1 See eg OECD Symposium on the Rule of Law and the Development of a Market Economy in the Russian Federation 23–24 March 1998, Paris: see http://www.oecd.org/daf/corporate-affairs/governance/rule-of-law/; also Sachs, J D and Pistor, K (eds) The Rule of Law and Economic Reform in Russia (Boulder, Colo: Westview Press, 1997 Google Scholar).

2 Eg the fact that while a person could own personal effects, no property could be owned with a view to using it for wealth creation.

3 See R David and Brieley, J E C Major Legal Systems in the World Today (London: Stevens and Sons, 3rd edn, 1985); K Zweigert and H Kötz Introduction to Comparative Law (translated from the German by T Weir) (OxfordGoogle Scholar: Clarendon Press; New York, Oxford University Press, 3rd edn, 1998) p 296. See, however, J Quigley’ Socialist Law and the Civil Law Tradition’ (1989) 37 AJCL 781, who refused to see socialist law separated from the civil law tradition. See also more recently B Puchalska-Tych and M Salter’ Comparing legal cultures of Eastern Europe: the need for a dialectical analysis' (1996) 16 LS 157.

4 Zweigert and Kötz, in the 3rd edn of their seminal book, Introduction to Comparative Law (translated from the German by T Weir) (Oxford: Clarendon Press; New York, Oxford University Press, 3rd edn, 1998), published in English in 1998, do not make any mention of the Socialist law family. ‘The years which have passed since the publication of the second edition have been very eventful. The “socialist legal family” is dead and buried, and although it will take a long time to erase the traces of more than forty years of total subjection to political ideology, it seemed right to discard the chapters on socialist law’: Preface.

5 V Knapp ‘Comparative Law and the Fall of Communism’ (1995) 2 Parker School Journal of East European Law 525 at 532.

6 David and Brierley, n 3 above, p 157.

7 Korten, D When Corporations Rule the World (Connecticut: Kumarian Press, 1995 Google Scholar); M Chossudovsky The Globalisation of Poverty (Halifax: Pluto Press, 1998); Harrison, P Inside the Third World: The Anatomy of Poverty (London: Penguin Politics, 3rd edn, 1993 Google Scholar); J Karliner The Corporate Planet (San Francisco: Sierra Club, 1997); S Bottomley’ Taking Corporations Seriously: Some Considerations for Corporate Regulation’ [1990] 19 Federal LR 204: R M Dworkin’ Is Wealth a Value?’ (1980) 9 JLS 191; D Campbell’ Ayres versus Coase: An Attempt to Recover the Issue of Equality in Law and Economics' (1994) 21 J Law & Society 434; R Cooter ‘Law and Unified Social Theory’ (1995) 22 J Law & Society 50.

8 The term ‘transplant’ is used here in a wide sense as ‘a wide supply of scholarly and statutory legal models to post-socialist legislators’. See G Ajani ‘By Chance and Prestige: Legal Transplants in Russia and Eastern Europe’ (1995) 43 AJCL 93.

9 Watson, A Legal transplants: an approach to comparative law (Athens: University of Georgia Press, 2nd edn, 1993 Google Scholar).

10 See P Legrand ’The Impossibility of “Legal Transplants”’ (1997) 4 Maastricht J European & Comparative Law 111. For a more moderate view on Watson's work, see W Ewald’ Comparative Jurisprudence (II): The Logic of Legal Transplants' (1995) 43 AJCL 489.

11 O Kahn-Freund ‘On uses and misuses of comparative law’ (1974) 37 MLR 1.

12 Kahn-Freund, n 11 above, at 6.

13 Kahn-Freund, n 11 above, at 6.

14 Kahn-Freund, n 11 above, at 12–13.

15 P Legrand ‘How to compare now’ (1996)16 LS 2 at 233.

16 Legrand, n 15 above, at 235.

17 Legrand, n 15 above, at 236.

18 Legrand, n 15 above, at 238.

19 See also V Gessner’ Global Legal interaction and Legal Cultures' (1994) & Ratio Juris 132B; Grossfield, B The Strength and Weakness of Comparative Law (trans T Weir) (Oxford: Clarendon Press, 1990 Google Scholar); L Friedman ‘Some Thoughts on Comparative Legal Culture’ in Clark, D (ed) Comparative and Private International Law: Essays in Honor of John Heny Merriman on his Seventieth Birthday (Berlin: Dunker and Humbolt, 1990) p 49 CrossRefGoogle Scholar.

20 See T W Waelde and J L Gunderson ‘Legislative Reform in Transition Economies: Western Transplants—A Short-Cut to Social Market Economy Status?’ (1994) 43 ICLQ 345. See also Ajani, n 8 above.

21 Waelde and Gunderson, n 20 above, at 370.

22 And even the effort to harmonise laws such as within the EU does not seem completely to eliminate the differences.

23 See on this theme J L Taylor and F April’ Fostering Investment Law in Transitional Economies: A Case for Refocusing Institutional Reform’ (1997) 4 Parker School Journal of East European Law1. See also P M Nichols’ A Legal Theory of Emerging Economies' (1999) 39 Vir JIL 229.

24 This factor may at first be unlikely to be of great importance now that the former Soviet block is committed to embracing democracy and market economy. In fact, a closer look on the reforms that took place in the last decade demonstrates that many countries from the former Soviet bloc, especially Russia, are inclined to try to find ‘a third way’.

25 See Ajani, n 8 above, at 115. In fact, as Ajani pointed out, the study of foreign and uniform influence in post-socialist law challenges the idea of the common law family being neatly separated from the Romano-Germanic (civil law) family: in fact, the models used by post-socialist countries cannot be only defined using these categories: they are themselves issued of EU law, uniform law, international conventions etc.

26 Waelde and Gunderson, n 20 above, at 370.

27 A Seidman and R B Seidman ‘Drafting Legislation for Development: Lessons from a Chinese Project’ (1996) 44 AJCL I, esp at 26.

28 Seidman and Seidman, n 27 above. See also Seidman, R B The state, law and development (London: Croom Helm, 1978 Google Scholar); Seidman, A and Seidman, R B State and law in the development process: problem solving and institutional change in the Third World (Basingstoke: Macmillan, 1994 CrossRefGoogle Scholar).

29 EDRUS 9607.

30 The innovative aspect of this contract was that it made the too often overlooked link between the area of the Rule of Law as a concept, where many agencies such as the World Bank or the USAID are heavily involved, with the more traditional commercial law reform programmes.

31 For a full report by the consultants, see A Lyon-Caen ‘Analysing a Drafting Process — Reflection on a work carried out in common by Russian and Western European Experts on the Reorganisation and Liquidation of Legal Entities (1998–2000)’ Institut International de Paris la Défense, Higher School of Economics and Russian Foundation for Legal Reform, Moscow, December 2000, TACIS EDRUS 9607.

32 The Soviet Civil Code of 1922 and the Civil Procedure Code of 1923 which were enacted as an institutional framework for the New Economic Policy were drawn from continental European models, including Germany and Switzerland, as well as a pre-revolutionary 1913 draft, since the draftsman was the same in 1922 and 1933. See Zile, Z (ed) Ideas and Forces in Soviet Legal History: a Reader on the Soviet State and Law (New York: Oxford University Press, 1992) p142 Google Scholar; Butler, W Russian Law (Oxford: Oxford University Press, 1999) p 333 Google Scholar. See also V Orlov Entrepreneurship in Russia Helsinki: Kauppakaari Oyj, 1999) p 67ff.

33 See the example of the concept of trust in Russia, E Reid ‘The Law of Trusts in Russia’ (1998) 24 Review of Central and East European Law 43.

34 The Civil Code of the Russian Federation P Maggs (ed and trans) with A N Zhiltsov (Moscow: International Centre for Financial and Economic Development, 1997).

35 Third Directive of 1978 concerning mergers of public limited companies, Council Directive 78/855/EEC. OJ L295/36;and Sixth Directive of 1982 concerning the division of public limited companies, Council Directive 82/891/EEC, OJ L378/47.

36 Umwandlungsgesetz of 28 October 1994.

37 Law no 66–537 of 24 July 1966 on Commercial Companies.

38 The category of companies is much broader than as understood by English company law and includes eg some forms of partnership.

39 Legally, there is participation of a company A into another company B's capital when A owns between 10 and 50% of B's capital. Above 50%, B becomes A's subsidiary. There can be only control over B not only in function of the capital owned by A, but also of the voting rights. The taking of participation can be done in different ways: the creation of a new legal entity, the acquisition of new corporate assets, the augmentation of capital of an existing company and the purchase of shares.

40 Law no 66–537 of 24 July 1966 on Commercial Companies.

41 Royal Decree-Law1564/1989 of 22 December 1989.

42 Law 2/1995 of 23 March 1995.

43 In New Cayman Investments Ltd v A1 Bank A1 Saudi A1 Alami Ltd (unreported,13 July 1995). HC, Ch D, Mr Justice vans-Lombe decided that the word ‘reconstruction’ did not have a technical meaning in law in all situations, but was normally used in circumstances where a company transfers assets to another company, either existing or newly incorporated, when that transferee company had substantially the same shareholding as the transferring company. He also held that, in the particular circumstances of the case, ‘reconstruction’ and ‘reorganisation’ meant the same thing.

44 See Davies, P Gower's Principles of Modern Company Law (London, Sweet & Maxwell, 6th edn, 1997) p 757 Google Scholar.

45 Under ss 425–427 of the Companies Act 1985.

46 The Directives' full implementation required the adoption of additional provisions, the Companies (Mergers and Divisions) Regulations 1987, SI 1987/1991.

47 Arts 57–60 of the Civil Code.

48 Civil Code of the Russian Federation, arts 57–60, and also in the Joint-stock Company Act 1996.

49 It is not clear whether it is up to the company or the other shareholders to buy out.

50 The irony is that, as admitted by the drafters themselves, these protective measures have been overturned by the practice, which developed operations that are not strictly speaking restructuring of enterprises as defined by the Civil Code and avoid creditors' right to demand immediate payment.

51 R Dobrinsky ‘Enterprise restructuring and adjustment in the transition to market economy: lessons from the experience of Central and Eastern Europe’ (1996) 4 Economics of Transition 2 at 389–410. Regarding the motivation for restructuring, micro-data indicate that restructuring efforts, when undertaken by the managers of state-owned enterprises, were as a rule actions which were not threatening to the insiders (ie the managers themselves) and which were not cash-demanding (the availability of cash is paramount to keep the enterprise as a going concern). When managers are threatened, they tend to seek rents: by contracting out supplies or sales and manipulating price differentials, a portion (which may be substantial) of the income is then channelled to the private firm(s) controlled by the enterprise management. In loss-making, state-owned enterprise, this result in asset stripping.

52 See Third Directive, Council Directive 78/855/EEC, arts 7 and 9. The same is provided in the case of a division: see Sixth Directive, Council Directive 82/891/EEC, arts 5 and 7.

53 See R Baldwin ‘Introduction-Risk: The Legal Contribution’ in Baldwin, R (ed) Law and Uncertainly: Risks and the Legal Processes (Berlin: Kluwer, 1997 Google Scholar); J Black ‘Perspectives on Derivatives Regulation’ in A Hudson (ed) Modern Financial Techniques, Derivatives and Law (London: Kluwer, 2000).

54 Black, n 53 above, n 5.

55 Black, n 53 above, p178.

56 Black, n 53 above, p180.

57 The technical perception of risk as objective and measurable is loosing ground: ‘the view that a separation can be maintained between “objective” risk and “subjective” and perceived risk has come under increasing attack, to the extent that it is no longer a mainstream position … Assessments of risk, whether they are based upon individual attitudes, the wider beliefs within a culture, or on the models of mathematical risk assessment, necessarily depend on human judgment’: see Royal Society Risk: Analysis, Perception and Management (1992)p 90.

58 See, for a small sample, Dine, J The Governance of Corporate Groups (Cambridge: Cambridge University Press, 2000 Google Scholar); Bottomley, n 7 above, at 203; K Greenfield ‘From Rights to Regulation’ in Patfield, F (ed) Perspectives on Company Law (London; Boston: Kluwer Law International, 1995–1997Google Scholar); Parkinson, J Corporate Power and Responsibility (Oxford: Clarendon Press, 1995 Google Scholar); Sugarman, D and Rubin Law, G, Economy and Society, (Abingdon: Professional Books, 1984 Google Scholar); M Stokes ‘Company Law and Legal Theory’ in W Twining (ed) Legal Theory and Common Law (Oxford: Blackwell, 1986); Posner, R Economic Analysis of Law (Boston: Little Brown, 4th edn, 1992 Google Scholar).

59 D Korten When Corporations Rule the World (Connecticut: Kumarian Press, 1995); Chossudovsky, M The Globalisation of Poverty (Halifax: Pluto Press, 1998 Google Scholar); P Harrison Inside the Third World: The Anatomy of Poverty (London: Penguin Politics, 1993); J Karliner The Corporate Planet (San Francisco: Sierra Club, 1997).

60 See sources cited at n 58 above.

61 Previously art 54(3)Google ScholarPubMed(g).

62 Edwards, V EC Company Law (Oxford: Oxford University Press, 1999) p 8 Google Scholar. For an inclusive view of EU company law, including creditor and employee protection, see J Dine and P Hughes (eds) EC Company Law (Bristol: Jordans, looseleaf). See also Bercusson, B European Labour Law (London: Butterworths, 1996 Google Scholar).

63 Davies, P Gower's Principles of Modern Company Law (London: Sweet & Maxwell, 1997) p 55 Google Scholar.

64 For a wider perspective on this debate see Bottomley, n 7 above, at 204; Dworkin, n 7 above; Campbell, n 7 above; Cooter, n 7 above. As well as the issues of psychological and cultural perception of risk, a further question relates to the issue of differential bargaining power. The extreme US model is based on the fiction that creditors and employees are in an equal bargaining position to even the biggest corporation; the EU has rejected that fiction and enacted substantial legislation to protect employees and creditors. See Cheffins, B Company Law, Theory Structure and Operation (Oxford: Clarendon Press, 1997 Google Scholar); A Ogus Regulation, legal Form and Economic Theory (Oxford: Clarendon Press, 1994).

65 Thus avoiding the extremes of the pure neo-classical approaches to the regulation of markets: see Posner, R Economic Analysis of Law (Boston: Little Brown, 4th edn, 1992 Google Scholar); F Easterbrook and Fischel, D The Economic Structure of Corporate Law (Cambridge, Mass: Harvard University Press, 1991 Google Scholar).

66 Companies Act 1985, ss 426 and 427A.

67 Umwandlungsgesetz, art 128.

68 See eg 1966 Law, arts 266 and 360, based on the Code Civil, art 1833.

69 See Law 2/1995 of 23 March 1995 on limited liability companies.

70 Respectively art 381 of the 1966 Law and art 261 of the 1967 Decree, and art 22 of the 1994 Umwandlungsgesetz.

71 As pointed out by Seidman and Seidman, a set of categories of factors influence a social actor's choice as to how to behave in the face of a law. These categories of factors must be examined in turn in order to explain the current behaviours and identify scope for reform in order to alter these behaviours or eliminate the causes of problematic behaviours. They are: (i) the rules, that is the existing laws; (ii) the social actors' opportunity and capacity to obey the rules; (iii) the extent to which these rules have been communicated to the social actors; (iv) their interest in obeying the rules; (v) the process by which they decide whether or not to obey (which may be important if the social actor is an implementing agency, but also a company); and, finally, (vi) the effect of the ideology of the social actors on their decision (their values and attitudes, what is usually referred to as ‘culture’): Seidman and Seidman, n 27 above.

72 B Levy’ Credible Regulatory Policy: Options and Evaluation’ in R Picciotto and Wiesner, E (eds) Evaluation and Development: The Institutional Dimension (Washington DC: The World Bank, 1998) p 178 Google Scholar. See also the draft paper from M L Russell-Einborn, ‘Implementing Legal and Regulatory Reform: Acknowledging the Importance of Strategic Management and Legal Constituencies' USAID Conference on Legal and Institutional Reform, Arlington, Virginia, 1998.

73 Council Directives 78/855/EEC and 82/89 1/EEC respectively.

74 We are grateful for confirmation of this by Alexey Timofeev, one of the Russian experts.

75 We are very grateful to a PhD student at the University of Essex, Alexander Nadmitov, for a translation of the draft under discussion.

76 Council Directives 78/855/EEC and 82/891 1/EEC respectively.

77 Article 9.

78 See discussion of the variety of protections at p 303 above.

79 [1891] 1 Ch 213.

80 Re Dorman Long & Co [1934] Ch 635.

81 At one point, during the first meeting of the working seminar, one of the drafters listed for more than 20 minutes technical questions he wanted to see answered. All of them were technical: eg when the table of assets and liabilities must be established.

82 The Russian team was excellent at these technical debates, at making sure that the law would fit with the existing legislation in terms of concepts and contents, but found defining the economic choices in terms of risk a more difficult task. All our visits to the country and discussion with practising local and foreign lawyers confirmed that legal skills exist. What does not seem to be part of the approach to law is the rationale behind the words, especially the economic rationale.

83 Legrand, n 15 above, at 236.

84 Seidman and Seidman, n 27 above, at 15.

85 Seidman and Seidman, n 27 above, at 38.

86 Seidman and Seidman, n 27 above, at 41.