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. Last Updated: 07/27/2016

Firms Sign Pact to Settle Feuds Out of Court

Representatives of firms of all sizes -- from entrepreneurial enterprises to powerful holdings -- signed an agreement Wednesday committing to an ethics code that could be used to settle business disputes outside the court system.

The code was originally drafted by the Russian Union of Industrialists and Entrepreneurs, or RSPP, for use among its own members, who are some of the country's most powerful oligarchs.

The RSPP then pitched its charter of corporate ethics to OPORA, a small business association, and Delovaya Rossiya, which unites medium-sized companies. Both welcomed the initiative.

"We really like the charter of corporate ethics, so making the decision to sign this agreement was easy," said Igor Lasinenko, head of Delovaya Rossiya.

The agreement calls on signatories to "combine their powers to create and use a system of extra-judiciary resolution of corporate disputes." It was signed by Lasinenko, RSPP president Arkady Volsky and OPORA chief Sergei Borisov.

The ethics commission is essentially a court of peers. Signatories pledge to serve as arbiters, similar to a jury duty system. And although it is not legally binding, proponents say it has other forms of leverage that are equally persuasive.

If companies sign the agreement, they are thereby bound to accept the commission's rulings, Borisov said. If they do not, they can be blacklisted by other signatories.

For example, he said, "Other companies can agree not to sign any contracts with the company for the next year or can boycott their products." He noted that a desire to preserve their business reputations will give firms additional incentive to comply.

The code is in effect already for RSPP's 320,000 members, whose companies represent 60 percent to 80 percent of the country's GDP.

The ethics commission was created as a supplement to the clogged court system, where there have been numerous instances of judges being willing to sell verdicts to the highest bidder. With the "administrative resource" of public servants in their pockets, companies have been able to co-opt the courts to secure hostile takeovers of rival firms.

Volsky said that three years ago, there were 4,000 bankruptcy cases in the courts and today there are 42,000. "And half of these are made-to-order bankruptcies. [We] want to rid the country of such things," he said.

Volsky said a commission is at work resolving the contested acquisition of a stake in Tverskoi Poliefir by ZMA-Holding. One hundred more cases await their turn.

Now OPORA's 150 member companies and Delovaya Rossiya's 700 member companies will be able take their complaints before the ethics commission as well, whose final shape is still in the process of being fleshed out.

Legal experts remained skeptical that the arbitration court would be effective.

Derek Bloom, a partner with the law firm Coudert Brothers, suggested that the arbiters in many cases might not be neutral third parties but instead have a vested interest in the case's outcome.

For this reason, he said, "we think the [arbitration scheme] is compromised. We would prefer to see a specialized court of law created to address corporate law and hostile takeovers."

Borisov said that not all OPORA members wanted to participate at first, "But we managed to convince the hot-heads that we need to find a medium through which we can live in peace."

Participants view the commission as a sign that the business community is maturing. "Small businesses have dreamed of civilizing corporate monsters," Lasinenko said, referring to the giant industrial holdings that have long been able to bully small firms.

As an institution for pre-court conflict resolution, this is not without historical precedent.

Borisov spoke of an old courthouse on Alexander Platz in Berlin where a bar called the Last Resort was once a gathering place for merchants who would sit down over a beer to try one last time to resolve their disputes before taking them before a judge. "We hope we can do the same thing," he said.