May, 2008

CASE ENGINEERING. SECOND EDITION

22/25, Bolshoy Strochenovsky laneMoscow, 115054, Russiatel.: +7 (495) 933 0800fax: +7 (495) 933 0802e-mail: vegaslex@vegaslex.ruwww.vegaslex.ru

ANALYTICAL REPORT

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This is the Second revised and corrected edition of the Analytical report dealing with the exclusive technology of the arbitration

proceedings in Russia – the . The Technology has

been developed by the Vegas Lex Law Firm, and has been successfully implemented in practice.

The second edition's main feature is the synthesis of the practical experience of the Technology's application in the most complicated arbitration proceedings carried on by Vegas Lex's specialists within the last two years; essential development of the most efficient tools of the technology described in the first edition; and complement of the Technology by a number of new important provisions increasing its practical efficiency.

Until recently, analytical reports have been an intra-firm means of communication for our Clients. Now, we have decided that, if such analytical and research data represented in the above form are of great interest to our Clients, this may be useful for a broader circle of top representatives of the corporate world.

Initially, we gathered information concerning key legal issues in different fields of economy and business, analyzed and interviewed leading business representatives, used any Russian and foreign sources available, as well as all our experience, to make certain conclusions and to identify relevant trends. We distributed this information among our colleagues within the Firm, to enable them to follow the data in developing Practices and their skills, to be on the peak of the market needs.

Case Engineering

Then, our Clients became interested in analytical reports, too, due to the fact that we not only discussed today's facts, but also analyzed various legal aspects modeled their development for the near future. The information obtained from us helped our Clients forecasting their companies' business for tomorrow, with a complete picture of potential risks and opportunities at their disposal.

We do not want to make any macro-legal forecasts as we believe that any such competent forecast is impossible. At the same time, we do not state the facts currently occurring: such information may be obtained from a great number of various sources.

, as one of the most utilitarian kinds of information.

Why do we want to share this information with you?

It is simple: we are interested in promoting our point of view into the market stimulating thereby a discussion on topical legal issues. Our Analytical report is an answer to the top manager's question: “How do the other corporations do this?”. Thus, we are promoting the expertise of leading Russian and foreign companies, and contributing in the development of the Russian law practice.

Hopefully the information presented periodically in our analytical reports could be useful for you and your company.

Truly yours,Vegas Lex team

Our scope of interest are tactical forecasts «for tomorrow»

CONTENTS

Dear friends! 245568

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Introduction Section 1. Case Engineering Proof Tools

Testimonial evidence Affidavit Expert opinion (pre-trial examination) Audio-visual materials, photos and other evidences Sociological surveys Public hearings The White Knight's Tactics elements Agreements on factual circumstances Arbitration Practice Memorandum

Section 2. Tactics of the arbitration proceeding Arbitration jury appointment Audio recording and stenogram of the judicial sitting PR support of the proceeding

Section 3. Case Engineering in the international contextSection 4. Communications as an integral part of the Case Engineering Conclusion

Any Russian top manager or any big company's head lawyer is regularly faced with a number of legal controversies of which its company is a party. As we know, one of the key tasks of an effective management is to foresee the situations giving rise to legal controversies, and to react adequately thereupon. Otherwise, the company may expect the worse consequences – from a long corporate dispute or charging multi-million damages, to the initiation of an insolvency (bankruptcy) proceeding.

It is a general belief that legal controversies in our country are hardly predictable and in most cases, especially as far as major cases are concerned, they look more like a lottery. Sociological surveys show that up to 70% of businessmen do not believe the arbitration proceeding to be efficient in Russia today. Most frequent causes of the arbitration justice inefficiency included:

- complexity and long duration of arbitration proceedings;- doubt of the justice independence;- high costs of carrying on cases and low execution rate of court

decisions.

Nevertheless, almost the same number of businessmen (about 75%) acknowledges the arbitration to be the only working mechanism in Russia to settle any business conflicts.

It means that today the Russian business community is in a sharp need of the of judicial results. Such predictability will allow businessmen to plan their activity as far as legal risks are concerned (in case there is any legal controversy unsettled).

Speaking of the predictability of a court proceeding, we do not mean a court's involvement or partiality of the court towards any of the parties of such a proceeding, although this aspect of the Russian arbitration system is widely acknowledged to be far from the ideal. First of all, we understand the ”predictability“ as a complex of measures and mechanisms using which a legal proceeding is more likely to be crowned with success.

Since the beginning of 2006, a number of our firm's departments have been carrying on various comprehensive practical and analytical researches seeking answers to the following key questions:

How to make the procedure of arbitration dispute examination more transparent and clear not only to the parties of the proceeding, but also to managers and shareholders (owners) of companies?

How to attract more attention of the arbitration traditionally

predictability

Introduction

The surveys carried out on our clients' base have shown that the final success of an arbitration proceeding was determined to approximately 50% by the «communicative» aspect. Once this fact was established, we have formulated certain conduct rules to be followed by all of the above-mentioned persons – this will allow achieving the maximal efficient result in the case.

Our investigation had identified certain patterns of using various procedural tools and instruments (both tactical and evidential) by the parties, and we estimated their degree of influence upon the final result. Then, we tried to perfect them, for which purpose we carried on a situational modeling of arbitration proceedings in various dispute categories. As a result of this work, since the early spring 2006 the new technology which is called the

, has been implemented.

The results of conducting judicial disputes since the Ñase Engineering commenced being used show that today, the Technology may be successfully applied in the Russian arbitration proceedings.

We would like to thank our Clients who have had confidence in our ideas, have acknowledged our findings, and have allowed implementing the same. It is not always easy to make such a decision: along with a great number of new interpretations of legal mechanisms already in force, the Ñase Engineering includes a number of fundamentally new tools, focusing on the “private” field of internal communications.

Ñase Engineering

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1overloaded to our particular case reducing court formalities to the minimum at the same time?

How to avoid any subjectivism in making decisions, and how can one with stand a court's involvement?

Is it possible (and in what cases) to avoid completely any potential legal proceeding? What are the key factors to be considered when identifying prospects of a legal proce-eding?

Which of the procedural tools provided by law are the most efficient, and how can their evidential significance be enhanced?

What are the most efficacious tactics of carrying on a legal proceeding?

Which of the most efficient mechanisms provided by law allow with standing the conduct of the judge and of other participants of the proceeding which gives rise to any doubts in the objectivity and impartiality of the future court decision?

In order to find answers to these questions, we have analyzed over 200 arbitration cases selecting intentionally the most complicated ones. Our survey was based on the arbitration portfolio of Vegas Lex's clients, and on legal acts available for public use. We have focused primarily on the cases with a high degree of judicial discretion and having no clear precedents, that is, on the cases upon which the judgment could have been made both in favor of the plaintiff and of the defendant.

As a result of our two years' work, we have upgraded the most efficient tools and mechanisms used by the parties in an arbitration proceeding, and also developed a number of new tools of an important tactical and evidential potential.

Moreover, we have analyzed a very important aspect of a pending or already commenced arbitration dispute, namely internal communication between the head lawyer of the company involved, the top managers, shareholders (owners), the company's adjoining units (if required), and the outside advisor, if engaged for the dispute resolution.

An important result for us is the fact that due to applying the Case Engineering, the arbitration proceeding became completely transparent to our clients, and this allowed to destroy the myth of the impossibility of carrying on a court proceeding in Russia by civilized methods. We are positive that the expansion of Case Engineering will enhance the prestige of the Russian judicial power in the view of the international business community, thus enhancing Russia's prestige as a whole as a civilized constitutional State.

There are three reasons why we decided to share our work results with you.

First, we believe the implementation of the Ñase Engineering to be useful not only for the development of judicial practice but also for the national economy as a whole.

Second, we hope to find supporters of the Technology among head lawyers and top managers of a number of Russian companies.

And third, finally, it is very important to us to find understanding with those wishing to use the Ñase Engineering in their practice, whether on his/her own, or in cooperation with us, or with any other legal advisers. We will achieve our main goal anyway: in one more arbitration dispute, the Ñase Engineering technology will demonstrate its efficiency proving to be useful particularly for you.

1 According to statistics, in 2007, the average arbitration court load rate was 41 cases per 1 arbitrator per month.

Head of the Arbitration Group,Vegas Lex

Andrey Korelsky

ANALYTICAL REPORT

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Section 1. Case Engineering Proof Tools

It is no secret that a well prepared witness is able not only to give more precise information on the circumstances of the case insufficiently reflected in the written evidences, but also sometimes to change radically the emotional condition of the proceeding's participants including the judges, and to bring doubt into the court's opinion on a circumstance practically established. Subject to this, we have developed the Work With Witnesses Program according to the Case Engineering principles. Besides procedural aspects, the Program includes a great part of psychological aspects of work with witnesses within an arbitration proceeding. In this kind of proceeding, the witness's role differs from the one of a witness in a court of general jurisdiction, thus, the “arbitration” witness's task is fundamentally different. The witness prepared under the Program shall not turn the formalized arbitration proceeding into a “show”, but can be convincing enough in exposing certain information and facts.

But what if it is difficult for a witness to appear in a court? You will agree that one could hardly be persuaded to come to the arbitration court at any inconvenient time (generally, within business hours), and to be subjected to a serious psychological stress in the form of witness hearing. For most Russian citizens, this procedure is associated only with an interrogation under a criminal case. Moreover, such persons are often located in another town or region, which again makes it difficult for them to appear in the proce-eding.

There are cases when the party summoned is simply not interested in the witness's appearance at court in person, because of the risk of obtaining any excessive or inaccurate information from the witness, including due to the stress. In this case, we resort to the affidavit.

Affidavit is a notarized written evidence of a witness, to be attached to the case as a separate procedural document.

In practice, the affidavit as a testimonial evidence is still rarely accepted by courts; however, there have been some precedents already and the number of those is growing constantly. Even if the court will not accept an affidavit as a testimonial evidence, the APC RF norms allow us to attach such evidence to the case under “other evidence” (see the Expert Opinion).

Another argument in favor of the affidavit is the practice when the judge does not involve any witnesses believing that, first, the legal proceeding will drag on in case of their default, and, second, judges do not want, as mentioned above, to make a “show” of the arbitration proceeding.

By realizing the affidavit in practice, we are able, without summoning the witness directly to the court, to attach a document to the case which will be of a sure interest to the judge and is to be read by him/her. In this way, the psychological effect required will be obtained, along with, sometimes, the essential effect as such data stated in a simple non-legal language may change the court's opinion to a great degree in respect of facts and circumstances of the case.

The tools used in the Case Engineering are the “basis” of its content.

Since the Technology was developed, and upon more than two years of its implementation, the Vegas Lex's specialists have created and perfected about 30 tools permissible directly by the procedural law but rarely used in practice by the parties, mainly for the so called “formalized” approach to the proof and conducting of arbitration proceeding.

Today, not all of the tools used by us are positively perceived by the judicial community, members of which, in fact, have to evaluate these tools in practice when examining specific cases. Especially this relates to arbitration proceedings in remote regions as key trends of the arbitration proceeding and innovations offered at courts of higher instances reach them extremely slowly.

We are, however, absolutely sure that the arbitration proceeding tools the Case Engineering uses are very promising.

These expectations are primarily based on the position of the Supreme Arbitration Court of the Russian Federation (SAC RF) whose representatives have more than once stated the necessity of departing from the formalism in the arbitration proceedings and from the hypertrophied importance of written evidence. They also stated the absence of a proactive courts' position towards a complete and comprehensive case examination using various tools provided by the Arbitration Procedural Code of the Russian Federation (APC RF) but, though, being not realized in practice.

To a great degree, our expectations are also furthered by the international cooperation experience of the SAC RF with courts of foreign jurisdictions.

We believe that in the next future a deep reform of the procedural law to be carried out as the fundamentals of this branch of Russian law were developed in the 1970s and are no more in line with today's situation.

As mentioned above, today, in the Russian arbitration system, written documents are the main proof in any case. Most often, these are business instruments: agreements, deeds, correspondence of the parties, etc. Quite often the court may refuse to accept any

documents issued by any third party as proofs considering those as not relevant for the case or not conforming to a certain procedural form as they do not meet the permissibility criteria.

It is no secret that the degree of formalization of Russian arbitration proceeding differs considerably from the foreign countries' legal

procedure – not for the best, unfortunately. Often, a party of a

proceeding is not able to proof its case to the Russian court due to any defects of the form (but not of the content) and may lose an absolutely substantiated case for that. In most cases, the court itself is not eager to help the parties in gathering and assessing the proofs. One may agree that our country's arbitration courts do not very often summon any witnesses, assess any expert opinions without appointing any legal expertise, incline the parties to conclude agreements in respect of factual circumstances, assess electronic documents and correspondence, as well as data from Internet and Wikipedia, etc. The communications have evolved dramatically nowadays not being limited to written documents; but the arbitration proceeding in Russia is extremely inertly assimilating any innovations in the proof base of data obtained from modern sources of information. In practice, this leads to unjustified court decisions determined exclusively from the formalism position.

Proof processing under the Case Engineering principles is aimed at the removal of this «archaism» in the arbitration courts' practice.

Today, using other kinds of proofs offered by the Technology alongside with traditional written evidence increases dramatically a party's ability to prove the factual circumstances of the case. Moreover, such proofs are of a crucial importance when the court is in doubt about the adequacy and authenticity of written evidence, or when the judge's opinion is 50/50. Exactly for situation of that kind, the Case Engineering Technology offers innovations in respect of the parties' case proof base processing.

To summarize the above, we are sure that in the very next future, the Case Engineering tools offered by Vegas Lex will be a ”commonplace“ of any arbitration proceeding.

Below, we expose a brief summary of key innovations of the Technology focusing on the points different from the “traditional” proof tools.

Testimonial evidence Affidavit

EXPERT OPINION

Head of the Tax Group,Vegas Lex

Oleg Bazhenov

Testimonial evidence is of a great importance for proving various circumstances of the case in an arbitration proceeding. Unfortunately, today, witnesses are only very rarely involved in the arbitration proceeding. The courts' reasons of waiving petitions of such witness' involvement are different, but the prime cause of the situation is the same: the very low discipline of the witnesses' appearance before the court and, subsequently, the excessive delaying in the arbitration determination.

ANALYTICAL REPORT

However, this should be the court's prerogative whereas such expertise may only affect a party's position adversely. According to our Technology, when carrying out such expertise, we identify the basic doctrinal issue, that is, the field where some kind of an expert's special knowledge would be required. Thus, without affecting the court's competence of evaluating all evidences based on the intrinsic conviction, we surely assist it in evaluating the same.

Generally, the expert for a case is selected subject to his/ her authority –

most likely, a specialist will be engaged whose reputation and independence are beyond doubt. Our special focus on selecting experts makes us study profoundly their scientific works in the field where special knowledge is required for the respective case. The Technology sets out the work procedure in details per each kind of opinion (expertise): you would agree that it is takes a totally different approach to preparing a financial & economic report than a construction or engineering expertise or any other technological expertise.

From the arbitration point of view, pre-judicial trials widely spread in the arbitration practice are not in fact any expertise. Moreover, the mass abuse of expert opinions, especially in the field of law, has induced the loss of the former importance of this procedural tool.

Insufficient legitimacy of an expert opinion (pre-judicial trial) as the key problem can be successfully resolved by initiating an expert examination by a notary. In this case, initiation of a pre-trial expert examination is an evidence security measure, and its result (namely an expert opinion) is an evidence meeting the requirements of the arbitration procedural law (article 85 of the APC RF).

Being legitimate, a notarized pre-judicial examination is free of the main defect of the “classical” judicial expertise, namely the opponent's

considerable role in an expert appointment made by the court. According to the Fundamentals of the notaryship law of Russian Federation (article 103), the opponent is entitled to be present during the expertise, examine its results, etc., but has actually no influence in the expert nomination by the notary.

The key requirement to the expert opinion is its compliance with the provisions of article 85 APC RF.

The purpose of expertise implementation in the arbitration proceeding is to clarify any issues requiring any special knowledge. The subject matter of the expertise shall be in conformity with this purpose: only highly special questions not related directly to the law. For example, in the tax disputes, a great number of issues relate to the

accounting procedure – thus, the chief accountant's explanation may

be replaced by the opinion of an independent expert accountant's who is aware of the criminal liability for giving any knowingly false evidence.

Such a narrowing of the pre-judicial expertise's scope due to the exclusion of the law from its subject matter shall be compensated by introducing non-standard (i.e. rarely used) kinds of expertise. So, the legal expertise of the opponent's arguments may be replaced by a logical expertise. The expert's opinion that the opponent's arguments contradict the rules of logic (“no true conclusion is possible with the premises available”) will have a greater impact upon the judges than the conclusion that the opponent's arguments are contrary to the requirements of the law.

Also, an even more “exotic” expertise may be appointed. For example, mathematical scientific institutions may carry out a probability of an event expertise. Such an expert's opinion on an extremely low occurrence probability of an event referred to by the opponent, will have a strong evidential effect (see the Precedent).

The less «exotic» linguistic expertise is absolutely indispensable when interpreting any governmental statutory acts and by-laws, contract provisions, and other documentary media. Being often one of the key evidences in this category of disputes, such an expertise is indispensable when conducting any arbitral litigation of the business reputation protection.

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An alternative to the witness summon is the affidavit, i.e. a notarized testimonial evidence.

The affidavit is based on the notary's right to secure the evidence (articles 102, 103 the Fundamentals of the Notaryship Legislation of Russian Federation) by way of witnesses' interrogation, written and material evidence examination, and expertise appointment.

Moreover, the evidence secured by notary have not only an “emotional” meaning: these are written evidence in the meaning attributed to the transcript of the witness's interrogation, examination report of the evidence at their place of location, and the expert's opinion (articles 88, 78, 86 APC RF).In any case, data of the evidence shall be evaluated and attached to the arbitration case, at least as “other documents and materials” (article 89 APC RF). Moreover, complying with the procedure of the evidence's notarial security may allow to avoid at all any question as to permissibility of such evidence.

Requirements to the procedure of the evidence's notarial security, including the affidavit, are not complicated and they include the following.

The notarial security of the evidence is only possible prior to the initiation of the arbitration case proceeding. Otherwise the evidence shall be secured by the arbitration court (article 72 of the APC RF).

The notary shall conserve the evidence according to a written application of any interested party.

An application of an evidence notarization is submitted to the notary in whose radius of activity these procedural acts shall be taken. Both public and private notaries have powers to notarize evidence.

Such application shall specify the causes of the evidence conservation, and state the facts allowing to suppose that the evidence presentation will be subsequently impossible or difficult. In practice, a formal cause is enough. For example, for the purposes of a witness interrogation it is enough to mention that the witness has a travel passport, and is going to travel abroad beyond Russia.

Such application shall contain contact details of assumed opponents, as the notary shall notify them of the time and venue of the legal proceeding. However, the default by the opponent's representatives shall not constitute an obstacle for the evidence notarization.

The application for the evidence notarization shall contain a list of questions to the witness. It shall be noted that the witness is interrogated by the notary, and not by the party of a potential dispute. The notary shall strictly comply with the framework of questions specified in such application.

The witness shall be warned by the notary of the criminal liability for waiver to giving evidence, or for giving knowingly false evidence. This rule contains a latent advantage of the affidavit as compared to interrogation conducted by such a widespread in the arbitration proceeding opponent as the tax authority. The tax authorities interrogate witnesses in conformity with the Tax Code of the Russian Federation (articles 31 and 90 TC RF). The witness's liability is determined also

according to the TC RF – in form of a fine of 3 000 rubles (article

128 TC RF). It is clear that testimony of a witness who is warned about the criminal liability which exceeds the tax liability considerably (article 307 Criminal Code of the RF), shall have a greater emotional effect over the judges.

Expert opinion (pre-trial examination)

Unlike the Civil Procedural Code, the APC RF does not directly provide for such way of proof as expert opinion. Nevertheless, we use this way of proof quite often attaching it to a case as an “other evidence”. Our Technology is focused on the form and content of the opinion, and on the selection of a specialist whose personality would inspire the judges to have confidence in his/her opinion.

Generally, we shall attach an expert opinion to a case either at the stage of the filing a claim statement, or when the court waives to appoint a legal expertise.

The principal error of the parties soliciting an expertise consists in trying to make the expert establish factual circumstances of the case.

A precedent of Vegas Lex

In one of the famous antimonopoly investigations of a cartel collusion, where the Vegas Lex specialists represented the interests of one of the parties, including the case materials from the Federal antimonopoly service (which were evaluated by the court when contesting the legality of the decision being made under an arbitration proceeding), an opinion of an authoritative higher mathematics chair was presented. The opinion stated that the probability rate of coincidence of the actions being analyzed of the parties accused in the collusion was negligible, and this was an evidence of the parties' guilt.

ANALYTICAL REPORT

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So far, unfortunately, the arbitration courts tend to be skeptic to such kinds of evidence. However, in some cases, these are valuable sources of establishing any substantial facts of the case.

Duly notarized legal audio and video records, with a written transcript certified by a stenographer or by the party, or photos with documents confirming the time, the place, and the circumstances of the photographing are a very efficient proof in certain situations (see the Expert Opinion below).

Unfortunately, it is quite difficult to execute such evidences properly in terms of procedure, due to that not all participants of court examinations know how to use them.

Moreover, as different evidences, other documents and materials may be attached to a case containing any data of relevant circumstances of a specific case.

Such evidences may include, even today, for example, computer

If there are no adequate technical means at the court for such materials presentation to be made, we can provide them by ourselves – a laptop with a big screen makes it quite possible. The question is not the independent significance of such evidences, but the assistance in understanding of some difficult situations.

and video reconstruction of events (actions, situation descriptions, etc.) relating to the subject matter of the dispute under examination. The technical level of some courts allows this to be done: a simple and clear presentation made by a party, for example, in the Microsoft PowerPoint, will allow a better understanding of the situation, than 30 volumes of written materials. We do not speak of an independent evidential significance of such evidences, but, jointly with the others, they can be evaluated as well.

ÒTraditionally, the evidences are examined at the place of their location if they could not be presented directly at the judicial sitting. First of all, this concerns the real estate.

In practice, the number of disputes relating to the real estate and other big objects is quite significant, and the most circumstances can hardly be proven without examining such objects. For example, the easiest way to prove the fact of a repair performed, or of an object's location at a certain address, etc. is the simple examination.

In fact, arbitration courts examine the evidences on site even more seldom than the above-mentioned witness interrogation. As an alternative, parties to the proceeding widely use the photo and video shoot. However, for a convincing proof, the informational capacity of mere photographs and video shoots is obviously insufficient as it is hard to fix where, when, by whom, and what for the shoot h as been taken.

A notarized proof is free of the above defects since the judges are presented not a “set of photographs”, but a report of the proof examination at the place of its location, attaching photo or video materials.

Requirements to the execution of this kind of evidence are the same as the general requirements to notarized evidences (see the "Affidavit" section). It may be noted that, besides the descriptive part recorded in the report, photo and video shooting are of a great importance.

Speaking of advantages and disadvantages of such evidences, the photography's advantages include the ease of handling (pictures can easily be filed to the case, examined in the judicial sitting without any special devices, etc.), and the video shooting's advantage include the visibility. Thus, the evidence on-site examination shall be complemented with the photo and video shooting.

Audio-visual materials, photos and other evidences

EXPERT OPINION

Head of the «Real estate. Land.Construction» Practice,Vegas Lex

Yuri BorisenkoFor these purposes, we generally engage a professional criminalist, to make such photo and video shooting according to the rules of the criminalistic expertise.

The shooting may be made by yourselves if the following simple principles are complied with:

A digital camera may be used for shooting, but a film one is better: it allows a negative to be presented which is more reliable and trustworthy.

The objects being photographed shall not have any deep shades covering a part of the picture Additional lighting may be used.

No photo pictures may be corrected by retouching, color correction, or any other similar methods.

To take photos of very big objects, a panoramic photography shall be used (photos of various parts of the object are taken, and subsequently mounted (pasted together) into a photo panorama).

If the object's dimensions have to be demonstrated, the metrical shoot shall be used, introducing any objects of a known size into the picture as a scale (for example, a ruler).

The shooting begins with the orienting shoot which shall the “where?” question. Therefore, not only the location shall be included within the picture, but also the surrounding area.

Overall photography shall be used when the object's overall view is needed; therefore the picture area is determined by its limits: it shall answer the “what is it?” question. The object must be photographed from different sides.

Unit shoot shall be used to fix the most important objects for the proving. For example, to prove the fact of any building or repair works performance, all premises, views of equipment installed, building materials used, etc. shall be photo-graphed.

Detail photos shall be taken, to reflect any specific peculiarities of the object (for example, the manufacturing date of a lighter, its model, etc.), according to the subject of the proof.

represent the object's location and positioning, and answer

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A PRECEDENT OF VEGAS LEX

There was a case in our practice where a regional court evaluated a report of the Public Opinion Fund presented by Vegas Lex. The report evaluated the level of the social tension in the region under any conditions directly depending on the court's decision. An arbitrator in a central region could have been perplexed by the materials submitted and could even have called them a “delirium”. The local court's judge, however, was not so categorical: being a resident of the region, he supported our principal's position. His arbitrament, of course, was not conditioned only on the original evidence we provided, but this tool definitely brought a part of the evidential significance on the case.

Notwithstanding the seeming banality of these words, the social aspect may often be have a significant influence (including psychological) over arbitration judges' opinion when taking a decision.

In such cases, regional courts' decisions are especially demonstrative (see the Precedent below), especially decisions on bankruptcy proceedings where the social importance of an enterprise is fixed in the local law. There are some decisions directly determining the destiny of a certain significant community of people. So, a seizure of the current account of a town-building enterprise may entail non-payment of salaries, and, as a result, give rise to a hearth of social tension; a land alienation into private property may break the interests of whole municipal formations, etc.

Therefore, when we see a necessity of proving any issues legally relevant for the case resolution which may have any potential social consequences, as one way of evidencing we use various sociological surveys.

Sociological surveys

One of the key tools of the Case Engineering is the so-called public hearings. We are quite careful in using the same; however, in practice they have shown the result desired.

Under public hearings, we mean a comprehensive complex of measures, with the common purpose of fixing the opinion of a certain group of people on any points at issue which could be a subject of arbitration.

So, according to clause 3 of article 304 APC RF, any effective judicial acts of arbitration courts shall be amended or cancelled if the Presidium of the Supreme Arbitration Court of Russian Federation (SAC) examining the case on review terms determines that the act at issue violated any legitimate rights and interests of a circle of persons, or any other public interests.

Summarizing the SAC Presidium's statistics since the new APC RF (2002) was enacted, we can see that the average rate of judicial acts cancelled on review terms under clause 3 of article 304 is from 5 to 7%. In the recent years, this rule is applied more and more

often – both as an independent ground for cancellation, ad

together with clause 1 of the said article (no uniform approach by the arbitration courts when interpreting and applying the legal rules).

Referring to the recent cases examined and cancelled by the SAC Presidium based on clause 3 of article 304, the following conclusion may be made: it is virtually impossible to determine the criteria based on which the supreme judicial instance has established the presence of a public interest. For example, this clause was applied in examining a dispute on a specific insured accident, or on an independent tax dispute concerning VAT collecting since if based on the subject matter of such cases, it would be extremely difficult to find any public interest in them. Nevertheless, the fact is that clause 3 of article 304 APC RF is quite a «living» article of the procedural legislation applied by the SAC Presidium in practice. We believe however that this rule has not yet been implemented in its complete scope.

Thus, the conclusion is as follows:

Once we came to this conclusion, we asked ourselves the following question: why should such public interest violation be discovered only at the stage of the review proceeding? It is

almost any case which reached the SAC Presidium may be cancelled under clause 3 of article 304 APC RF if there is even a minor possibility of violation of a group of persons' interests by the result of a case.

Public hearings

generally known that only single cases of hundreds of thousands reach the SAC Presidium. Could not a social community itself claim its interests are being (or may be) violated in an individual case? Why could it not be declared already at the moment when such threat arises?

Public hearings can answer these questions.

We hold such hearings both on public sites, i.e. sessions of legislative and executive authorities' committees, of the Public Chamber and on business community's sites (eg. Russian Chamber of Businessmen (RSPP), Chamber of Commerce and Industry). Also, public hearings may be organized on “neutral territories”, i.e. sites of any public organizations' representing any business branch.

The purpose of such measures is to discover public interest to an issue and to fix the results on material media (see the Client's Opinion below). Such fixing (eg. minutes, stenograms, audio & video records, etc.) is an integral part of the measures as we attach all the materials received to a case as additional evidences substantiating the Party's position.

the psychological effect of application is obvious: as all of us, including the judges, are human beings, such materials in 99% of cases will generate interest, even if based on the “just to read” principle. The

Thus, public hearing as a tool allows us to achieve a number of goals.

First,

hearings rightly prepared on a point at issue coupled with their immediate result described in a simple language is a guarantee of obtaining the first reference points required to form the court's position.

if a «conservative» judge does not attach such public hearings results to the case, most probably the case will be reexamined in the “second circle”, as not completely investigated in the scope of proof evaluation, contrary to the parties' competitiveness principle.

and finally, as it is often the case, such evidences are attached to the case, though not evaluated (or not completely evaluated) when examining.

The advantages of the results described are:

the interested party may refer to those in any instance as to an evidence, even if not examined;

a court of any instance will be able to examine such materials and to build its opinion in respect of their evidential effect Including an opinion different from that of a preceding judicial instance's;

if the case comes to the SAC RF Presidium, the interested party could help the court in discovering of infringement of any “public interest” as such infringements have been identified from the very beginning of the legal proceeding.

Second,

Third,

CLIENT'S OPINION

In a legal proceeding accompanied by Vegas Lex specialists concerning payment of a big insurance compensation, minutes were filed with the case of meetings conducted by the parties of the dispute on the site of a State regulatory authority. These minutes reflected the parties' positions in respect of certain circumstances which the unfair party tried to waive subsequently at the court. Having analyzed the materials submitted, the court evaluated them properly in favor of the insurance company's position substantiation.

Head of the Legal Department of the “ROSNO” OJSC

Alexander Cheryarin

ANALYTICAL REPORT

The White Knight's Tactics elements

The bona fide use of pre-judicial methods of dispute resolutions such as claim procedure, negotiations, etc. would build for a party an image of a “white knight”, i.e. a party performing bona fide its obligations, in the judge's view. However, a formal claim is not enough; in order to create such an image the party shall demonstrate its wish to settle the dispute pre-judicially by any

means available, thus forming the judge's opinion that only the procedural opponent's gross default and the impossibility of an amicable settlement of the dispute has induced the party to go to court. More often such White Knight Tactics is used by the plaintiff, but sometimes by the defendant, too.

EXPERT OPINION

First of all, you should pay attention to the content of your claim. If you are not merely stating a fact of breach, but consistently describing in details the effects of a breach of contract to your opponents, the value of such an action is much higher than that of a half-page claim. Your document shall be legally detailed, by referring to laws and the judicial practice you should inform your opponent of what you are going to do in connection with its default (to go to court, to file a complaint with a regulatory authority, etc). The key task at this stage is to show that you are completely ready to a “judicial war”, since all the evidences are collected and the legal strategy is worked out.

The claim is a form of communication with the opponent. By using it, you make you opponent understand that you are confident in yourself and persuade him/her of the seriousness of your intents, spreading doubts in their camp. Once having done all that, you might consider half of the deal won. You should only bear in mind that your message should be address to the company's top management. If you draw up a claim intended for your colleague lawyer, the success of the claim would be more difficult to achieve, for the laywer's professional ambitions may prevail over the corporate interests. A corporate lawyer may believe that proving his/her rightness to “that guy believing himself a lawyer” is more important than the company's interests. Therefore, when arguing your position, bring the meaning of you claims to the opponent company's manager in capacious phrases not overloaded with law terms.

Managing Partner of Vegas Lex

Albert Eganyan

If the company involved is a part of a holding, you should inform the head company of such a claim. Since most holdings have already become public, i.e. have just carried out (or are going to carry out) an IPO, any allusion to come negative news will make the managers extremely nervous as this may affect the IPO price or the company securities' quotations on the secondary market. Each manager is aware that the trial is a lottery and it is impossible to predict who will be the winner and who will be the loser. A rational manager of a public company comprehends that it is better to suppress the conflict in the bud as image losses from a lawsuit may be much graver. If your sound claim is able to persuade such a manager in your rightness, then you will get the best of any possible allies - the chief of the person who, properly speaking, has broken the company's obligations.

The facts stated above do not mean that this method will not work in non-public companies; the point is, just the motives are different. Any company has its own «weak points», eg. attitude to any press publications or authority in the view of colleagues, or an opinion of the bodies supervising the respective market segment, or, finally, the manager's or the principal shareholder's psychology. When drawing up a claim, treat your opponent on an individual basis. The deal will not be limited to sending the claim. If the claim is not a mere formality, you will ace sometimes with very hard negotiations. But in case of the pre-judicial conflict settlement, you will not lose your business partner as it is sometimes the case after a judicial recourse. Moreover, by avoiding such recourse, you will save a considerable amount of time and money.

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One of the most widespread elements of The White Knight Tactics is the claim.

It shall be noted that a “white knight” shall maintain its image not only at the preparatory stage but also during the whole legal

proceeding. For example, a court's proposition to conclude an amicable agreement to sign an agreement on factual circumstances, etc shall be readily accepted (see the Statistics of the SAC RF ).

Total number of cases examined in the first instance

Case proceeding terminated by amicable agreement

% of the number of cases examined in the first instance including:

% of the number of cases examined based on civil legal relations

In the appeal instance:

Including:

in the first instance:

In the cassation instance:

On economic disputes based on civil legal relations

Statistics of the SAC RF

2004 2005 2006 2007

1 215 590

26 568

2,2%

7,0%

651

25 857

60

25 344

1 467 368

25 536

1,7%

6,7%

745

24 733

58

24 304

1 094 849

22 725

2,1%

5,8%

704

21 960

61

21 629

905 211

22 300

2,5%

5,5%

593

21 630

77

21 324

ANALYTICAL REPORT

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Arbitration Practice Memorandum

There is no official position of any Russian authority in respect of any evidential force of a judicial precedent. However, it is no secret that when taking decisions, the higher courts' position on the matter of a similar case is of a great importance. This is especially the case in the arbitration proceedings, and here, the trend shows a constant growth (see the SAC RF Opinion ).

We prepare an Arbitration Practice Memorandum virtually on every arbitration case.

A good proceduralist would always include extracts of judicial practice into claim materials or into his/her opinion on the claim. As a rule, the interested party of a case searches for the judicial practice required and attaches the same to the case materials – in most events this is the practice of SAC RF or of cassation courts which verify judicial acts in judicial districts. Our Memorandum's distinction is that it is a self-sufficient document with independent conclusions, including informational data and figures (see the Example).

SAC RF OPINION

14.02.2008. The SAC RF Plenum adopted a key resolution making the first step towards the official legitimization of the judicial precedent in the Russian arbitration proceeding. The revolutionary nature of the Resolution consists is that, since its adoption, article 311 APC RF determining grounds for a case retrial subject to newly discovered circumstances, shall be complemented with another ground, namely building a position of the SAC different from that of an inferior instance court on a particular case. Purpose of the Resolution is to exempt the SAC RF Presidium from examining any cases which are contrary to the judicial practice uniformity and should be submitted to the Presidium for the court decision

supervision review, but can not be submitted due to the 2Presidium's overloading . Henceforth, the SAC will return such

cases for retrial under newly discovered circumstances to the first instance court precisely with the motivation of failure by the inferior court to comply with the uniformity requirement of the judicial practice application (in particular, of the SAC built position on a disputable matter of law) but on another case with other participants.

This kind of agreement has not yet been a widespread procedural tool; however, it has a great potential. According to the Case Engineering, agreements on factual circumstances shall be worked up already at the pre-judicial stage as this allows to reduce considerably the time consumed for proving the fact not giving rise to any material disputes. Such pre-judicial work is very similar to the claim procedure (see the Precedent); however, it has a number of differences and makes it possible to come to a situation where the parties when going to court have to prove one to three material facts in average.

As mentioned above, the agreement on factual circumstances is not widely used in the arbitration court. Nevertheless, an evidential effect of this tool is virtually absolute. According to clause 2 of article 70 APC RF, the circumstances acknowledged by the parties based on an agreement made between them shall be accepted by the arbitration court as facts not requiring any further proving. Such judicial or extrajudicial parties' agreement on such circumstances shall be certified by written statements made by the parties, and shall be recorded in the judicial sitting's minutes.

Then, the fact of circumstances acknowledging shall be recorded by the arbitrator in the judicial sitting's minutes and be certified by the parties' signatures. The written acknowledgement shall be attached to the case (clause 3 of article 70 APC RF).

No provision of the APC RF allows any of the parties, once such agreement of the circumstances acknowledgement is signed and accepted by the arbitration court, to renounce such circumstances acknowledgement. However, the explanation thereon in clause 14 of the SAC RF Presidium's Information Letter dated 22.12.2005 ¹ 99 "Of some issues of the APC RF application practice” shall be considered.

Agreements on factual circumstances

In this clause, the Presidium explained that, as from clause 2 of article 70 APC RF, it dos not follow that the parties (or a party) shall not have a possibility (before the chairman of the first instance arbitration declares the case substance examination completed) to inform the judge of the sitting where the case's circumstances are being investigated that the agreement of the circumstances acknowledgement is an erroneous one, such a statement with the agreement of the circumstances acknowledgement signed earlier by the parties shall be evaluated by the court along with other evidences, according to the provisions of article 71 APC RF which directs the arbitration to evaluate any case circumstances based on its intrinsic belief subject to a comprehensive, complete, impartial, and first-hand examination of any case evidence available.

In theory, keeping in mind that the evaluation of the case's factual circumstances is also covered by the appeal instance court's competence. But there is a probability though that the parties may renounce their agreement of the circumstances acknowledgement signed before in the appeal instance court, too.

Thus, the agreement on the case's factual circumstances is a virtually absolute proof exempting from proving. This tool however is not free of defects since the opponent is entitled to renounce such an agreement after it being signed.

It shall be noted that such renouncement is only possible for a material reason (such as acting under threat, fraud, deception, etc.). That is, to declare his/her renouncement of an agreement on factual circumstances, the opponent shall prove that there are valid reasons for such a renouncement.

Federal Arbitration Court of the East Siberian region 13%

33%

4%

3%

10%

3%

20%

5%

9%

0%

13%

Federal Arbitration Court of the Far Eastern region

Federal Arbitration Court of the Western Siberian region

Federal Arbitration Court of the Moscow region

Federal Arbitration Court of the Povolzhsky region

Federal Arbitration Court of the Northern West region

Federal Arbitration Court of the Northern Caucasus region

Federal Arbitration Court of the Ural region

Federal Arbitration Court of the Ural region

Federal Arbitration Court of the Volgo-Vyatsky region

33%

4%3%10%

3%

20%

5%9% 0%

Example

2In average, the SAC RF Presidium examines approximately 350 to 400 cases per year.

ANALYTICAL REPORT

Head of the Tax Group, Vegas Lex

Oleg Bazhenov

The Memorandum shall include extracts of the SAC RF Plenum and Presidium's resolutions, arbitration practice and information letters reviews, as well as of the Constitutional Court of the Russian Federation's acts which acquire a more and more independent evidential force, and of cassation instances' resolutions of all judicial districts. Moreover, the growing transparence and publicity of judicial acts enables us to include the inferior courts' decision in the Memorandum. A quantitative analysis of decisions under individual case categories is performed, and the prevailing trend in the law interpretation is established. This allows the judge to make sure that his opinion being diametrically opposite to the trend, may give in the future not only a ground for such decision to be appealed on review basis, but also enable the superior instances to determine the judge's qualification (with relevant consequences).

The Memorandum as a conviction tool is more efficient than the traditional “practice review” also by the fact that it influences the judge's psychological mood. It is hard to pronounce a judgment contrary to the judicial community and to the opinions of colleagues' whom, generally, the judge knows personally. Moreover, taking into account that the memorandum is a striking

and thoroughly understandable instrument, its very presence in the case materials put an idea into the judge's mind that, if his position is contrary to the judicial practice, all of superior courts and the qualification board (should it demand the case materials to be submitted for study) will be aware of it. The judge is aware that nowadays, in the judicial community the judicial practice uniformity is of a very great importance; so, it is obvious that a particular judge can not disregard the analytics contained in the Memorandum. In other words, in the Russian arbitration proceeding, an Arbitral Practice Memorandum fulfils partially the function of 'the precedent' in the Anglo-Saxon justice system.

The above list of methods of proving in the arbitration

proceeding is not exhaustive – we have described only the key

tools implemented in practice. Their number and qualitative performances will be extended for sure, but already today these instruments used as a complex give a guarantee of a higher chance of success in a judicial case.

Section 2. Tactics of the arbitration proceeding

Today, only the most responsible lawyers would draw a plan of an arbitration proceeding. Moreover, such plan has often an «as the situation requires», «subject to the opponents' possible arguments», «subject to the court's reaction», etc. reservation. That is, the lawyer occupies beforehand a waiting-defensive position: «If the court demands discovering this argument, then I will present this evidence". Needless to say that this tactics is not the best one to win. At least such a waiting position will result in a material delay of the arbitration proceeding: each fact of additional evidence representation in practice would entail a postponement of the court sitting for one month, on average.

In order to enhance the arbitration's effectiveness, a detail plan of the arbitration proceeding shall be drawn – the arbitration tactics, or, in terms of the Technology, Tactics of Case.

Such document shall include at east: In fact, the

document shall constitute a complete statement of claim; Based

on this list, an assignment shall be prepared for the internal departments to select and prepare evidences to be attached to the statement of claim, and an assignment shall be formulated for external sources of evidences;

The number of the opponent's possible arguments may be quite big; therefore, it is pointless to include your counter-arguments directly in the statement of claim. But, anyway, you should be prepared for them to come up;

The subject matter of the claim shall be approved to avoid any possible necessity of the subject matter amending, for such actions may also be a reason for the court's sitting postponement;

(expertise, testimonial evidence, affidavit, etc.). Based on this list, costs of the proceeding may be planned;

of each procedural tool, and

of procedural actions to be implemented;of petitions filing, expertise

appointment; etc.

- all arguments defending the company's position.

- a list of all evidences required to prove these arguments.

- possible arguments of the opponent, and counter-arguments to those.

- a stated and approved subject matter of the claim.

- a list of special instruments required

- evaluation of the probable result of applicationconclusions on the proceeding's general

prospects;- plan and list - time schedule and order

The plan may be amended, to a certain extent, but it should be realistic as a whole. Based on it, the lawyer's competence may be evaluated: the closer the real evolution of event is to the plan, the lesser is the reason to worry.

The plan shall be drawn according to the following principles:- the document shall be prepared in the shortest period of time possible. It shall be worked up since the commencement of the dispute;- the preliminary plan of the proceeding shall be delivered to the employees of the company's internal departments to be examined and approved. Remarks and comments based on the company's business specificity are particularly important;- the document shall be written in an understandable business language which is crucial for the document to be comfortably studied by internal departments whose staff do not necessarily know the law terms perfectly.

The final version of the document shall be submitted to the company's manager; based on this version, all procedural actions shall be carried out. The proceeding plan (together with the reports) is another criterion of a lawyer's effectiveness evaluation.

During implementation of an arbitration practice, every act of the lawyer shall be accompanied by a brief written report (hereinafter “Report of Case”). Should there be any deviations from the tactics approved, such deviation's causes shall be motivated. This allows to achieve a high level of the company's management awareness of the arbitration case result.

In most cases, obvious disadvantages of the arbitration planning turn into its advantages, like the additional man-hours at the initial stage would result in a considerable reduction of costs. High requirements to the experience and the qualification of the lawyer who plans the proceeding are compensated by the possibility of transferring cases of the same kind with a plan already developed and approved to junior colleagues.

Below, we will refer to a number of tools, i.e. actions in the arbitration proceeding we determined at the stage of preparation of the Tactics of Case which, in certain cases, allow to withstand efficiently any partiality in the arbitration proceeding.

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ANALYTICAL REPORT

1918

According to procedural rules, an arbitration jury may only be involved at the first stages of a dispute examination. Therefore, we propose this measure to our clients where there are some doubts in the court's impartiality already at the pr-trial stage. If a judge demurs, the demur determination shall be taken by the court president or vice-president. In the event of a tie vote by the

3arbitration jury member, the judge shall be deemed rejected .

Moreover, in the event of a clear wrongfulness of judicial actions, an arbitration jury member is entitled to have a separate opinion to be attached to the court decision and to be analyzed by superior court instances (see the Client's Opinion).

It should be noted that, currently, the SAC RF is deliberating on a bill under which the arbitration jury members should be appointed by the judge himself, and not by the parties. We do hope the bill will not be approved as it is surely infringing the parties' right to an objective and impartial justice. We believe it fit that the arbitration jury is appointed at least in an automatic independent mode, similar to the computer system of cases allocation to judges.

Arbitration jury appointment

3 Clause 4 of the SAC RF Information Letter dated 13.08.2004 ¹ 82 "Of some issues of the application of the Arbitration Procedural Code of the Russian Federation".

CLIENT'S OPINION

Appointment of an arbitration jury in one of our complicated court cases supported by Vegas Lex specialists has materially strengthened our position in the superior instance.

So, when there was an unjust decision of the first instance court, an arbitration jury member's separate opinion on the case has drawn

Alexander Plotnikov

Head of the Legal Department,«Ilyushin Finance Co.» OJSC

This measure allows to avoid any free or knowingly erroneous procedure of the court sitting's minutes keeping. If any remarks shall be prepared to the court sitting's minutes, we produce, along with the statement, an audio record of the sitting and a stenogram (transcript) thereof. If required, the same materials may also be submitted to a superior court in case of a judicial act appealing or to

a qualification board of judges – should we have nay reason to put in

doubt a judge's behavior and his/her qualification.

In the environment of a proactive information field, openness and publicity of the legal proceeding coupled with public and journalists' participation disciplines the bench in a case examination to a great extent. In this event, we do not try to put any pressure upon the bench, trying only to hold it within the legal field.

PR support of the proceeding

Audio recording and stenogram of the judicial sitting

the appeal court's particular attention. Our appeal's arguments, together with the separate opinion of the arbitration jury member, allowed us to cause the first instance court's decision to be completely cancelled. Thus, this procedural technique gave the result desired when the decision was appealed in the superior instance.

Head of the international Practice, Vegas Lex

Yuri Bortnikov

Section 3. Case Engineering in the international context

While developing the Case Engineering technology, our Firm wanted to take into consideration the international experience in this field. The following two points were of a key importance: application of the international experience in the Russian context (where possible), and using the international experience in cases involving the competence of several countries.

Based on this position, we have formulated the two main lines of the Case Engineering application in the international context:

1) Using international tools in the Russian arbitration proceeding; and

2) Using the Case Engineering technology in cases examined in several jurisdictions.

Having used the Case Engineering technology when working with cases in Russian arbitration courts for a number of years, we made sure that in the Russian arbitration, notwithstanding the formalism, thee is a wide range of possibilities to use the international experience and international tools. In this report, we would like to examine three key situations where the international experience may be applied in Russian courts.

A reasonable question arises: how can foreign legal norms be used in the Russian arbitration proceeding? In order to better understand

the situation, the word “use” shall be accentuated – and not the

“application”. That is, when preparing the case, developing the evidential base, and working-up each of the tools to be used in an individual case, we refer to such foreign legal norms as to a sample, an example, or a guide in those fields where the Russian legal norms are missing, or are not clear enough to regulate any issue.

International tools in the Russian arbitration proceeding

Situation 1: Using foreign legal norms

A good example may be an affidavit preparation. As mentioned above in this report, an affidavit (written notarized testimonial evidence) may be used under the Russian law, but there are no norms in the Russian legislation which would clearly regulate the affidavit execution form. In order to minimize the probability of the judges' claim to the form of the document being submitted, and to a certain degree help standardizing the affidavit form used by the Firm, we have used the foreign legal norms as a standard affidavit form.

Having analyzed the foreign norms in this field, we have found the French law norms to be the most clear and logical, specifically article 202 of the Civil Procedural Code of the French Republic.

According to this article, an affidavit shall contain:

- description of factual circumstances of the case witnessed by the person giving the testimonial evidence;- full name, date and place of birth, place of residence and occupational activity of the witness, as well as, if required, information of the person's familial or any other relationship with a party o the dispute, the person's subordination to a party, data on cooperation or common interests with a party;- a statement of the fact that the affidavit is made to be used at the court and that the witness is aware of the liability for giving any false evidence;- date and the witness's personal signature.

A certified copy of the witness's identity card, containing the witness's signature, shall be attached to the affidavit.

The above-mentioned requirements of the French law are quite logical. Using this structure when preparing an affidavit, we have not yet faced with any situation when the court would express any claim in respect of the form of the affidavits so produced.

The next point enabling us to use the international experience in the Russian arbitration proceeding is the possibility of using international or foreign courts' decisions in the Russian arbitration proceeding (see the SAC RF statistics).

ANALYTICAL REPORT

2120

official published text of the decision, and then, a notarized translation shall be made in Russia, to be attached to the arbitration case materials.

Courts may treat this tool in different ways; however, this practice enables the court to substantiate is decision subject to an international business usage. Moreover, it reduces the possibility of the court decision to be canceled by the higher instance because of the groundlessness of the position connected with the use of an international business usage. If such usage proving has a material importance for a specific dispute's party, the tool may be used in the most efficient way by presenting court decisions from a number of counties, including the dispute opponent's country of origin (unless it is a Russian company), discovering and interpreting any such usage in a similar way.

Another possibility to use foreign and international court decisions is to include such decisions in judicial practice memoranda to be presented when examining an individual case. In our opinion, this tool has an auxiliary, informational function for judges on any disputable, debatable, or technically complicated points.

So, a statement of claim may contain legal arguments subject to references to the European human rights Convention, and to specific decisions of the European Court on this issue. In the judicial practice Memorandum, these and other relevant decisions may be analyzed in details, not only to confirm the European Court's position on an issue, but also to help the Russian court to understand reasons and arguments of such interpretation, and properly motivate its decision.

Moreover, foreign and international courts decisions may be used in order to clear up any issues relating to high technologies and those unprecedented in the Russian judicial system, such as disputes in connection with computer technologies: the factual component of such cases in various countries may be almost the same.

The third possibility of using the international experience in Russian arbitration courts is applying of practical techniques widely used by our colleagues abroad. This also may concern some already known and used Case Engineering tools applied for any other reasons and for other purposes. (So, the affidavit's purposes of use are set forth in above sections of this report.) There is a practice abroad when the affidavit may be used in major cases which's examination takes a long time. Such cases may be under examination for several months to several years, for it is quite normal that witnesses may simply not more remember any relevant factual circumstances. In such events,

affidavits shall be prepared at the initial preparatory stage, in order to record a witness's evidence as far as they are still fresh in his/her memory. Besides being attached to the case, the affidavits are also used to “refresh” the witness's memory immediately before the judicial sitting in which he/she shall give his/her testimonial evidence.

Not only cases with a foreign element are considered herein (where one of the parties is a foreign legal entity), but the cases where various elements or stages of the process may take place in different jurisdictions. Very often are situations when evidences are beyond the country where the dispute is examined, or cases where the decision may be executed in a different jurisdiction.

When considering the situation where evidences are in a country other than the country o the dispute examination, there is a mechanism provided by the Hague convention of 1972 «Of receiving evidences on civil or commercial cases abroad». But the period of evidence representation under this Convention may take several months, while any delay in the case examination may aversely affect the respective party.

In such events, alternative methods of evidence fixing and representation may be justified. When selecting such methods, the key point should be the proving requirements in effect at the venue of the dispute examination, and respective possibilities shall be considered provided by the law of the place of evidence location. For example, in some countries, some actions are recorded by a local court clerk, following those respective affidavits are made. Evidences prepared in this way further are generally recognized by Russian courts. In a situation when the evidence is within the territory of Russia whereas the proceeding is held abroad, there is a wide range of possibilities to fix the evidences by notaries, including any affidavit certification, on-site examination, audio-visual procedures involving a notary, etc.

The next common situation when conducting an arbitration case in Russian court should be considered with international aspects in mind: a dispute is examined within Russia whereas a Russian court's decision shall be executed abroad. Moreover, situations are possible when a Russian court's decision may be used abroad in the future, in a dispute examination, as an evidence of a factual circumstance of the case.

Situation 2: Case Engineering in cases examined at several foreign jurisdictions

Total number of cases settled

Involving foreign persons (% of the total number of cases examined)

Foreign court orders executed

Claims settled:

Claimed (mln RUR)

Including those of CIS countries:

Including those of CIS countries:

Claims settled (Mln RUR)

2004 2005 2006 2007

1215590

1 2700.10

60

62148.9%

385

239

3 103

1467368

1 2000.08

126

58348.6%

363

215

14 377

1094849

1 3200.12

211

67851.4%

384

244

2 628

905211

1 3380.15

288

69652.0%

501

347

575

Including:

Number of cases examined in the cassation instance involving foreign persons

Number examined of foreign persons' applications for security measures

392

106

313

149

275

73

330

162

28 931 19 813 5 811 670

SAC RF Statistics

There are a number of options and possibilities to use foreign court decisions. So, in certain situations, foreign court decisions may

themselves be used as evidence – for example, when a contract

party asserts that its relations with the counteragent were regulated by an international business usage. When examining this argument, the court, besides any other question, will have to ascertain of such usage actual existence, and to establish such usage's content. Keeping in mind that most international business usages are not

fixed in any legally valid documents, the judicial practice may be the most efficient way to confirm the existence of a usage, and to clear up its content.

In practice, this is as follows. A foreign court decision shall be selected which shows in the most complete way the content of a usage, based on which the court has pronounced its judgment. Then, an apostilled copy of the decision is made, prepared with the

ANALYTICAL REPORT

Both situations presume a certain analysis of the Russian court's decision validity by foreign courts, especially taking into account the error existing in the West of the Russian courts being totally engaged. Details of such analysis may vary subject to the fact whether there is a treaty between Russia and the country, providing for mutual acknowledgement and execution of court decisions. According to our experience, in any way, it will be extremely difficult to execute a court decision under which the defendant shall pay a huge amount of money, if made on two pages, without specifying any factual or legal circumstances of the case.

Accordingly, irrespective of the fact in whose interests (the plaintiff 's or the defendant's) legal services are provided, it may be

extremely important to use the Case Engineering in such situation –

both in order to ensure further acknowledgement and execution of a Russian court's decision in a foreign jurisdiction, and, on the contrary, to oppose to a Russian court's decision acknowledgement and execution.

In particular, when representing the plaintiff, it shall be ensured that the court's decision in favor of the plaintiff is maximally reasoned,

impartial and justified – notwithstanding the fact that the dispute's

factual and legal component may be obvious. Nevertheless, for the avoidance of any future suspicion of foreign courts concerning the Russian court's engagement and partiality, the position shall be substantiated using as many Case Engineering tools as possible; and you should ensure that the court shall attach to the case all materials produced. Ideally, a Russian court's decision shall contain the analysis of each instrument used, confirming the court's determination on the case.

When representing the defendant, the goal is opposite: that is to show that the Russian court has failed to consider a great number of strong evidences produced under the Case Engineering technology. As a result, the foreign court may have doubts in the Russian court's impartiality in examining the case, and in observing the parties' proceeding guarantees by the court (including the parties' equality in terms of evidence representation).

The key moment to keep in mind when working with such cases is the necessity to comply with the proving requirements of the country where the Russian court's decision will be executed, as sometimes diametrically opposite proving approaches are applied in different countries. So, in the USA, it is quite normal to “prepare” the witness to the giving of testimonial evidence in the judicial sitting; in Germany, on the contrary, any pre-judicial contact between a party and a witness is perceived extremely negatively and may give rise in the future to the court's doubts in the witness's objectivity. In many countries (such as the USA, again) a material importance is attached to the possibility of both parties to interrogate the witnesses; if any party had not had any such possibility, the court may determine such witness's evidence invalid.

Based on this fact, at the very first stage of the case preparation on which the decision shall be acknowledged and executed abroad, it is extremely important to keep in mind the relevant jurisdiction's proving requirements when selecting proving tools in any specific case, in order to avoid any later problems to come up when executing the Russian court's decision.

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Section 4. Communications as an integral part of the Case Engineering

Sometimes, the success in a case depends not only on the professional knowledge and experience level of the lawyer representing a party's interests in the arbitration proceeding as often the lawyer's communicative skills are also no less important. These skills are dealt with individually in a separate block of the Case Engineering.

A litigation gives rise to a complex of multi-level communicative relations (see the diagram below) involving not only those who are directly connected with the proceeding, but also, for example,

employees of the company being party of the case. Thus, when a case is submitted to a specialist of the Vegas Lex, the Firm carries out a special psychological analysis of the lawyer's personal compatibility who will represent the Customer's interests at court and manage the proceeding, and the Principal's representative (generally, a top-lawyer or the company's employee in charge of the legal proceeding realization). Such an analysis allows us to avoid any important conflicts and controversies between the participants of the case's communicative process, from th e very beginning.

Head of the Analytical Department, Vegas Lex

Maxim Chernigovskiy

Moreover, in such conditions, it is extremely important that the case party's representative is skilled in the right organization of communicative processes. These skills are crucial for a successful submission of evidence by the lawyer, as well as the legal position presentation to the judge, or even for inclining the opposite party to an amicable agreement.

Referring to the general theory of communication, it is well known that different people prefer different channels of the information perception; eg., someone relies on his/her eyesight, somebody on the hearing whereas for someone would important how confidently people comport themselves during a conversation. Ideally, the evidence submitted to the court shall, to a lesser or

Arbitralrepresentative

Court

Respondent

Owner

Plaintiff

Top manager

Financial directorate

Other directorates

Legaldepartment

ANALYTICAL REPORT

2524

greater degree, actuate all of the communication channels, therefore, several kinds of evidence shall be used at the same time,

in order to confirm the same circumstances of the case – this will be much more convincing.

Let's take, for example, such an important tool of the Case Engineering as using photo and video materials as a proof. Usually, parties submit written documents, that is, documents containing a verbal description of relevant circumstances of the case. But in

practice, nothing can be more persuasive than the visuality –

something one can see and touch. Therefore, if you attach to the usual documents any properly executed photo or video shoots, the evidential force of the case materials presented by you will grow. For the same purpose, such rare kinds of evidence as the computer simulation are used (see the Precedent).

It is clear that it is not enough to take a photo of an object or to print a computer picture as it is required that the evidences gathered are in conformity with procedural requirements. In the case described in the “Precedent” insertion above, the computer model was attached to the case as an annex to the project documentation of the architecture & design bureau, and the photos taken by the photographer criminalist were certified by his notarized signature.

Thus, virtually any tool of the Case Engineering is an element of the communicative strategy aiming at achieving greater

persuasiveness against any of your opponents. This concerns the Case Engineering technology as a whole: as such, it is a commu-nication tool.

A corporate lawyer communicates much more often with the ,company s managers, with his/her colleagues from financial or

production departments, and those others than with a judge; thus, the most important is to speak the language which is customary to non-lawyers. A company's manager would hardly be interested in the law nuances as such as to him/her, it is important how fast a problem may be resolved and how high is the probability that his/her lawyer's actions will not justify his/her expectations, and whether this probability can be reduced by any reasonable means. Therefore, a manager whom a great number of legal papers is submitted to for examination, feels a quite explainable psychological discomfort.

On the other hand, not every manager is ready to acknowledge that he/she does not completely understand the documents submitted to him. A situation is not rare, when the company's management can not realize why the layers do or make any action or thing, and what shall be the meaning thereof: in the top manager's belief, success can be achieved with lesser efforts. This issue, as mentioned above, is resolved by us using the Tactics of Case and Report of Case, bringing together the understanding of the case's legal component with the company manager's position.

A PRECEDENT OF VEGAS LEX

In an episode of a complicated arbitration case in the Vegas Lex practice, we had to prove the improper quality of finishing works executed in an office building. Typically, such circumstances are evidenced by a delivery and acceptance report specifying any imperfections, by opinions of professional technologists, etc., but under such documents, it is not always possible to distinguish a high-quality expensive repair from an absolute waste. In this case, along with traditional evidences, we used a computer simulation, precisely a three-dimensional picture of individual elements of

the building, the offices in the designer's idea, compared to the photos of the same premises where the finishing works have been performed. The most obvious non-compliances with building technologies (such as level differences, loose plaster, etc.) were closed-up, according to the rules of the criminalistic photography. After the judges had examined the computer model of the office premises, they had no additional questions on written evidences submitted, as the breach was obvious and undeniable.

Thus, the Ñase Engineering implementation in the last two years allowed us to enhance considerably the efficiency of court and arbitration proceedings to which our clients are parties. Notwithstanding the fact that Vegas Lex has seldom received any orders for “simple” arbitration cases conducting, the Clients' satisfaction rate after the two years of use was of 94%.

Thanks to the Technology, we have achieved a considerable rate of predictability of our Clients' legal proceedings: they were always able to plan their legal costs, determine their legal and other consequential risks, and to strictly substantiate our joint actions before the company's investors, shareholders, top managers.

Very often, the Technology makes it possible to determine the prospects of a legal proceeding at its very earliest stage, as well as

the need for interference, and in some cases – to bring out the

increased legal risks beyond the client company, thus securing the company and its management against any reputation risks.

Thus, the comprehensive implementation of the Ñase Engineering technology may be of important assistance to companies' top managers and head lawyers in achieving any predictable objectives of legal projects, using transparent civilized methods of the proceeding conduction, allowing to efficiently withstand any partiality manifestations. This, in turn, is very important for a today's company manager who feels responsible to investors and shareholders and perceives the business reputation as an integral part of successful business.

Conclusion

ANALYTICAL REPORT