Legal Nihilism and William Browder

browder0619.jpgWilliam Browder of Hermitage Capital was once one of Russia’s most enthusiastic supporters for foreign investment.  He was also an advocate for stronger corporate governance, shareholder and property rights, and transparency.  Unfortunately, under the current government, these two interests collided tragically.  Browder, whose case of persecution is documented in the recent Council of Europe report on Russia’s politicized justice system, has authored a devastating opinion article in the Financial Times today.

Foreign investors get ripped off all the time in many countries. What makes this story unique is the state officials working together to steal $230m from the Russian state itself. The sharks have started to feed on their own blood.

What makes it even more worrying is thatthe Russian government took no action to recover the money when wereported the crime. Rather than going after the rogue officials andcriminals, the government turned the full weight of the law enforcementapparatus against us for reporting it. They arrested our lawyer, SergeyMagnitsky, who uncovered the tax rebate fraud. He has since been keptin pre-trial detention on cases I believe were fabricated. Six otherlawyers who filed criminal complaints or helped discover the fraud wereharassed and fled Russia for safety.

What are we to conclude fromthis episode? Some may argue the rule of law in Russia should notconcern outsiders, but if corrupt officials can steal such a largeamount of money from the state with no questions asked, it is not avery big leap for a similar group of corrupt officials to sell someloose Russian military hardware to terrorists, or even help roguestates to acquire nuclear technology. Moreover, when governmentofficials act not in the interest of the state but for themselves, thenormal tools of diplomacy simply do not work. It becomes impossible totrust international commitments, be it in the area of arms control ornuclear security. Perhaps there was a line in the past that Russianswould not cross, but with the spectacular recent decline in the rule oflaw, anything is possible in Russia now.