Business Transaction Invalidity in the Context of the Principle of Legality

Abstract

This paper explores business transactions in the context of the principle of legality. It will be argued that Article 168 of the Russian Civil Code, as a metarule, contains three types of rule: 1) rules dealing with the priority of special rules and exceptions (exclusive rules); 2) rules dealing with the interpretation of general, special and exclusive rules, as well as with the requirements of statutes or other legal acts violated by a transaction and established outside of Article 168 of the Civil Code; 3) rules dealing with the admissibility of special rules and exceptions, as well as with the conditions of admissibility of these rules. With regard to the first group of rules, the legislature and commercial courts consider Article 168 of the Civil Code a common base for other grounds in the Civil Code, and in certain other statutes, for declaring transactions invalid. According to the second group of rules, the subject-matter (object) of legal interpretation consists of two elements: а) the text of Article 168 of the Civil Code; and b) the texts of legal acts, described by the generic term “statute or other legal act.” Article 168 of the Civil Code provides instructions, not only for rules as objects of application of the article, but also for the methods of interpreting violated requirements. The rules of admissibility for special rules and exceptions, as well as the conditions of admissibility for these standards, are aimed at the numerous cases in which the legislature, in the Civil Code or in other legal acts, expressly establishes nullity (voidness), voidability and other legal consequences for illegal transactions. The paper also answers questions regarding the impact of recent amendments to the Russian Civil Code on the use, by commercial courts, of rules on business transaction invalidity.