Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Legislative Changes Set a Fast and Furious Pace

Legislative liberalization has been the buzzword on lawyers' lips since waves of new legislation began crashing down on them with the introduction of Part I of the new Tax Code on Jan. 1, 1999.

The laws on joint stock companies were overhauled in 2000, with a focus on limiting abuses to minority shareholders.

The Land Code was passed in 2001 and the agricultural land bill last year.

The Labor Code has been revised, and a raft of initiatives has been introduced in the financial sector.

From 2004, banks will be required to adhere to international accounting standards, with similar requirements for corporations to follow.

A judicial reform package introduces three new legal codes: the Civil Procedural Code, the Arbitration Procedural Code and the Criminal Procedural Code, with its provision for trial by jury.

President Vladimir Putin recently signed into law new intellectual property legislation, and exotica such as derivatives legislation could soon be on the way.

But still, the bugbears remain.

The anti-monopoly regime is confusing and needs to be reviewed, said David Marshall of Cameron McKenna. "No one seems clear on its application or implications," he said.

One headache for foreign investors, and a pet gripe of metals mogul Oleg Deripaska, is the exhaustive clearance procedure required in order for firms to buy more than 20 percent in a company.

"The reality is that this is very, very rarely relevant to anti-monopoly competition issues," said Dominic Sanders of Linklaters.

While it may be good for lawyers that Russian bonds are always issued through offshore vehicles, the process is "incredibly inefficient" and hinders Russian companies from raising finance cheaply on international markets, he said.

The main concern for investors and their advisers, however, is the application and enforcement of the law rather than its text.

"Consistency of treatment is a prime requirement of a stable business environment," Marshall said.

And litigating in Russia remains a problem.

"We've seen so many decisions that are not based on the facts," said Eric Michailson, a partner at White & Case LLC. "You really have to know the judges and know how they operate.

"So much of it is about knowing the system rather than knowing the law and about being a good advocate in court. We don't go to court a lot. When we arbitrate, we arbitrate internationally in Stockholm, London or Paris," he said.

A reform package to make litigation more appealing is on the way.

Starting in October, the government also plans to raise judges' salaries by 40 percent.

Last year, Dmitry Kozak, Putin's deputy chief of staff and a key advocate for judicial reform, said the government intends to increase judges' salaries by about 300 percent by 2006 in four stages, with the last one to be introduced in 2005.

The government intends to allocate about 45 billion rubles ($1.4 billion) for the development of the judicial system over the next three years -- with a majority of the new funding to be spent on the salary increases and upgrading the country's judicial infrastructure.

Many international firms maintain a litigation practice and plead their clients' case in court despite the potholes.

At Clifford Chance Punder and Salans, litigation is more of a priority, anchored by Russian partners Ivan Marisin and Sergei Marinich, respectively.

"We are seeing a number of big things come through the door in terms of litigation either in courts here or in arbitrations overseas involving Russian companies," said Michael Cuthbert of Clifford Chance.

Hugh Verrier, managing partner of White & Case, said a foreign firm's decision to invest in Russia ultimately has very little to do with the laws.

"I don't believe that investment turns on legislative changes, and I don't think transactions turn on legislative changes," he said.

"Generally speaking, what matters is political stability, and if you have political stability and at least a core of legislation, people will invest," Verrier said.