Unlike the usual position for
warranties, indemnities under
English law are not usually
qualified or reduced by disclosures,
or by the knowledge of the buyer
and there is usually no duty on the
part of the indemnified party to
mitigate loss.
Another example
Russian law does recognise
conditional contracts, but the
conditions must be outside of the control of the parties.
Any condition that is within the control of a party is
likely to be automatically deemed satisfied. This could
create problems on some finance and M&A deals, where
conditions relating to Investment Committee approvals,
Credit Committee approvals, board and shareholder
approvals could all be argued to be within the control of
one of the parties, depending on the nature of the party
and its corporate structure. Some more subjective
conditions, such as the availability of funding,
satisfactory due diligence results, or no material
adverse change, would also be grey areas for
interpretation.
Another negative business factor in Russia is the
unsatisfactory legal framework for holding companies
and the tax rules for them, driving Russian companies
to base their structuring outside Russia where most of
the transactions take place and where English law is
best understood and is applied in a predictable way. Big
Russian property owners still prefer offshore
jurisdictions, security of business being an important
consideration.
Under English law, the parties can agree to whatever
conditions they like for the contract to complete. These
conditions do not need to be within the control of the
parties and do not even need to be realistic, provided
they are clear and can be objectively assessed.
And one more general argument. English law is not
set out in a single civil code. This approach has enabled
English law to be flexible, adaptable and practical when
dealing with the developing needs of commerce, as
technology, evolving markets and new techniques all
continue to revolutionise the ways in which we do
business.
English courts and arbitration tribunals have a
strong reputation for reaching fair, balanced and
unbiased judgments and rulings and (on the whole)
clear and predictable outcomes.
Andrey Goltsblat
RUSSIAN LAW DOES PLAY AN IMPORTANT ROLE
Investors should have an insight into Russian laws too,
because even though a transaction may be governed by
English law the main assets of its participants remain in
Russia. In this context, it is extremely risky to ignore
Russian law. If there is a dispute - even if it comes to
arbitration outside Russia - the courts very often need
an understanding of Russian legal institutions.
Russian corporate and financial law has made
significant progress in a relatively short period of time.
A lot remains to be done, of course, but we can see
quite clearly that Russian law is moving slowly but
surely forward as confidence in the legal system grows
and the courts accumulate experience and a body of
practice is built up.
The Russian Civil Code was originally influenced by
the German Civil Code, but that historically, court case
precedent has not been recognised when interpreting
provisions of the Russian Civil Code. The German
system does recognise warranties, which are not set
out in the German Civil Code but have developed
through court case precedent. It is likely that at some
point the Russian system will adopt a similar approach
and there are already discussions taking place at a high
level about this. We are also already seeing in practice
an increase in the use of decisions of the Supreme
Arbitrazh Court as guiding precedents for other Russian
courts. As this develops, it will be a significant step
along the road towards fully developing some of the
legal techniques and practices discussed in this booklet.
The common practice of Russian-only parties using
Russian law, and the insistence of state organisations
on using Russian law where possible, are also very
helpful in creating momentum and track record and in
building confidence in the system. Over time this will
lessen the need for off-shore structures on many
Russian deals.
International businesses will take longer to become
completely comfortable in using only Russian law and
this is likely to be a slower process of development.
However, English law took some 600 years to develop
into what it is today and so in the last 20 years Russian
law has already made some huge steps in the right
direction. ■
NOTE
1 See: Ian Ivory, Anton Rogoza, Use of English law in Russian
transactions, Moscow, Alpina Publishers, Goltsblat BLP, 2011
Andrey Goltsblat is Managing partner at
Goltsblat BLP in Moscow.
Goltsblat BLP
Capital City Complex
Moscow City Business Centre
8, Presnenskaya Nab., Bldg.1,
Moscow, 123100, Russia
Tel: + 7 (495) 287-4444
Fax: + 7 (495) 287-4445
Web: gblplaw.com
