Russia’s Offshore Rule of Law

A great piece by Alan Riley from yesterday’s International Herald Tribune has gone online today.  Riley writes on the key role played by the European Court of Human Rights and the English High Court in Russia’s justice system, noting that, as of the end of last year, the former had over 40,000 Russian applications, making up just under 30% of the total applications pending.  In terms of commercial cases being heard at the court in London, he says, current conditions are sparking an exodus of young lawyers from Russia, who prefer London’s ‘strong rule-of-law environment‘ to the corrupt and politicized ways of their own justice system.

President Dmitri Medvedev, who has sought to draw foreign investors with the promise of greater stability and increased rule of law, should reflect on the reality that Russian businesses and the Russian state are being increasingly guided by international treaties and commercial realities. While London has become a second home for much of the Russian business community, Russian business people are also using international arbitration forums in places like the Hague, Stockholm, Vienna and Paris. International arbitration clauses, commercial contracts and bilateral investment treaties are increasingly limiting the ability of Russian oligarchs and the Russian state to ignore the rule of law.

The Russian legal system is widely seen as one in which judges act under direct government orders, setting aside legal rules for political ends. The Yukos bankruptcy case is a classic example, and by no means exceptional. Moscow’s willingness to use tax law to bludgeon businesses into making payments to the authorities — whether legally due or not — is widespread.

Thus it is not surprising that foreign investors think long and hard before investing in Russia. Nor is it surprising that opinion polls indicate that Russians have little faith in their courts. A 2004 survey by the Russian Public Opinion Foundation found that 67 percent of respondents thought that the majority of Russian judges took bribes.

It will be interesting to see whether the newly reopened Sergei Magnitsky case makes it to the European courts – there’s certainly no possibility of the case being justly resolved if it stays on Russian soil.  Read the IHT piece in full here.