Bankruptcy in Russia: Away From Creditor Protection and Restructuring

Abstract

Bankruptcy laws aim to protect creditors, introduce pressure on managers for financial discipline and restructuring and free assets from inefficient use. Effectiveness of Russian Bankruptcy law is undermined by the political capture of arbitration courts by the regional authorities. Governors in alliance with managers of large regional enterprises use bankruptcy procedure as a mechanism for expropriation of the federal government and outside investors. Recent amendments to the Bankruptcy law, formally motivated by the apparent inefficiencies of current bankruptcy practice, fail to improve creditors protection, while they provide additional power to incumbent managers and governmental agencies.