Contract Enforcement in Post-Soviet Ukrainian Business

Using the findings of a five-year ethnographic study, this thesis examines the contractual relationships that prevail in low-technology moderately competitive industries characteristic of the contemporary Ukrainian economy. The research reports on how contracts are enforced and how the stability of business relationships is ensured in Ukraine. The established view of many scholars that business efficiency is held back in most post-Soviet economies by frequent contractual violations and dysfunctional courts is not entirely supported by the research underpinning this thesis: in Ukraine, contract enforcement is generally effective enough to allow stability in day-to-day transactions, and the commercial courts do provide adequate backing. Although the mechanisms used to enforce contracts in Ukraine are generally similar to those found in developed countries, there are distinctive features within the overall pattern. In particular, firms rely extensively on repeated interactions and self-enforcing devices while signing short-term formal contracts and avoiding interdependency between trading partners. They do not rely on their reputation or business association memberships and they make no use of private arbitration. Instead, a few legal institutions dating back to the Soviet period proved adaptable and viable in a market economy. When transactions involve either state-owned companies or the exercise of administrative resources, contract enforcement becomes problematic. Illegal kickbacks from suppliers and the coercive use of state machinery come into play, and asking a court to enforce a contract is more costly and less effective than in other cases. However, the author shows that in the typical everyday transactions of Ukrainian private firms, the state and its administrative resources are involved in the minority of cases, and that they do not undermine the dominant pattern of orderly contractual dealings. The thesis concludes that the contractual pattern prevalent in Ukraine effectively serves straightforward traditional buyer-seller transactions but it is ill-suited to meet the requirements of globalized trade, production diversification and technological progress. Adaptations of the existing system to meet these requirements are likely to depend upon changes in the wider business environment, namely upon institutions constraining the coercive power of the state.This thesis is not currently available on ORA