Contract law and negotiation tactics in Russia

Contract law and negotiation tactics in Russia

Facts on market entry, contracts and negotiations in Russia

What do you need to know about Russian business culture?

The Russian way of doing business is heavily influenced by their cultural context and Soviet past. Their communist history preferred ‘collectivism’ as a way of life but the current political and economic scenario recognizes individuality. Russia ranks high on World Bank’s index of difficult places to do business and a combination of manipulative behavior and rigid approach characterizes business negotiations.

What are negotiation tactics in Russia?

  • Russians are comfortable with a local resource or ‘connection’ as a go-between in negotiations
  • Russians are known for their patience and business negotiations can stretch for long hours
  • Russian negotiation style is distributive and information is not shared freely
  • Compromise is often thought as a ‘bad’ business strategy and Russians can come across as taking ‘hard lines’
  • However, ‘Final Offers’ are not final in nature and outcomes can be negotiated
  • Price is a decisive factor in negotiations and you should highlight ‘exclusive relationship’ or ‘exclusive order’ and/or the value your company will bring
  • Keep presentations short, precise and visual heavy
  • Russians speak English but it is preferable to have printed materials available in both English and Russian. It is preferred to have business cards printed in both languages, with the Russian side facing while presenting your card
  • Gifting and bribing are an accepted practice
  • You should wear conservative, formal attire at business meetings
  • You will be expected to be punctual but your Russian counterpart may be late

What is a contract worth in Russia?

There is overall low contract loyalty in Russia. Changes in signed contracts are common and negotiated contracts can sometimes become illegal at a later date. Russians prefer relationships based on trust over contracts. You should not ignore the relationship after contract is signed.

What are pricing policy, pressure and restraints in Russia?

With Russia’s entry into the World Trade Organization (WTO) in 2011 and rising dependence on foreign trade, a more flexible, market-driven pricing system has emerged. A major constraint is Russia’s history of protective pricing for domestic market especially for oil, gas and electricity. In the post WTO regime, the country is trying to balance its social obligations along with conformity to WTO policies.

What is Russian legal system?

The Russian Civil Code is the guiding source of civil law.

The International Private Law is the most relevant law under the code, for those wishing to conduct business within or with the country. This law governs any civil legal relations involving the participation of a foreign citizen or foreign entity like in the case of a trade alliance.

Matters pertaining to the application of the International Private Law are influenced by relevant treaties of the Russian Federation, The Present Code, and other laws and usage as per the Russian Federation.

What is the arbitration and litigation in Russia?

Arbitration

  • International arbitrations are governed by federal law on ‘International Commercial Arbitration’ (ICA). The law mirrors the UNCITRAL Model Law 1985.
  • These rules primarily govern international arbitrations seated in Russia, and a few provisions are applicable to those with a non-Russian seat.
  • While the laws under ICA are binding, there are several provisions that you can work around.
  • Reforms to this law are under process and expected to come into force by end of 2015

Litigation

  • Higher courts in cities such as Moscow tend to be more impartial even though the Russian legal system seems to be strict. Hence, it’s preferable to appeal to the Higher courts for more important issues.
  • For international disputes, law firms are often appointed as mediators for alternative dispute resolution, such as out-of-court settlements

Expanding to the Russian Federation can be a challenging task. A prior understanding on Russian market entry, contracts and negotiations is the key to a successful business in Russia.

This entry in Europe was updated on October 17, 2016 by specialist.