Revisiting the emergence of the rule of law in Russia

Abstract

In an extended comment on work by this paper’s authors, Gustafsson in a previous issue of this journal reaches scathing judgements on Russia’s arbitrazh (or commercial) courts and draws strong conclusions about the prospects for the rule of law in Russia. He concludes that litigants use the courts because they can bribe the judges. His paper revives old tales about the 1990s that we showed previously were myths. We examine Gustafsson’s argument both conceptually and empirically. We demonstrate that this argument rests on two erroneous assumptions: that the use of legal institutions equates with trust in these institutions and that strategies for use of law are not context-dependent. We show that Gustafsson’s empirical specification is not uniquely related to a single theory and indeed that one interpretation of his results is that enterprises use the courts because they perceive less corruption there than in other venues, a theory diametrically opposite to the one Gustaffson chose emphasise. Using a rich data set collected in Russia in 1997, we are led to the tentative conclusion that firms turned to the arbitrazh courts because of the relative quality of this institution.