Accessibility links

Russian Court Rules on U.S. Business Dispute

  • Robert Lyle



Washington, Feb. 28 (RFE/RL) - In the realm of business disputes, it is but a minor bump in the road. But a ruling by the anti-monopoly committee of the Russian federation in a fight between American Medical Clinics (AMC) and PepsiCo is a landmark in one important way: it is apparently the first time a business dispute between two U.S. companies has been handled by a Russian judicial entity.

Last Friday, The Chairman of the Committee for Antimonopoly Policy and Support for New Economic Structures, Leonid Bochin, issued an opinion that PepsiCo had been guilty of breaching article 10 of the Russian Law of Competition by misappropriating trade secrets and confidential business information from AMC's outpatient medical facility in Moscow.

PepsiCo, which is in a wide variety of businesses in addition to its core beverage Cola and its Pizza Hut restaurant chain, was in a partnership with Worldwide Medical in 1993 to open a medical clinic in Moscow.

AMC had established the first western-style clinic in Moscow inside the U.S. embassy in 1989, moving it outside the embassy compound in 1992.

AMC charged that in 1993, when it was negotiating with a Russian health care enterprise to establish a joint venture to develop a larger facility, PepsiCo officials attempted to interfere with the negotiations, and in the process stole confidential business documents.

The Chairman of U.S.-based First Medical Corporation and American Medical Clinics, Dennis Sokol, says the theft of trade secrets and confidential business papers seriously interfered with AMC's operations in Moscow and delayed plans to open a much larger facility.

He told our correspondent in Washington that AMC was "prevented from building a hospital, so we've lost a lot of time on it."

AMC sued in a county court in the American state of North Carolina in 1994, seeking unspecified damages from PepsiCo. The suit was filed in the obscure Alamanze County circuit court because of the incorporation structure of PepsiCo's businesses.

According to AMC, the court last year agreed with a PepsiCo demand that the case be dismissed unless AMC first obtained a ruling from the Russian anti-monopoly committee.

AMC says that with the Russian Committee ruling, it will return to the North Carolina court and seek to have damages awarded.

PepsiCo officials declined to discuss the matter with reporters, but the company's international headquarters in Purchase, New York, issued a brief statement saying the decision by the Russian committee "is just plain wrong and was made without much attempt to hear both sides of the story."

PepsiCo's statement said that the ruling "doesn't change the fact that after exhaustive hearings two U.S. courts of law have already dismissed all of AMC's claims." AMC says there has been only one court case on the matter -- the one in North Carolina -- and PepsiCo would not explain its statement any further.

PepsiCo's statement said the corporation continues to "believe that the case is without merit" and that ultimately, it will not "impact our commitment to the Russian market or the pursuit of our long-term business plans."

AMC chairman Sokol says the medical clinic in which PepsiCo was involved has since gone bankrupt and that his company's efforts to open a new, large facility will now proceed. He said it should be finished within nine months.

Whatever the eventual outcome of the case, experts dealing in the growing involvement of American business in Russia have long said that business dispute resolution is a critical part of the market environment in any nation. The fact that a Russian committee acted with dispatch in a dispute between two American firms is taken as a positive sign by U.S. business and investment experts.

Sokol says the committee's action "reaffirms my confidence that American companies like AMC can continue investing in and building facilities in emerging markets such as Russia, knowing they will have the full support of their government to settle cases" involving both local and foreign companies.

XS
SM
MD
LG