Oda Russian Commercial Law 2007-1

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6PRESIDENTIAL DECREES

At the Federal level, in addition to laws enacted by the representative body, some other bodies enact binding rules. In fact, in Russian terminology, laws, presidential decrees, and edicts of the government (cabinet) of the Russian Federation are put in the same category of “legal acts (pravovye akty)”.19 Another concept, “normative acts”, in addition to these, covers acts of ministries and other Federal administrative agencies.20 By the same token, legislation (zakonodatel’stvo) in Russian includes not only acts of the legislature, but also presidential decrees and edicts of the government.21 Between 1995 and 2000, around 1,000 Federal laws were adopted, while there were 800 presidential decrees and 2,000 edicts of the government.22

The president is the head of state in Russia (Art.80, para.1) and is elected for a four year term by direct election of the citizens (Art.81, para.1). The president is empowered to issue decrees (ukazy) and orders (rasporiazheniia) (Art.90, para.1). Although it is binding in the same way as decrees, the latter normally does not have a normative character; it addresses individual matters.23 President Yel’tsin heavily resorted to presidential decrees in the early 1990s. Of the legislation enacted at the Federal level between 1991-1998, presidential decrees accounted for 14.4%, while laws accounted for 1,7%. In fact, in 1991, presidential decrees accounted for 28.5%.24 In the earlier period after the collapse of socialism, in many areas, relevant Federal laws were absent, while the legislative process was slow for various reasons. Therefore, the president utilised his power to issue presidential decrees in an extensive way.Acommentator reminisces that the President had “radically changed many essential aspects of social relations in the country” by resorting to presidential decrees.25 The percentage of presidential decrees among the legislation has been in constant decline. In 1998, it dropped to 8.5%.26

Presidential decrees and orders may not contradict the Constitution and the Federal laws (Art.90, para.2). Federal laws in this context include both Federal constitutional laws and Federal laws. Particularly in the earlier days, “many of

19M.I.Braginskii ed., Nauchno-prakticheskii komentarii k chasti pervoi grazhdanskogo kodeksa Rossiiskoi Federatsii, second edition, Moscow 1999, pp.43-44.

20Ibid., p.45.

21A.Ia.Sukarev ed., Rossiiskaia iuridicheskaiia entsiklopediia, Moscow 1999, pp.1009-1110.

22A.Makovskii and A.Silkina, “Novyi klassi kator pravovykh aktov”, RIu, 2000 No.5, p.7.

23Baglai, supra, fourth edition, p.461.

24Isakov, supra, pp.63-65.

25B.N.Topornin ed., Konstitutsiia Rossiiskoi Federatsii: nauchno-prakticheskii kommentarii, Moscow 1997, pp.505-506.

26Isakov, supra, p.65.

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the presidential decrees were not perfect, some of them not totally coincided with the constitutional norms and previous legislation, some of them were contested in the parliament chambers and the constitutional court”.27 The Constitutional Court has the power to review the constitutionality of presidential decrees. On some occasions such as the sending of military forces to Chechnya, the Constitutional Court acknowledged the constitutionality of the relevant presidential decree, while there were other cases where a presidential decree was found unconstitutional, such as the decree establishing a new ministry by combining the Ministry of State Security and the Ministry of Internal Affairs.28

The priority between the presidential decree and legal acts of the constituent entities is decided by analogy with the relationship between Federal laws and the legal acts of the subjects.

7EDICTS OF THE GOVERNMENT

Executive power in Russia is exercised by the government (pravitel’stvo), which is the Russian equivalent of a cabinet (Art.110). The head of the government – the Prime Minister – is appointed by the President with the consent of the State Duma (Art.111, para.1). The Prime Minister proposes candidates of ministers to the President who is empowered to appoint and dismiss them (Art.112, para.2). The President has the right to chair sessions of the government.

The government is empowered to enact edicts (postanovlenie) on the basis of, and in implementation of, the Federal Constitution, Federal laws, presidential decrees of a normative nature and for their implementation (Art.115, para.2). In contrast to presidential decrees which the President issues on the basis of his inherent power, it is clear from this provision that government edicts derive their power from the Constitution, Federal laws, and even presidential decrees. What is more, if an edict of the government is against the Federal Constitution, Federal laws, or a presidential decree, the President is empowered to revoke it (Art.115, para.2).

Federal ministries are established by presidential decrees and regulated by a statute either in the form of an edict of the government or a presidential decree. According to the Federal Constitutional Law on the Government of Russia of 1997, ministries are subordinated to the government and are responsible to the government for performing the entrusted tasks. Within their power, ministries issue instructions, circulars and other subordinate acts (podzakonnye acty).

27Ibid.

28Topornin ed., supra, p.507.

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8ACTS OF LOCAL SELF-GOVERNMENTS

The system of local self-government (municipalities) falls within the joint jurisdiction of the Russian Federation and the constituent entities (Art.72). Under this provision, the Federal Law on the General Principles of the Organising of Local Self-Government was enacted in 1995. Within the framework of this Law, which is fairly general, each constituent entity regulates the problems of local self-government within its jurisdiction. Therefore, the structure of local selfgovernment varies from place to place.29 As a rule, there is a representative body and an executive body. Representative bodies are called duma, assembly, sovet, etc. The executive body is organised under the head of administration. In most places, the head of administration is elected by the populace.30

Local self-governments have a representative body which enacts their fundamental statute (ustav) and other normative legal acts.31 Local self-governments are empowered to enact such acts via a representative body, or by direct referendum on matters of local signi cance, based upon the interest of the inhabitants, their historical traditions and other local traditions. This includes the creation of taxes and levies, the maintenance of law and order in the locality and the registration of inhabitants. Acts of some constituent entities and local self-governments involving these matters have been contested at the Constitutional Court.32

9COURT JUDGMENTS

Precedents are not binding on the courts in the same way as they are in AngloAmerican jurisdictions. Under the current system, judicial precedents are not regarded as a source of law in the sense that contravention of precedents is not a ground for appeal or any other means of reviewing the judgment by superior courts. In fact, precedents are not referred to in the judgments at all.

If one compares the entry of “judicial precedents (pretsedent)” in the legal encyclopaedias published in 1984 and 1999, there is not much difference. In both publications, court precedents are primarily treated as alien institutions. The only difference is that in the 1999 Encyclopaedia, there is a brief reference to Tsarist Russia and the contemporary period, but there is no substantive discussion as to the status of court precedents as a source of law.33

29Lazarev ed., supra, p.624.

30Baglai ed., supra, fourth edition, pp.773-774.

31I.V.Vydrin and A.N.Kokotov, Munitsipal’noe pravo Rossii, Moscow 2001, pp.178-182.

32Lazarev ed., supra, p.632.

33R.O.Khal na, “Pretsedent” in A.Ia.Sukharev ed., Iuridicheskii entsiklpedicheskii slovar’,

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The fact that Russian law is part of the Civil Law system does not necessarily mean that judicial precedents have not been regarded as a source of law in Russia. In fact, in many Civil Law jurisdictions, judicial precedents are considered to be a source of law. As a leading expert on comparative law has pointed out, matters are not really very different between Anglo-American jurisdiction and Civil Law countries:

It is true that there is never any legal rule which compels a judge to follow the decisions of a higher court, but the reality is different. In practice a judgment of the Court of Cassation or of the Bundesgerichtshof in Germany can count on being followed by lower courts just as much as a judgment of an appeal court in England or in the United States.34

In the Tsarist period, there were different views on the status of precedents. Some people, such as N.Korkunov, acknowledged that court precedents quali ed as a source of law,35 while others totally denied this.36 In the socialist period, court precedents were not regarded as a source of law. It was only natural that under a system where political power was highly centralised, law-making by lower court judges could not be tolerated. It was also noted that the system of judge made law gives opportunities to the ruling class to contradict provisions of existing legislation.37

Under socialism, theoretically, judges were supposed to apply the law in a mechanical way without exercising any discretion. There was no room for free interpretation of statutes by judges. In fact this has been a tradition since the Tsarist period. The Fundamental Law before 1906 dictated judges must apply laws in a “mechanical manner”.38

However, since provisions of the law tend to be fairly general and abstract, it was technically impossible to restrain judges from interpreting the law and, at the same time, let them apply the law to speci c circumstances. The solution was to concentrate the power of interpretation to the Supreme Court, more speci cally to the Plenum of the USSR Supreme Court which comprised the President and his deputies as well as chief justices of the constituent republics. It goes without

Moscow 1984, p.296. V.V.Boitsova and L.V.Boitsov, “Pretsedent sudebnyi”, inA.Ia.Sukharev ed., Rossiiskaia iuridicheskaia entsiklopediia, Moscow 1999, pp.2385-2394.

34K.Zweigert and H.Kötz, An Introduction to Comparative Law, third edition, Oxford 1998, pp.261-263.

35N.M.Korkunov, Lektsii po obshchei teorii prava, 8th edition, St.Petersburg, 1908, pp.295298.

36V.V.Boitsova and L.V.Boitsov, supra, p.2387.

37Khal na, supra, p.296.

38Korkunov, supra, p.306.

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saying that the Plenum was under strict control of the CPSU. Thus, the court, even under socialism, was equipped with some power to interpret the law, not only to mechanically apply it, but such power was not given to lower courts.

The device used by the Plenum of the Supreme Court at that time was its “guiding explanations”. Guiding explanations were issued in various areas of law where they were needed. Also publications entitled Sudebnaia praktika (court practice) edited by the Supreme Court were published from time to time to give guidance to lower court judges. Therefore, some people acknowledge that judicial precedents were a “de facto source of law” even under socialism. However, such views remain in the minority.39

This system of “guidance” by the Supreme Court (and the Supreme Commercial Court) still remains in Russia, but in a different format. It takes the form of the decisions of the plenum of either the Supreme Court, the Supreme Commercial Court, or the joint plenum of the both. The presidium of the Supreme Commercial Court also publishes a “review (obzor) of the court practice” covering various areas, which takes the form of an “information letter”. They are published in the of cial periodicals of the court – Vestnik verkhovnogo arbitrazhnogo suda RF and the Biulleten’verkhovnogo suda RF. In addition, the former publishes around 40-50 cases a month, and the latter, around 10 cases, which is quite different from the practice in the socialist period when even judgments of principal signi cance were not always published. There is a view which regards the publication of the higher courts on speci c cases as another form of “guidance”.40

Usually, decisions of the plenum take the form of compilations of rules. Thus, as an example from the early period, the joint decision No.6/8 of the plenum of both courts entitled “Some problems on the application of Part One of the Civil Code of the Russian Federation”, which comprises more than 50 items, provides the following in item 3:

3. In accordance with the Federal Constitution, civil legislation falls within the jurisdiction of the Russian Federation (Article 3, para.1 of the Civil Code). Provisions of civil law of the constituent entities of the Russian Federation, enacted before the Federal Constitution has taken effect, can be applied by the courts in settling disputes, if they do not contradict the Federal Constitution and the Code.

39M.N.M.Marchenko, “Iabliaetsia li sudebnaia praktika istochnikom rossiiskogo prava”, ZhRP, 2000 No.12, p.12.

40G.T.Ermoshchin, “Problemy obespecheniia nezabisimosti sudebnoi vlasti”, in Iu.A.Tikhomirov ed., Sudebnaia reforma v Rossii, Moscow 2001, pp.28-29.

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19. The list of activities which juridical persons may conduct only on the basis of a license is determined by law (Article 49, para.1, subpara.3). On this matter, the court should bear in mind that after the entering into force of the Civil Code, types of activities which are subject to license can be established only by law.41

In contrast, “review of court practice” is more speci c. Usually, it is a compilation of a summary of cases. For example, in the “Review of court practice regarding the recognition and enforcement of foreign judgments, contesting of arbitral awards, and issuing of enforcement documents for the enforcement of foreign arbitral awards” adopted in 2005, 32 cases are summarised under headings such as:42

4. The commercial court is not entitled to examine the judgment of a foreign court on its merit when considering the application for its recognition and enforcement [summary of the case omitted]

28. The commercial court accepts the request for setting aside of an arbitral award if it established that the award concern a matter which falls within the exclusive competence of the commercial court of the Russian Federation.

[summary of the case omitted]

By the same token, the “Review of the court practice on the application ofArticle 414 of the Civil Code of the Russian Federation” stipulates the following:43

1. Agreement of the parties which modi es the date and procedure of payment in a credit contract does not mean that the means of performance has been modi ed, and therefore, is not a novation.

[summary of the case omitted]

In this way the Supreme Commercial Court and Supreme Court of the Russian Federation “guide” the lower courts.

The present Chairman of the Supreme Commercial Court,A.A.Ivanov, attributes the necessity of such guidance to the low quality of some of the laws:

41Decision No.6 of the Plenum of the Supreme Court and Decision No.8 of the Plenum of the Supreme Commercial Court of July 1, 1996. VVAS RF, 1996 No.9, pp.6, 10.

42Information Letter, Presidium of the Supreme Commercial Court, No.96, December 22, 2005.

43Information Letter, Presidium of the Supreme Commercial Court, No.103, December 21, 2005.

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We come across them [low quality laws] literally every day at every meeting of the presidium of the Supreme Commercial Court when considering this or that case by nding apparent contradiction of provisions of various laws and in one and the same normative act.... If the quality of the laws were adequate, the necessity of such information letters will simply disappear.44

Acommentary on the previous Code of Civil Procedure published in 1999, referring to the fact that erroneous interpretation of the law by the court is a ground of appeal, states the following:

If the court does not have the possibility of utilising the result of the of cial interpretation of the Supreme Court of the Russian Federation of one or another provision of substantive law, the court may interpret it in a wrong way. Therefore, such circumstances may serve as a ground for quashing such a judgment. It should be noted that if there is a decision of the Plenum of the Supreme Court of the Russian Federation on the problem which is being examined by the court, in order to avoid the possibility of having the judgment quashed, the court should utilise the rules set out in the given decision. If the conclusion of the court is based upon the interpretation of the norm of substantive law by the Supreme Court of the Russian Federation, the possibility of having the judgment quashed on the ground of erroneous interpretation is excluded.45

A vice president of the Supreme Court pointed out as follows:

With the taking of effect of the new Federal Constitution and the increased role of the court in society and the state, also in court practice, emerged new, extremely important functions of the court....despite signi cant renovation of legislation and adoption of a number of laws, there are many vacuums in the legal system and many contradictions emerged. Overcoming these problems is more complicated than before and is one of the most dif cult tasks of court practice. On several occasions, judgments of the Supreme Court have become sources of law.46

He also commented elsewhere that at present, courts are often forced into having to create law, otherwise, “their activities would not only be ineffective, but result in the opposite of what society legitimately expects of them; they will not defend

44A.A.Ivanov, “Kachestvo zakonov i deiatel’nost’ arbitraznykh sudov”, ZhRP 2005 No.4, p.3, p.5.

45A.P.Ryzhakov and D.A.Sergeev, Postateinyi kommentarii k grazhdanskomu protsessual’nomu kodeksu RSFSR, Moscow 1999, p.523.

46V.M.Zhuikov, “Rol” sudebnoi praktiki v pravoprimenitel’nom protsesse”, zhuikov ed., Sudebnaia praktika po grazhdanskim delam 1993-1996, Moscow 1997, p.6.

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rights, but will facilitate their violations”.47 There are others who claim that “the courts, at present, are simply under an obligation to create law”.48

Several recent publications on the Code of Commercial Court Procedure acknowledge court judgments as a source of law. One commentary points out that “court practice is a source legal regulation and most important of these rules serve as the basis of judgments”.49 The new Code of Commercial Court Procedure allows the court to quote the decisions of the plenum of the Supreme Commercial Court in the reasoning part of the judgment (Art.170, para.4).

It may be premature to say that judicial precedents have been formally acknowledged as a formal source of law in Russia. After all, acknowledging judicial precedents as a source of law is about granting the courts power to create law. The judicial system in Russia has undergone signi cant changes since perestroika. The independence of judges, which has existed only on paper, is gradually gaining substance. The authority of the court is being strengthened which is demonstrated e.g. by the expansion of court jurisdiction and the abolition of “judicial supervision” by the procuracy, but still there is some hesitation with regards to of cially allowing judges to create law:

Among our judges, there are still not a small number of lawyers with a low level of quali cation. Granting each of them the right to create law means to bury legalityt.... At present, in Russia, a “war of laws” is going on. Allowing the creation of laws by the court and the expanding of the discretion of judges will reinforce this negative process.50

However, it cannot be denied that the judgments and other instruments of the Supreme Commercial Court and the Supreme Court are expected to guide the lower courts and in reality have a signi cant in uence on the practice of the lower courts.

There are views which acknowledge that the Constitutional Court, by reviewing the constitutionality of normative acts, creates law, and therefore, their judgments are sources of law. But this is naturally a totally different matter.

47Marchenko, supra, p.17.

48Quoted in I.L.Petrukhin, “Problema sudebnoi vlasti v sovremennoi Rossii”, GiP, 2000 No.7, p.19.

49V.Iarkov ed., Kommentarii k arbitrazhnomu protsessual:nomu kodeksu RF, Moscow 2004, p.25.

50Ibid.

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10 CUSTOM

Custom and Customary law were regarded as something backward and to be overcome in the socialist period. “Socialist states actively fought against customs which re ected ignorance, inequality, exploited the status of women and against other remnants of exploiting forms”.51 Besides, under socialism, the political leadership could not tolerate the spontaneous emergence of norms outside of their control. Commercial custom was applicable only when it was sanctioned by the state such as the custom which was referred to in the Civil Code and other civil legislation.52 Custom in this context meant international commercial custom, mainly those terms covered in Incoterms, which were worked out by the United Nations, and also international custom referred to in Comecon – the Council for Mutual Economic Cooperation – General Conditions of Supply as well as some international arbitration treaties.

The present Civil Code provides that commercial custom (obychai delovogo oborota) is a rule of behaviour not provided by legislation, but suf ciently speci c and widely applied in any area of entrepreneurial activities, regardless of whether it is xed in any document or not (Art.5, para.1). “Tradition” of performing a certain type of contract is cited as an example.53 Commercial custom is a source of law (Code of Commercial Court Procedure, Art.13, para.6; Code of Civil Procedure, Art.11, para.1). It is not applicable, however, if it is against the law.

Commercial custom is applied only when there is no applicable contract or mandatory provision of the law (Code of Commercial Court Procedure, Art.13, para.6). Commercial custom is not only a source of law, but is one of the factors which should be considered when interpreting contracts (Civil Code, Art.431). Commercial custom is referred to in various provisions of the Civil Code (arts.311, 312, 314, 474, 478 etc.).

11 INTERNATIONAL TREATIES

The Civil Code provides that generally recognised principles and rules of international law as well as the treaties of the Russian Federation are the “constituent part” of the Russian legal system (Art.7, para.1). This re ects the constitutional

51R.O.Khal na, “Obychnoe pravo”, “Obychai’ in A.Iu.Sukharev ed., Iuridicheskii entsikolopedicheskii slovar”, Moscow 1984, pp.208-209.

52Ibid., p.209.

53Joint Decision of the Plenums of the Supreme Commercial Court and the Supreme Court No.6/No.8, supra, item 4.

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rule that if an international treaty contains a rule which is against Russian law, the international treaty prevails (The Constitution, Art.15, para.4).

Principles and rules of international law must be recognised as such by the Russian Federation in order to be a “constituent part” of the Russian legal system and bind the state as well as state agencies and of cials.54 Such principles and rules are found in the United Nations Charter, declarations and resolutions of the United Nations, documents and statements of international organisations and conferences as well as in the judgments of the International Court of Justice.55

Russia is a signatory to the Vienna Convention on the Law of Treaties. The Law on International Treaties of the Russian Federation was enacted in 1995. According to this Law, international treaties denote inter-state, inter-govern- mental, and inter-agency agreements in the form of treaties, conventions, agreements, protocols, exchanges of letters and notes.56

Generally, principles and rules of international law and international treaties are applicable to civil law relations in a direct way, i.e. without an enabling legislation (the Civil Code, Art.7, para.2). A potential problem is the situation where there is a con ict between an international treaty and Russian law. The Constitution has an explicit provision addressing such a situation; provisions of the international treaty have priority over provisions of the laws of the Russian Federation (Art.15, para.4). Those who apply law are not only empowered to, but are under an obligation, to apply international treaties on such occasions, and parties are entitled to quote the rules of international law in order to defend their rights.57

On the other hand, this provision does not directly refer to a situation where there is a con ict between an international treaty and the Constitution. There is a view that in such cases, the Constitution is understood to prevail, because of the supremacy of the Constitution within the Russian legal system, to which international treaties a constituent part.58

International treaties concluded by the USSR have been, in principle, inherited by the Russian Federation, unless these treaties were declared to have lost effect. Such treaties which have now lost effect were published in the of cial gazette between 1989-1991.59

54Lazarev ed., supra, p.101.

55O.N.Sadikov ed., Kommentarii k Grazhdanskomu Kodeksu Rossiiskoi Federatsii, 3rd edition, Moscow 2005, p.24.

56Law FZ-101 of July 15, 1995.

57Lazarev, supra, p.101.

58Ibid., p.102.

59Sadikov ed., supra, p.24.