Legal Fundamentals of the State Regulation of Economy

S.N. Shishkin, Doctor of Law, Advisor to the Russian Constitutional Court Judge, Russia

The following norms of the RF Constitution form the fundamental legal prerequisites of the state regulation of economy: on the social state (Art.7); on the guarantees of Common Economic Space; on the support of competition; on equal protection of different forms of ownership (Art.8); on freedom of economic activities and prohibition of the monopolistic activity and unfair competition (Art. 34); on prevention of the formation of customs borders, duties, fees or other barriers to the free movement of goods, services and finances (Art.74), etc. According to Art. 71 of the RF Constitution, the Russian Federation is responsible for establishment of the fundamentals of federal policy and federal programs in the field of economic development of the state, establishment of legal basis for a single market, financial, currency, credit and customs regulation, money emission, principles of pricing policy, etc. These and other provisions of the RF Constitution predetermine the state regulation of the economy and form the foundation for legal support of such regulation.

Modern constitutions of most countries contain numerous legal norms regulating economic relationships, which are responsible for arising of the concept of “the economic constitution” in scientific usage. Most researchers consider the economic constitution as a set of constitutional provisions related to the field of economy[1]. Within the framework of such understanding of the economic constitution, it is necessary to lay emphasis on Professor G. A. Gadzhiev’s approach. In accordance with this approach, the economic constitution is a set of constitutional provisions connected by a single subject-matter - the relationships in the sphere of economy - and possessing an internal unity of logic and legal systemic ties[2]. Such an approach is of great importance for the science of entrepreneurial (economic) law because it leads to the following conclusion: if the RF Constitution contains provisions imbued with internal unity and related to one subject-matter - the relationships in the sphere of economy, then in order to implement these constitutional provisions, a special legal regulatory legal act should be adopted; this act must include the provisions related to a single subject-matter - the economic relationships.

In general, the approaches to the concept of “the economic constitution” are diverse. Formally speaking, the economic constitution means a law or a group of laws of the state which possess the highest legal force and contain legal norms regulating economic relationships. Materially speaking, these are only the norms of the constitutional level and also of other legal acts comprising the provisions significant for economic relationships[3]. Such a division may be considered to be controversial; however, based on the meaning of these approaches, the existence of the viewpoint considering the antimonopoly (antitrust) legislation to be the economic constitution is justified.

As to the attempts to revive the idea of the RF Civil Code as the economic constitution, which has been repeatedly rejected by the RF Constitutional Court, it should be noted that even representatives of the civilistic science regard it as irrelevant, stating that the Civil Code is not intended to regulate all groups of relationships constituting the common notion of “production relationships ”. Out of the four stages of production relationships functioning in the sphere of production, distribution, exchange and consumption, the Civil legislation, due to its legal nature and purpose, can fully regulate only property relationships in the sphere of exchange of goods[4].

Without going further into the discussion of “the economic constitution”, especially since it is the undisputed “territory” of the science of constitutional law, it seems necessary to draw attention to the absence of a special chapter dealing with regulation of economic relationships in the RF Constitution. Such a chapter, as well as the very mention of the economic constitution, is not contained, for example, in the Fundamental Law of the FRG (Germany), however, the disputes about whether the Fundamental Law contains a certain economic constitution or principles regarding the economic life have been going on since the foundation of the FRG (Germany)[5]. “The Federal Constitutional Court notes that the Fundamental Law is very moderate in the issue of economic structure. The legislator intentionally left the issue of economic constitution open… The modern economic structure, according to the Fundamental Law, is only one of the possible ones, but not the only possible. It is based on the decisions adopted by the legislator in the field of social and economic policy, and these decisions can be changed or replaced by other decisions”[6].

During the past ten years, a new research area related to the general doctrine of the state has appeared; it is called the constitutional economy. Lawyers and economists are trying to work together in order to find out how the constitutional law can influence the adoption of the most important (strategic) economic decisions constituting the essence of economic policy of the state[7]. “Constitutional economy is a research field studying principles of optimal combination of economic expediency with the level achieved in constitutional development and reflected in the rules of constitutional law that govern the state economic and political activities”[8].

Constant growth of the role of constitutional law in the society is one of the main ideas of the said research field. Therefore, the issue of limits of the constant growth of the role of constitutional law in the state regulation of economy inevitably arises. Besides, the need for special sectoral government regulation of the economy disappears.

Thus, Professor D.V. Mazaev notes that expansion and increasing complexity of the constitutional and legal regulation does not mean the escalation of the constitutional law on the entire set of public relations and the blurring of the constitutional impact. The designation of the contents of the subject-matter of constitutional regulation includes the relationships ensuring the balance in inter-relationships of the society, the state and an individual with the use of political power as the most important tool and guarantee of these relationships[9]. Further, Professor D.V. Mazaev concludes that constitutional economy is “ one of the most interesting creative interdisciplinary areas for disclosure of regulatory capacity of the most generalized and socially significant constitutional provisions in the sphere of economy: “In our opinion, this direction will be most successful within the framework of methodological developments of the general theory of the constitutional law and the philosophy of law[10].

Professor V. K. Andreev underlines that the RF Constitution recognizes and guarantees rights and freedoms of citizens and associations but does not regulate public relations with their participation[11].

Under the influence of the constitutional provisions, the entrepreneurial activity as a subject of regulation was included in the RF Civil Code, but it did not receive any form of independent regulation because it has been hidden or sometimes simply replaced by the category of “property relationships”. The RF Civil Code takes the legal area which, according to the norms of the RF Constitution, is the sphere of the entrepreneurial law[12].

It should be taken into consideration that any uncertainty and vagueness in the field of legal support of state regulation of economy will inevitably create bureaucratic arbitrariness and corruption. One of the main reasons for this situation lies in the fact that the norms of administrative law are used for the state regulation of economy. Thus, Academician of the Russian Academy of Science (RAS) V.V. Laptev was right when he noted that public-law regulation is formed not on the economic legal basis but on the principles of “police” law which, although necessary for combating administrative offences, does not reflect specific features of state regulation of economic activity[13].

Since the norms of the RF Constitution regarding the state regulation of the economy do not make clear and coherent progress in the legislation, the special sectoral state regulation of the economy is required. It is necessary to provide the optimal combination of private- and public-law regulation on the basis on special economic legislation.

There is a vital need for adoption of the Entrepreneurial (Economic) Code, which must establish the new public-law rules of economic activity; determine purposes, forms and limits of state intervention into economy; consolidate guarantees of rights of economic actors as an ordinary federal, not constitutional, law, without claims to be “the economic constitution”. Only within the framework of such a sectoral legal act can the state regulation of economy be clearly established. This Entrepreneurial (Economic) Code must establish the foundations of federal policy in the field of economic development, mentioned in Art. 71(e) of the RF Constitution, and also address a significant legislative gap - consolidate the concept of “economic policy” and determine its fundamental directions . The situation when the term of “economic policy” that has no normative definition, is widely used in the legislation and justifies the judicial decisions, looks quite paradoxical.

Academician of RAS V.V. Laptev believes that the enactment of the Entrepreneurial (Economic) Code or any other generalizing law regulating entrepreneurial (economic) relationships is a perspective strategic task that should be taken into account in elaboration of the conception of improvement of entrepreneurial (economic) legislation; however, this task cannot be solved rapidly in the conditions of this country. Today a great importance is attributed to the elaboration of laws of the “second level” regulating some major issues of entrepreneurial (economic) activity. They include the law on state regulation of entrepreneurial (economic) activity administering economic relationships vertically[14].

Professor V.K. Andreev proposes to adopt the Law On The Fundamentals Of State Regulation Of Entrepreneurial Activity[15]; Professor V.S. Belykh - The Law On The Fundamentals Of Administration Of Economy[16]. Professor I.V. Doinikov draws attention to the fact that modernization of the Russian economy contemplates the elaboration of a draft law on the state regulation of economy[17]. Professor E.P.Gubin notes that it is necessary to work out the conception of improvement of not only the civil legislation but of the entire legislation regulating the market economy. Besides, E.P.Gubin suggests adopting the  Law On Entrepreneurial Activity And Protection Of Rights Of Entrepreneurs that would contain a section devoted to the issues of interrelation of the state and entrepreneurship, including principles and legal means of state regulation of economy[18].

Thus, the leading scholars in the field of entrepreneurial (economic) law agree in the main point - the necessity of adopting a regulatory legal act devoted to the state regulation of economy.

However, it is necessary to consider the idea of Professor I.V. Doinikov that the starting point of the draft conception of development of entrepreneurial (economic) legislation must be the recognition of necessity to adopt the Economic Code of the Russian Federation[19].

Up to now, all economic breakthroughs have coincided with strengthening of the state authority[20]. Only the state possessing a considerable power potential, can be recognized as a strong one. In practice, it means that a strong state should possess a sufficient amount of resources that would allow it to aggressively influence public processes, implement rulemaking at a high professional level, ensure legitimacy and law order, exercise control functions[21].

The creation of systemic integrity in regulation of economic relationships should correspond to strengthening of the state, improvement of its efficiency and building of a uniform vertical power structure. At present, measures are taken to establish such integrity with regard to certain fields of state regulation of the economy. Federal Law of June 22, 2005 No. 340-FL (amended as of December 25, 2009) “On Special Economic Zones in the Russian Federation”[22] (hereinafter - the Law on the special economic zones) is in its essence a kind of the Entrepreneurial (Economic) Code with regard to these areas. However, achieving the goals for which the special economic zones are created is of great importance for the economy of the country. According to Art. 3 of the Law on special economic zones, the special economic areas are created to develop manufacturing sectors of economy, high-tech sectors, production of new goods, and development of transport infrastructure, as well as tourism and health resort sector. A special economic zone is a part of the territory, determined by the RF Government, where a special regime of entrepreneurial activity is applied (Art.2 of the Law on special economic zones). Industrial and manufacturing, innovation technology-related, tourist, recreational and port special economic zones can be created on the territory of the Russian Federation. The Law on special economic zones establishes the rules on creation and termination of special economic zones, procedure of their management , legal status of residents, procedure of making agreements on the corresponding types of activity, and also determines some measures of state support and guarantees for the residents. The Law on special economic zones stipulates and regulates the conclusion of two types of vertical entrepreneurial law agreements (the agreement on the development of a special economic zone and the agreement on performance of the relevant type of activity). The agreement on the development of a special economic zone establishes the procedure of formation of the Supervisory Council of the Zone that consists of representatives of the federal and regional authorities, local self-government, representatives of residents. The Supervisory Council exercises considerable powers. Such a representative structure of the Supervisory Council ensures both integrity of the chain of command of the special economic zone and the democratic type of management.

In general, the Law on special economic zones is a clear systemic legal regulatory act responsible for the state regulation of a certain economic sphere[23], and also an example of adoption of a relevant general special legal act regulating economic activity and consolidating a uniform system of the state regulation of economy.

Also, Federal Law of December 28, 2010 No. 381- FL (as amended on December, 23, 2010) “On the Fundamentals of State Regulation of Trade Activity in the Russian Federation”[24] (hereinafter - the Law on the state regulation of trade) defines the trade activity as a type of entrepreneurial activity associated with acquisition and sale of goods. The Law on the state regulation of trade contains definitions of wholesale and retail trade that are treated as types of trade activity. One of the positive and symbolic aspects of the Law on the state regulation of trade is the fact that it regulates relationships between the state authorities, the agencies of local self-government and economic actors while they are engaged in trade activity. This means uniform regulation of vertical and horizontal entrepreneurial (economic) relationships in the field of trade activity.

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