Post-Soviet Media Law & Policy Newsletter

Issue 10     Benjamin N. Cardozo School of Law     September 10, 1994

Shakeup at Russian Federal Press Committee,
Mironov Dismissed for Nationalist Boasts

    The Federal Committee on the Press made news in a big way this last month.

   1. Most important, its chief, Boris Mironov, attacked for pro-nationalist statements and intemperate calls for more government control of the media (see also PSMLPN issue 9), was unceremoniously sacked on Friday, September 2.

    He was provisionally replaced with Vladimir Volodin, the committee’s first deputy chair. “We are living in a time when President Yeltsin and the government are careful to listen to public opinion, and this decision is evidence that our society has acquired an immunity to fascism and chauvinism,” said Vyacheslav Kostikov, Yeltsin’s press secretary.

    Rumors about Mironov’s dismissal had circulated all summer; according to some reports, the decision to replace him had been taken early on because of maladministration of the distribution of textbooks to schools.

    Just days before the firing, Mironov was widely quoted for speeches given on a tour in which he met with regional newspaper editors.  According to reports, he had urged that such editors be appointed by the government if the papers were funded by the state.    Among the spectacular quotes attributed to him were that “the media is more important to the state than the army.  It should be managed more rigorously than our troops.”  A loyal aide, Nikolai Shkut trying to defend Mironov, said that the press chief was “working for stability.  A bonfire is blazing and some newspapers want to put petrol on it.  We ought not work in that way.”

    Mironov’s dismissal coincided with a Council of Europe meeting in Moscow on the mass media during which the flap over his statements and tenure in office was a mild embarrassment as Russia wished to emphasize its progress toward a free press. 

    2. The Council on Oversight over Distribution of State Subsidies to Periodical Publications announced, in late August, the results of its review of applications for financial support.   111.4 billion rubles, approximately $55 million, was to be distributed.  About one half of the subsidy amount was distributed to the government newspapers Rossiyskiye Vesti and Rossiyskaya Gazeta, as well as to the magazine Rodina.  The chair of the committee was Sergey Gryzunov, Deputy Chairman of the Press Committee, who reportedly sparred with Mironov over the question of subsidies to Pravda and Sovetskaia Rossiia, with Mironov in the end successfully advocating such grants.  Among its distinguished members is Yassin Zassoursky, the dean of the Journalism School of Moscow State University. 

    3.  While Mironov was still head of the Committee, and traveling about the country making the nationalistic statements that brought him down, the Committee issued official warnings to three so-called “patriotic” papers based on their publication of materials “fueling national intolerance and strife.”

    Under the law, if a publication receives two such official warnings in a year, a court may be petitioned to close the paper down.

    Deputy Chair Gryzunov was in charge of the notifications.  He suggested that “national patriotic forces and the groups behind them have already created a whole system of mass media expressing extremist views, which are seeking to push our society off the path of democratic advance.”

    The Committee, according to Gryzunov, would also determine whether the papers are,  in terms of actual publication, complying with their registered charters. The three papers warned were ‘Chernaya Sotnya,’ ‘Zarusskoye Delo’ and ‘Narodnyy Stroy.’


Moscow's TV6 Joint Venture Dissolves

    Daily Variety called it Splitnik:  the divorce of Turner Broadcasting System from TV6, the much heralded “first independent television station in Moscow.”

    From the generally amicable words uttered at the dissolution of the joint venture, the level, causes and implications of disagreement was hard to assess.  According to Eduard Sagalaev, President of Moscow Independent Broadcasting Corporation, “we didn’t feel comfortable with the level of investment from TBS.”

    According to Sagalaev, Channel 6 offered TBS a 25 percent share in the project, but Turner wanted at least 50 percent.  An important factor was said to be proposed legislation limiting foreign investors in the media to 25 or 30%.

    Relations between Turner Broadcasting and TV6 have always been complex.  The first executive director, Sidney Pike, sent by TBS to help set up and manage the joint venture was replaced by Stuart Loory, the respected, quasi-ambassador of Turner to the former Soviet Union.

    There was, despite hopes to the contrary, precious little original programming. TV6 carried CNN International, cartoons and films from the Turner library. A weekly schedule showed virtually no locally produced news.

    The joint venture also required a systematic replacement of rooftop antennas in Moscow so that more homes could receive the frequency. This was a painful process, scheduled to be completed at the end of 1994 at a cost of around $1 million.

    Another possible difference between the partners might have been the attributed cost for programming supplied by Turner and the way in which that was to be converted into equity.

    During the period between the celebration of the marriage and the announcement of the separation, the Russian partners have had discussions with major Russian financiers.  Just as Igor Malashenko’s MTV has a long-term financing arrangement with the MOST Bank, TV6 may have a major industrial partner in mind.

    Like Malashenko and others, TV6 is attempting to extend its reach by providing satellite distribution of its programming to stations around the former Soviet Union.


The MMM Case: Implications for The Russian Media

    The collapse of the MMM investment fund on July 29th sent shock waves throughout Russia and the world.  It provided a graphic illustration of the dangers of attempting to introduce capitalism overnight into Russia.  Lured by glossy television and newspaper advertisements promising 3000 percent annual dividends, California vacations, Paris apartments and the like, an estimated ten million Russian citizens invested billions of rubles in what turned out to be a classic Ponzi scheme.

    The MMM case has important potential implications for the mass media.  It brings to the fore the essential question of whether Russia should rely primarily on the market or on government regulation to sort out truth from falsehood in commercial information.

    Prior issues of this newsletter have discussed the desperate struggle of the Russian print and electronic media for economic survival.  While the press has emphasized the continuing need for government subsidies, others have pointed out the incompatibility of such support with the ideal of an independent “Fourth Estate.”  Commercial advertisement has proven to be one of the most successful responses to this dilemma.  The newspaper Izvestiia is a prime example.  Due in large part to its five-year aggressive campaign for advertisements, Izvestiia managed to operate without state subsidies in 1993 and even showed a small profit.

    It is hardly surprising, then, that most of the major Russian newspapers and television stations chose to carry MMM advertisements.  MMM, named by Izvestiia’s Mikhail Berger as “Russia’s chief advertiser,” reportedly spent 10 billion rubles per day on advertising alone.  Critics have charged that, as a result, the Russian print and electronic media were essentially “purchased” by the MMM company.  They contend that by displaying MMM advertisements and publishing articles that expressed only the most muted criticism of the company’s investment practices, mass media outlets became MMM’s “accomplices” in deceiving the Russian public.

    The role of advertising in the MMM case has already drawn considerable official attention.  A week prior to the July 29th collapse, the Committee on Anti-Monopoly Policy publicly recommended that the mass media cease carrying MMM advertisements.  On July 30th, ITAR-TASS reported that Moscow Mayor Iurii Luzhkov had ordered a ban on all MMM advertisements pending full investigation of the company’s activities.  On the same day, Yeltsin’s top security advisers called for a crackdown on companies with similar advertising campaigns and for the Duma to suspend its vacation and adopt emergency federal legislation on advertising.

    Also on July 30th, the Finance Ministry issued a statement charging the media with “unlawful promotion” of financial companies and announcing its plans to ask tax and procuratorial organs to investigate media activities and confiscate “any unlawfully-derived profits.”  It specifically cited the MMM example in “advising” Russian citizens to seek professional guidance before purchasing securities and to be wary of “a commercial promising to pay higher than average dividends or that share values can only go up.”  Largely as a result of the MMM case, federal administrative and legislative authorities are currently in the process of drafting comprehensive regulations on advertising.

    Media dissemination of “improper” advertisements is by no means a new issue for post-Soviet Russia.  As early as December 1992 this question gained prominence when the Moscow Procurator’s Office instituted criminal actions against Moskovskii Komsomolets and Chastnaia Zhizn’ for publishing advertisements for “intimate services” and illegal purchase and sale of convertible currency, orders, and medals.  More recently the focus has been on advertisement of hazardous products and activities.  For example, the May 5th Recommendation of the Presidential Chamber for Information Disputes (printed elsewhere in this issue) condemned media advertisement of alcoholic beverages, tobacco products, and unlicensed practitioners of non-traditional medicine as contrary to Russian health legislation.  The Judicial Chamber made two points that may be indicative of overall Russian approaches to advertising.  First, it directed the media to verify that potential advertisers had obtained the requisite certification of products before agreeing to advertise such products.  Second, it called for confiscation of all profits generated from illegal advertisements.

    Thus far, Russian authorities have provided only rudimentary guidelines on the specific problem of advertisements for banking and financial enterprises.  In April, the Central Bank issued an appeal to the mass media to confirm with the Central Bank that potential advertisers were formally licensed to do business in Russia.  In May, the Finance Ministry published in Rossiiskaia Gazeta a letter to Russian citizens on the “critical situation” in the Russian securities market.  This notice cautioned investors that “no advertisements should be trusted.”  In early June, Rossiiskie Vesti reported that former Finance Minister Boris Fedorov had submitted to the Duma a draft Law on Protecting Consumers’ Rights in the Sphere of Financial Services.  Fedorov proposed the creation of special inspection departments within the Central Bank and Finance Ministry to investigate and prevent deceptive financial advertising.  He also recommended publication of “black lists” of unlicensed financial companies.  He called for immediate suspension of these enterprises’ operations and advertisements and for imposition of fines on any media outlets that “publish or broadcast an advertisement for companies that are ultimately banned.”

    At present, the two key legal acts are Yeltsin’s decrees of June 10 and June 11, 1994:  Decree No. 1183 on Consumer Protection Against Unfair Advertising and Decree No. 1233 on Protection of Investors’ Interests. In brief, these decrees introduce reporting requirements for advertisers (e.g., “real” dividend and interest rates, registration information), prohibit advertisement of securities prior to registration of the prospectus, and oblige advertisers to avoid false, misleading, and unconfirmable promises regarding future performance.  Sanctions include mandatory withdrawal of “unfair” advertisements, cancellation of the securities issue registration, and suspension or revocation of the advertisers’ business license.  The mass media, in turn, have a legal duty to require presentation by a potential advertiser of securities of its official certificate of registration.  Any mass media that carry false advertisements or announcements regarding securities are obliged to publish information on the subsequent cancellation of the registration of the securities issue.

    The Committee on Anti-Monopoly Policy and the Central Bank have already served notice that they intend to enforce these presidential decrees.  For example, in late July, the Anti-Monopoly Committee issued implementing procedures and formally notified managers of twelve private companies of their noncompliance with the new advertising requirements.  The Committee also announced plans to reduce media advertising from 40 percent to 25 percent of printed space and from 25 percent to 15 percent of broadcast time.  On August 19th the Central Bank press service provided central Russian news agencies and publications with a list of more than twenty unlicensed financial firms.

    Russian authorities have pledged to ensure that there will be no repetition of the MMM scandal.  They have promised imminent adoption of detailed laws on securities markets, banking operations, and commercial advertising.  Early indications are that these laws will introduce extensive content regulation of advertisements.  Recent official statements and commentary have focussed almost exclusively on the negative side of advertising—specifically, the power of major advertisers to influence, even distort, media coverage of events and to mislead and ensnare a gullible public.

    It is important to remember as well, however, the potential benefits of advertising for post-Soviet Russia.  To borrow a phrase from C. Edwin Baker, advertising can be the “life blood” of a democratic media.  As a nongovernmental “subsidy,” it can liberate the media from state support and direction and, ideally, increase the media channels available to the Russian audience.  Advertising can also be an effective source of commercial information and encouragement for Russian consumers.  As such, it can contribute directly to development and expansion of the Russian economy, an urgent priority for the Yeltsin government.

Frances Foster
Washington University
School of Law

Note:

    The Russian Finance Ministry has announced that a series of presidential decrees is being prepared to prevent further scandals similar to the collapse of the pyramid investment scheme run by the MMM company. Under the proposed decrees, investment companies will be prohibited from quoting prices for their own shares, and they will no longer be ableto issue shares with a total value exceeding their authorized capital. It is also expected that systems will be organized to ensure the independent registration of shares and state regulation of the activities of investment companies.

Ostankino Mayak Radio, August 29, 1994


Presidential Chamber Advertising Decree:
Tobacco, Alcohol and Other Problematic Products

    We have been following the work of the Presidential Chamber for Information Disputes of the Russian Federation, an important tribunal in Moscow, and, from time to time, will include copies of their decrees and recommendations. Here, translated from the Russian by Natalia Dronova and Frances Foster, is a document published in Rossiiskaia Gazeta on May 14, 1994.

    The Russian Federation Presidential Chamber for Information Disputes has examined the issue of dissemination of advertisements that are dangerous for life and health.

    It analyzed publication of advertisements for alcoholic beverages and tobacco products in March-April 1994 issues of the newspapers “Ekstra-M,” “Ekspress-Reklama,” “Moskovskii Komsomolets,” “Kommersant,” “Kommersant-Daily,” “Delovoi Mir,” “Tsentr Plus,” “Rossiiskaia Gazeta,” “Komsomol’skaia Pravda,” and other publications.  The Judicial Chamber also studied information regarding advertising of alcoholic beverages and tobacco products on television—by the television company NTV, the tele-radio companies “Moskva” and “Sankt-Peterburg-5th Channel,” the VGTRK, and the 1st Channel “Ostankino.”

    The Judicial Chamber heard the expert conclusions of a group of specialists headed by M. N. Maleina, the Chairman of the Russian Federation State Committee on Anti-Monopoly Policy and Support for New Economic Structures (N.E. Fonareva), the representative of the Russian Federation Ministry of Health (G.B. Tkachenko), and the representatives of the mass media (B.A. Piliatskina (“Izvestiia”), I.M. Podzigun (“Ostankino”), A.S. Politkovskaia (“Obshchaia Gazeta”), L.V. Grechkina (“Moskovskii Komsomolets”), Iu. M. Nekrasov (“Delovoi Mir”), R.I. Alibegov (“Otkritoe Radio”), A.O. Shchekelev (MTK “Moskva”), and others).

    The Judicial Chamber has determined that:     Moreover, the mass media do not always observe Article 7 Clause 4 of the Russian Federation Law “On Certification of Products and Services.”  This article prohibits the advertisement of products that must be certified, but have not received such certification.

    Also, the mass media do not always fulfill the requirements of Article 43 Clause 8 of the Fundamentals of the Russian Federation Legislation “On Protection of Citizens’ Health.”  This article prohibits propaganda of methods for prevention, diagnosis, and treatment, as well as medicinal remedies that have not been properly tested as required by law.  The mass media also advertise various healers, psychics, sorcerers, and other persons who claim to be specialists in non-traditional methods of treatment but do not have the appropriate permits to do so.  In  fact, the Russian Federation Ministry of Health has failed to control such persons and the advertising of their unlawful activities.

    During the Judicial Chamber hearing, representatives of the mass media that violated Article 19 Clause 2 of the Fundamentals of Russian Federation Legislation “On Protection of Citizens’ Health” (regarding advertisement of alcoholic beverages and tobacco products) presented various reasons to justify the established practice of dissemination of prohibited, improper advertisements.

    These reasons included:  the financial hardship of many individual mass media outlets, especially tele-radio companies; the blanket prohibition of advertisements, which should be replaced by a system that would only limit such advertisements and allow them to appear at specified times (for example, as on “Ostankino” from 11:00 p.m. on); the failure to distinguish between advertisements and commercial announcements (information); the lack of a Russian Federation Law “On Advertisements;” the absence of norms regarding responsibility for violation of Article 19 Clause 2 of the Fundamentals of Russian Federation Legislation “On Protection of Citizens’ Health”, and so on.

    The Judicial Chamber could not agree with such arguments.

    Protection of Russian citizens’ health remains a priority and is set forth in existing law.  It is impermissible to adopt administrative normative acts that contradict or “correct” this legislation.  It is easy to distinguish advertisements from mere announcements of the sale of alcohol and tobacco products.  Advertisements popularize and extol the quality and accessibility of the products, and encourage consumption of these products by various methods.

    Russian legislation includes some legal remedies that could cover the most obvious cases of dissemination of prohibited advertisements.  In particular, Article 49 of the Russian Federation Civil Code may be used for this purpose.  This article provides that, under certain conditions, all profits from a transaction may be confiscated by the state if such a transaction is declared void because its purpose contradicts the interests of society.

    During the Judicial Chamber hearing, B.G. Tkachenko, the representative of the Russian Federation Ministry of Health presented extensive data revealing that smoking has become an alarming problem in Russia and showing the increase in fatalities from smoking and the rise in numbers of teenaged and women smokers (including pregnant women), etc.

    The Judicial Chamber placed special emphasis on the fact that advertisement of foreign alcohol and tobacco products has increased significantly in the Russian mass media, at the very time that these same advertisements are not carried in the manufacturing countries.  Therefore, foreign producers of alcohol and tobacco products are using advertisements, especially those in the Russian mass media, to turn Russia into a market for the sale of their products, despite the legislation for protection of Russian citizens’ health.

    In light of the above-stated facts and in conformity with Articles 20 and 21 of the Statute on the Judicial Chamber, the Judicial Chamber recommends:

    1.  Mass media dissemination of advertisements for alcohol and tobacco products, for whatever reason, should be considered a violation of Article 19 Clause 2 of the Fundamentals of Russian Federation Legislation “On Protection of Citizens’ Health.”

    2.  It is important to draw the attention of the mass media to the fact that, according to Article 7 Clause 4 of the Russian Federation Law “On Certification of Products and Services,” in entering into a contract for advertisement of a product that requires certification, the mass media must verify that the advertising party has obtained the appropriate certificate.  In the absence of such certificate of compliance, the mass media should not enter into a contract for advertisement of a product that requires certification.

    3.  It is necessary to take into consideration the fact that the results of testing new methods of prevention, diagnosis, treatment, and medicinal preparations should be reported by the mass media in a manner consistent with Article 43 Clause 8 of the Fundamentals of Russian Federation Legislation “On Protection of Citizens’ Health.”  Prior to final formulation of such results, the mass media may report only the facts of such testings and research.  This information should not be accompanied by conclusions regarding the progressiveness, effectiveness, uniqueness, and other alleged advantages of new methods of treatment and medicinal preparations (i.e., they should not be advertised).

    It is impermissible to allow advertisement of activities by persons who claim to be specialists in non-traditional methods of treatment (so-called healers, psychics, sorcerers, fairies, etc.) but do not have the appropriate permits to engage in such activity.

    4.  It is necessary to draw the attention of the Russian Federation Ministry of Health and procuratorial organs to their failure to use legal remedies to prevent violation of Article 19 Clause 2 of the Fundamentals of Russian Federation Legislation “On Protection of Citizens’ Health.”  These remedies include in particular Article 49 of the Russian Federation Civil Code, which as stated above, provides that all profits from a transaction may be confiscated by the state if the purpose of such a transaction is against the interests of the state and society.

    5.  It is necessary to examine proposals presented during this hearing by representatives of the mass media.  These proposals may be used in drafting the Law “On Advertisements” and in improving legislation on protection of citizens’ health.  It is advisable to accelerate the drafting of the Russian Federation Law “On Advertisements.”

    The Judicial Chamber decided to send all information regarding established cases of violation of the legislation on protection of citizens’ health to the Russian Federation Ministry of Health for the application of concrete sanctions against the violators.

Chairman of the Judicial Chamber
A. V. Vengerov
Recommendation of May 5, 1994, No. 1


Will Russian Defamation Law Acquire a Consitutional Dimension?

    Beset by a tide of defamation lawsuits, some seeking hundreds of millions of rubles in damages, Russian mass media organizations may find themselves seeking protection from Russia’s recently-resurrected Constitutional Court.

    Defamation actions for money damages are a recent phenomenon in Russia, but litigants are quickly catching on.  Prior to 1991 the only remedy available to plaintiffs was retraction of the offending statement.  Soviet law viewed monetary compensation as inappropriate because defamation is a form of moral (non-property) injury.  In 1991, however, Article 7 of the Civil Code was amended to permit courts to impose monetary damages in such cases.  The Russian Mass Media Law contains a similar provision in Article 62.

    A number of political figures, including Moscow Mayor Yuri Luzhkov, former Vice President Aleksander Rutskoi, and State Duma Deputy Vladimir Zhirinovsky, have repeatedly resorted to the filing of defamation actions.  Zhirinovsky, for example, has candidly warned mass media representatives about his ability to make their lives difficult, and reportedly has filed nearly one hundred lawsuits in the last nine months.  Last January, he warned journalists that “Before writing articles, you should check to see whether there is money in your coffers”.  In July, Boris Mironov, while he was still Chairman of the State Committee for the Press, became the first member of the government to sue Izvestiia.  He sought $1,000,000 in damages for an article which he charged was untrue and mischaracterized his political leanings.

    The revision of Article 7 in 1991 to include money damages was not accompanied by other changes in defamation law.  Thus, the elements of a successful action—publication, defamatory meaning, and falsity—remain the same as when Article 7 was enacted in the 1960’s. The defendant continues to bear the burden of proving the truth of the statement in controversy, and liability is not based on fault.  In other words, the plaintiff need not show that the defendant acted willfully or negligently.

    Critics of the existing law have proposed various changes to improve what they view as inadequate protection of mass media rights.  One proposal seeks to remove the incentive for high damages claims by borrowing a device from Article 82 of the Code of Civil Procedure—the imposition on plaintiffs, at the time of filing, of a state duty equal to 15% of the claimed damages.  Currently, the filing fee is a mere ten rubles—a fraction of a cent.  Thus, according to Pavel Gutiontov, Secretary of the Union of Journalists of Russia, “a person who considers himself offended by a journalist has the right to claim any sum up to the country’s budget, taking no risks and paying a ridiculously small fee.”  Or, as Boris Klim, attorney for the newspaper Kommersant, exclaimed to the Boston Globe’s Jon Auerbach: “It’s like playing roulette—you give just 10 rubles and you can win tens of millions.”

    A Moscow attorney, Genri Reznik, recently took issue with this approach in an article in the July 26th issue of Izvestiia. While sympathetic to those who sought to curb plaintiffs’ “excessively mercenary appetites”, Reznik pointed out that the Russian Supreme Court recently explained that the Code of Civil Procedure does not permit a percentage-based levy in actions for moral—as opposed to property—injury.  In addition, Reznik voiced skepticism about whether such a state duty would in reality create an effective deterrent. 

    Instead, Reznik proposed that courts should refrain from ordering pre-trial “arrest” (attachment) of a defendant’s property— a procedure permitted under Article 134(1) of the Code of Civil Procedure for purposes of insuring the availability of funds for a successful plaintiff.  Such attachment, he argued, should not be ordered in cases where the plaintiff seeks compensation for moral injury.  

    As pointed out in Reznik’s article, however, this position is not uniformly accepted by the courts.  A solid statutory foundation for Reznik’s argument would require changes in Russia’s Code of Civil Procedure.

    Thus, critics of current defamation law will perhaps seek relief through an appeal to Russia’s Constitutional Court, which after being suspended shortly after the events of October, 1993 is slated to resume deliberations this fall.  The Court will operate under a new statute enacted in July, which empowers it to rule on complaints that laws violate citizens’ constitutional rights in those cases where a lower court or other government body has begun or completed examination of the law in question.  It is unclear whether the statute requires that the lower court or other governmental body must join in the complainant’s petition to the Constitutional Court.  In addition, it is not clear whether the Constitutional Court must accept all cases presented to it.

    If a constitutional challenge to current defamation law does come before the Court, it will present a clash of constitutional rights. Article 29(1) of the Russian Federation Constitution guarantees to “everyone” freedom of speech, and Article 29(5) guarantees freedom of the press.  Meanwhile, Article 23(1) recognizes that “everyone” is entitled to “protection of his or her honor and good name.”

    It is also possible that Russia’s continuing interest in admission to the Council of Europe, as evidenced by Moscow’s hosting of an August 30-September 2 conference on mass media in a democratic society and the State Duma’s July, 1994 Decree affirming the standards in the European Convention for the Protection of Human Rights and Fundamental Freedoms, might play a role in the Court’s decision.  A prerequisite to admission is an applicant’s promise that it will join the European Human Rights Convention, which in Article 10 guarantees the right to freedom of expression subject to restrictions necessary for protection of the “reputation or rights of others”.  In a series of defamation cases interpreting Article 10, the European Court and Commission of Human Rights have fashioned rules strongly protective of information media defendants. 

    As long as Russia is not a Council of Europe member, these rulings would provide at best only persuasive authority for the Russian Constitutional Court.  If and when Russia is admitted, however, the European Human Rights Convention will be incorporated directly into Russian law under Article 15 of the Constitution, which provides that international treaties of the Russian Federation are a component part of the Federation’s legal system and take precedence over Russian laws inconsistent with them.

Peter Krug