by William Partlett
With the Sochi Olympics approaching, the eyes of the world are turning to contemporary Russia. At the forefront of this coverage has been Russia’s odious anti “gay propaganda” law and questions about its ability to safeguard the Olympics from terror attacks. A potentially more far-reaching development, however, has largely been ignored. With very little publicity, the Putin administration is pushing through its most significant constitutional reform in decades. This amendment will subordinate the commercial courts—the most independent and innovative part of the Russian judicial system—to the general courts.
This creation of a unified Russian court system might sound like a mundane streamlining of the Russian judicial system. It is not. This constitutional reform will significantly undermine the ability of Russian businesses to shield themselves from fraudulent tax claims by competitors, which often have ties to the government, in the cutthroat world of Russian business. Furthermore, this reform threatens an increasingly important legal check on the “state capitalism” that lies at the heart of Putin’s system of governance: The use of minority shareholder suits to expose Russia’s highly corrupt culture of crony capitalism in which large companies operate as arms of the state.
Pockets of judicial innovation in the Russian judicial system
After the collapse of communism, most Russian legal cases—including crimes, civil lawsuits, and cases involving administrative offenses—were decided by courts inherited from the Soviet period. This court system and many of its judges retained the traditions of Soviet justice, including highly formalistic decision-making and a strong deference to the government. There were two pockets of judicial innovation, however, in the post-Soviet period: The Russian Constitutional Court and a multi-level system of commercial courts. The independence of the Russian Constitutional Court came to a dramatic end in September 1993. The independence of the commercial courts is meeting a far less dramatic, yet potentially more far-reaching, fate today.
The commercial courts were designed to consider cases involving economic disputes arising under Russia’s new capitalist economic system. The commercial courts have worked to make court decisions more predictable, pro-business, and transparent. These changes have paid off: Investors and corporations have increasingly sought out the commercial courts to protect themselves from malicious tax claims. More importantly, minority shareholders in major state-owned companies have filed claims in commercial courts seeking access to the records of Russia’s largest state-owned companies. For instance, one of Russia’s key opposition leaders, Alexei Navalny, made his name by filing minority shareholder suits in the commercial courts and successfully gaining access to corporate records. Navalny then published these records on his website, exposing billions of dollars of corruption in Russia’s majority state-owned energy companies.
Constitutionally eroding the rule of law
In June 2013, Putin proposed that the commercial courts be subordinated to the general courts. Putin explained that this “merger” would guarantee uniformity and equality in court cases. This justification, however, masks a far more insidious goal: To reassert centralized presidential control over the courts. In fact, a Putin-controlled Judicial Qualifications Board will review all judges on the court, giving the Putin administration a perfect opportunity to purge judges seen as disloyal. The Putin administration is hoping that a tightly controlled court system will allow the federal government to more easily extract tax revenue. Furthermore, the unified court system is a key strategy to prevent minority shareholder suits from exposing facts about the close relationship between the Kremlin and big business.
A growing number of legal and political elites associated with former Russian President Dmitry Medvedev are pushing back against this merger. Opposition has been buttressed by demand for property rights protection from the growing Russian entrepreneurial class. Seven commercial court judges have resigned in protest and more than eighty law firms have criticised the reform in an open letter claiming that it will subordinate the commercial courts to the “parochial” general courts. Key businessmen have also spoken out against the reform, arguing that the move threatens to deprive private businesses of protection against fraudulent strike suits—a key strategy used by both government and private interests in hostile takeover attempts. The current chair of the commercial courts has publicly stated that the merger will “destabilize” the Russian judicial system.
This elite will attempt to mobilize and limit the damage of the court merger during its implementation this year. Their success in preserving the pro-business and minority shareholder rights innovations of the Russian commercial courts will play a critical role in determining the fate of Russia’s fledgling rule of law system. Moreover, their relative success will also represent a significant chapter in whether law will remain a tool for exposing and disrupting the cozy relationship between centralized political power and big business in Russia.
About the Author
William Partlett is Postdoctoral Research Fellow and Lecturer at Columbia Law School. Partlett’s scholarship draws on his background in law, history, and comparative politics to examine the way in which constitutional and criminal law can be used to undermine individual rights and erode pluralistic democratic governance.