlling stake in the company.

Baltika has yet to see its shares -- Minsk changed the dates for the share emission and refused to return the money.

Baltika president Taimuraz Bolloyev supported Putin's decision to sign the law. "We won in the International Arbitration Court more than a month ago, sent the documents to Minsk, but no action has been taken yet. Creating a unified legislative playing field is positive for investors," Bolloyev said.

Another investor, Mobile TeleSystems, fought for months to persuade Belarus to register a joint venture with a local GSM license holder in which the company had a 49 percent stake. MTS transferred $10 million to the Belarussian state budget, but Minsk continued to stall.

"For Russian companies, it is more comfortable to work in a country that shares a unified economic and legislative field," said MTS spokesman Kirill Maslenitsin.

According to Dmitry Amunts, head of the Russia-Belarus Union's investment committee, the document was ratified "in the presumption of a coming mass privatization of Belarussian state-held property, which large Russian holdings are interested in."

Minsk plans in the coming years to privatize its stakes in six petrochemical enterprises including Azot and Belneftkhim, as well as others such as the Minsk Auto Factory.

But not all potential investors are enthusiastic.

"When making a decision on acquiring Belarussian assets, you have to base it on your good relations with the local government and only then think about legal risks," said a lawyer at oil major Slavneft.

Sergei Marinich of law firm SHH said the whole thing was a mistake.

"Globally, such agreements are only signed between countries that are assured of the other country's courts' impartiality," he said. "In Belarus' case, it would be an understatement to say that there are doubts about their courts' impartiality. So Russian companies can expect problems from Belarussian courts."