This can-and in Russia, already has--undermined popular support for further privatization and other reforms needed for a healthy market economy C. Legal and Market Controls in Emerging Economies Even as the economic and political goals of corporate law in emerging economies favor a strong protective function, limitations on enforcement resources constrain how this protective function is discharged. Developed economies usually have sophisticated enforcement institutions that can implement complex, finely nuanced rules. Emerging economies have less sophisticated enforcement institutions, and hence need simpler, more easily administrablerules The most significant enforcement limitation is weak judicial enforcement. Several weaknesses in a judicial system can hobble the enforcement of corporate law in emerging markets. First, the substantive legal remedies available to judges may be ill-defined or inadequate. a simple but telling example in Russia is the absence of a rule permitting judges to adjust damages for inflation. Without such an adjustment, damage awards in a high-inflation environment will compensate for only a negligible fraction of the actual loss when paid some years later. Moreover, judicial procedures may be so cumbersome, or the court system so overtaxed, that timely judicial action may be impossible to obtain except in rare cases. Russia, for example, has no analogue to a preliminary injunction. Further, the judiciary may lack experience with corporate law cases, may be corrupt, or may be so ill-paid that skilled lawyers will not take judicial jobs See, e.g., Can Yeltsin Win Again?, Economist, Feb. 17, 1996, at 43(describing the Communists' political resurgence in Russia and President Yeltsin s subsequent decision to fire Anatoly Chubais, the architect of privatization and the last remaining prominent free-market reformer in the Yeltsin administration ); Peter Galuszka Rose Brady, The Battle for Russia's Wealth: Can Rich New Capitalists Weather a Popular Backlash, Bus. Wk, Apr. 1, 1996, at 50(describing political backlash against the conspicuous wealth of new Russian tycoons) 27Our focus here is on civil enforcement of the rights and duties established by the corporate law. Criminal enforcement, which can also be relevant in the corporate context in extreme cases, suffers from additional limitations, including poorly paid, poorly trained, and sometimes corrupt investigators and prosecutors An example: one of us is familiar with a contract case to recover 32, 000 rubles brought in 1990, when the ruble-dollar exchange rate was around 1: 1. The damage award was paid in 1995, by which time 32, 000 rubles A senior member of the Supreme Russian Arbitrage Court(the Russian"arbitrage"courts exercise jurisdiction over commercial disputes)recently admitted, with unusual candor: " This share business is too complicated for us. We dont understand it. We have no laws to deal with it. Elif Kaban, Shares, Guns and Bodyguards in Russia's Courts, Reuters, May 14, 1995, available in LEXIS, News Library, Wires File 30 For example, the Russian arbitrage courts have experienced little change in personnel since the demise of the Soviet Union. Current judicial salaries are as laughable as other official Russian salaries. A senior judge today earns around $100 per month, barely more than a subsistence wage. A competent judge can increase his26 See, e.g., Can Yeltsin Win Again?, Economist, Feb. 17, 1996, at 43 (describing the Communists' political resurgence in Russia and President Yeltsin's subsequent decision to fire Anatoly Chubais, the architect of privatization and the last remaining prominent free-market reformer in the Yeltsin administration); Peter Galuszka & Rose Brady, The Battle for Russia's Wealth: Can Rich New Capitalists Weather a Popular Backlash, Bus. Wk., Apr. 1, 1996, at 50 (describing political backlash against the conspicuous wealth of new Russian tycoons). 27 Our focus here is on civil enforcement of the rights and duties established by the corporate law. Criminal enforcement, which can also be relevant in the corporate context in extreme cases, suffers from additional limitations, including poorly paid, poorly trained, and sometimes corrupt investigators and prosecutors. 28 An example: one of us is familiar with a contract case to recover 32,000 rubles brought in 1990, when the ruble-dollar exchange rate was around 1:1. The damage award was paid in 1995, by which time 32,000 rubles were worth around $7. 29 A senior member of the Supreme Russian Arbitrage Court (the Russian "arbitrage" courts exercise jurisdiction over commercial disputes) recently admitted, with unusual candor: "This share business is too complicated for us. We don't understand it. We have no laws to deal with it." Elif Kaban, Shares, Guns and Bodyguards in Russia's Courts, Reuters, May 14, 1995, available in LEXIS, News Library, Wires File. 30 For example, the Russian arbitrage courts have experienced little change in personnel since the demise of the Soviet Union. Current judicial salaries are as laughable as other official Russian salaries. A senior judge today earns around $100 per month, barely more than a subsistence wage. A competent judge can increase his 13 This can -- and in Russia, already has26 -- undermined popular support for further privatization and other reforms needed for a healthy market economy. C. Legal and Market Controls in Emerging Economies Even as the economic and political goals of corporate law in emerging economies favor a strong protective function, limitations on enforcement resources constrain how this protective function is discharged. Developed economies usually have sophisticated enforcement institutions that can implement complex, finely nuanced rules. Emerging economies have less sophisticated enforcement institutions, and hence need simpler, more easily administrable rules. The most significant enforcement limitation is weak judicial enforcement.27 Several weaknesses in a judicial system can hobble the enforcement of corporate law in emerging markets. First, the substantive legal remedies available to judges may be ill-defined or inadequate. A simple but telling example in Russia is the absence of a rule permitting judges to adjust damages for inflation. Without such an adjustment, damage awards in a high-inflation environment will compensate for only a negligible fraction of the actual loss when paid some years later.28 Moreover, judicial procedures may be so cumbersome, or the court system so overtaxed, that timely judicial action may be impossible to obtain except in rare cases. Russia, for example, has no analogue to a preliminary injunction. Further, the judiciary may lack experience with corporate law cases,29 may be corrupt, or may be so ill-paid that skilled lawyers will not take judicial jobs.30