On the reasonable scope of freedom and good faith of the business. Experts discussed the amendments to the Civil Code of Russia.

Discussions of amendments to the Civil Code remain acute in 2013. If anything, the debates about the economic constitution of the country grew hotter. And the issue of the good faith principle has gained special significance, because the first package of amendments to the respective provisions of the Civil Code enters into force on March 1^th of 2013. The authors of the amendments state that we really need the legal security of the parties to those relations, and they know how to achieve it, but they do not know, what the lawmakers will finally decide. The representatives of the scientific community and of key ministries spoke on those and may other topics at the practical conference “Topical issues of amending the Civil Code of Russia”, which was organized by the Corporate Lawyers Association together with the Law Firm "YUST" and the Norton Rose international company.

Veniamin Yakovlev, Chairman of the Council on codification and improvement of the civil legislation under the President of Russia, pointed out that the Russian society is a society with multidirectional interests, and many social groups nowadays are capable of actually and not always positively affect the adoption of certain amendments. Paraphrasing the celebrated quote by J.Kennedy, he called upon the lawyers to not look for those guilty of the situation our justice is now in but to look at themselves and see what we can give it.

The draft amendments to the Civil Code eliminate the unilateral approach, the main task of the authors is “to perfect the efficient mechanism of civil law”. V.Yakovlev further stated: “Ill faith is the antithesis of law”. According to him, it is the ill-faith persons who give bribes: they cheat on their counterpart and bribe the official, who is supposed to control the good faith of the relations and is thus integrated into the corruption scheme. V.Yakovlev jokingly said about the utilities sphere, which is the most livid example: “Law and order haven’t spent a night there”. According to his calculations, the judicial system should be the first to become flawless, then – the law enforcement system, and then – the public service in general. After that, the society will become healthy.

Evgeny Sukhanov, Head the Chair of civil law of the Law Faculty of the Mikhail Lomonosov Moscow State university, agreed with his colleague and reminded those present that law is an art of good and justice, “and not of optimizing costs”. The outstanding civilist explained that legal institutions should be thought of in the terms of morality. The professor said: “When we start discussing issues, which were known centuries ago, we become ignoramuses”. An improved Civil Code is necessary for the transition to a civilized market. This is a process, which is currently underway in over 20 Eastern European countries. In his turn, he suggested not mixing in the terms of American and European legislation. He believes that the European way of development of the civil law is better than the American one, but nobody knows, what the lawmakers will finally decide.

Yury Liubimov, Secretary of State – Deputy Minister of Justice of Russia, noted that theoretical developments should have been put into normative practice. The amendments suggested are doubtlessly of historical value. The official pointed out that it was the first time, when the State Duma broke the document into several parts after the first reading. He stated that the Government needed to stop “the tide of uncomfortable, blanket, low-level legislation”. Rostislav Kokorev, Deputy Director of the Corporate Legislation Department of the Ministry of Economic development of Russia, elaborated on that thought by saying that the Ministry strived to support those normative solutions, which “would provide for a reasonable degree of freedom for the business in constructing its relations with business”. In his opinion, as regards the renovation of regulation of corporate relations, such vector has been kept. This statement involves, for example, a new principle of the approach to classification of economic societies – as public and non-public – and acknowledging the latter’s rights to construct more flexible intra-corporate relations.

But Evgeny Zhilin, Associated Partner of the Law Firm "YUST", reminded the experts that the devil is in the details. He told the conference members of the new instruments of legal regulation of corporate relations, which possibly will be adopted during the autumn session of the Parliament, and called their attention to the significant amount of evaluative notions in the provisions on the corporate agreement. The slant towards liberal construction of the suggestions is evident. For example, the process of piercing the corporate veil in the edition of the amendments presented by the State Duma committee needs further concretization, and court practice is essential here. There is also a risk of “splitting law and order” in the part of the regulation, which allows to apply foreign legal provisions to corporate agreements. However, according to the expert, the inclusion of such institution into the Civil Code of Russia is doubtlessly a useful instrument of augmenting the investment attractiveness of the Russian economy and a means to increase the competitiveness of Russian law and order.

The experts believe that the parties to corporate relationships and civil turnover as a whole are eagerly awaiting the enactment of good faith provisions. According to Anna Kotova-Smolenskaya, Associated Partner of the Law Firm "YUST", the current provisions of the Civil Code of Russia consider that category as “some redundant mechanism of establishing rights and duties of civil relations participants”. Formal approach to the good faith as a “subsidiary category” and not as a general rule of conduct caused the situation, when the principle, unfortunately, was not put in practice despite its doctrinal general legal significance. The experts expressed their dissatisfaction at that, since March 1^th, good faith as a basic principle is presumed in civil relations in all cases, and deliberate ill-faith conduct will be considered abuse of right.

At the same time, according to A.Kotova-Smolenskaya, the absence of criteria of good faith may give grounds for unlimited discretion of the judges when interpreting the term. Practice shows that each situation involving this category is unique. And it may happen that the turnover participants will be unable to achieve a solid resolution of the matter of their conduct’s compliance with that principle even preventively. In her turn, the Advocate suggested as the central criterion the awareness of the subject of civil relations of the possibility of violation of third persons’ rights by his actions (inaction).

In addition, she told about the definition of good faith, including as applied to legal entities, that had been suggested within the framework of the activities of the NCP “Assistance to the development of corporate legislation”. Such definitions were not included in the new edition of the Civil Code of Russia, but should in all probability be used in practice.

Denis Novak, Deputy Head of Private Law Department of the HCA of Russia, continued the topic by informing that the term “evasion of law”, which will enter into force on March 1^th, is impossible to use “out of context” as it is formulated as a form of abuse of right. During the second reading, amendments stressing the liability for purposefully harmful actions were included in the draft. Thus, according to D.Novak, the evasion of law with a legal purpose was made possible, which should not be fought against. Even though it was meant that any evasion of the law is always an ill-faith action, an ill-faith exercise of civil rights. D.Novak pointed out: evasion of the law is a redundant mechanism, if there is no specific provision. And the considered cases mention the good faith in its subjective meaning.

The materials of the conference are available at the organizers’ website.

© photographs by E.Gorbunova