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Foreign Investors' Legal Victories Boost Faith in Russian Courts

Finance: Quality of justice is uneven. But one judge says higher pay for those on bench has helped lessen influence of corruption, regionalism.


"Although the courts are paid for through the federal budget, local courts often are dependent on the regional administrations for other important supports, everything from the location of their premises to the furniture," says Olga Anissimova, a former St. Petersburg judge who is now with the Moscow office of the Coudert Bros. international law firm.

She attributes the trend toward a more responsive judiciary to both a strengthened legal foundation and to the improving pay and prestige accorded those on the bench.

"Salaries are much better now. In Moscow, an arbitration court judge can earn $1,000 a month. That isn't much by Western standards, but here it is quite a lot," Anissimova says. "Local court judges probably only earn half of that, but still this is a good salary in the regions."

Genrikh Pavda, a prominent defense attorney and head of the Russian Union of Lawyers, says another important inducement to developing a reliable judiciary is pressure from the top to make the system predictable and accountable.

"Our leadership understands the significance of foreign investment in developing the country and that foreign investment will come only when there is a favorable legal climate," Pavda says. "[Kremlin officials] have brought pressure to bear on local courts to abide by the law if any investor's rights are violated, foreign or Russian."

Arbitration courts, both local and international, have become the primary venues for resolving disputes involving Western investors, many of whom designate that type of legal recourse in their initial contracts with Russian businesspeople or agencies in the event the partnership runs into trouble.

More than 1,600 lawsuits involving foreign citizens were registered in Russian courts of arbitration in 1997, and about 45% of the 1,100 resolved were decided in favor of the foreign partner, says Nonna Grebneva, spokeswoman for the federal court system. Representatives for foreign investors, however, estimate that the proportion of successful lawsuits is much higher, noting that the majority of 500 or so cases never decided by the court were settled to the investor's satisfaction in private negotiations.

Last year's caseload was more than triple the level of five years ago, when disgruntled foreign investors were more likely to run when chased away by local partners' goon squads.

"I must say that it is my impression that many judges, though certainly not all, are doing their best to develop an independent judiciary," Davies says from his home in Mesa, Ariz. "And we should know--we've been in court in Russia 24 or 25 times."

But the proof will be in the paying, says Davies, who still faces one more likely appeal in the breach-of-contract judgment and a labyrinth of hearings and reviews on peripherally related tax cases.

"We will contest this decision, and we will contest the sum [of the award]," vows the deputy regional administrator for the Lovozero district, Fedor Shveitser. "We will keep challenging as long as it takes."

Davies' local attorney, Ilya Beiderman, takes heart from the battle won in Lagutina's court but predicts a long slog to victory in the war for reliable protection of investors' rights.

"This case is significant because it shows that, if an investor's rights are violated, there are legal mechanisms for rectifying those wrongs," the Murmansk attorney says. "But it's another question entirely whether local authorities can and will be made to comply."

Williams was recently on assignment in Murmansk.

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