Commercial Raiding Russian-Style
Much like their Viking forebears Russian market players are raiding the market place. Unlike the rest of the world where raiding is a term used to denotes the takeover of a company by a stronger and usually more commercially efficient company by legal means. In Russia it is an illegal tactic that is fraught with fraud, forgery, legal shenanigans, coercion, strong-arm tactics & no too infrequently raw violence.
Bribes are frequently the first and sometimes the only step needed in a “raid” on a commercial entity in Russia. There are also legal loopholes that are being exploited as well s purely illegal strong-arm tactics. Paying off an official or officials to allow a false re-registration of a company is not at all uncommon. It takes the legal owners months to wade thru the Russian legal system to get their company back. In the meantime the company has been stripped of assets, key people have been fired or have quit and the business has been flushed down the toilet! The raiders are much more efficient at raiding than the Russian authorities are in combating this illegal raiding practice.
Economic & financial experts from Russia s well as abroad estimate that 7%-10% of mergers, acquisitions & after-the-fact partnership s are illegal acts. It may actually be as high as 18%. Such criminal acts make the criminals approximately 1000% profit.
How & why is it that these criminal activities are possible in Russia? At first sight, the reason seems obvious. Raiding is anew phenomenon in the Russian economy raiding and as such there are no actual laws that cover this activity in the Russian legal code. Mostly the schemes for such raiding are based upon some violations of the Russian Criminal Code. These range from document forgery to coercion to strong-arm tactics to baseless court rulings. Russian Legal Code does not have any articles that specifically address such moves as “raiding”to take over property by using criminal tactics & force. This means that raiders can only be charged only with individual offenses and this also usually means that the masterminds are nver charged with any crimes just their minions.
For the foreign investor this can mean that investments are not safe or that their investments amy be in a company that is going to collapse before any guarantees can be asserted. Warnings by such entities as the U.S. Department of Commerce, the U.S. Department of State, international investment groups, etc. are often times ignored. The best bet for foreign investors is to seek expert advice & to hedge their investments in some way to avoid becoming a victim of the fallout of a raid.
Moves to safeguard investments and companies in Russia are being initiated by the Russian Chamber of Commerce & Industry. This group is now proactively entering the fray to combat this illegal practice of raiding. They have formed the United Anti-Raider League that is beginning to see some success in this fight against such racketeering & criminal behavior.
You can read an excellent article about this economic phenomenon at:
http://en.rian.ru/analysis/20061211/56772669.html
Sources:
Modern Russian Economy
By; Alexei D. Suvarov, Moscow 2002, in Russian
http://www.pravda.ru.
Http://itar-tass.ru
http://en.rian.ru/analysis/20061211/56772669.html
© Donald R. Houston, PhD
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Comments: 6
Thank you for sharing
That's true that all superprofited businesses attract raiders like crazy.
Albeit, raiding is not a new phenomenon in Russia... The Soviet appointments and reappointments of CEOs and management teams (with all the ensuing consequences) may be considered as a form of (state) raiding too...
Now the Russians have got to learn their lessons of free market and democracy, law and business better than ever in order to become more civilised and more attractive...