Improving corporate law is a prerequisite for creating an international financial centre in Russia

Sergey Pepeliaev, managing partner of Pepeliaev Group, took part in a meeting hosted by the Russian President to discuss the new version of the Russian Civil Code drafted by the Russian President’s Council for the Codification of Civil Law.

‘The Russian Civil Code lays the foundations of property and economic relations in this country, and it should be kept updated’, says President Medvedev, who is personally overseeing the process of reforming corporate law. The new version of the Russian Civil Code contains amendments to a number of fundamental provisions and civil law institutions, including the law of property, certain provisions of the law of obligations, inheritance law, international and social law.

Having discussed the proposed amendments with the meeting’s participants, the Russian President said that the amendments to the Russian Civil Code should be consistent with the project to create a international financial centre in Russia. Mr Medvedev was also critical of the amendments dealing with issued capital and incorporation. The proposals relating to irrevocable powers of attorney, guarantees, the right of the creditors of one debtor to regulate their relations with each other, and other proposals were sent back for revision.

Sergey Pepeliaev is sure that the Russian Civil Code has long been ripe for improvement. It is no accident that major Russian law firms have set up a non-commercial partnership to coordinate their work on improving corporate law. In Mr Pepeliaev’s opinion, the general feature of the proposed Civil Code is excessive paternalism and restriction of freedom of contract. What is good for relations between private persons is unacceptable for business. ‘For example, the rule whereby transactions could be treated as invalid if entered into on highly unfavourable terms due to a party’s insufficient business experience, thoughtlessness or lack of strong will could be highly damaging to business’, says Sergey Pepeliaev. He also thinks that business and non-business relations must be subject to different regulation. ‘Business relations should see as much freedom of contract and discretional regulation as possible’, says Mr Pepeliaev, ‘while non-business relations should see the weaker party protected by the Civil Code, together with antitrust and consumer protection legislation’. Mr Pepeliaev is of the view that ‘Russia will only see the emergence of an international financial centre once the Russian law becomes the law of choice for deals involving Russian assets and Russian parties, and once Russian legal entities become a useful tool for investment, financial and corporate transactions’.

The meeting hosted by the Russian President was attended by: V. Lebedev, Chairman of the Supreme Court; А. Ivanov, Chairman of the Supreme Arbitration Court; I. Shuvalov, First Deputy Prime Minister; А. Kudrin, Deputy Prime Minister and Minister of Finance; L. Brycheva, presidential aide and head of the State and Legal Department; А. Dvorkovich, presidential aide; А. Konovalov, Minister of Justice; E. Nabiullina, Minister of Economic Development; V. Yakovlev, presidential advisor and chairman of the Council for the Codification and Improvement of Civil Law; A. Voloshin, head of the task force for the creation of an international financial centre in Russia, which is part of the President’s Council for the Development of Financial Markets; А. Makovsky, deputy chairman of the Council for the Codification and Improvement of Civil Law; and E. Sukhanov, deputy chairman of the Council for the Codification and Improvement of Civil Law.

Mr Medvedev awaits constructive suggestions on how to improve the amendments to the Civil Code that deal with legal entities and business transactions.

The members of the Russian President’s Council for the Codification and Improvement of Civil Law, experts and lawyers will continue their work on improving the amendments to the Russian Civil Code, so as to take forward the reform of corporate law.