Companies dealing with the Russian judicial system contend with high corruption risks. Corruption in the courts takes many forms, including bribery and the fabrication of evidence (ICS 2016). Bribes and irregular payments are widely exchanged in return for favorable court decisions (GCR 2015-2016). Even though the law provides for an independent judiciary, judges are subject to undue influence from politicians, the executive branch, the military and other security forces (HRR 2016); this is particularly true for the lower-courts (BTI 2016). Corruption is prevalent in high profile or politically sensitive cases, furthermore, local courts often favor local politicians when settling disputes to the disadvantage of civil rights (HRR 2016, BTI 2016). Independent dispute resolutions can be difficult to obtain (ICS 2016). Business executive do not perceive the courts as independent and describe the legal framework as inefficient in settling disputes and challenging government regulations (ICS 2016). Other obstacles to effective dispute settlement are frequently changing laws, decrees and regulations, often leading to an overlap or conflict in practice (ICS 2016). While court rulings in inter-firm cases are perceived as fair, those against state agencies are not (BTI 2016). Thus, companies are advised to include foreign arbitration clauses in their contracts to minimize the role of the Russian legal system (Export.gov, Jun. 2016).
Commercial disputes previously fell under the purview of the Court of Arbitration, however, following an amendment to the Constitution, the court was merged with the Supreme Court, broadening the jurisdiction of the latter to rule in criminal, civil and commercial cases (Russian News Agency, Feb. 2014). The merger excluded most former Supreme Arbitrage Court judges (Export.gov, Jun. 2016). Russia has signed and ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and is also signatory to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID).
In a recent retrial, and perhaps one of the most illustrative cases of political influence over the courts, the prominent opposition leader and potential 2018 presidential candidate, Alexei Navalny, was handed down a five-year suspended prison sentence for embezzlement by a provincial court in Kirov. The conviction effectively bars Navalvy from running in the 2018 presidential election. Navalvy was initially sentenced in 2013 in connection with allegations that he had embezzled USD 502,700 worth of timber from the state-owned company Kirovles. However, Navalny appealed the sentence, and following a ruling issued by the European Court of Human Rights describing Navalny’s trial as unfair, the Russian’s Supreme Court overturned the conviction in 2016 and sent it back to Kirov for retrial (OCCRP, Feb. 2017, Russia News Agency, Feb. 2017).