RUSSIA WATCH Duncan DeVille, Guest Editor Graham T. Allison, Director Analysis and Commentary Danielle Lussier, Assistant Editor Strengthening Democratic Institutions Project Editorial Staff: Melissa Carr, David John F. Kennedy School of Government Rekhviashvili, Annaliis Abrego, John Harvard University No. 7, March 2002 Grennan Rule of Law in Russia: The Wild East No More? Russian support for U.S. efforts in The new Criminal the war on terrorism has surprised Procedure Code. Long many Western observers. But this advocated by Western legal was not the only recent surprise experts as an important step in the development of the rule of law, from Moscow Western — the new Criminal Procedure Code advocates for the rule of law in will divest power from Russia’s (continued on p. 3) Russia also had much to celebrate in the closing months of 2001. Under IN THIS ISSUE: strong prodding by President Sergei Stepashin, p. 9 Vladimir Putin, the Duma passed several impressive pieces Chairman of the Auditing Chamber of the Russian Federation of reform legislation, including an entirely new Criminal Rule of Law and the Peculiarities of Russia Procedure Code, a potentially revolutionary land reform * law, new shareholder protections in amendments to the Scott Boylan, p. 10 Joint Stock Company Law, and the first post-Soviet Labor Regional Director for Eurasia, U.S. Department of Justice Long Awaited Russian Criminal Procedure Code is Enacted Code. * All of these bills had been stalled in the State Stephen Handleman, p. 13 Duma since the mid-1990s despite — or because of — Time Magazine International former President Boris Yeltsin’s efforts to get them passed. Russia’s Terrorism - Organized Crime Yet Putin, with little fanfare, managed to do what Yeltsin * with all his bravado could not do: push the notoriously Yelena Mizulina, p. 15 Member of the Russian State Duma conservative Duma to approve these sweeping laws. A New Criminal Procedure Code Of course, the more difficult task of actually * implementing these new laws lies ahead. We should not be Lee Wolosky, p. 17 Pollyannaish about this prospect. In a country without rule Former Director for Transnational Threats, National Security Council of law traditions or the civic institutions so important to Rule of Law and National Security the rule of law, implementing these four sweeping pieces * Bruce W. Bean, p. 18 of legislation is easier said than done. Passage of these Clifford Chance Puender laws may have been the easiest part of the reform process. Perspective on Corporate Governance Progress under Putin But if properly enforced, these new laws will make for * enormous changes in the lives of ordinary Russian citizens. Sarah Carey, p. 21 They will provide Russia’s citizens with a measure of Squire, Sanders & Dempsey U.S. Investors in Russia: A Greatly Improved Landscape personal and economic freedom not previously enjoyed. * This issue of Russia Watch surveys the recent Elena Gerasimova and Irene Stevenson, p. 23 progress toward making Russia a rule of law state. A quick Labor Lawyer and Field Representative, Solidarity Center/AFL-CIO look at these new laws is revealing. New Labor Code in Russia * Adrian Moore and Ilya Petukhov, p. 26 “A dictatorship of the law is the only kind Baker & McKenzie The New Russian Land Code of dictatorship that we must obey.” * Vladimir Putin, January 31, 2000 Evgeny Reyzman and Maxim Kalinin, p. 29 Baker & McKenzie The New Russian Federation Labor Code * “As good government is an empire of U.S.-Russia Business Council and laws, how shall your laws be made?” American Chamber of Commerce, p. 31 Policy Recommendations for the Bush Administration John Adams, “Thoughts on Government,” 1776 * Ruben Vardanian, p. 33 BACK ISSUES OF RUSSIA WATCH CAN BE FOUND Troika Dialog Bank Corporate Governance: Russia’s Present Day Perestroika AT: www.ksg.harvard.edu/bcsia/sdi Russian Supreme Court website, http://www.supcourt.ru/EN/rj.htm Levels of Trust and Mistrust in Police 28.1 28.5 30 25 22.5 Complete Trust 20 Mostly Trust 13.3 15 Mostly Distrust 10 7.6 Completely Distrust 5 Hard to say 0 Level of Trust ROMIR Consulting poll of 2000 respondents in 62 regions of the Russian Federation October 2001, www.romir.ru 2 (continued from p. 1) prosecutors and invest it in the blows with proponents of the measure in the Duma session country’s judiciary. It does this by taking away from during which the bill was passed. The opponents then prosecutors the right to issue arrest and search warrants, and marched out of the Duma en masse and sang old placing this power in the hands of judges. The new code also revolutionary songs outside. allows criminal defendants to retract confessions, many of Not only does this land reform bill allow private which are still beaten out of suspects by Russian police. ownership of land by Russian citizens, it even allows land Under the new code, once retracted by a defendant, such ownership by foreigners — a remarkable change. confessions cannot be used as evidence. Russia’s markets have been slow to develop in the Finally, and perhaps most importantly, the new atmosphere of uncertainty that currently exists over the issue code guarantees the right to jury trials in criminal cases. of whether or not individuals can really own land. In Under the current system, Russian prosecutors often do not addition to the obvious economic benefits of legalizing even show up at trials, so confident are they in the likelihood private land ownership, this law takes a major step towards that the judge will convict, since there is no jury to hamper reducing the power of organized crime groups in Russia. the court. The absence of legal land ownership has created a bonanza Russia actually began a jury trial experiment in for mafia groups who currently control property through a 1993, but jury trials were only held in nine of the country’s violent black market system. eighty-nine regions, and in recent years juries heard only 2 Adrian Moore and Ilya Petukhov of Baker & percent of Russia’s criminal trials. The results of even this McKenzie’s Moscow office explores the new land reform small experiment have been startling: while the acquittal rate law on p. 26. in old-style Russian criminal trials today is about 1 percent, The new Joint Stock Company Law. The year in areas with the jury trial experiment nearly 20 percent of 2001 also saw President Putin sign the first substantial all accused have been freed by juries. overhaul since 1995 of Russia’s basic corporate law, the Joint Stock Company Law. The changes are designed to protect minority shareholders’ rights, including measures to Russia desperately needs tougher prevent dilution of ownership through issuance of new anti-trust laws. shares. Other amendments require that there be, in most cases, a seventy-five percent quorum of shareholders before a vote may be taken regarding the issuing of new shares. The new criminal procedure code expands this right Finally, the new amendments provide enhanced access to to all Russians accused of serious crimes, allowing them to shareholder lists and accounting records, the right to have their cases heard by ten-member juries of their peers. nominate candidates for board and management positions, This will force prosecutors to actually prove their cases with and an easing of the requirements for removing a company’s hard evidence, rather than relying upon the rubber-stamps of general director/CEO. judges or so-called lay assessors — two hand-picked citizens In this issue of Russia Watch, Bruce Bean of who sit with the judges— a vestige of the Soviet system. Clifford Chance Puender’s Moscow office reviews the new Once implemented, the new code will force Joint Stock Company Law on p. 18. Ruben Vardanian of prosecutors throughout the entire country to bring stronger Russia’s Troika Dialog Bank suggests areas for further cases, or else face a loss at the hands of suspicious juries. improvement of corporate governance in Russia (p. 33), and Furthermore, a stamp of public approval comes with a jury Sarah Carey of Squire, Sanders & Dempsey (which has a verdict, and serves to make credible the actions of the state. large Moscow office) evaluates current conditions for Juries also act as a check on state corruption. Russia sorely Western investors in Russia (p. 21). needs such a system of checks and balances as it attempts to confront organized crime and establish the rule of law. Yelena Mizulina, a member of the Russian State Even the best laws will be Duma, and Scott Boylan of the U.S. Department of Justice, examine the new criminal procedure code in their articles in ineffective if not properly this issue of Russia Watch (p. 15 and p. 10, respectively). implemented. And Time’s Stephen Handleman (author of Comrade Criminal: Russia’s New Mafiya) provides an update on Russian organized crime on p. 13. Lee Wolosky, formerly The new Labor Code. On the last day of 2001, with the National Security Council, discusses post- Putin signed into law the new Labor Code, an important September 11 U.S. national security threats that might result component of his economic program. The provisions of the from unchecked crime in Russia on p. 17. Labor Code had been argued for the last five years and faced The land reform law. Equally far-reaching in the vocal opposition from the Communists in the Duma. But the historic change it represents, the land reform law will do Kremlin was able to get its bill through the Duma largely something that would have been anathema to Communists: intact. The new Labor Code will replace the 30-year old allow the private ownership of some land in Russia.