It is quite possible that Russia will reunite with
Europe - then it is not the Ural but the Alps that are to become the border between
Asia and Europe, and Europe will spread over to the Chinese and the
Japanese Empires and the Pacific.
Richard N. von Coudenhove-Kalergi
The European manufacturer needs new outlets. Another surge of the global financial crisis and debt loads of the European countries only have intensified that necessity. Russia to this extent is quite promising direction being a market with huge demand of goods from the west. And regarding the formation of the Customs Union of three countries - the Russian Federation, the Republic of Belarus and the Republic of Kazakhstan - that market became much more appealing. Indeed, Customs union means unified customs area having no customs duties and economic restrictions in mutual trade within. The range of trading and economic relations between the Customs Union and the EU countries is steadily increasing. Moreover, auxiliary facilities for business arise in connection with Russia's entering the WTO, the Russian market, consequently, becoming more open. Amid structural difficulties of some Euro-zone countries, Russia actually turns into an investment paradise for European investors.
However, European entrepreneur very often unwillingly get in touch with enterprises in Russia. There are a lot of reasons for that: insufficient acquaintance with the market, legal details, barrier communications, unknown risks as well as different mentality and specialties of the juridical system are the most frequent occurrence.
Let's fix upon the problem that became especially pressing for the last few years.
It is the issue of non-payment and fraud. The autumn of 2008 was the time when the global financial crisis burst which is also called “the Great Recession". Gradually, its consequences began to show in all-round unfavourable volume variance, decrease of demand prices for raw materials, difficulties in production distribution. Subsequently, a great number of earlier efficiently-run companies declassified into unsound and terminated activities. Some could not repay debts and commenced insolvency proceeding. The mass of bankruptcy increased as well as the number of businessmen unable to receive reimbursement on bargain from their partners.
But the one who escaped the need to repay unpunished once, may well want the same again. To some of bankrupted undertakers this way of business became a standard practice. The number of “conditionally insolvent" steadily increased. Very easily a delay in payment and even non-payment (non-delivery) for goods is used between companies from different countries. In that case, complexities with debt recovery are more numerous than in business within one country. Often those difficulties take place because of simple improvidence and non-acquaintance with the legislation of partner's country.
Here are standard faults in foreign economic agreements complicating recovery - as for statistics by legal agency “Lev & PARTNERS":
- Incorrect arbitration misprints - references to non-existing courts or incorrect naming of existing courts.
Understanding of the situation by the debtor allows him fight a delaying action in the procedure of recovery, block the procedure or even make it economically unpractical.
- Reference to a court house whose decision cannot be executed in the country of the counteragent. Reference to a court at one's own governorship.
European undertakers often mention arbitration reference to a court in their country which gives a false feeling of a stronger safety. But the creditor's country may not have an agreement on execution of judgement with the debtor's country. In that case, the judgement received by the creditor may remain non-executed or demand additional costs and time. You should make war in the enemy's land.
- Difference between Russian and foreign-language texts of the agreement.
This allows the debtor expound the agreement's point in a light favourable to himself.
- Absence of exact terms for fulfilment of obligations.
Complicates the actions for charging, extends the terms to start an effective charging.
- Absence of penal sanctions.
The creditor doesn't hold extra market pressure on the debtor in pre-juridical order, the debtor loses motivation to promptly fulfill his contract obligations.
- The so called “gentlemen agreements"
Absence of all reached understandings between partners leads to misconception and, consequently, to non-fulfilment of the whole agreement.
Though the above mentioned faults are obvious, they tend to persistently come up in contracts not only with novices in business but also with big international companies.
Availability of a high-quality and adjusted agreement undoubtedly simplifies protection of your interests both in pre-juridical stage and in court. But how can we know if our partner has declassified from “well-tried and conscientious" into “conditionally payable"? Your ability to refund the invested money depends on how soon and up-to-date you define that. In fact, if his status turns to “non-payable" to refunding would be extremely difficult.
Legal agency “Lev & PARTNERS" advises some indicators for eventual debt problems:
- Durable breach of payment schedule;
- Claims from suppliers;
- Information on overdue debt load;
- Information on breakdown of business sale;
- Exposure of relation of businesses (that fact is important when problems in one flow can be solved by means of another);
- Violent fall of stock-taking at the debtor-company's warehouse;
- Extremely expensive purchase by debtor-company or its heads and founders.
If counteragent's insolvency continues for some time you have to choose whether to believe promises about soon payment or to start the process of debt recovery. The experience is justified by the following formula: prompt reaction to financial problems with the counteragent guarantees debt recovery. Business collapse, as a rule, does not arise instantly and suppliers with the promptest reflexes have the best chances to be repaid. Companies that prefer carrying on a 6-monts’ corresponding often are left with nothing.
Is it practical, when having a business, to save yourself from relevant problems? Of course, not. But before you conclude another agreement you can carry on a minimum examination of a counteragent. That cannot eliminate all the risks but would substantially reduce their rate of occurrence. Here are some references that could be of help to you:
1) Info on the accounting reports is available at the data base “Accounting Records of Activities" by the Rosstat.
2) Info about registered rights on realty is given by the Board of the Federal Registration Service.
3) Info on the registered vehicles with the debtor is available at the road police (GIBDD) on claims from legal bodies, courts, officers of justice, government attorney, lawyers.
4) The most complicated is obtaining evidence for debtor's concealing his property. For example, in the mass media, in the internet you may often find announcements by your debtor on sale of his property. An extract from the state register of legal bodies will show you replacement of debtor's founders or chiefs.
5) On the site of the High Arbitration Court of RF, the base of arbitrating courts’ decisions, you can find info on availability of arbitrations with the counteragent. If available, it is shown if he was a defendant and the amounts claimed from him by other creditors. Info about arbitrations on bankruptcy of the counteragent also may be found.
6) The Federal Tax Administration site you info about entering of a legal body into the integrated state register of legal bodies, about tax payers’ reg. No's, legal address as well as about liquidation proceedings if available. Besides.
7) With the help of web site of the local service of officers of justice it is possible to learn if there are enforcement proceedings against the counteragent.
8) On the RF Ministry of Internal Affairs site - structure gives you info about persons in search on suspicion of crimes (including economical ones).
As a result, having n elementary examination of an eventual counteragent and settling an agreement with him considering peculiarities of his country's legislation you would exclude at least insulting ridicules and mistakes that can be avoided.