Учебный год 22-23 / William_Simons_Private_and_Civil_Law_in_the_R

contracts are accused of an anti-reformist attitude “aiming at discrediting the very idea of developing towards a market in Russia”.45

The prokuratura’sclaimsbeforethecourttodeclaresuchagreements void are based on the illegitimate character of sell-off of state property

(nepravomernogo otchuzhdeniia gosudarstvennogo imushchestva).46 In the most explicit cases, the privatization is illegal because it concerns forbidden objects—first of all in the military sphere (linked to state security) or to social infrastructure. It was, for example the Procurator General who introduced with success a claim to return to the local authorities 30 kindergartens which were included in the charter capital of AO “Zil”.

In the case of privatization, a claim to return the assets is often based on “istrebovanie iz nezakonnogo vladeniia gosudarstvennogo imushchestva” (claim for the return of state property from illegal possession), on the basis of which agreements and legal acts can be declared void. In many cases, the assets of a state enterprise are transferred by the director, who was not the owner but the holder of a right of operative management or economic governance (khoziaistvennoe vedenie).

Articles 301 and 302 treat the protection of rights of ownership and other rights in rem. The owner can reclaim her property from another’s illegalpossession(Art.301).Article302specifiesthat—ifpropertyhasbeen acquired from the person who did not have the right to alienate it and if the acquirer was a good faith acquirer (did not know or could not have known that the seller was not the owner)—then the owner has the right todemandandobtainthispropertyfromtheacquirerwhentheproperty has been lost by the owner or when the owner lost the possession of her property for reasons outside her will. The possessor in good faith can, in such a case, reclaim compensation for improvements, albeit not more than the amount of the increase of the value of the property (Art.303).

This exactly makes restitution of property to the owner quite difficult. It becomes even more difficult when one readsArticle 305 which concerns other rights in rem. According to this provision, the posessor (non-owner) of the property can use the same means as the owner for protection of her property (Arts.301-304) and can even defend herself as non-owner of property against the owner.

On the other hand, the Prokuratura bases its claims on the need to protect state and social interests (isk v zashchitu gosudarstvennykh i obshchestvennykh interesov). Prokuratura officialsalsoprofilethemselvesasprotectors of social interests before the court—in particular, when they oppose the

45Ibidem, 9.

46V. Davydov, (RF Deputy-Procurator General), “Vtoroi etap privatizatsii neobkhodimo usilit’ nadzor”,Zakonnost’ 1997 No.2, 9.

sell-offofobjectsinthesocialsphere(rasprodazha ob”ektov sotsial’noi sfery). They reproach the Supreme Court for having recognized the whole corpus of state enterprises, kolkhozy and sovkhozy as private and not official per- sons.47 In this way, the Supreme Court excluded this former state sector from the sphere of criminal responsibility for abuse (zloupotreblenie) of state property. In their eyes, the whole system of legal protection received a blow from this “unfounded” decision. When they became “chastniki”, these “leading people” were excluded from the circle of responsibility of thewholerangeofofficialoffenses.Administrativeresponsibilityforviola- tions of privatization legislation is lacking completely. These new private firms are often even authorized by the Russian government.48

In order to question the functional relation between property own- ership (as legal institution) and privatization, one should clearly define (standardize and differentiate) the concept of property ownership. This problem becomes more important now that the causal relation between privatization and efficiency is questioned and the liberal approach to private property rights—partially as a consequence of electoral results— is increasingly being replaced by the tension between privatization and social justice.

TowardsaNewDifferentiationinPropertyRights

There are limits to the change of institutions. As in Rome, in the begin- ning of the Republic, the citizens of Russia finally obtained recognition and protection of their civil and political rights, but at the same time the inequality of their living conditions grows.Asociety that changes its institution of property rights needs to decide at which inequality she is aiming.

In a post-communist situation, the transfer of property rights and the re-definition of the institution of ownership ask for a re-definition of the social function of ownership rights. Perhaps the crucial institutional factor of post-communist capitalism will not be private property in the classical sense of the word, but the rules of the game (the content of property and rights in rem to another’s property), according to which property is organized. The wording of property rights and rights in rem in the new Civil Code hides two problems in this respect: on the one hand, the danger for distortion of the concept of private property, as it is used as a stretched concept in a transition period, while the privatization process

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

1995 No.9, 13.

48Ibidem.

still continues. On the other hand, the introduction of a liberal concept, which contains no indications as to the social function of ownership. Both remarks originate from an extra-legal sociological source but have their impact on the interpretation of current civil legislation.

First of all, the theory of private property as a basis for individual freedom is perhaps not enough valorized. This individual property should function as a personal island, small but sovereign for the physical person.

A civil ownership, as a minimum to realize one’s personal freedom in a post-communist society is necessary and should be elaborated. 49

Thisfirstquestion(privatepropertyownershipasabasisforfreedom) has to be distinguished from a second: private property ownership as the legalformforconcentrationofindustrialandfinancialcapital.Thepower elites do not seem to be prepared to give up their economic decisionmaking and (with that) their political power positions, and implicitly their chances for personal enrichment. In this sense, the claim for interven- tion powers—formulated by the Prokuratura—is remarkable (protection of rights of small shareholders, legality of activities of representatives of the state in joint stock companies, taking operational measures to dissolve illegal contracts linked to privatization, protest local normative acts which are against the federal legislation on privatization, assisting in the handling of bankruptcy cases). Some features of this evolution in legal practice are pointing at near-market reforms (okolo-rynochnych) where the public features of ownership are resisting against the “strong wind” of privatization. 50

There is a need for differentiation in the roles and rights of the state with respect to its enterprises as well (is the state owner of the enterprise, owner of the assets used by the enterprise or regulator of economic and social interaction?). Probably it is not necessary to reject all tradition in Russian property rights regulation. The legal institution of the dvor for example was clearly a left-over of pre-revolutionary Russian law. It was ideologically rejected but legally regulated by the Soviet system. The dvor wasnotqualifiedasalegalperson,butsubjecttorightsandobligationsto a certain extent. It concerned persons, living together, not necessarily relatives.The property of the dvor could not devolve through inheritance.This propertyofthepeasant’shousehold(whichisdefinedascommonproperty in Arts.257 and 258 of the new RF Civil Code) is not private property; it is also not individual property but works as a harmony of interests.

49G. Nersesiants, “Kontseptsiia grazhdanskoi sobstvennosti”, Gosudarstvo i pravo 1994 No.10, 44-45.

50V. Parchevskii, (Procurator of Tver Oblast’), “Bank priznan bankrotom”, Zakonnost’ 1997 No.110, 4-7.

The Comprehensive and the Absolute Concept of Property

Any conception of property involves the balancing of individual and collective interests. This implies that the universally recognized idea that individual rights—protected under the rubric of property—must exist in a collective context. Property is increasingly viewed as a bastion against an ever encroaching state. This mythology of property—as that which represents the individual’s protected sphere—has survived although the content of this myth (the definition of protected rights) has undergone continuous change.

In the course of history, property has been the medium through which struggles between individual and collective goals have been refracted.That is why protection of individual property rights has been highly valued in the framework of liberal democracy as protecting important values in society. However, reliance on an “objective” and “technical” definition of property leads to conflicting and contradictory results. Property is a concept with multiple meanings, but it has always retained a broad and a narrow meaning.

The broad meaning, including a comprehensive approach to property is often overlooked. The comprehensive approach incorporates the historical tension between the individual and the collective.

Property ownership—in the historical view—did not represent the autonomous sphere of the individual to be asserted against the collec- tive. This tension—now seen as something external to the concept of property—was, in fact, internal to it. Historically, property included not only external objects and people’s relationships to them, but also all of those human rights, liberties, powers, and immunities that are important forhumanwell-being—includingfreedomofexpression,freedomofcon- science, freedom from bodily harm, and free and equal opportunities to use personal faculties.51 This comprehensive approach incorporates the historical tension between the individual and the collective.

The comprehensive approach was pushed aside by an absolute interpretation of private property ownership, which became dominant in the end of the eighteenth century. Since then, an inherent tension has existed between the view that property is crucial to the development of personality or that property secures liberty and the simultaneous view that no redistribution of wealth was required: if property is necessary for the

51L. Underkuffler, “On Property: An Essay”, 100 Yale Law Journal 1990, 129. “In a word as a man is said to have a right to his property, he may be equally said to have a property in his rights” (Madison, in his essay entitled Property (1792)). Under rights, he understands rights to freedom of conscience, freedom of expression, physical liberty,andtheabilitytouseone’sintelligenceandcreativepowerswhichis,indeed, radically different from the ordinary understanding of property today.

development of personality or the maintenance of personal and political independence, it is difficult to see how its deprivation can be justified. Eighteenth century theorists attempted to circumvent this difficulty by stressing that it is the security of property and not property itself that ensures liberty. Relying on a Lockean tradition which emphasized rights as the object of legitimate government and, hence, the limit thereto, in- dividual autonomy was conceived of as protected by a bounded sphere— defined primarily by property—into which the state could not enter. Since then, courts’ formulations have all rested on the assumption that property is objectively definable or identifiable—apart from the social context—and that it represents and protects the sphere of legitimate, absolute individual autonomy. In this way, property draws a circle around the activities of each private individual; within that circle, an owner has a greater degree of freedom than without. Outside, s/he must justify or explain her actions and show her authority. Within, s/he is the master, and the state must explain and justify any interference.52 The consideration of collective interests is a distinctly separate and second-order matter.

This is exactly the way property is approached in the new legal frameworks of post-communist market economies. They took up the powerful rhetorical image of property as that which confers upon the individual a bulwark of isolated independence, as the central symbol of the antagonism between private and public life. When this absolute approach to property is combined with seemingly absolute constitutional guarantees, adifficultproblemarises.RudolfvonJheringhadalreadystressedthatno property is independent of the interests of the community,53 and many judges have explained that property is held under an implied obligation that the owner’s use of it should not be injurious for society. But how far can this endorsement of radical individualism go without resulting in intellectual incoherence?

In a post-communist situation, the reasoning that material possessions bolster liberty—by making individuals independent from government— leads to an even more inescapable conclusion that some enjoy greater liberty or property than others.

The general feeling of inequality and misappropriation dominates the public debate in Russia since at least a decennium. Kargalitsky pro- poses a radical solution: the post-Elt’sin government will be forced to re-nationalize under the pressure of public opinion and good sense. He calls for a radical transformation of the structure of property ownership.

52T. Reich, “The New Property”, 73 Yale Law Journal 1964, 733.

53R. von Jhering, Geist des Römischen Rechts auf den verschiedenen Stufen seiner Entwicklubng, 4th ed., Leipzig 1878, 7.

According to him, to imagine that the president could strengthen the state by ‘putting pressure’ on the oligarchs was absurd, since in modern Rus- sia the state and the oligarchs are one and the same. The state apparatus was constructed in such a way as to serve the oligarchy, and the oligarchy has become closely intertwined with the bureaucracy. Consequently, a strengthening of regulation can only result in an intensification of the theft of state funds, to the benefit of the people who are supposed to be regulated. After seven years of neo-liberal experiments, a majority of Russian citizens are calling for a mixed economy with a dominant public sector. “An effective economic policy is impossible in Russia unless it is based on expropriation of the oligarchy and on the return to the people of the property stolen from them.”54

Lilia Shevtsova argues that the current situation of big business in Russia will be considered illegitimate for a long time: “The oligarchs would help their own cause by becoming more socially active and spending their money on philanthropic pursuits. In fact, most oligarchs have started charities and foundations.”55

Towards a Comprehensive Approach?

How to come to a new alignment of individual and collective interests and how to reduce the tension between the private and the public within the concept of property? How can the protection of private property lose its aura of illegitimacy? How can we come to a concept of property that includes an explicit acknowledgement of collective concerns?

—The most radical answer is repartition of property, expropriation of the oligarchs and returning property to its so-called “real owners”. This is a new specter that haunts Russia and Eastern Europe: the specter of the re-division of property. This would involve a new revolution and re-nationalization and is, thus, a rather de-stabilizing answer to the situation.

—Shouldanewcategoryofownershipbedeveloped—publicownership for example—which would be different from state ownership and situate itself closer to municipal ownership? This kind of ownership would be exercised on behalf of the public entity by organs of public authority.

—A common law concept of property rights would bring Russia perhaps closer to a solution; but, in the past, it became clear that

54B. Kagarlitsky, Russia under Yeltsin and Putin. Neoliberal Autocracy, London 2002, 289.

55L. Shevtsova, “Clash of the Russian Titans”, Bangkok Post, 2 August 2003.

Russian legal culture is not acquainted with common law concepts as trusts for example.56

—Should the oligarchs take the initiative to include the collective concern into their private property by fulfilling social functions

(helping the poor, homeless, sustaining charities) without involving in politics? This practice has actually been developed in Russia (with the fund “Otkrytaia Rossiia”, for example).

—Canweinspireourselvesontheories,astheonedevelopedlongago byCalabresiandMelamedintheirarticle—“PropertyRules,Liabil- ity Rules, and Inalienability: One View of the Cathedral”57—which reveals the problems inherent to the use of an absolute approach to property and suggests how the comprehensive approach can resolve these problems. Under their analysis, entitlements created by property and tort law are of three types: those protected by property rules, those protected by liability rules, and those which are inalienable.

—One can also refer to the idea of corporate social responsibility, which in an EU-context have taken the form of corporate codes of conduct, sustainability reporting and multi-stakeholder initiatives.58

Radinfocusesupontheextenttowhich“personhood”factorsshouldaffect the recognition of traditionally defined (individual) property rights.59

—If Russia would seek its inspiration in the jurisprudence of the

European courts of Strasbourg or Luxemburg, it would hardly find ananswer,althoughArticle1ofthefirstAdditionalProtocoltothe

European Convention for Human Rights creates an opportunity for fine-tuning of the legal concept of private property.The European Convention on Human Rights and its principle of equality and non-discrimination, indeed, leave an opening to a more comprehensive approach to property rights.60 Under the Convention, the principal provision in the field of non-discrimination isArticle 14.

56E. Reid, “The Law on Trusts in Russia”, 24 Review of Central and East European Law 1998 No.1, 43-56.

5785 Harvard Law Review 1972, 1089.

58Multi-stakeholder forum: <http://europa.eu.int/comm/enterprise/csr/forum.htm>.

59V. Radin, “The Liberal Conception of Property: Cross Currents in the Jurisprudence of Takings”, 88 Columbia Law Review 1998, 1667, 1676-1678.

60O.M.Arnardottir,“EqualityandNon-DiscriminationundertheEuropeanConven- tion on Human Rights”, 74 International Studies in Human Rights 2003.

In the sphere of property rights, Article 14 has to be considered in conjunction with Article 1 of Protocol 1. However, this wide margin of appreciation leads to findings of violations ofArticle 1 Protocol 1: “[…] only in the most extreme cases”.61

More innovative research on the social function of property rights is needed both in Russia and in the European Union.This is a task for lawyers, historians, and social scientists. As Max Weber has underscored: social scientists have to worry about the social function of property rights.

Conclusion

As with many other questions, we have reached a breaking point in the relations between Eastern and Western Europe: either we come to a fruitful dialogue on property ownership differentiation, being both (East and West) aware that neither the nineteenth-century modern concept of ownership nor the “real socialist” one is adapted to the new conditions of life. Or we come to a new dividing line between cultures in ownership where the picture would be, on the one hand, the enlarged European Union, which follows the civil liberal model of property ownership and economic organization based on individual private property and, on the other hand, a consolidated CIS for which this model is not (or, at least, not to the same degree) an attractive perspective for the development of legal and economic policy.62

The positive evolution would be that the collapse of real-socialist concepts of property ownership calls for new efforts to look for a new theory of property rights. In a post-modern period, the modern institute of ownership underwent a remarkable change as to the context (social function) of this right. Social duty, co-decision of workers, protection of possession, and use became as strong as ownership and the regulating intervention of the state constantly has to be brought in harmony with the individual right of property. A modern concept of ownership as a liberté is introduced in Russia in times where the entire surrounding world tries to refine and (re)adjust ownership to protect citizens, and to respect the socialfunctionofdifferentkindsofproperty.TheWesternconceptofsocial property rights—according to which, in a social state, non-owners have a claim to social security and participation in the labor process as a general personalityright—hasbeenworkedoutbytheBundesverfassungsgericht, but

61Y. Winisdoerffer, “Margin of Appreciation and Art.1 of Protocol No.1”, 19 Human Rights Law Review 1998 No.1, 18.

62H. Roggeman, op.cit. note 24, 94.