Amendments to Civil Code on 10-year statute of limitations in privatization disputes are Russian govt's consolidated position - minister

VELIKY NOVGOROD. Feb 27 (Interfax) - Russian business currently does not understand where the line lies in privatization disputes; this hinders its ability to plan long-term development, and the amendments to the Civil Code on a ten-year statute of limitations in this matter are a consolidated position of the government, Economic Development Minister Maxim Reshetnikov said at a meeting of the presidential council for codifying and improving civil legislation held on Friday in Veliky Novgorod.

Reshetnikov presented a bill introducing amendments to the Civil Code, prescribing a ten-year statute of limitations for disputes over privatization.

"The economy is currently going through a very difficult stage. Therefore, to preserve their businesses in the current climate, many owners are faced with questions - either about its recapitalization, or about a long-term refusal to pay dividends; about complex negotiations with banks on debt restructuring and additional personal guarantees. Such decisions can only be made with complete confidence in the long-term ownership of one's asset," he said.

"And all this against the backdrop of news about the seizure of private enterprises makes it extremely difficult to do. The criteria and approaches applied when challenging privatization affect a wide range of owners, including SMEs, as well as investors who have financially invested in certain assets. They do not understand where the line lies. As a result, the zone of uncertainty spreads to the entire economy. Under these conditions, maintaining the trust of owners, many of whom have developed companies since the mid-90s, becomes as much a priority task as seeking and attracting new investments," Reshetnikov said.

"The main principle is the stability of civil-law transactions. The time has come for the state to signal to market participants its unwavering commitment to this principle. This signal was given by the president last spring at a meeting with the RSPP [Russian Union of Industrialists and Entrepreneurs] business community and this summer at the St. Petersburg International Economic Forum. The president said this issue needed to be "settled once and for all." I quote: "An even worse solution would be to start taking everything back now... We must finally develop a regulatory framework for statutes of limitations for all such events," the minister said, recalling the president's instruction.

"Our proposal is fairly simple. Article 217 of the Civil Code needs to stipulate explicitly that the statutes of limitations established by the Code and the rules for enumerating them apply in privatization disputes. That is, three years from the date rights were violated. But in any case, the statute of limitations cannot exceed 10 years," Reshetnikov said.

"We believe that the inclusion of a clear provision and an unambiguous indication of the moment the 10-year statute of limitations begins is the very guarantee the president spoke of," the minister said.

"The bill makes no explicit mention of the bona fide principle in the acquisition of property. Linking the statute of limitations to bona fide would send a signal to businesses about the selective nature of this provision. Also, bona criteria, as we understand them now, clearly do not align with our ideas of bona fide 30 years ago," Reshetnikov said.

"The bona fide mentioned in the president's instruction needs to be viewed in the context of what he said at the SPIEF, when he emphasized that a regulatory framework was needed for all such events, that this issue must be settled once and for all, for the rest of our lives," the minister said.

The possibility of seizing property acquired through corrupt means or mala fide without a statute of limitations has already been resolved by the Constitutional Court and the bill does not concern it.

"Continued failure to comply with the president's direct order is giving businesses the impression that the stability of civil-law transactions is not a state economic policy priority," Reshetnikov said.

"The solution we are proposing is the government's consolidated position. It is supported by the Justice Ministry and Finance Ministry. It will send a clear signal about property guarantees for those who have developed and invested in enterprises, and developed and supported their teams of employees for many years," he said.