Учебный год 22-23 / William_Simons_Private_and_Civil_Law_in_the_R

The Dutch Code goes into far more detail—in the general part, as well as in the later books. It has until now far in excess of 3,000 provisions, and this number will increase even further when additional parts, such as Book 4, enter into force. It bears the vestiges of the sometimes far-reaching academic discussions and the not always well-balanced contributions of worried practitioners and interest groups during the long time of its creation.

On first sight, it may seem that this love for detail could lead to a rather legalistic style of interpretation, trying for the sake of certainty to stick as much as possible to the wording and the system of the new code. Before introduction of the code, Dutch legal professionals were fearful, in fact, of such a development. This fear turned out to be unfounded, as might have been expected from the court practice under the legislation prior to 1992, including the then new Books 1 and 2, and from the many provisions in the new legislation maintaining (or extending) the vague norms and general standards that lead, in fact, to judge-made law.

Characteristic here are the references to reasonableness and equity in the Articles 6:2 and 6:248, the former for obligations in general and the latter for contracts.

The first paragraphs of those provisions state that parties must act between (or among) themselves according to these standards, which means that these paragraphs might lead a court to accept additional rights and duties not provided for by contract or statute law. Reasonableness and equity here have a supplementary function.The second paragraphs state that a rule—even a rule of law—binding upon the parties does not apply to the extent that, under the circumstances, this would be unaccept- able according to criteria of reasonableness and equity. These standards have here a derogatory function.10 This might seem a rather radical rule,

might have been overly optimistic. First, the sanction on violations of this rule by laws of the same level as the code seems doubtful. The President of the Russian Federation might veto a law on the grounds of such violation, as he has done several times. But when he fails to do so, the courts will probably have no other choice than to attempt to find an interpretation of the special law that is—as much as possible—in confor- mitywiththecode.Workingonthecode,itmusthavebeendifficulttoforeseeallthe problems that could possibly be met during the future work on the more precise rules in the special statutes. As Professor Sukhanov has observed in Sudebnik 1996, 297, it is difficultto adheretotheprincipleofArt.3,para.2(secondsentence), in practice.This, again, might be an incentive for a flexible interpretation of the special statute, as well as of the provisions of the code that this statute pretends to elaborate. Elaborating a main rule means, in practice, accepting new distinctions and exceptions. There is no harminthis,aslongasthemainruleisnotseriouslyaffected.Inthisview,Art.3,para.2

(second sentence), where applied to legislation of the same level as the code, is reduced to a rule of interpretation.

10Arthur S. Hartkamp, “Judicial Discretion under the New Civil Code of The Netherlands”, The American Journal of Comparative Law 1992, 551-571.

endangering the certainty and predictability that the code promised to bring. But it must be remembered that, under the old code, virtually the same standards were derived from the traditional notion of good faith in the performance of contracts and had been applied in practice for a considerable time. For that reason, Articles 6:2 and 6:248 refer, in fact, to a large reservoir of existing case law developed in the decades before 1992 and continued thereafter in the same spirit. Many norms and guidelines have their basis in this case law.The new code has codified some of those norms and has reformulated those standards according to what was, in fact, already court practice. All this, combined with the need to come to reasonable results on the basis of the obsolete Code of 1838, has led the courts to a rather free attitude in interpreting even recent legislation, pay- ingmoreattentiontotheconceptbehinditandtopracticalconsequences than to the actual wording.

In Russia, the situation seems more or less the opposite of this. In the field of interpretation, Russia has inherited from the times of the former

Soviet Union a rather legalistic tradition. Literal meaning and systematic arguments used to prevail, which is, of course, in the interest of certainty. But under the new code, it is simply not possible to continue this attitude in its old strict form. A new code not only needs to be interpreted but also implemented. It necessarily has gaps and will be full of provisions that might turn out to be ambiguous when confronted with unexpected cases, as inevitably will be invented by entrepreneurs and their legal advisers trying to find their way in the new economic circumstances. As Profes- sor Makovskii and the late Dr. Khokhlov have already observed in their introduction to an English translation of the new code,11 the code gives the courts much more freedom than they previously had. That means that, in fact, the creating of certainty in Russia, as well as in The Netherlands, to a large extent, is in the hands of the courts with the difference that Rus- sian courts still have to create an amount of case law comparable to what existed in The Netherlands in 1992 and served as the basis upon which Dutch courts were able to continue to build their practice. On the other hand, Russia has the important instrument of guidelines for interpretation, rendered by decree of the plenums of the Supreme Court and the Higher Arbitrazh Court of the Russian Federation, an instrument that has already given evidence of its usefulness with respect to the Civil Code.

11This has been published in a volume which also contains a translation of the Russian code: see The Civil Code of the Russian Federation, Parts 1 and 2, (Peter B. Maggs and A.N. Zhiltsov, trans.) Moscow 1997. Another translation of the code is at “Civil Code of the Russian Federation: First Part”, (Ger P. van den Berg, William B. Simons, trans.), 21

Review of Central and East European Law 1995 Nos. 3-4, 259-426.

The most obvious instrument in the Russian Code for filling gaps is Article 6, which stresses analogy.The first paragraph refers to analogy of legislation (analogia legis), which comes to a form of systematic interpretation. The second paragraph refers to general principles of civil legislation (analogia iuris) and the requirements of good faith, reasonableness, and equity.Asfarasthegeneralprinciplesofcivillegislationareconcerned,it should be remembered that the Russian Code pays much more attention to fundamental rules, expressing clearly the spirit in which the code should be applied, than does the Dutch Code. In this respect, the Russian Article 6 is perhaps more important than the Dutch Articles 6:2 and 6:248. On the other hand, the impact of Article 6 is less in this sense in that it has only a supplementary function. The Russian Code does not give to good faith,reasonableness,andequitythederogatoryfunctioncharacteristicof

Dutch civil law. The Russian courts can apply here only the more restrictive standard of abuse of right (Art.10, para. 1, RF Civil Code).

Thisreluctancetogivethecourtsallatoncethesamepowertoinflu- encecivillawbymeansofgeneralstandards—asexistincountriessuchas TheNetherlands—seemswise.Asitis,thepositionoftheRussianjudiciary initsconfrontationwithmajorchangesinnearlyallfieldsoflawisalready difficult enough. For the time being, the code does not ask for bold legal scholars intent on innovation but, rather, for reasonable practitioners who are prepared to consult carefully the Civil Code, including the general principles of the first chapters, and who—in case they encounter a gap— will stay as much as possible within the lines suggested by the code itself. Article 6, as it stands, suits practitioners of this kind. A cautious judge who has to find a solution for a new problem will go forward by trying to find comparable cases in the field of analogia legis, as well as in the field of analogia iuris, and the requirements of good faith, reasonableness, and equity. This quest for analogy, together with Articles 5 and 421(5), might lead one, where necessary, to seek inspiration in international rules like theViennaConventiononInternationalSales(CISG)—whichhasalready inspiredseveralprovisionsofthecode(formationofcontracts)—andthe

UNIDROIT Principles of International Commercial Contracts.12

An example can be given here to illustrate this point. Some writers on the Russian Code have criticized it because of its unclear rules on

12Compare A.S. Komarov, “Remarks on the Application of the UNIDROIT Principles for International Commercial Contracts in International Commercial Arbitration”, in: The Unidroit Principles for International Commercial Contracts:: A New Lex Mercatoria?, ICC dossier of the Institute of International Business Law and Practice, 1995, 157-166, andA.S. Hartkamp, “The Use of the Unidroit Principles for International Commercial Contracts by National and Supranational Courts”, idem, 253-262.

the consequences of termination of a contract.13 Article 453(3) seems to preclude any return of that which was performed prior to the moment of the termination, a solution that differs from Article 167 concerning the consequences of invalidity and seems hardly justified in cases where the other party did not perform his own obligation that was the counter- part of the obligation of the first party. But problems of this kind can be solved by arguing that Article 453 leaves a gap for the special situation of unjust enrichment.This gap canbe filled by bringing thissituationunder the provisions on unjust enrichment of Articles 1103(1), 1105, and 1106, by seeking support in provisions like Articles 468(3), 475(2), 480(2), and

523 on purchase and sale—eventually applying them per analogy—and in seeking inspiration in Articles 81-84 CISG and Articles 7.3.5 and 7.3.6 of the UNIDROIT Principles. The result, thus obtained, is perfectly in accordance with Articles 6:271-275 of the Dutch Code. I understand that the plenums of the RF Supreme Court and Higher Arbitrazh Court have already reached the same solution.14

Legal Persons and Law of Property

It would certainly be interesting to go into a detailed comparison between the rules on both sides on legal persons and on the law of property and rights in rem. But it is not possible to delve into these subjects without exceeding the limits of this simple essay. So it must suffice to make some general observations.

The Dutch Code contains a closed system of legal persons, including public-law legal persons. Article 2:1, para.1, enumerates the state, provinces, municipalities, and some other expressly mentioned specimens. According to Article 2:1, para.2, entities that have a public task only have legal personality when this is given by statute or on the basis of a stat- ute. Russia—as The Netherlands—has a closed system of civil-law legal persons. As far as public-law entities are concerned, the Civil Code thus does not answer the question of their legal personality. It gives only rules

13See, for instance,V.A. Rakhmilovitch, “The New Civil Code of the Russian Federation”, 22 Review of Central and Eastern European Law 1996 No.2, 135-152, esp. 151-152.

14Decree of 1 July 1996 “Some Questions Connected with theApplication of Part 1 of the Civil Code of the Russian Federation”, ruling in Point 59 that the nullity of a contract aiming at privatization, prescribed by Art. 30 of the Law “On Privatization” of 1991, in case the price is not paid, is not covered by Chapter 9, para.2, of the Civil Code on invalidityoftransactions,butbyChapter29onamendmentandterminationofcontracts.

Nevertheless,thepartiesareentitledtorequirethereturnofwhathasbeenperformed by them under the contract until the moment of its rescission. See, also, M.I. Braginskii and V.V. Vitrianskii, Dogovornoe pravo, Obshchie polozheniia, Moscow 1997, 652-653. Case law seems to confirm this. I thank Dr. Ger van den Berg for his kindness in providing me with this information.

see to it that all parties can take part in these activities on an equal foot- ing. This means that limits must be set on the freedom of those parties. Both codes are rather brief on this subject, leaving the rules on preventing monopolistic conduct and unfair competition to case law or special statutes. On the other hand, civil legislation must give the instruments necessary for self-regulation, allowing the parties to organize their mutual relations as they think best. The most obvious instrument for this is, of course, contract law.

Amajor issue here is the standardization of contracts by using general conditions. General conditions are a very important instrument for regulation of commercial relations. In the same way that a large enterprise has to standardize its products for the sake of the transparency of the production process, it has to standardize the conditions upon which those products are sold for the sake of the transparency of its commercial activities. The same thing goes, for instance, for banking. In The Netherlands, banking law is almost entirely a matter of the general conditions of the banks and their adhering organizations, such as the central clearing institute.

The Russian rule on this subject is to be found inArticle 428 (contract of adhesion; see, also,Art.400, para.2). Paragraph 3 of this provision favors the use and validity of general conditions between enterprises that knew (or should have known) the terms and conditions concerned, while Section 2 gives clear protection against abuses in other cases. Moreover, the Russian Code admits agreements in favor of a third party (Art.308, last sentence) in contrast to the common law. This enhances considerably the scope of what can be achieved by general conditions.Those few Russian provisions are simple but sufficient for contracts between entrepreneurs.

Characteristically, the Dutch rules on general conditions (Arts.6:231247) are much more detailed and complicated. They have in view general conditions in contracts between professionals, as well as in consumer contracts, and they include contracts where one of the parties is the state or another public-law entity. The emphasis is on the protection of consumers in accordance with the guideline of the European Communities on this subject. The general rule is that stipulations that are deemed to be “unreasonably onerous” may be annulled. Following the example of other European countries, this principle has been worked out for contracts between consumers and professionals by introducing two lists of stipulations: the firstone (blacklist) pertaining to stipulations that are considered to be unreasonably onerous in any event; the second one (gray list) pertaining to stipulations that are presumed to be unreasonably onerous, the user of those stipulations being allowed to prove that they are not. The annulment can be effected upon request of the consumer, but

equally upon request of a consumer organization or an organization of entrepreneurs that might fear the use of unreasonable general conditions as an instrument for unfair competition.

Another difference between both codes is that the Dutch Code has a special rule for the “battle of forms” in Article 6:225, para.3, stating that where offer and acceptance refer to different general conditions, the sec- ondreferenceiswithouteffectunlessitexplicitlyrejectstheapplicability of the general conditions indicated in the first reference. In the Russian Code, this problem is left to the general rules on offer and acceptance of Articles443and438,para.3.Thiswillprobablygiveadifferentresult.The reference to general conditions in a letter purporting to accept an offer will, according to Article 443, be considered as a rejection of the original offer and—at the same time—as a new offer if those general conditions are in conflict with the general conditions mentioned in the original offer. When the party that made the original offer does not react and starts performing unaware of the reference to the general conditions of the acceptant, he will be deemed to have accepted these general conditions even if this acceptant did not explicitly reject the applicability of the general conditions in the original offer. However, both systems seem to accept the application of distinctive sets of general conditions as far as they concur.

Interpretation and Form

This brings me to another major issue: interpretation of contracts. This interpretation is, of course, something different from the interpretation of the code itself, as dealt with before. But it has much in common with it.

Here, the Dutch Code does not have any special rule. Case law is based mainly on the general provisions pertaining to the conclusion of juridical acts.These provisions apply to contracts as well as to other transactions (Arts.3:33 and 35). Article 3:33 stresses the importance of the will

(theintentiontoproducejuridicaleffect)andthedeclarationmanifesting this intent. Article 3:35 stresses the reliance principle: it is not the real intention of a party that is decisive but the interpretation of its statement by the other party, provided that this party has interpreted this statement in conformity with the sense it could reasonably attribute to it in the circumstances of the case. It might even be that the first party, in reality, intended no declaration at all but that the other party could reasonably interpret its conduct as a declaration. The rule of Article 3:35 applies in that case as well. Case law has deduced from those rules that—for the conclusionofacontract—itiswhatbothpartiesinthegivencircumstances were reasonably allowed to conclude from each other’s statements (and

eventual other conduct) that is decisive; it has stressed that the literal meaning of a written contract is only one element that must be taken into account in the light of this general standard.This means that—just as in the field of interpretation of legislation—the courts have a wide latitude to interpret contracts even where they are in writing or have the form of a notarial deed.

Again, the situation in Russia is different. The Russian Code has an express provision concerning the interpretation of contracts: Article 431. Article 431, para.1, stresses the importance of the literal meaning of the wording and of systematic interpretation of the contract as a whole. In Paragraph 2, this general approach is somewhat mitigated by introducing—as a subsidiary standard—the common will of the parties, taking into account the aim of the contract. A second sentence takes over Article 8(3), of the Vienna Convention on International Sales, referring to all relevant circumstances, corresponding as well to Article 4.3 of the UNIDROIT Principles. But this sentence applies only in the context of the subsidiary standard.

The emphasis on literal and systematic interpretation is clearly in the interest of certainty. This can be seen in relation to another characteristic feature of the Russian Code: its emphasis on form and writing. Literal interpretationofcontractsandtherequirementofwritingbelongtoeach other as hand and glove. According to Article 161 of the Russian Code, writing is required for all transactions between legal persons, between a legal person and a citizen and between (or among) citizens, in the last case provided that the value of the transaction exceeds ten times the minimum wage, the sanction being that proof by witnesses is not admitted.According toArticle 162, para.3, “foreign commercial transactions” are not valid if not inwriting­.Inmanycases,notarizationandstateregistrationarerequired as a matter of form not only for the transfer of property but, equally, for the contract that contains the obligation to transfer the property. Even lease contracts, long-term or not, are subject to state registration if immovables are involved.

This stressing of form is in sharp contrast to Dutch practice as mirrored in the Dutch Code. Dutch law tends to informality as a result of a development that started a long time ago and probably has not yet ended. The new code knows but few exceptions to the main rule that oral agreements are binding. However, it must be admitted that the Russian love of form certainly has diminished in comparison to the past. From the introduction of Professor Makovskii to an English translation of the code,15 we might even understand that the notaries were worried by this

because they feared a fall of their income. Foreign investors sometimes complain about the high fees for notarization (1.5% of the value of the contract). But we should be aware of the fact that those formalities serve clarity and may contribute to the prevention of fraud. The danger that state registration might degenerate in state interference is reduced by the expressremedyofArticle131,para.5,againstunjustifiedrefusalofregistra- tion. The elaboration of this is left to a special statute.

With respect to this last matter, the Dutch Code has a similar solu- tion. Article 3:30 provides a remedy against unjustified refusal of regis- tration in the field of immovables. The whole subject of registration is elaborated in a separate statute on land registration and the registration of ships and airplanes.

Secured Transactions

Animportanttaskofacivilcodeistooffertopracticeinstrumentsforthe financing of entrepreneurial activities. The classical way of financing is, of course, to borrow the money and to do this against an interest rate as low as possible by using the assets of the enterprise as collateral. The most obvious instrument here is the right of pledge. In the Russian terminology, which I will follow hereafter, mortgage is seen as a special form of this right. Another instrument is buying the goods needed by the enterprise on credit, the supplier giving immediately possession of the goods but reserving their property by means of a retention of title. The contract of hire-purchase is a variety thereof. Other important instruments are the financial lease, factoring, and securitization.

The Russian and the Dutch rights of pledge, at first sight, seem to have much in common. Both codes allow a right of pledge on goods that remain in the possession of the debtor and both requireregistration only for such rights on immovables. Legal systems recognizing rights of pledge onmovablesrequiringneitherpossessionbythecreditornorregistration are rare. But, first, this parallel is purely coincidental. The Russian Code has followed its predecessor of 1964 and the Law “On Pledge” of 29 May 1992, both knowing a right of pledge on movables without possession or registration. The Dutch system is, in fact, the successor of the former

DutchfiduciarytransferofpropertyofwhichIwillspeakhereafter.Second, on further reflection, differences between both systems prevail.

The Russian right of pledge is, in particular, a much weaker right than its Dutch counterpart. To illustrate this, I will make some remarks on the most obvious kinds of collateral.

As far as immovables are concerned, the code (Art.334, para.2) refers to a special statute that has indeed been adopted: the Federal Law “On

Mortgage (Pledge on Immovables)”, which entered into force on 22 July 1998.16 But this law, though stipulating that the right of mortgage shall only enter into force from the moment of its state registration (Art.10, para.2), does not solve the main problem of such a right: a workable registration system that makes it possible to protect creditors who obtained a right of mortgage from an apparent owner on the basis of their good faith. Registration, which is indispensable for any reliable right on immovables, is at this moment still a point of much concern in Russia. A satisfying registration is linked to land registration problems that, for political reasons, are difficult to solve.We here meet again the gap in the code concerning land in general: the postponed introduction of Chapter 17. Nevertheless, a law on state registration of the rights to real estate and real-estate transactions was adopted on 17 June 1997.17 But it will take years to set up a countrywide real-estate system, and it still remains to be seen if thissystemwillreallybeeffectiveinthesensethateveryinterestedparty is allowed to consult the register and is able to learn from it—without delay—who the owner is of the immovable offered to him for sale or as collateral, and what rights are already established thereupon. This makes it understandable that no protection on the basis of good faith is offered toacquirersofimmovableswhoreliedontheregistration.Thepledgoris obliged to warn the pledgeholder about all rights of third persons to the subject of the mortgage known to him at the moment of registration, but the sanction for non-performance of this duty is only that the pledgeholder may demand early performance of the secured obligation or may change the conditions of the mortgage contract (see Arts.12, 42, and 44, para.1

(secondsentence),oftheLaw“OnMortgage”).Again,thisisnoteffective protection for a creditor who has already furnished the money, relying on its right of mortgage. All this is important indeed because it leads to a lack of transparency that is a strong obstacle to any development of a reliable right of pledge on real estate.

The code also speaks of a right of pledge on an enterprise (Art.334, para.2; Art.340, para.2), which is considered to be an immovable (Art.132). But, in contrast to the selling or leasing of an enterprise (Arts.559-566 and Arts.656-664), Articles 69-73 of the Law “On Mortgage” do not contain detailed rules that might enable practitioners to cope with the problems that this complicated collateral must be expected to entail. Moreover, registration problems here are no less serious than in the field of real estate.

16For an English translation, see Sudebnik 1998, 673-734; for a German one, see WiRO 1999, 59-66 and 90-99.

17For a comment on this law, see F.W. Digmauer, C. Hüper, and I. Rumjanzev, WiRO 1998, 21-29.