Volume 10 Number 4

Fall 2001

Special Reports

The Pensioners' Court Campaign: Making Law Matter in Russia
Ilian G. Cashu and Mitchell A. Orenstein

A symposium published in the East European Constitutional Review in the fall issue of 1999 addressed the apparent lack of a “demand for law” in Russia. Building on Kathryn Hendley’s 1996 work, Trying to Make Law Matter: Legal Reform and Labor Law in the Soviet Union and several subsequent articles, this group of prominent scholars explored the reasons why attempts to establish the rule of law in Russia seemed to have failed. They emphasized several points, and in particular, Hendley singled out the inherited public cynicism toward law bred under Soviet rule, the continuing favoritism of courts toward the well-connected, the meager chances for average citizens to obtain satisfaction, and the spectacular failure of the government and its public officials to obey their own laws. Other scholars stressed other points, but all agreed, as Stephen Holmes wrote in his introduction, “Although the ‘supply’ of law in the Russian Federation has improved dramatically over the past eight years, ‘demand’ for law lags miserably behind.”

In this article, we present evidence to suggest that the “antipathy towards law shared by most Russians” is overstated.¹ We will show that at the time of the EECR symposium, Russian pensioners were in the midst of a massive, national, and coordinated court campaign that sought to use the Russian judicial system to protect their entitlements. This campaign had been building for some time but reached its height in 1999, receiving substantial attention from the State Duma and forcing regulatory changes.

In her EECR article, Hendley argued that “demand for law is likely to emerge first among economic actors,” and, indeed, much of her extensive field research has focused on the use of law by enterprises. Yet in the present article we suggest that the demand for law in Russia has arisen among a most improbable group-former Soviet pensioners, who have never been perceived by scholars as a likely avant-garde of legalism. In fact, the example of the pensioners’ court campaign deserves scholarly attention and gives us reason to change the way we view the demand for law in Russia, which is considerably greater than the conventional wisdom might suggest. The problem is not so much a lack of consumer demand for law, but that there is not enough in the shops. Courts and other state institutions do not provide enough justice to encourage a greater resort to the law on the part of the population. It takes great persistence and determination to pursue one’s rights in Russia, and this discourages many citizens from trying.

However, the scarcity of justice in Russia has not caused all citizens to give up on the law. Indeed, the pensioners’ court campaign provides evidence of an increasing demand for law on the part of Russian people, an appetite fed by widespread frustration with arbitrary rule by state institutions. Nowhere is this frustration more evident than among the pensioners of the former Soviet Union. These people are often seen as bearers of an old Soviet mentality that causes them to support authoritarian rule and question democratic institutions. Yet it is among this oft-derided group of former Soviet citizens that we find a new form of legal activism emerging in Russia-the coordinated, national court campaign that threatens to embarrass both courts and state institutions into action. This is a form of activism that has much in common with the great civil-rights struggles of the modern era.

Pensioners’ troubles

Before exploring the pensioners’ campaign, we need to provide some background on the context of their struggle and the laws at issue. Although they are sometimes described as relatively privileged beneficiaries of the state, pensioners in Russia were nonetheless subject to a series of arbitrary cutbacks in pension-benefit levels starting in the early 1990s. These reductions may have been less severe than those in other areas, such as the state health system, but still, they were painful and arbitrary.

In the early 1990s, the government introduced the practice of regularly upgrading, or indexing, pensions. This had not been necessary under the Soviet system, thanks to the low level of inflation. But in a newly inflationary environment, regular indexation was required to shield pensions from erosion. However, the so-called “upgrading coefficients” the new government introduced were never applied consistently. In addition, the actual coefficient used was often several times lower than the actual rate of inflation.² Pensioners were hit especially hard in 1992.

In response to the failure of indexing, which became a further issue in the struggle between President Yeltsin and the State Duma in 1993, Yeltsin issued the decree of October 27, 1993, replacing price indexation with so-called “compensation.” Compen-sation took the form of a flat sum for all pensioners, placed on top of their current pension. By instituting flat-sum increases in an inflationary environment, pensions soon became divorced from prior earnings. The whole Russian pension system was leveled in this way, so that most pensioners began receiving something close to the average pension. This was especially disadvantageous for those workers in the Soviet period who had achieved relatively high status.

During the Yeltsin administration, pension compensation alternated with partial price indexation approximately once every three months. However, there was one seventeen-month period, from May 1996 to October 1997, when pensioners saw no increase at all.³ Moreover, the arbitrary application of indexation/compensation schemes was sometimes followed by a total default on pension payments and other welfare benefits. A pension-arrears crisis emerged in mid-1995 and immediately became a hotly contested political issue. The government tended to pay arrears around election time but did not eliminate them until mid-1999, thanks to an increase in the world oil price.

Pensioners’ anger grew in the face of such arbitrary state actions that so directly affected their livelihoods. While this anger was growing over a prolonged period, the pensioners finally rallied in particular around opposition to Law 113, “On Calculating and Upgrading State Pensions,” adopted by the State Duma on July 21, 1997. Law 113 came into effect on February 1, 1998. It introduced yet another method of upgrading pensions, one that proved to be legally unclear and designed for arbitrary manipulation by the state. This device was called the “Individual Pensioner Coefficient” (IPC).

The IPC, established for the purpose of calculating individual pensions, was the ratio between the individual pensioners’ final wages at retirement and the national average wage. By multiplying this ratio by a factor representing length of service and the national average wage, one arrived at the pension amount. The purpose of the IPC seemed to be to reinstate some relation between a person’s pension and previous earnings. However, as it turned out, Law 113 did not do this. This is because the law declared that while the maximum level of the IPC was 1.2 it would be temporarily restricted to 0.7. This meant that the majority of pensioners whose final income was greater than 70 percent of the average wage would not receive higher than average benefits under this formula. Law 113 also did not augment pension levels, although the government had explicitly presented the new formula to the Duma as a means of substantially increasing pensions.⁴ This recasting of the pension formula turned out to be a piece of chicanery. In practice, the opposite happened: pension spending was reduced, with the government claiming it lacked resources.⁵

In addition, Law 113 failed to specify how the government would calculate the average wage in the economy, a key factor in the new pension formula.⁶ This average-wage figure soon became the government’s most important tool for manipulating pension spending under the new law.⁷ The government simply selected a number that was substantially lower than the figure calculated by the State Committee on Statistics. In one sense, this was entirely arbitrary though, in another, the rationale was clear enough. Duma deputies and members of the public were outraged.⁸ The government argued that it could not collect social security contributions in full and, therefore, that its move was justified.⁹ Both the Duma and the Federation Council contested the arbitrary setting of the average wage and asked President Yeltsin to intervene, demanding the government reconsider its estimate.¹⁰

Confronted with strong pressure, the government backed off but did not relinquish its power to set the average wage by fiat. In June 1998, the Supreme Court struck down on technical grounds the government’s December 1997 instructions to the Ministry of Labor and the Pension Fund regulating implementation of the new law.¹¹ As the controversy intensified, blame shifted to the implementing institutions, the Ministry of Labor and the Pension Fund. At the same time, the government took to blaming the Duma for not properly understanding the IPC, thus compromising its enforcement.¹² Throughout this debate, the government skillfully camouflaged the real cause of the problem: its use of arbitrary power to set pensions by manipulating calculations of the average wage. This devious behavior could have continued unabated except for the massive and sustained court campaign launched by pensioners in 1998.

The court campaign

Lawsuits against the government’s pension calculations began as soon as Law 113 came into effect on February 1, 1998. This was not the first time pensioners had gone to court to protect their rights. On previous occasions, there had been numerous, often quite successful, cases of pensioners securing overdue payments through court orders. However, no earlier government act had generated so much public contempt as the recalculation law. According to Valery Saikin, chairman of the Duma Labor and Social Policy Committee, by March 2000, there were about 220,000 pensioners’ cases pending in courts across the Russian Federation.¹³

One of the pensioners’ first major court victories came on June 18, 1998, four months after the enactment of the recalculation law. The Supreme Court, on appeal, ruled in favor of pensioner Tsederbaum, who claimed that the December 1997 instructions by the Ministry of Labor and the Pension Fund on recalculating pensions violated his entitlement rights. In particular, the instructions wrongly reduced some additional payments to which he was entitled as a Second World War veteran, to below what the maximum coefficient established by law (1.2) would provide. The court agreed that additional payments should not be subject to reduction under the temporary IPC restriction, and that Tsederbaum’s pension had been unfairly reduced. The court ordered his pension recalculated, declared the instructions invalid, and obliged the Ministry of Labor and the Pension Fund to withdraw their instructions from subordinate agencies.¹⁴

This Supreme Court victory reinforced the popular impression that local social security agencies were cheating pensioners. In this atmosphere of suspicion, these agencies came under attack, and, on July 23, 1998, the Kaliniskii District Court in Novosibirsk ruled in favor of pensioner Izosimov and established a higher coefficient for calculating pensions than that used by the local agency. The court ordered Izosimov’s pension raised and compelled the local pension agency to cover his court expenses as well.¹⁵

This interpretation of the law not only supported the expectations of pensioners, it also motivated others to sue the government. At the same time, the Communist Party became actively involved. The Communists set up centers providing free legal counseling to pensioners wishing to take the government to court.¹⁶ While such centers may not have been functioning all over the country, they most certainly were in the big industrial areas. Every court victory was publicized in the party’s newspaper and other national media outlets.¹⁷ The resulting publicity helped establish a positive image of the pensioners’ cause in the society at large, and in the courts in particular.

Although the pensioners’ court campaign enjoyed some remarkable successes before the financial crisis of August 1998, the crisis helped raise pensioners’ issues to the top of the political agenda. Communist leaders joined the struggle in an effort to secure the support of one of their largest constituencies. And when a new, postcrisis government was formed with Communist participation, the concerns of pensioners continued to receive official attention. This may have sent a signal to judges that ruling in favor of these retired workers was approved of by at least some of the powers-that-be. In any event, by the end of 1999, the scale of the pensioners’ victory had reached massive proportions. More and more courts across the Russian Federation ruled in favor of the pensioners.¹⁸ Even some representatives of the executive branch began to defect to the pensioners’ side. For instance, the Samara Oblast governor unilaterally ordered an increase of the coefficient for calculating pensions in his region.¹⁹

At the beginning of 2000, the hearing of pensioners’ cases was suspended pending further instructions from the Supreme Court regarding the proper interpretation of the disputed provisions. The Court, in its turn, asked the government and State Duma to clarify the matter through legislation.²⁰ In May 2000, the initial coefficient of 0.7 was raised to 0.8, then to 0.95 in August 2000, and finally to 1.2 in May 2001, the maximum limit stipulated in the recalculation law.

Conclusions

What does the pensioners’ campaign tell us about the supply of and demand for law in Russia? First, this episode should put to rest the idea that the demand for law is missing in Russia. Pensioners across the Russian Federation showed in 1998 and 1999 a strong demand for rule by law, rather than by an arbitrary state. The pensioners may have gone through a phase in the early 1990s when they did not understand that they could use the courts to pursue such matters. Indeed, under communism, the main recourse regarding social benefits was through the party, not the courts. But by 1998, pensioners had gotten the message and begun to use the courts vigorously to demand their rights. Incidentally, the press monitoring and interviews we have conducted since 1998 show that similar campaigns can be found in Kazakhstan, Moldova, and throughout the former Soviet Union. As in Russia, these cases of pensioner activism are regularly reported in the local press.

We do not believe the pensioners’ court campaign is an isolated case in an otherwise apathetic Russia. Lev Ponomarev, a legal activist with Democratic Russia, noted in a talk in June 2001 at Harvard University that approximately 5 million civil cases are brought each year in Russia. In his estimation, as the head of a legal-advice center, most of these concern labor law and legal termination, the main area of Hendley’s original 1989-90 field research, and the basis of her judgment that there was little demand for law in Russia, at least at that time. At the same Harvard meeting, Sergei Pashin, a former Moscow City Court judge and Yeltsin-era legal reformer, noted that there are now 70,000 wrongful-arrest complaints each year in Russia, one-fifth of which are successful. While these figures are small in relation to the total number of arrests in Russia, they show that terminated workers and wrongfully arrested individuals are also beginning to use the courts to press for their rights in Russia. The demand for law appears to have grown quite substantially during the 1990s.

Second, Russian courts are not uniformly the instruments of the rich or the central government, in which regular citizens can expect little or no relief. Instead, the pensioners’ judicial campaign shows that the courts can be a valuable resource for disempowered groups, and, in some instances, are willing to rule against the state. In the late 1990s, the courts provided pensioners with a national forum in which to voice their complaints, as well as a focal point for mobilization. In many ways, the courts were the pensioners’ most important weapon. Courts not only restored pensions on a case-by-case basis but also influenced the government to make nationwide regulatory changes in the methods of pension calculation. There is no question that the rising strength of the Communist Party and the politicization of pensioners’ issues in the wake of the August 1998 crash aided the pensioners’ efforts. However, the courts played an important, independent role. Without their use of the courts, the pensioners’ situation might never have become such an important political issue. It is fair to conclude that Russian courts provide significant resources for civic mobilization against unfair and arbitrary state action.

Third, we need to reexamine seriously the argument that the Soviet legacy hampered the demand for law, particularly through its impact on the mentality of people and their attitudes toward the courts. Pensioners are regularly seen as those individuals most imbued with the Soviet mentality. Yet it was the pensioners, with support from the Communist Party, who led the charge for rule of law in social-welfare administration. What does this say about the Soviet legacy and its impact on the demand for law? Scholars have argued that the coercive use of law in the Soviet period influenced legal attitudes later on, but now we should investigate which aspects of the use of law in the Soviet era encouraged pensioners to employ the courts so vigorously and effectively, apparently in advance of other groups. It may be that some aspects of the Soviet legal tradition are more useful than previously realized.

Fourth, the experience of the pensioners validates one contention of Hendley’s and of the EECR symposium-that the greatest threat to the rule of law in Russia is arbitrary state action, a state that stands above the law. This was clearly the central issue in the pensioners’ court campaign. Not until the Russian state admits to being ruled by law itself will the rule of law advance further in Russia. The administration of justice also needs to be improved. Indeed, judicial reform is now at the top of the political agenda in Russia, though this probably will be a long-term process, extending over many decades.

It is important, though, not to confuse Russia’s institutional problems with popular attitudes. As Judge Pashin stated, “We can be proud of the highest standards of the legal culture of our population. However, the legal culture of our population is not the same as that of our state,” which remains highly conservative and corrupt. Decoupling institutional trends and popular attitudes is also urged by Timothy Colton and Michael McFaul, who concluded recently that the Russian “people have assimilated democratic values faster than the elite has negotiated democratic institutions.”²¹ The pensioners’ long march through the courts suggests that this finding may hold true in the area of rule of law as well.

Fifth, the breadth and scope of the pensioners’ court campaign causes us to ask why the EECR did not notice it in advance of its 1999 symposium. As friends of the EECR, we would like to suggest that one reason may be the constitutional focus of the journal and its reporting on legal developments. But as scholarly focus shifts from setting up constitutional frameworks to establishing the rule of law in Central and Eastern Europe, the EECR could consider enhancing its sociological reporting on the demand for law as part of its regular country updates. This will, we think, increase public awareness of the demand for law that is out there, not least among the pensioners of the former Soviet Union. It would also help all of us rise to Kathryn Hendley’s challenge to focus not only on the provision of law but on the demand for it as well.

Ilian Cashu is an Open Society Institute Policy Research Fellow at Central European University, Budapest. Mitchell Orenstein is assistant professor of political science at the Maxwell School of Syracuse University and a fellow in the Strengthening Democratic Institutions Project at Harvard University. He is the author of Out of the Red: Building Capitalism and Democracy in Postcommunist Europe (University of Michigan Press, 2001).

NOTES

1. Kathryn Hendley, “Legal Development in Post-Soviet Russia,” Post-Soviet Affairs 13, no. 3, pp. 228-51.
2. Yuri Petrov, Pensioneram o Pensiakh, Partia Pensionerov Rossii (To pensioners about pensions, The party of pensioners), (Moscow, 2000), p. 7.
3. Mikhail Zaharov and Elvira Tuchkova, Pravo Sotsialnogo Obespechenya Rossii (The right to social protection in Russia) (Moscow: Bek, 2001), p. 317.
4. Comments by Tamara Pletneva, “Transcript of the Hearing on Amending Law 113,” 82d Session State Duma, March 22, 2001.
5. Interview with Elvira Tuchkova, Moscow, March 29, 2001.
6. Supreme Court, “Official Letter to the Government Regarding the Interpretation of Law 113,” No. 85-1, January 5, 2000. Published in Yuri Liublin, Comments to the Federal Law 113 from 21 July 1997, “On the Method of Calculating and Upgrading State Pensions;” this is a supplement to the journal Pensia (Moscow 2001), pp. 373-76.
7. Comments by Mikhail Zaharov, “Transcript of the Hearing on Pension Reform in the Russian Federation: Problems and Perspectives,” State Duma, March 20, 2001.
8. “Resolution on the Government’s Actions regarding the Implementation of Law 113,” State Duma: January 16, 1998.
9. Petrov, Pensioneram, pp. 26-27.
10. State Duma of the Russian Federation, “Address to President Boris N. Yeltsin,” Resolution No. 2112-II, January 21, 1998. Federation Council of the Russian Federation, “Address to President Boris N. Yeltsin regarding the 30 December 1997, No. 1660, government decision on the average wage for the fourth quarter of 1997 for calculating and upgrading state pensions,” Resolution No. 135, April, 1, 1998.
11. Supreme Court Decision, GKPI No. 98-191, November 13, 1998.
12. Vice Prime Minister Valentina Matveenko, quoted in “Sobytya Mesyatsa,” Pensia, no. 3 (March 2000), p. 16.
13. State Duma of the Russian Federation, Transcript No. 13 (461), March 29, 2000, p. 43.
14. Supreme Court Decision, GKPI No. 98-191, June 18, 1998.
15. Kaliniskii District Court Decision, city of Novosibirsk, July 23, 1998.
16. “Bryansk: Communists Help Pensioners Go To Court,” Russian Federation Report, RFE/RL, vol. 1, no. 9 (April 28, 1999).
17. Interview with Elvira Tuchkova, Moscow, March 29, 2001.
18. State Duma of the Russian Federation, “On the Implementation of the Federal Law Regarding the Method of Calculating and Upgrading State Pensions,” Resolution No. 3763, October 29, 1999.
19. Pensia, Monthly Updates, no. 5 (May 2000), p. 15.
20. See note 6.
21. “Are Russians Undemocratic?” Carnegie Endowment Working Paper 20 (June 2001), p. 21.

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