As most of you have already noticed, several changes to the Russian Constitution were definitively approved last week. The changes have been promoted by the Rrussian president Vladimir Putin and most of them have mainly an internal Russian impact.

However, there is one change that should not be missed by foreign investors and people trading with Russia. According to the new regulation, the Russian constitution will have priority in case of a conflict between the constitution and an international treaty (which Russia has already accepted as binding).

Russian lawyers are assuring that this change of the constitution is not going to affect the position of foreign investors or foreign business relations. They also say that this change shall in no way affect the commonly used possibilities to choose the applicable law within business relations with Russian business partners (other law than Russian law), or to choose the court or court of arbitration outside of Russia. Agreements on protection of foreign investments and other international treaties should stay in force without any change.

The said change of the constitution should only incorporate the principle that has been set by the Russian constitutional court some time ago. By this decision, the Russian constitutional court has denied enforceability of a specific decision of the European Court of Human Rights in Russia. The reason behind this decision was that ECHR´s interpretation of the European Convention on Human Rights was in conflict with the Russian constitution. It was a famous case Yukos / Michail Chodorkovskij. This change should underline the sovereignty of the Russian constitution in cases with political overlap, where the Russian government / judicial system feels that foreign institutions are interfering with the Russian authority. The purpose of this change should not be to interfere with common business relations with foreign partners.

It is possible to agree that common business relations with Russian partners or investments to Russian assets most often do not have significant political overlap and, therefore, they should not be viewed as conflicting with the Russian constitution and its accent on Russian sovereignty.

However, one cannot exclude the possibility of escalation of a conflict in any legal or business relation that may lead to the necessity that it is judged from the perspective of protection of constitutional rights of the affected person. It can happen in the „trial phase“, where the conflict between a Russian and a foreign person is being examined. It can also happen in the “execution phase“ when a foreign person tries to achieve execution of an enforceable decision against a Russian person in Russia.

Consequently, the current change of the Russian Constitution reminds us that it is necessary to pay an increased attention in order to sufficiently secure any business positions with Russian partners.