Corporate Lawyers Forum “100 Steps Forward: Business and the State”
Corporate Lawyers Forum “100 Steps Forward: Business and the State”, with the participation of RAPSI and the Corporate Lawyer magazine was held at the International Multimedia Press Center of RIA Novosti on October 3 and 4 of 2012.
Over 100 heads of law departments and sections of large Russian state and commercial organizations, Russian juridical business representatives came to the Forum to discuss the issues of legal protection of business in Russia.
Business and the State: the principles of coexistence
Vitaly Ushkanov, Director General of RAPSI, delivered the opening speech of the Forum: “There are professionals in this hall today. It is most important for business and the State to develop together. Corporate lawyers at times heed helmets in order to bear the hits of fate and, lamentably, of the State. I sincerely hope that the Forum’s members will find points of contact and will solve the existing problems by discussion”.
Yury Pilipenko, Managing Partner of the Law Firm "YUST", First Vice President of the Federal Chamber of Advocates of Russia, moderated the Forum. He expressed his hope that the Forum participants would dissipate his pessimistic attitude towards the cooperation of the State and business. He said: “I hope that the participants in their reports will tell that everything is fine in our country, after all”.
But Evgeny Sukhanov, Chief of the Civil Proceedings Chair of the Law Faculty of the Moscow State University, supported Y.Pilipenko. The Russian legal scholar said: “Unfortunately, I have to agree with our moderator. Games still go on in our State, as do intrigues. It all concerns the changes to the Civil Code. Back in December of 2011 and in early January of 2012, we thought we had agreed on everything, but after that the draft was not moved for two months. Granted, it was finally adopted, but later over two thousand amendments were made”.
Professor E.Sukhanov added that the draft is currently completed and worked through, it would seem that no further amendments are needed for the second reading. He noted: “While the draft of the Civil Code was being approved, the State kept pushing certain other draft laws. It is impossible to foretell, how these games will end”.
In his turn, Alexey Filimonov, Director General of ASTERA company in the alliance with BNP Paribas Real Estate, pointed out that the number of active participants of the real estate market, for example, has lately decreased many times. A.Filimonov spoke his viewpoint: “No one currently invests into the real estate market, because the economic as well as the legal factors of its trends are unknown. Predictability of the rules is the only thing that the professionals want today”.
He added that, as of the present moment, most specialists are preoccupied not by the change of the rules of the game, but by that it happens repeatedly. The Director General of ASTERA company in the alliance with BNP Paribas Real Estate said: “They are preoccupied, that the rules may again become even more complex. After the Civil Code is amended, a multitude of by-laws will be amended as well, and after that we will have to deal with the interpretation of those by-laws by the municipal administrations”.
Alexey Kasparzhak of the Managers’ Association of Russia, pointed out: “It feels like putting an interrogation mark after the thesis “100 steps forward”, at least. The Managers’ Association of Russia has recently made a rating of top 1000 managers of Russia. The persons in the rating remain largely the same. From this, one may conclude that the economy is developing slower that before. We may talk about a step forward, but the step is very specific”.
Ekaterina Liakhova, Chairperson of the Board of Directors of “Atomenergoprom” OJSC, in her turn, said that life itself puts the requirement to aim for commercialization. E.Liakhova is of the following opinion: “It is important not to overdo it. The structure and the management need to be made more transparent. And this is the most serious sphere for the lawyers, where they are most needed by the state companies. As of now, lawyers become active participants of business decision taking. This is a significant step”.
Marat Davletbaev, Head of Department of “Inter RAO EES” OJSC, believes that the perspectives of business development are largely dependent on the legal situation in the country: “But our country’s law nowadays is largely uncertain”.
Protection of business: from the ill-faith management to the arrhythmic development of the federal legislation
During the session “Legal and economic protection of business” of the Corporate Lawyers Forum, the experts discussed the way to increase the efficiency of representing the companies’ interests.
Olga Nikonova, Executive Director of the Directorate of Normative and Legal Support of “TVEL” OJSC, a large manufacturer of nuclear fuel, was the first to speak. In her opinion, if no attention is given to inside risks, this may “destroy the company quicker, than illegal actions by third parties”. Mme. Nikonova shared her successful experience of joint training of business divisions and the legal service. She believes: “If the legal service serves the interests of business and forms the legal culture of the company – such business is protected from the inside”.
Alexander Yermolenko, Partner of FBK-Pravo, drew the attention to the issue of the management’s responsibility for ill-faith actions. The respective norms were “not completely alive” for approximately 20 years, but, thanks to the amendments to the Civil Code and the activity of the SCA of Russia, the situation started changing. The lawyer pointed out the special role of the notorious dispute between a minority shareholder of a Kirovsk factory with the director general of the venture. The case precedents elaborated by the SCA of Russia dive a “double effect”: shareholders of the companies enjoy a larger degree of protection than they used to, while the management should be warned of the new practice.
Valery Yeremenko, partner of EPAP, explained that now the head of the company “has to prove his innocence”, while earlier the practice followed the scheme: “no proof – claim dismissed”.
Artem Kukin, Partner of the Firm, agreed with the colleagues and told of an interesting precedent, which he had discovered among the works of the finalists of «Company Lawyer-2012» award. The Board of the SCA of Russia revoked the decisions of three court instances and ruled: the list of persons, who occupy positions in the management, should be construed in a wide manner. In particular, not only the director general, but also his deputy and the chief accountant should be counted among the management.
Mikhail Yeremenko, Vice President of Legal Issues of “KES”, defined in his speech “the five aspects of tension” from the point of view of the risks of the regulation of environment”.
First, it is the authorities’ mistrust towards business. Second, the authorities do not always choose juridically adequate regulation measures. The expert pointed out: “For example, when a healthy competition environment is needed, limitations are imposed”. Third, the economy’s opportunities of self-regulation are rarely used. Fourth, the federal legislation’s development is arrhythmic. Fifth, the legal technique is of low quality. M.Yeremenko explained that the latter becomes even more noticeable at the level of institutions. Moreover, the expert mentioned that “the regulators fail to make the next step”. The law-application activity goes on, but there is no methodical work aimed at the strengthening of legal culture. Acting on those premises, he called upon the higher education facilities and the consultants “to form civilized institutions” and look for the ways of dialogue with the authorities.
Ivan Nikitin, Director for Legal Support of MGTS, complained that there are no stable and transparent rules of conduct. He gave two examples. First, the issue of application of accelerated amortization by the communication operators. The practice on this issue formed five years ago, but the tax authorities are now resorting to the SCA of Russia. Second, the framework nature of the recently adopted Federal Law No. 223-FZ “On purchases of goods, works, services by certain types of legal entities”. The expert believes that the number of court proceedings on the issue of its application may increase within the year.
Advocate Viacheslav Leontiev, moderator of the session, inquired whether the speakers had ever been able to communicate the position of the business to the regulators.
In this connection, the experts have noted the successful cooperation in the banking sphere, between cellular operators and the Ministry of Communications, and agreed that it was “nice and easy” to talk about the work with the Federal Antimonopoly Service and the SCA of Russia. Artem Kukin pointed out that, for example, the cooperation with the FAS of Russia was established through its councils of experts as well as through the non-profit partnership “Promoting the development of competition”. He remarked that it was not always possible to communicate the position of business, but: “in general, one cannot say that business receives no attention”.
The experts also noted the positive experience in the cooperation with the Ministry of Economic Development, the FTS, the Rostekhnadzor.
Closing the discussion, the moderator specially mentioned: business wants to unite in order to receive better economic and legal protection, and this is doubtlessly a positive moment.
Credit relations: looking for balance in the legislation
During the specialized session “Banking law” of the Corporate Lawyers Forum, the experts discussed the issues of regulation of banking activity: charging bank fees, extrajudicial procedure of charging pledged property, protection of creditors during the debtor’s bankruptcy etc.
Arthur Rokhlin, Partner of the Firm, moderated the session. He asked the members of the discussion: what changes should be made to the legislation in order to improve the banks’ efficiency and to balance the interests of all parties to banking relations?
Igor Kondrashov, Director of the Legal Department of “Sberbank of Russia” OJSC centered the attention at the court practice of resolving said issues. Maria Shliapina, head of the Juridical Department of “VTB-Capital”, in her turn, informed that the problems of foreign regulation and the impact of world trends on their activity are at least as important for investment and international banks.
Igor Shkliar, head of the Juridical Department of Deltakredit bank, noticed that “there is a trend of state assistance to the less protected groups of people” in the sphere of consumer crediting. If the bank understands that the risks have grown disproportionately, the rates also start growing, and – as I.Shkliar elaborated later – “good-faith citizens start paying for those of ill-faith”. He lamented the fact of existing contradictions in the legislation and the absence of a single strategy, which would permit to unify the modernization of the civil legislation at all levels.
Igor Dubov, Partner of the law firm “Yakovlev and Partners”, agreed with the colleagues, who expressed the view that the bank itself often becomes “the weaker party to the legal relations” after the execution of the agreement in the situation of exacting the lend from the ill-faith debtor. The lawyer believes that improvement of court procedures in common law courts as well as in arbitration is one of the possible solutions of this problem.
According to Arthur Rokhlin, “legal changes of the past few years are like a pendulum”, giving a lot of excitement to lawyers. For example, when forming the approaches to the possibility of extrajudicial charging of pledged property the practice went from “prohibited” to “permitted” and back again.
Igor Kondrashov noted that, at the execution of a credit agreement, general and individual conditions must be combined, the conditions in the texts of the documents must be understandable for both parties. He believes that this will allow preventing possible objections by the bank’s clients and reducing the risk of allegations of misunderstanding of the text of the agreement.
Regarding the issues of fees on the credit accounts, the session participants agreed that the practice is extremely contradictory. The SCA of Russia believes that the limitation period begins on the moment of execution of the transaction, but the common law courts count this period from the moment, when the person became aware of the violation of the right. The experts were skeptic towards the SCA’s prohibition to resolve the disputes at the locations of the credit organizations. It results in additional expenses for the banks, which send their specialists to the court of the debtor’s location. The situation is further complicated by the imperfect bailiffs’ work, and by the insufficient trust of the people towards the banks. A number of social researches show that approximately 30% of the respondents do not trust Russian courts.
Maria Shliapina called the participants’ attention to the problems of interaction of the banks with foreign partners. For example, the partners have high requirements to the corporate management and disclosure of information. For that reason, limitations are imposed on the financing of certain borrowers and on the attraction of investment capital on certain conditions. The American regulators go still further, gradually implementing control over the income of tax residents. On the basis of those, non-public agreements are entered into with the regulator regarding the disclosure of the account information. If such agreements are not executed – starting in 2014, up to 30% of payments made will be withheld from the banks. Starting in 2017, this practice may encompass the “translated” payments.
In general, the discussion members agreed that the access to bank secrecy privilege is getting wider, and that this is the world trend. Igor Dubov pointed out that even Switzerland, which had long positioned itself as a “safe haven” for capitals, is starting to lift the bank veil a little.
At the end of the discussion, Arthur Rokhlin raised the issue of procedural alternatives of settlement of disputes between banks and their borrowers to the court proceedings. According to Igor Kondrashov, the possibility of creation of an institution of financial ombudsman was discussed with the Association of Russian Banks and with the Association of Regional Banks; German and English experience was studied. However, the initiative had no success. Together with the listeners, the experts discussed, how intermediate courts and mediators could assist the settlement of conflicts, and why such institutions are not in demand nowadays.
Publications on the event:
Corporate Lawyers Forum opens in RIA Novosti – RAPSI
Credit relations discussed at the Corporate Lawyers Forum - RAPSI
Rankings and Partners
