Originally from:
The Journal of Eurasian Law (JEL)
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This article looks at a specific phenomenon that has marked Russia’s
legal development as an open market economy since 1992: the dominant
use by Russian economic actors of corporate and contractual structures
governed by foreign law instead of Russian law for a substantial portion of
their activities and the adjudication of large Russian commercial disputes in
foreign venues rather than in domestic venues. Russian economic actors
have been extraordinarily busy users of foreign legal infrastructure. During
this period there was, in fact, a hefty Russian demand for commercial law
and legal services, but instead of being directed towards Russian domestic
law and legal infrastructure, much of this demand was outsourced to foreign
lawyers and foreign legal infrastructure. The Russian political structures
and domestic legal community allowed the outsourcing and in some ways
encouraged it, in an implicit consensus that Russian law was not (or not yet)
able to serve the needs of large Russian businesses.
In a globalized world, the use by economic actors of foreign law,
foreign courts, and foreign corporate structures is a common form of private
ordering of transnational activity.1 It is obviously not unique to Russia.
What seems unique in Russia is the extent of the outsourcing and the fact
that it affected not just transactions between Russian and foreign economic
actors but also entire segments of domestic activity that were structured
specifically in order to use foreign legal infrastructure rather than domestic
infrastructure. The insufficient protection of property rights by Russian law
and the discretionary use of Russian law as a weapon for political ends are
well known themes that have already been widely examined.2
Delphine Nougayrède
Docteur en droit (Paris V), solicitor (England and Wales). This article draws
on my experience practicing tax law and corporate transactions in Russia and the
former Soviet region between 1995 and 2013. It was written while I was a visiting
scholar at Columbia Law School. I gratefully acknowledge comments and advice
offered by Irina Sakharova, Constantine Lusignan-Rizhinashvili, Paul Stephan and
Katharina Pistor (some of whom, for full disclosure, did not always agree with
what I write). The article reflects my views only; errors are also my own.