Учебный год 22-23 / William_Simons_Private_and_Civil_Law_in_the_R

(1)where it concerns the immediate allocation (Zuordnung) of goods or rights (intellectual property rights, for example), ownership is an absolute, exclusive right;

(2)bound to this allocation of goods and rights to the entitled person is the right to appropriation of income from these goods and the right of possession, use, and disposal to the entitled person, as well as the right to autonomously and privately decide on income from this property, its use, and disposal;

(3)from this broadly defined concept of property ownership, other connected institutions of private law are derived: enterprise law, right to lease, and “complementary” institutes with a public law character: competition law, construction law;

(4)constitutional protection of ownership aims at protecting owners or entitled persons against interference and taking by public authorities as far as public needs do not justify such interference.24

The new Russian Civil Code returns to the legal institution of private property. Private property is recognized as the basic form of ownership for citizens and legal persons.Article 212 recognizes private property alongside state property, municipal property, and “other forms of ownership”. But Article 213 hesitates to repeat the concept of private property (chastnaia sobstvennost’) and prefers to refer to the property ownership of citizens and legal persons (pravo sobstvennosti grazhdan i iuridicheskikh lits). Nevertheless, there is no doubt that the basic paradigms on property rights were changed in a drastic way by the new Civil Code. Property rights and other rights in rem should no longer serve the requirements of a plan-organized economy but, rather, should induce flexibility in a market-organized society. This change in the social role of property rights is presented as having not only legal technical, but also practical, relevance; in this way, the western forms of credit guarantees and capital procurement became available. Ownership limitations are restricted; the principle of universality in appropriation capacities for legal subjects is introduced. As to content, there is no limitation in the form of social binding (function) of ownership. The classical guarantee of remuneration in case of expropriation is included in the 1993 Russian Constitution (Art.35).

The current concept of private property ownership in the new Russian Civil Code is an encompassing concept of ownership as an absolute right in rem. The general Article 209 (content of the right of ownership) contains the classical definition of property ownership as the right of

24H. Roggeman, “Zur Verhaltnis von Eigentum und Privatisierung in den postsozialistischen Ländern”, Recht in Ost und West 1996 No.3, 89-90.

possession, use, and disposal of property (imushchestvo) which belongs to the owner. The owner can transfer property into the ownership of other persons, keep the ownership title and transfer the rights of possession, use, and disposal, hand over property as a pledge or otherwise encumber it, or dispose of it in other ways. The owner has the right at her/his discretion (po svoemu usmotreniiu) to perform with her/his property any activities which are not contrary to legislation and do not violate the rights and interests of other persons, protected by law (Art.197(2)).

In this way, Russia seems to evolve towards a liberal theory, looking at ownership as a fundamental freedom (Art.35, 1993 RF Constitution, is even more explicit in this perspective). The individual becomes entitled to guarantee for him/herself a material guarantee for freedom, a space for freedom in the material sense of the word and—at the same time— this ownership right enables that individual to develop her or his life in a responsible way. The basic assumption is clear: ownership is the most encompassing right to a good from which all other limited rights in rem are derived. This kind of private ownership should guarantee economic viability and freedom of entrepreneurship of the owner as a citizen and as an economic actor. But, at the same time, it forms the basis for unlimited enrichment and capitalist concentration of wealth in the hands of a few.

Such a “stretched concept of ownership” is extremely useful in the post-Soviet struggle for control of financial and natural resources. One could hardly imagine a better legitimation for holdings and other con- centrations of financial-industrial capital so as to concentrate the basic wealth of Russia in the hands of a post-Soviet elite.The Russian Civil Code provides a basis for this kind of post-communist development in property rights. One could ask what is wrong with this and remark, in the words of the Chairperson of the RF Higher Arbitrazh Court, Dr.Veniamin Iakovlev, that:“thisisnotaquestionofinsufficiencyoftheCivilCode,butaninsuf- ficiency of Russian commercial practice.”25 The question, however, is not only whether the Civil Code builds in sufficient mechanisms for control and attenuation of this neo-liberal approach but, also, how to evaluate this normative approach to property rights in a transition period.26

Certainly, the new 1994 Russian Civil Code places itself in a long tradition of civil law countries where—in contrast with the Common Law tradition—private-law civil codes exist as the source or reference

25Interview with the President of the RF Higher Arbitrazh Court, V.F. Iakovlev, with Kommersant’ Dengi 18 October 2004 No.41 (496). Reproduced at: <http://www.arbitr. ru>.

26On the difference between “libertés-résistance” and “droits-créances”, see G. Lebreton,

“Unlegsdel’U.R.S.S.àlaC.E.I.:LaDéclarationsoviétiquedesdroitsdel’hommedu

5 septembre 1991”, Revue du Droit Public et de la Science Politique en France et à l’Etranger

1993, 281-313.

basis of the law-making or law-finding process.27 The difference between the ownership concept of civil lawyers and the Anglo-American idea of property rights as bundles of rights is a typical example of this divergence.

The European codification movements were based on the ideas of the

Enlightenment era and on the common belief that there was a natural law to be recognized by reason and that society as a whole could be ordered by a system of legal rules, designed and enacted by the sovereign in accordance with the commands of the enlightened reason. In this holistic (or perhaps even somehow totalitarian) approach to law and legal order, the so-called natural-law codes were created, of which the French Civil Code of 1804 was the most shining example.28 Around the turn of the twentieth century, the enlightened citoyen had been transmuted into the capitalistic leader of the industrial revolution: the bourgeois. In contemporary Russia, however, it is not the enlightened citoyen who is turned into a capitalist but, rather, the non-owning privileged and powerful member of the communist elite, who changes her power into property rights relating to the most important wealth in Russia. This happens while a mass of citizens—having lived under “real socialism”—remains impoverished and unprotected, unable to use its newly acquired private property rights.

This is, however, often presented as a sociological development that a Civil Code can hardly take into account. In Western Europe, the notion continues to survive that a civic society—to be well ordered—should be ruled by a more or less all-encompassing system of codified law.The idea persists that the Civil Code figures the legal pattern of civil life and the code is seen in civil law countries—as the Bürgerliches Gesetzbuch of 1896 and the Swiss Zivilgesetzbuch of 1907—“as a self-sufficient whole, taken to contain, in the form of logical principles inherent in its structure, its own method of development”.29

27Although common-law and civil-law systems are drawing closer to each other (the emerging of a category of European law has accelerated this process), there remains a differenceinthenotionsoflawandlegalorder,stylesoflegislation,judicialdecision- making, and statutory interpretation: Oehler, op.cit. note 20, 711.

“The perceived difference between common-law and civil-law approaches—that one is bound by case precedent and the other to an unyielding code is, in the modern world, more apparent than real.”

28Oehler, op.cit. note 20, 713.

29The civil-law judge can make use of a canon of interpretation techniques: the literal or grammatical interpretation, with further help provided by historic intent, the legal context or framework of the norm to be interpreted, teleological considerations and the legislative purpose or the ratio legis. Learned commentary on the legal norms in the code, condensing the systematic law, constitutes the primary tool of choice for the legal interpretation of civil law: Arthur Taylor von Mehren, “The Judicial Process in the United States and Germany” in Festschrift für Ernst Rabel, 1954, 67, as referred to by Oehler, op.cit. note 20, 714.

At present, however, in a post-communist situation, we can talk about an “extreme crisis of interpretation”.30 What is the kind of private property to which are we referring?

Breaking with the Continuity of the Past

WehavealreadyreferredtothequalityofinternalconsistencyoftheSoviet system of property rights. The division of possible subjects and objects of differentiated ownership forms was typical for the Soviet institution of property rights (socialist state, cooperative property, property of social organizations, and personal property). Personal property was presented as individual property to a very restricted circle of objects, to be situated mainly in the sphere of consumer goods and goods for personal use. State property—legallydefinedasanindivisible,exclusive,andabsoluteright— found its legitimation in the reasoning that the state represented the whole people as a collective owner of state property. In this sense, state property was in its content functional and social (collective), and exactly this content legitimized the exclusive attribution of this property to the state as the sole owner. The reasoning was that state property served the implementation of the plan and in this way—indirectly—the needs of the population.

Two categories of objects of property rights were, in particular, relevant during the Soviet period: res intra and extra commercium and production goods and consumer goods.The difference between movable and immovable goods had become irrelevant. All land had been nationalized, had become state property, and was governed by land law (zemel’noe pravo). Enterprises and other production means were operationalized as state property by legal persons sui generis (state enterprises, institutions), authorized by the state; but not owners however. The idea of res nullius was unknown, ungoverned property became state property. Personal property—theonlyavailableformofindividualproperty—wasconsidered as socially less important and derived from socialist property. Commercial activity by a private individual or legal person—or even an attempt to do so with the aim of gaining something out of this—fell under the criminal act of speculation (Art.154, 1960 RSFSR Criminal Code).

Thenew1994RFCivilCodeis—withoutadoubt—anti-differentialin its ownership concept (Art.209), but in the concrete allocation of wealth in society it introduces quite some limitations. The code distinguishes among three types of ownership: private, state and municipal, besides

“other types of ownership”.All these forms (the rights of these different

30K. Segbers, Post-Soviet Puzzles. Mapping the Political Economy of the Former Soviet Union,

Vols.1-4, Baden-Baden 1995, 145.

owners) are protected equally by law (Art.212(4)). There is, however, in

Article 212 a Gesetzvorbehalt:

“peculiaritiesofacquiringandterminatingtherighttopropertyandthepossession, use and disposal of it, depending upon whether the property is in private ownership of a citizen or a legal person or in state or municipal ownership may be established only by law.”

The RF Supreme Court—in its legal practice—has tried to strengthen the autonomy of subjects of property rights. Organs of state power and government are forbidden to take any discriminatory legal measures by which the autonomy (samostoiatel’nost’) of separate economic subjects can be limited, especially when these limitations risk having an impact upon competition and, thereby, diminishing the interests of economic subjects.31

However, the question is not only whether the individual citizen is upgraded in her or his property rights but, also, which rights are attributed to those legal persons that have changed their label from state enterprises to commercial entities. For example, the Plenum of the RF Supreme Court wasconfrontedwiththequestion:atwhichmomentdoesstateownership lose its qualification as “state”? Its answer was that property can only be qualifiedas“state”whenthepropertyisinstateownershipandattributed to state enterprises and institutions in possession, use, and disposal. Property of various legal persons “new style” (i.e., commercial entities), in the charter capital of which state assets are also included cannot be qualified as“state”.Theconsequenceisthattheftofsuchpropertyistobequalified asillegalappropriationorwasteofanother’spropertyandnotasabuseof anofficialposition(asitisthecasewith“state”property).32 This is a clear exampleof“conceptualstretch”.Theformerstateproperty—whichenters the “omnibus” category of private property—falls under the principle of “equal treatment” of all forms of ownership as well as under the liberal connotation of private property and loses its social (collective) function as “state” property.

As to the possible subjects of ownership, property can be divided in ownership of citizens, legal persons, the Russian Federation, the Subjects of the Russian Federation and municipal entities (Art.213). No distinction is made in the Civil Code between the legal capacities of citizens and legal persons. Citizens and legal persons can have in ownership any property, whatever the composition, quantity or value of the property acquired. Enterprises—which were converted from state enterprises into private

31Biulleten’ Verkhovnogo Suda Rossiiskoi Federatsii, 1995 No.4, 2.

32“O nekotorykh voprosakh primeneniia sudami zakonodatel’stva ob otvetstvennosti za prestupleniia protiv sobstvennosti”, Biulleten’ Verkhovnogo Suda Rossiiskoi Federatsii

1995 No.9, 13.

structures—do not seem to fall under any special category but, rather, to follow the general (liberal) “regime” of property ownership. The point is that private property—being the philosophical and legal basis for a capitalist organization of the economy—“naturally” includes, inter alia, production means. By their very nature, these production means can only be controlled by few, certainly not by all the members of society. Here comes an important ideological “clash”: socialist property was ideologi- cally defined as property of the whole people and opposed to the idea of transformation of state property into private property belonging to few, a minority in society. Moreover, there is clearly a conceptual difficulty in makingthedifferencebetweentheownershipofanenterprise(orstockin an enterprise) and the ownership of the property used by that enterprise. In this sense, the ownership confusion extends to “ownership” rights in privatized joint-stock companies.

The objects of property ownership are now divided along the cat- egories of movable and immovable property. This classification replaces the Soviet distinction between production and consumer goods. Special chapters are devoted to property rights and other rights in rem in land and dwellings or living space. We will not go into details on the content of the new Land Code of 30 October 2001 and its possible discrepancies with the Civil Code. Neither will we discuss the new Housing Code of 1 March 2005, which introduces such a radical shift from the state to the citizens-owners as to the responsibility for the management of apartment blocks and communal housing, that “Russians treat the new Housing Code as an infringement on one of their most important civil rights: the right to housing”.33 These two categories of immovables (land and dwellings) are not treated by the 1994 Civil Code as “full” objects of private owner- ship. In the wording of the Code, one can find a certain hesitation to recognize full private ownership to these special objects. This is certainly not a new phenomenon. Before the Revolution, the outstanding civilist Shershenevich broke a lance for the need to strengthen real rights in immovables. He pointed at the confusion which originated from the use of the term “ownership” (sobstvennost’) as a synonym for “use” (pol’zovanie) or “possession” (vladenie). In its turn, “possession” should be distinguished from the simple holding of a good on the basis of a contractual relation (derzhanie). Pokrovskii stressed that this confusion has its old roots in the special treatment of immovables (land and housing) in the allodial or patrimonial law (votchinnoe pravo).34 He points to the public law character of land use in that time: a person did not possess land as a private person but, rather, as a member of the community. Her/his right was not founded

33The Public Opinion Foundation at: <http://bd.english.fom.ru>.

34I.A. Pokrovskii, Osnovnye problemy grazhdanskogo prava, 1917, re-published in the series Klassika Rossiiskoi Tsivilistiki, A.L. Makovskii, foreword, Moscow 1998, 199.

on a private act; it was created by the social, public-law division of land, which belonged to the community, between its members. The Russian

Ruling Senate clarified, for example, that the use of land based on a lease could not be equalized with possession.35

The principle in the new Civil Code is that land, its subsoil, forests and waters which are not in private or in municipal ownership remains in state ownership. Here, the designation and functional approach of rights is clearly stronger, as the Civil Code specifies in Article 214: “insofar as this is not contrary to the conditions of use of the immovable property.” Land has traditionally been removed from the commercial realm of “civil law relations”, and the current Russian government is also confronted with the inertia on all levels with respect to full and unconditional legitimation of private property rights in land.36 The whole of Chapter 17 (Property Ownership and Other Rights in Rem to Land) is devoted to the special approach to land. The reference to Article 209 is made under the restriction of a Gesetzvorbehalt: as far as land is not partially or completely made “res extra commercium” (Art.260, RF Civil Code). The functional designation of land (in priority for agricultural aims) defines the way in which land should be used (Art.260(2)). According to Articles 284 and 285, plots of land can be taken from the owner if the plot is not used according to its defined aim (agricultural use, living space) for a period of three years—or evensooner—whenaseriousviolation(gruboe narushenie) of the law can be detected (against the rules of rational use or having a significant negative effectontheenvironment)(Art.285).Theorgansoflocalself-government areinchargeofthecontrolonlanduse.Theycandecidetoconfiscatethe plot (iz”iatie) from the owner. When the owner does not agree with the decision, the organ of local self-government needs to request permission ofthecourttoselltheplot(Art.286).This—inanycase—isafar-reaching

“limitation” of the right of ownership.

The same is true for property ownership (and other rights in rem) to living space (Ch.18).The owner has to exercise her right of possession, use, and disposal to a living place according to its aim. Also, here, the private character of ownership is clearly “overruled” by its social and collective character. For example, the rights of the members of the family are explicitly mentioned in Article 292. The organs of local self government can take residential property when it is used other than according to its social function or when the rights and interests of neighbors are systematically violated. The same is true when the owner relates in an “uneconomic” way

35Kass. resh. 1909 No.6, cited by G.F. Shershenevich, Uchebnik’ Russkago Grazhdanskago Prava, 9th ed., Moscow 1912, 238.

36W.C. Frenkel, “Private Land Ownership in Russia. An Overview of Legal Developments to Date”, Parker School Journal of East European Law 1996 No.3, 258.

(beskhoziaistvenno)totheproperty.Thecourtcandecide—afterawarning by the organs of local self government—on the public sale of the living space (Art.293).37

State ownership is subject to decentralization and can take the form of federal ownership, ownership of the republics within the Russian Federation, ownership of provinces, regions, autonomous regions, autonomous national areas, or ownership of the cities of Moscow and St. Petersburg.

The law defines which kinds of property can be exclusively in state or municipal ownership (Art.213(3)).

The problem of allocating state property among the various state bodies and jurisdictions of the constituent parts of the federation and the need for a precise definition of the content of federal and municipal property—as well as for a procedure for formalizing the right of owner- ship—wasfinallytackledinadecreedividingallstatepropertyamongthe various parts of the federation. However, this answer to the question of the precise locus of ownership and control was formulated only six months after the law on privatization. And even, afterwards, it was clear that an additional period was needed for further processes of registration and other administrative measures.38 State property is deemed as remaining in federal ownership until the moment of determination of the corresponding owner. However, the idea of decentralized ownership is not clear. The whole process of decentralization was leading to confusion in the field of state property ownership.39 A state register for assets in federal ownership was only started by Goskomimushchestvo at the end of 1994. The indica- tions in this register were often contradictory and insufficient.40 One of

37V.M. Zhuikov, (ed.), Sudebnaia praktika po grazhdanskim delam 1993-1996 g.g., Moscow 1997, 232-286.

38Sarah Reynolds “Privatization and the Development of Russian Civil Law”, in George Ginsburgs, Donald D. Barry and William B. Simons, (eds.), The Revival of Private Law in Central and Eastern Europe, in F.J.M. Feldbrugge, (ed.), Law in Eastern Europe, No.46, The Hague, London, Boston 1996, 228.

39Decree (Postanovlenie) of the RF Supreme Soviet “On the Delimitation of State Ownership in the Russian Federation into Federal Ownership, State Ownership of the Republics within the Russian Federation, of Krais, Oblasts, Autonomous Oblasts, Autonomous Okrugs, of the cities of Moscow and St. Petersburg, and of Municipalities”, 27 December 1991, Vedomosti S”ezda narodnykh deputatov RSFSR i Verkhovnogo Soveta RSFSR 1992 No.3 item 89 (Art.3).

40In the register of Goskomimushchestvo,onecouldfind—inthemiddleofthe1990s—121 state enterprises and more than 700 joint-stock companies in the sphere of the military-industrial complex; according to Goskomoboronprom, there were at that time some 500 state enterprises and more than 1200 joint-stock companies active in this sector. The registration of state property outside the country is even worse. O.V. Karaysheva, E.L. Gerasimova, “Nekotorye pravovye aspekty sozdaniia i vedeniia

theproblems—whichenabledillegalappropriation(zakhvat)ofland—was the lack of a land registry (kadastr).41

Privatization

Privatization affects the institution of property rights in a fundamental way.The declared aim of economic transition is the realization of a market economy, based on private property ownership. In this way, private prop- ertyownershipisdefinedasthefinalresultofprivatization.Theneedfor a set of well-defined property rights is commonly accepted as a conditio sine qua non for large-scale redistribution of property.

However, privatization is not regulated by the Civil Code but, rather, by special legislation. The Civil Code’s provisions governing property are written “for eternity”; privatization is a transitory phenomenon that requires a lex specialis. It cannot be denied, however, that both are linked to one another and that privatization makes it difficult for the new civil law property regulation to remain trustworthy. Privatization is enhancing the feelings of legal nihilism that live with the Russian population.

“The ambiguity of the legal basis, the difficulty to find out the real purposes of the parties in privatization, the politization, the lobbying, the psychological pressure, among others, by the mass press organizations.”42

The ideology of private property has led to a semantic confusion in the case of state enterprises that were transformed into commercial entities. In numerous instances, high ranking persons transformed their political power into economic power on the basis of the property they appropriated

(were authorized to appropriate). Is this phenomenon to be qualified as enrichment of the nomenklatura or as initial allocation? One could, again, answer that this is a political rather than a legal question. Politics should be separated from economic power of private owners. Legal regulation is not affected by the problematic relation between public economy, state property, private commercial activity and private property. Economically andpolitically,theCivilCodeis—toalargeextent—neutral.Theproblem is, however, that the “stretched” concept of private property ownership, consolidated by the Civil Code, is used to legitimize the transfer of power positions into private property rights.

It cannot be denied that the essence of privatization (cfr. the law on privatization of state and municipal enterprises) is the unprecedented operation of “razgosudarstvlenie” (de-statisation) of property. Examples of

gosudarstvennogo zemel’nogo kadastra Rossiiskoi Federatsii v usloviiakh rynka”,

Gosudarstvo i pravo 1998 No.3, 28.

41Ibidem.

42N. Tkachev, “Nuzhna li Rossii takaia privatizatsiia?”, Zakonnost’ 1997 No.9, 11.

thecreativityshowninthefieldofre-arrangingpropertyrightsarenumer- ous: the transfer of state property to the balance sheets of commercial structures or to their charter capital, the infringement of the rights of the labor collectives in the process of sell-off (aktsionirovanie) of enterprises, the transfer of enterprises by way of long-term lease (arenda) with the right of buy-out, the founding of autonomous legal persons with mixed capital on the basis of structural subdivisions of the enterprise, autonomous legal persons with mixed capital, the de-valuing the objects to be sold, the privatization of objects of social and cultural relevance. Enterprises in the sphereofhightechnology—incorporatingtheknow-howofscientificcol- lectives in the charter capital—have been sold for the “remainder value”

(ostatochnaia stoimost’) of the intellectual property. In this way, the shares were not representative of the value of the know-how. Sometimes, intellectual property rights have not even been included in the charter capital.

“Loans for shares”—as a privatization method—illustrates that even the pledge of shares in state enterprises, as a right in rem for the creditor, can lead to a privatization which is lawful but illegitimate.

Comments from Russian practicing lawyers make clear that they have problems with this re-naming (pereimenovanie) of state or social property to private property. 43 Cynically, procurator Tkachev adds:

“History does not know one state where it would have been possible to steal, let us say, a shop, enterprise and even a whole sector. Here it is allowed. Admitted, what they steal, they do as if they buy (privatize).”44

Perhaps this is too extreme an interpretation of Proudhon’s “La propriété, c’est le vol”, since a drastic change in the economic organization of the country was much needed. Moreover, this criticism comes from the Prokuratura, which at that time was not particularly happy with the fact that the new 1995 law on the Prokuratura did not endow the Prokuratura with the power to supervise the legality of the activity of commercial entities. Demeaning privatization was a way to strengthen their claim for a right of control, referring to diverse problems connected with privatization. Nevertheless, there is much truth in their indignation. Rightly, they see the privatization process as over-politicized. The “chinovnichii peredel’ sobstvennosti” (the bureaucratic repartition of property) is effectuated in the formof“fair”contracts,whiletheconsequencesofthedeceitappearmuch later. Prokuratura officialscomplainthatthosewhowanttodissolvethese

43Instead of talking about private property (chastnaia sobstvennost’), Tkachev uses the words “personal property” (lichnaia sobstvennost’) which is a strange mistake made in 1997—except, of course, if it was made on purpose. Ibidem, 14.

44Ibidem, 9.