The Gazette 1993

GAZETTE

I M N A GEM N JUNE 1993

Recently a special Constitutional Court was established, whose task is to ensure that the recently adopted laws and regulations do not contradict the existing Constitution. Any natural or legal person has the right to appeal to this Court. For anybody intending to carry out business activities in Russia company law, foreign relations law and property law are of most interest. As company or business law, and until 1967, economic law was not even admitted as a branch of legal science, and problems connected with regulation of economic relations, when not dealt with by plans and planning bodies, were dealt with by the civil law. mentioned above, the Russian economic system did not need In 1987, the USSR Joint Venture Decree No. 49 permitted the formation of the first Soviet legal person for commercial purposes. This decree permitted foreign participation in Soviet Joint Venture companies provided that at all times the foreign partner had a minority shareholding and the chairman of the board was always a Soviet citizen. These restrictions were removed in 1989. Joint Venture law is very basic and was following the demise of the USSR replaced by a Joint Stock Company Law NO. 509 dated July, 1990 which envisaged more sophisticated company structures including private and public companies. This Joint Stock Company legislation is however, also very sketchy and lacking in detail and definition. Furthermore, as the whole concept of limited liability companies is new to Russia many Russians both at State and business level do not clearly understand the principles. It is, therefore, advisable when drafting Joint Stock Company documents for Russia and other Eastern European ventures generally Developments towards business law

constitution and operation of the various elements of the corporation structure such as shares, meetings or voting are not dealt with in any detail in the general legislation and so it is advisable to use the foundation documents to legislate for the- company. ". . . as the whole concept of limited liability companies is new to Russia many Russians both at State and business level do not clearly understand the principles." Joint Stock Company foundation documents consist of a Charter and Agreement. The Charter is registered with the Ministry of Finance of Russia and so must contain all provisions regarding the operation of the company's affairs and its objectives, and the agreement is used to set out any additional matters agreed between the parties. The greatest care must be devoted to drafting these documents and to legislate for the company. It is also recommended that any disputes arising under these documents should be determined by arbitration which should take place outside Russia as the Russian Courts have great difficulty understanding and interpreting the new economic laws and have very few precedents. The International Chamber of Commerce in Stockholm is considered to be an acceptable venue for such arbitration as there is a long history of Soviet use of Stockholm Arbitration in state international contracts under the old regime. The newly emerging political economic and legal structure in Russia causes confusion to reign everywhere. For this reason patience is required at every level of dealing there from negotiations with potential partners to registration of documents at state agencies. Property law in its infancy

usually be overcome.

"patience is required at every level of dealing there from negotiations with potential partners to registration of documents at state agencies. The "cannot do" approach is still very prevalent, but take heart, it can usually be overcome." Property law is also very much in its infancy and in a constant state of change. The State owns all of the freehold in all of the land. Up to 2 years ago the concept of leasehold did not exist and the only form of ownership permitted to citizens and enterprises alike was the right to use buildings. Leases of buildings and land are now permitted by law but are more difficult in practice. Leases of buildings up to 100 years are easier "ownership" of the buildings they occupy under recent privatisation legislation. The situation regarding land is far less clear as over the years the State's interest in the land vested in different State bodies such as local authorities, government departments, regional authorities and collective farms. Now there is much conflict among these entities as to who owns what and in many instances it is likely that more than one State organisation claims the right to the land. to obtain as many citizens and enterprises have been granted A long lease of a building at market rent without title to the land is a comon title now on offer in Moscow, for example, but such a deal should be approached carefully to ensure that no further significant change will be made for the ground rent when the land is finally carved up because at present the State envisages levying high ground rents on users and lessees of buildings.

Changing nature of regulations

to include much detail in the foundation documents. The

The 'cannot do' approach is still very prevalent, but take heart, it can

Anybody carrying on business in Russia or throughout the old Eastern

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