To mark the beginning of a new legal page in The Moscow Times I would like to run through some of the legal problems which beset both foreigners and Russians who want to do business in Russia.


When I started to practice law in Russia over three years ago, foreign clients would ask whether there was any commercial law. Since then a great deal has changed but much else has remained the same. The so-called "war of laws" between the Soviet Union and the then Russian Republic was of course resolved in the latter's favor.


However concerns about whether the Union's or the Republic's laws took precedence have been replaced by a rather similar uncertainty about the status of presidential decrees as compared with laws or resolutions of the prime minister and the weight to be given to instructions issued by services such as the State Tax Inspectorate.


This causes particular problems in the area of taxation. Thus there are still questions about which taxes apply to foreign representative offices and foreign-owned enterprises and whether a presidential decree issued a year ago affords protection to them.


Many decrees and laws have been passed to regulate commercial activity, however contradictions persist which give pause to potential investors. For example, it is internationally accepted practice that a shareholder who contributes cash or property to the capital, or authorized fund of a company receives shares in the company which represent his investment. His contribution becomes the property of the company. This is also to be found in Russian company regulations.


However, another law, passed at the same time as the company regulations, gives the shareholder continuing rights to the actual cash or property which he has invested in the company.


Fortunately, it seems that this problem will be resolved by a section of the new civil code that will deal with companies, together with a new company law, which should both take effect early next year.


In some cases it is the lack of clear procedures for putting the laws into effect that gives rise to difficulties. Officials may devise procedures to fill the gaps, attempting to carry out the spirit of the law and referring to traditional Russian practices, but later the investor may doubt that every step in the procedure was correctly taken.


By contrast the foreign investor may be bewildered by requirements from the same officials that, for example, a document be sewn only with white cotton or that a signature be two inches further to the left. It can be hard to reconcile the overall uncertainty about laws, procedures and taxes with this insistence on bureaucratic minutiae.





Marcia Levy, an attorney with Norton Rose, has been practicing law in Moscow for three years.