Author: Kaj I. Hobér*
Published: January 2013
Description: Shareholders’ agreements are widely used today with respect to shares in Russian companies. It is reasonable to assume that most major corporate transactions involving Russian companies result in some form of shareholders’ agreement. In fact, shareholders’ agreements concerning Russian companies have been used since the early 1990s. For more than a decade, however, they were not visible on the legal radar screen. There were no statutory provisions. There was no judicial practice. Yet, shareholders’ agreements were entered into, the parties thereto presumably hoping for the best, but ultimately relying on the principle of freedom of contract laid down in the Russian Civil Code. This principle, absent during the era of planned economy, figures prominently in the Russian Civil Code by being enshrined in Article 1(1) of the Civil Code, which reads:
Article 1. Chief Principles of the Civil Legislation
1. The civil legislation shall be based on recognizing the equality of participants in the relationships regulated by it, the inviolability of property, the freedom of agreement, the inadmissibly of anybody’s arbitrary interference into the private affairs, the necessity to freely exercise the civil rights, the guarantee of the reinstatement of the civil rights in case of their violation, and their protection in the court.
The principle of freedom of contract is further elaborated on in Article 421(1) of the Russian Civil Code, which reads:
Article 421. The Freedom of the Contract
1. The citizens and the legal entities shall be free to conclude contracts. Compulsion to conclude contracts shall be inadmissible, with the exception of the cases, when the duty to conclude the contract has been stipulated by the present Code, by the law or by a voluntarily assumed obligation.
Since Russian law lacked provisions on shareholders’ agreements, and since the precise meaning of freedom of contract under Russian law was not clear, parties often subjected such agreements to foreign, i.e. non-Russian, law.
*Partner, Mannheimer Swartling, Stockholm. Professor of International Investment and Trade Law, Uppsala University.