When Russian President Boris Yeltsin issued a far-reaching decree to liberalize foreign trade last fall, he sent Western companies into a tizzy. The decree banned the sale of goods for hard currency in Russia starting in 1992, adding another layer to the rules governing joint ventures. The phones of Western and Russian lawyers began ringing off the hook. Says Alexander Minakov, a Russian lawyer whose clients include Benetton Group: "These days, there are no definite answers. We have to act like witches and predict the future."
Such uncertainty is sure to get worse. As the free market struggles to its feet in the former Soviet Union, the republics, led by Russia, are scrambling to pass laws that will support it. At the same time, Western legal experts are rushing over to grab a toehold in the two-month-old Commonwealth of Independent States by offering up their law-writing services, often free of charge. Despite the help, which is both necessary and problematic, there's no master lawmaking strategy in sight. Slap-dash decrees collide with old Soviet statutes. And a persistent habit of leaving out the details makes many laws impossible to enforce. "They're a set of slogans," says Russian economist Abel Aganbegyan, "when what we need are dry, lucid laws."
The legal void worsens the risky investment climate. Westerners have been hankering for a nice, dull law spelling out their ownership rights. "They want a clear definition of property rights," says Alexander Papachristou, an attorney with the Moscow office of White & Case, a New York-based law firm.
DEARTH OF JUDGES. The legal problems are hardly news in the Commonwealth, where legislators were once picked for their willingness to rubber-stamp the Politburo's rules. Few parliamentarians are lawyers. Indeed, lawyers are thin on the ground. Moscow has just 1,500 practicing attorneys, compared with 61,000 lawyers in New York City. And after 74 years of communism, hardly anyone remembers pre-Revolution commercial law. That includes judges, who also are in short supply. To top it off, people disregard the laws that do exist.
Some law reforms were already taking shape under perestroika. Then came last summer's coup and the Soviet Union's breakup, bringing an urgent need for laws at the republican level. "Right now," says Minakov, "I'd say we have only 10% to 15% of what we need."
These days, drafts and decrees are flying off the printing presses. Under Russia's proposed new criminal code, offenses such as "entrepreneurialism" have been blotted out in favor of such capitalist-type crimes as fraudulent trademarks. Meanwhile, legislators are racing to get commercial laws into place.
Despite a Russian legal tradition based on European law, the drafts show strong American influences. Commonwealth law professors speak glowingly--and knowingly--about the Sherman Antitrust Act. But there are other influences. A securities law that has just surfaced in Russia is largely the work of a joint Russian-American law-writing project founded in 1990 and headed by Milbank, Tweed, Hadley, & McCloy, a New York law firm. Another New York law firm, Cleary, Gottlieb, Steen & Hamilton, is now the Russian government's consultant on foreign investment law.At their best, Western advisers stay in the background, commenting on drafts and suggesting model legislation. But more legal advisers are rushing over. And institutions such as the European Bank for Reconstruction & Development (EBRD) worry that the lawyers could add to the chaos by offering sporadic help--or by overreaching.
Some advisers are criticized for trying to make the laws come out to their advantage. The Russian Petroleum Legislation Project is a joint venture of the University of Houston Law Center and the Russian Republic. Big Oil is financing about half of the $1 million project to help draft Russian law on access to underground resources, including oil.
CRUDE QUEST? The project is raising eyebrows. "It could be seen like a fox not just guarding, but building, the chicken house," says Irina Savelyeva, a Moscow attorney. But law center Dean Robert L. Knauss denies that his school is in thrall to the oil giants. The Russian authorities, he says, asked the project "to provide legislation that would conserve energy, protect the environment, and be attractive to foreign investors."
With no time to build their own commerical law system, Commonwealth lawmakers have no choice but to rely on the West for advice. To track this Western aid, the EBRD announced a program on Feb. 11 to set up electronic data bases listing Western projects and circulating drafts of laws. That should cut down on some of the legal chaos. But the hardest part may come after a new legal system has been set up. That's when lawmakers must persuade citizens, enterprises, and bureacrats that the new set of economic laws aren't made to be broken.