Учебный год 22-23 / William_Simons_Private_and_Civil_Law_in_the_R

dard form contracts) whereby the party who has had the standard form imposed on it:

“[…] shall have the right to demand dissolution or change of the contract […] if the contract of adhesion, although not contrary to law and other legal acts, deprives this party of the rights usually granted under contracts of that type, excludes or limits the responsibility of the other party for a violation of obligations, or contains other conditions clearly burdensome for the adhering party that it, proceeding from its own reasonably understandable interests, would not accept if it had the opportunity to participate in determining the conditions of the contract. (Art.428(2)).”

This provision applies whether or not the parties are consumer and seller or supplier, but there is a special provision if the adhering party made the contract “[…] in connection with the effectuation of its entrepreneurial activity”, then the contract will not be dissolved if they “[…] knew or should have known on what conditions the contract was concluded”. The 1977 English Unfair Contract Terms Act encapsulates an analogous idea in itsrequirementof“reasonableness”forthevalidityofexclusionorlimita- tion clauses imposed by a standard form contract between businesses, or imposed on a consumer (sec.3), and the 1999 Unfair Terms in Consumer Contracts Regulations (originally 1994, based on European Council Directive 93/13/EEC) achieves much the same by its focus of good faith.

Under the Russian Civil Code, consumers are given extra protection by Article 400 when there is a contract of adhesion or other contract where the consumer is “creditor”, and the contract purports to limit the liability of the “debtor” in the event of particular violations. In such a case, the agreement to limit liability is void:

“[…] if the amount of responsibility for the particular type of obligations or for the particular violation has been determined by a law and if the agreement was concluded before the circumstances ensue that entail responsibility for the failure to perform or the improper performance of the obligation.” (Art.400(2))

Under Section IV of the Code, where specific provisions for individual types of obligations are set out, there are also a number of useful provi- sions that specifically assist consumers. For instance, the contract of electric-power supply (defined in Art.539) places the obligation on the supplier, inter alia “[…] to ensure the proper technical state and safety of the electric-power networks […]” (Art. 543) where the subscriber is a citizen using electric power for domestic consumption.Also, underArticle 546, a domestic consumer may unilaterally terminate the contract with due notice (and settlement of the account). However, more frequently, the specific contracts—set out in Section IV of the Code—act both to impose obligations on entrepreneurs and to give consumers supplementary rights.

The Balance of Obligations

Thereareanumberofexamplesofspecificcontractsbalancingobligations. For instance, a retail purchase-sale contract (Ch.30, part 2) is defined in Article 492 as being between the “[…] seller effectuating entrepreneurial activity relating to the sale of goods” and a “[…] purchaser of a good in- tended for personal, family, home or other use that is not connected with entrepreneurial activity”. In such contracts, the purchaser (effectively, a consumer)hastherighttoexchange(provideditisanon-foodstuff)foran analogous good of another size, form, dimension, style, color, or complement within fourteen days of the original transfer. If there is nothing suitable for exchange, the purchaser may get his or her money back instead.

The only requirements for the purchaser are that the good has not been used, “has retained its consumer properties” and there is proof of its ac- quisition from the particular seller.Thus, the voluntary trade practice of some of the larger and friendlier Western department stores (in England, famously, Marks & Spencer) is embodied in the Russian Civil Code.

Article 730(2) dealing with domestic independent work contracts— perhaps the epitome of entrepreneur-consumer relations—defines the contract as a public contract, thus neatly ensuring a “level playing field” for the consumers. More generally, the contract of independent work

(defined in Art.702) imposes very clearly the obligation of proper per- formance and liability for defects on the contractor (Art.723), although the customer is not without his obligations too, for example to assist, as appropriate (Arts.718, 719).

Anothercontractthatbydefinitionisbetweenanentrepreneuranda consumer is the contract of delivery underArticle 506.Article 519 sets the default position that the consumer may return incomplete goods within a reasonable time to be replaced with complete ones.

It may be noted, from the comparative perspective of a common lawyer, that the civilists’ detailed enumeration of the parties’ respective rights and obligations for typical contracts would appear to be an asset in avoiding consumer disputes. One thinks particularly of householders dealing with builders, plumbers, electricians, and so on, where the pro- visions of such articles as 715 (rights of a customer during fulfillment of work by independent work contractor), 718 (assistance of a customer),

721 (quality of work), and 731 (guarantees of rights of customer) give a framework that protects both parties by clearly defining the balance of their mutual obligations.

Causing Harm

Aside from contractual obligations, we should note that there is one important obligation, which arises as a result of causing harm, which is of particular interest with respect to our concern with entrepreneurs and consumers. Part 3 of Chapter 59 deals with compensation for harm caused as a consequence of defects in goods, works, or services. Article

1095 imposes a duty to compensate:

“harm caused to the life, health, or property of a citizen or the property of a legal personasaconsequenceofdesign,prescription,orotherdefectsofagood,work,or service,andalsoasaconsequenceofunreliableorinsufficientinformationconcern- ing the good (or work, service), shall be subject to compensation by the seller or the manufacturer of the good or by the person who fulfilled the work or rendered the service irrespective of their fault, and whether the victim was in contractual relationship with them or not.

The rules provided for by the present article shall be applied only in the instances of the acquisition of the good (or fulfillment of work, rendering of service) for con- sumption purposes and not for use in entrepreneurial activity.”

This clearly gives the consumer an advantage in bypassing the normal fault requirement for compensation for harm caused, set out in Article

1064 of the Russian Civil Code.

Conclusion

The foregoing enumeration of rights and duties in the Russian Civil

Code—whichparticularlytouchentrepreneursandconsumers—seemsto evidence a commendable concern for both special groups. By the general rulesonliability,duress,andcontractsofadhesion,andthemorespecific requirements of individual obligations, a fair framework is achieved that should encourage entrepreneurship while supporting consumers from unwarranted exploitation.

the right to withdraw surplus or unused property or property not used according to its designation, and to dispose of it at its discretion.”

The right of operative management was conceived by Venediktov after the end of the Second World War3 and became one of the cornerstones of the Soviet law of property (see, e.g., Art.94(2), 1964 RSFSR Civil Code). However, the right of economic management appeared much later: in the 1990 RSFSR Law “On Ownership” (Art.24) and the 1991 Principles of Civil Legislation of the USSR and the Union Republics (Art.43). Both conceptswereintendedtoprovidelegalpersons—whowerenot“owners” strictly speaking—with an economic basis which would enable them to participate in an autonomous way in civil law relationships.4

The right of economic management is provided for industrial enterprises (proizvodstvennie predpriiatiia) (Arts.113-114, RF Civil Code) and for institutions engaging in commercial activity while the right of operative management is foreseen for non-commercial institutions (gosbiudzhetnye uchrezhdeniia) and treasury enterprises (kazennye predpriiatiia). It is obvious that both these forms of property need to be understood in the light of the privatization process.5 Russian authors have recognized these norms of limited rights in rem as bearing a risk of being abused by enterprises organizations (or their organs) in order to transfer property from the state to the private sector under conditions which are disadvantageous for the state.6 It is for this reason that the content of these rights has been reduced in the new Civil Code as compared with the previous version.

According to Article 295(1):

“an owner [i.e., the state or other public entity] of property held in economic manage- ment, in accordance with a law, decides questions of the creation of the enterprise and the determination of the objects and purposes of its activity, its reorganization andliquidation,appointsthedirectoroftheenterprise,andeffectuatescontrolover the use thereof according to the designation [of the property] and preserves property

3On the concept of “operative management”, see G. Ajani, “Gestione operati”, in

Digesto delle discipline privatistiche, Sezione civile, VIII, Torino 1992.

4In that sense, see Kommentarii chasti pervoi grazhdanskogo Kodeksa Rossiiskoi Federatsii dlia predprinimatelei, Moscow 1996, Arts.294-300, 262.

5ThefirstRussianPrivatizationLawof3July1991hasbeenreplaced,intheframework of the third stage of privatization of State property, by a new Privatization Law of 21 July 1997 (Sobranie zakonodatel’stva Rossiiskoi Federatsii 1997 No.30 item 3595; 1999 No. 26 item 3173). On this law, see A. Rohde, “Das neue russische Privatisierungsgesetz vom 21. Juli 1997”, Recht in Ost und West 1998, 194-198, and the German translation of that law in Recht in Ost und West 1998, 198-203. Concerning the second stage (19941997) of privatization in Russia, see L. Riister, “Privatisierung und Strukturwandel russischer Unternehmen”, Recht in Ost und West 1997, 237 et seq. The third stage of privatization was aimed—in particular—at privatizing commercial enterprises in which the State still held shares of stock.

6See Kommentarii, op.cit. note 4, 264.

belongingtotheenterprise.Theownerhastherighttoreceiveaportionoftheprofits from the use of the property in the economic management of the enterprise.”

In other words (at least, theoretically), the organs of enterprise which enjoy a right of economic management may not decide to reorganize or to liquidate the enterprise—contrary to the provisions of Article 24 of

1990 RSFSR Law “On Ownership”. Furthermore, Article 295(2) provides that:

“an enterprise does not have the right to sell movable property, which belongs to it by right of economic management, or to lease it, pledge it, contribute it as a part of the charter (contributed) capital of the joint-stock society or partnership or dispose of this property—by other means—without the consent of the owner.

The remaining property, which belongs to the enterprise, is disposed of autonomously except for instances provided for by a law or other legal act.”

Contrary to prior legislation, the new Russian Civil Code does not allow the state to arbitrarily limit the power of possession and use which is conferred upon an enterprise enjoying the right of economic management.7 In particular, the state cannot deprive the enterprise of its property without its consent except in the case of liquidation or reorganization of the enterprise.8

In fact, the right of economic management leads to the transfer of responsibility for the activity of the enterprise from the state to the enterprise itself.

As far as the right of operative management is concerned, its content is less substantial as compared with the right of economic management. Here, the state cannot only withdraw surplus or unused property—or property whichhasnotbeenusedaccordingtoitsdestination(Art.296(2))—butan enterprise which enjoys the right of operative management “has the right to alienate or otherwise dispose of property allocated to it only with the consent of the owner of this property” (Art.297(1)). Such an enterprise can only autonomously dispose of the products/services which it has produced itself (Art.297(1) infine). As far as the revenues of the enterprise are concerned, the distribution thereof is to be determined by the state (Art.297(2)). To the contrary, where an enterprise enjoys the right of economic management, the state only has a right to receive a portion of the profits (Art.295(1) infine).9

The right of economic management as well as the right of operative management of property are enjoyed by the enterprise (or institution)

7Ibidem, 264.

8Ibidem, 265.

9In case of an “institution” (uchrezhdenie) as opposed to an “enterprise” (predpriiatie), Art.298 provides that it does not have the right to alienate the movable property entrusted to it.

“from the moment of the transfer of the property unless otherwise established by a law or other legal acts or by a decision of the owner” (Art.299(1)).

Concerning the fruits, products, and revenue from the use of property held in economic management or operative management—as well as the property acquired by a unitary enterprise (or institution) by way of con- tract or on other bases—Article 299(2) provides that they will “enter the economic management or the operative management of the enterprise or institution in the procedure established by the present Code, other laws or other legal acts governing acquisition of the right of ownership”.

This means that these fruits, products, or revenues do not become the property of the enterprise (or institution) but, rather, remain the property of the state.10

As far the termination of the rights of economic management and operative management is concerned, this can occur:

“upon grounds and in the procedure provided by the present Code, other laws or other legal acts governing the termination of the right of ownership and, also, in instances of the lawful withdrawal of the property from the enterprise or institution under a decision of the owner.” (Art.299(3))

The reference to “acts governing the termination of the right of ownership” means that the requisition of the property—without the consent of the enterpriseorinstitution—ispermittedonlyifgroundsforterminatingthe right of ownership are provided for by Article 235 of the Civil Code.11

According to Article 300(1):

“in the event of the transfer of the right of ownership in a state or municipal enterprise as a property complex to another owner of state or municipal property, this enterprise retains the right of economic management of the property belonging to it.”12

However, this article only deals with the case where an enterprise is transferred from one public owner to another (for instance, from the Russian Federation to a Subject of the Federation). If the new owner is a private (legal or natural) person, we are dealing with privatization.13

10See Kommentarii, op.cit. note 4, 266.

11Ibidem, 267.

12A similar solution is foreseen in Art.300(2) for the operative management of an institution.

13See Kommentarii, op.cit. note 4, 268.

A Novelty at the Border of the Russian Law of

Property and Contract: The Trust

Introductory Remarks

The new Russian Civil Code has introduced the concept of the “trust” (doveritel’noe upravlenie) into the Russian legal system (Arts.1012-1026).

However, it should be kept in mind that the Russian trust differs from the common law trust insofar as “the transfer of property to trust management does not entail the transfer of the right of ownership thereto to the trust manager” (Art.1012(1)).14 In other words, the Russian trust has appeared in the legal horizon as the means for the founder thereof to realize his power of disposition without creating a new right of ownership over the transferred property. In fact, the trustee manager is a kind of representative (or agent) of the founder. Trust manager holds possession of certain property which must be managed in favor of the founder or of a third person (i.e., the beneficiary).

Such a trust is at the border of the law of property and the law of contracts. On the one hand, Article 1012 is entitled “The Contract of Trust Management of Property”; on the other hand— although the trustee manager is not the owner of the transferred property—he can, for instance, enforce all claims to protect the property which only belong to the owner (Art.1020(3)).

On the contrary, the common law trust is not a contract: it exists as soon as the settler has created it—even before the appointment of the trustee and his agreement to act as such.15 Furthermore, the trustee has a legal interest over the entrusted property and—from a continental law perspective—should be considered to be an “owner”.

One can here recall the 1993 Edict of the Russian President “On Trust” which introduced a “genuine” trust into Russian law.16 According to section 3 of the Edict, this entails the transfer of the right of ownership to the entrusted manager. However, this Edict has been repealed as

14See, also, Art.209(4) in the same sense.

15See Megarry’s Manual of the Law of Real Property, 7th ed., London 1993, 273: “Trustees are usually appointed by the settlor when creating the trust. If he neither

makes an appointment nor makes any provision for one, the Court may appoint trustees [...] A person appointed trustee need not accept the trust even if he had agreed to do so before it was created, provided he disclaims the trust before he has accepted it either expressly or by acting as trustee.”

a result of the adoption of the new Russian Civil Code.17 What are the main features of the Russian trust?18

The Main Features of a Russian Trust

The Trustee Manager

Article 1015(1) provides that “an individual entrepreneur or commercial organization, except for a unitary enterprise, may be a trustee manager”. Furthermore, when a trust is established on grounds provided for by a law, “the trustee manager may be a citizen who is not an entrepreneur or a non-commercial organization except an institution” (Art.1015(1)). Neither a state agency (agency of local self-government) (Art.1015(2)) nor a beneficiary (Art.1015(3)) may be a trustee manager.

As far as the rights and duties of a trustee manager are concerned, he “has the right—with respect to the entrusted property and in accor- dance with the contract of trust management—to perform any legal or factualactintheinterestsofthebeneficiary”(Art.1012(2)).Nevertheless, in case of transactions involving property which has been transferred to trust management:

“the trustee manager concludes a transaction in his own name indicating that—in doingso—heisactingassuchmanager.Thisconditionisdeemedtohavebeencom- pliedwithif—whenperformingactsnotrequiringwrittenformalization—theother party has been informed about the performance thereof by the trustee manager in such capacity and in written documents by making a notation “D.U.” after the name of the trusty manager.” (Art.1012(3))

The failure to observe this duty of disclosure is sanctioned by the fact that “the trustee manager personally bears liability vis-à-vis third persons and is liable to them with all the property which belongs to him” (Art.1012(3)).

Generally speaking:

“the trustee manager effectuates—within the limits provided for by a law and the contract of trust management of property—the powers of the owner with respect to the property transferred in trust management. The disposition of immovable property by the trustee manager is effectuated in the instances provided for by a contract of trust management.” (Art.1020(1))

Despite the fact that the trustee manager is not the owner of the entrusted property(Arts.209(4)and1012(1)),heisneverthelessentitled—withinthe limits of the law and the contract—to possess (vladet’), use (pol’zovat’sia),

17See O.N. Sadikov, (ed.), Kommentarii k Grazhdanskomu Kodeksu Rossiiskoi Federatsii. Chasti vtoroi, Moscow 1996, 594-595.

18On the Russian trust see, for instance,A.V. Kriazhkov, “Doveritel’noe upravlenie im- ushchestvom v Rossii: formirovanie instituta i sfery primeneniia”, Gosudarstvo i pravo 1997 No.3, 22-31.

and enjoy (rasporiazhat’sia)19 movable entrusted property.20 For immovable property, these powers exist only if they are provided for in the contract of trust management. In other words, the trustee can be seen as a “quasi- owner”, who can even transfer the property to third parties.21

A duty of information is imposed upon the trustee manager insofar as he is required to “submit to the founder of the management and to the beneficiary a report concerning his activity within the periods and in the procedure established by the contract of trust management of the property” (Art.1020(4)). Another duty can be seen in the fact that the

“trusteemanagereffectuatesthetrustmanagementofpropertypersonally except in the instances provided for by section 2 of the present Article” (Art.1021(1)). However, he may delegate a portion (or all) of his duties to another person where he is empowered to do so by the contract of trust management of the property, where he has received the consent of the founder to do so in writing, or where he is forced to do so by virtue of circumstances.

As regards the liability of the trustee manager, Article 1022(1) provides that:

“the trustee manager who has not displayed due diligence in the trust management of thepropertyintheinterestsofthebeneficiaryorofthefounderofthemanagement will compensate the beneficiary for the lost advantage for the period of the trust management of the property and [compensate] the founder of the management for losses caused by the loss or damage to the property taking into account its natural wear and tear and also lost advantages. The trustee manager bears responsibility for lossescausedunlessitisprovedthattheselossesoccurredasaconsequenceofinsur- mountable force or of acts of the beneficiary or the founder of the management.”

As Russian authors have underlined,22 these two sentences—providing for liability of the trustee manager—appear to be contradictory. On the one hand, according to the first sentence, this liability has its roots in the absence of “due diligence in the trust management of property”. In other words, here we are dealing with liability for fault. On the other hand, in light of the second sentence, the trustee manager is discharged from li- ability only where the losses are a consequence of insurmountable force or the act of the beneficiary or the founder the management. Here, we are dealing with strict liability. The contradiction ought to be resolved in favor of strict liability in accordance withArticle 401(3) which—as a gen- eral rule—provides that a person who engages in entrepreneurial activity

19The same trilogy as in the case of “operativnoe upravlenie” is to be found here.

20See Kommentarii, op.cit. note 17, Art.1020, 606.

21Ibidem, Art.1020, 606.

22Ibidem, Art.1022, 608.