Courts and Transition in Russia: The Challenge of Judicial Reform

In the new Russia, where the major players in the economy are now private firms, the handling of commercial disputes represents an important new function of courts. In the capitalist economies of the West, courts may not be involved in the bulk of such disputes, but they stand as a viable and respected last resort for many, and may act as well as a deterrent to breach of contract. Whatever the courts' impact on the overall process of commercial dispute resolution, their role in this process adds to their status and reputation. In Russia, too, courts deal with only small portion of commercial disputes, but for reasons peculiar to Russian economic realities. These reasons include the prominence of cash and barter transactions (which do not produce written evidence), the prevalence of hidden parts of businesses (to avoid taxation), and relationships with private protection agents (providing what Russians call a "roof"). All the same, a substantial number of commercial disputes do reach the courts in Russia, and there is an opportunity for the courts there to raise their profile by handling them well.

In post-Soviet Russia most disputes among private firms and between private firms and state bodies belong to the jurisdiction of the arbitrazh (or commercial) courts. Administratively separate from the system of courts of general jurisdiction analyzed in this report, the arbirtazh courts were established in 1991 as successors to the system of state arbitration bodies (gosarbitrazh) from the Soviet period. The full-time arbiters who staffed the state arbitration bodies dealt mainly with disputes between

-163-