Anti-Corruption in Russia

Alexander Bychkov*, Roman Butenko*, Alexander Monin* (Baker McKenzie Russia)

1. Domestic bribery (private to public)

1.1       Legal framework

Russian criminal law prohibits active and passive bribery of Russian public officials.

1.2       Definition of bribery

A bribe is defined as money, securities, other property, or the illegal provision of services, property rights or the provision of other property benefits to a Russian public official (bribe taker) (including instances where a bribe upon their instructions is provided to other individual or legal entity) for the acts or omissions by such public official in favour of the bribe giver or any parties that represent the bribe giver, if such acts or omissions fall within the range of the ex officio powers of the public officials or if such a public official can, by reason of his or her ex officio status, foster such acts or omissions, or for general patronage or connivance in service.

Aiding and abetting public bribery is a separate criminal offense. Aiding and abetting is defined as the physical giving of a bribe on the instructions of the person either giving or receiving a bribe, as well as any other assistance to either of these persons in reaching or executing an agreement between them to give and take a bribe. This also applies to offers or promises of assistance in aiding and abetting of public bribery regardless of the value of the bribe.

1.3       Definition of public official

Russian “public officials” is defined, in Article 285 of the Criminal Code, as persons who permanently or temporarily, pursuant to a specific authorization, perform the function of a representative of state power as well as persons who perform organizational or administrative functions in the state and municipal bodies, state or municipal establishments, as well as in the Russian military and other armed forces.

1.4         Consequences of bribery

(a)        For the individuals involved

The sanctions under Article 291 of the Criminal Code vary, depending on: (a) whether the person giving a bribe has acted alone or in conspiracy with others; (b) whether the bribe is given for the commission of a lawful or an unlawful act (or failure to act); and (c) the amount of the bribe.

The minimum sanctions ? for minor public bribery of up to RUB 10,000 (~USD 170) ? include a fine of up to RUB 200,000 (~USD 3,400) or the salary or other income of the convicted for a period of up to three months, correctional labour for a period of up to one year, a limitation of freedom for a period of up to two years, or imprisonment for a period of up to one year.

The maximum sanction for a bribe exceeding RUB 1 million (approximately USD 17,000) is a fine from RUB 2 million (~USD 32,400) to RUB 4 million (~USD 64,900), or in the amount of the salary or other income of the convicted for a period of two to four years, or of 70 to 90 times the amount of the bribe with or without a prohibition from holding certain positions or engaging in certain professional activities for up to 10 years, or imprisonment for a period from 8 to 15 years with or without a fine of up to 70 times the amount of the bribe and with or without the prohibition from holding certain positions or engaging in certain professional activities for up to 10 years.

A person who has given a bribe may be released from criminal liability if he or she actively aided in detecting and prosecuting the crime, and either the bribe was extorted from him or her, or he or she voluntarily reported the bribe to the criminal law enforcement authorities.

The sanctions for aiding and abetting public bribery, as well as grounds for releasing from criminal liability are generally similar to those for public bribery (excluding the ground of extortion).

According to Article 104.1 of the Criminal Code, property obtained as a result of a criminal offense and any property into which such criminally obtained property has been subsequently transformed, as well as any proceeds from the use of such property, may be subject to confiscation.

According to Article 104.2 of the Criminal Code, a court may decide to confiscate the value of the criminally obtained property if, by the time the court issues a judgment, confiscation of this property as such becomes impossible due to this property having been used, sold or due to other reasons. Where such funds are absent or their amount is insufficient, the court may decide to confiscate other property that is equivalent or comparable in value to the criminally obtained property (except for property that is exempt from any levy of execution).

(b)        For the company/legal entity

In Russia, legal entities have no criminal liability. When a legal entity is held responsible for unlawful conduct, the entity is ordinarily subjected to administrative liability, such as administrative fines.

Article 19.28 of the Code of Administrative Offences provides for the administrative liability of a legal entity for the unlawful provision, offer or promise by anyone acting in the name or in the interests of a legal entity of anything of pecuniary value to a Russian public official or manager of a non-public legal entity for any actions or omissions to act in the interests of this legal entity.

The sanctions under Article 19.28 of the Code of Administrative Offences vary, depending on the amount of the unlawful remuneration, that is, the bribe. The minimum sanction for a bribe up to RUB 1 million (~USD 17,000) is a fine of up to three times the amount of the bribe, but not less than RUB 1 million (~ USD 17,000). The maximum sanction for a bribe over RUB 20 million (~ USD 340,000) is a fine of up to 100 times the amount of the bribe, but not less than RUB 100 million (~ USD 1.7 million). In all cases, the bribe or its equivalent value may be confiscated.

A legal entity may be held liable under Article 19.28 of the Code of Administrative Offences, irrespective of the liability of a particular individual involved in the giving of a bribe.

1.5       Political contributions

Contributions to political parties are regulated by Federal Law No. 95- FZ “On Political Parties” of 11 July 2001. In general terms, contributions to political parties from legal entities are allowed if their total amount does not exceed RUB 43.3 million (~USD 732,000) per year from one legal entity. As a general rule, political parties are not entitled to receive any contributions from state authorities, foreign entities, individuals and non-commercial organizations that have received any funds from the abovementioned within a year prior to the assumed contribution to a political party.

Contributions by legal entities to electoral funds of political parties and of candidates to public offices (including that of the president of Russia) are also subject to restrictions established by the relevant federal laws.

1.6       Limitations applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)

The applicable limitations on acts of hospitality generally do not depend on the type of hospitality, but rather on the status of the recipient and the general purpose of the hospitality. A general prohibition on accepting any hospitalities (gifts, loans, services, payment for entertainment, vacations and transportation expenses, among others) applies to state and municipal servants. At the same time, under Russian law, not every public official falls under the category of a state or a municipal servant, and each case requires a separate assessment.

2. Domestic bribery (private to private)

2.1       Legal framework

Russian criminal law prohibits active and passive commercial bribery.

2.2       Definition of private bribery

Article 204 of the Criminal Code defines private bribery (named in the legislation as “commercial bribery”) as the unlawful provision of anything that has pecuniary value (including property rights and services, among others) to a person who performs managerial functions in a commercial or other organization, or upon the instructions of such person to other individual or legal entity, for an act or omission in connection with such person’s job position, in the interests of the provider or other persons, if such acts or omissions fall within the range of the authority of such person or if such a person can, by reason of his or her job position, foster such acts or omissions.

Article 204 contains provisions on passive commercial bribery, that is, receipt by a person who performs managerial functions in a commercial or other organization (including instances where upon the instructions of such person the commercial bribe is handed over to another individual or legal entity) of anything that has pecuniary value (including property rights, services, among others) for an act or omission in connection with such person’s job position in the interests of the provider or other persons, if such acts or omissions fall within the range of the authority of such person or if such a person can, by reason of his or her job position, foster such acts or omissions.

Moreover, the same conduct may be prosecuted under Article 201 of the Criminal Code, which prohibits abuse of authority, that is, the use by a person who performs managerial functions in a commercial or other organization of his authority, contrary to the lawful interests of this organization, for the purpose of obtaining an advantage not only for himself but also for other persons, as well as for the purpose of causing damage to other persons.

A person who performs managerial functions, according to Article 201 of the Criminal Code, may be an individual executive officer or a person who is a member of a collective executive body or the board of directors. In addition to the top management, relevant persons include those who perform organizational or administrative functions, that is, manage at least some personnel or at least some property of the organization. As a practical matter, it should be noted that Article 204 of the Criminal Code also covers conspiracies to engage in commercial bribery, which expands the reach of this article beyond persons with managerial functions.

Article 204.1 of the Criminal Code introduced in July 2016 criminalizes aiding and abetting commercial bribery where the value of the commercial bribe exceeds RUB 25,000 (~USD 420). This Article also applies to offers or promises of assistance in aiding and abetting commercial bribery, regardless of the value of the bribe. The sanctions are a bit lower than those for aiding and abetting public bribery.

2.3       Consequences of private bribery

(a)        For the individuals involved

The sanctions for active commercial bribery under Article 204 of the Criminal Code vary, depending on whether the person giving a commercial bribe has acted alone or is in conspiracy with others, as well as on whether the commercial bribe is given for the commission of a lawful or an unlawful act (or failure to act).

The minimum sanctions ? for minor commercial bribery up to RUB 10,000 (~USD 170) ? include a fine of up to RUB 150,000 (~USD 2,500) or the salary or other income of the convicted for a period of up to three months, mandatory labour for a period of up to 200 hours, correctional labour for a period of up to one year, or a limitation of freedom for a period of up to one year.

The maximum sanctions for active commercial bribery – for a commercial bribe exceeding RUB 1 million (~USD 17,000) – are a fine from RUB 1 million (~USD 17,000) to RUB 2.5 million (~USD 42,000), or in the amount of the salary or other income of the convicted for a period from one year to two-and-a-half years, or of 40 to 70 times the amount of the commercial bribe with or without a prohibition from holding certain positions or engaging in certain professional activities for up to five years, or imprisonment for a period from four to eight years with or without a fine of up to 40 times the amount of the commercial bribe and with or without prohibition from holding certain positions or engaging in certain professional activities for up to five years.

The sanctions for passive commercial bribery under Article 204 of the Criminal Code vary depending on whether the person receiving a bribe has acted alone or in conspiracy with others, as well as on whether the commercial bribe is received for the commission of a lawful or an unlawful act (omission) and on whether there was extortion of the commercial bribe. The minimum sanctions are the same as for minor active commercial bribery. The maximum sanctions for a commercial bribe exceeding RUB 1 million (~USD 17,000) are a fine from RUB 2 million (~USD 34,000) to RUB 5 million (~USD 85,000), or in the amount of the salary or other income of the convicted for a period of two to five years, or of 50 to 90 times the amount of the commercial bribe, with a prohibition from holding certain positions or engaging in certain professional activities for up to six years, or imprisonment for a period from seven to 12 years with or without a fine of up to 50 times the amount of the commercial bribe and with or without the prohibition from holding certain positions or engaging in certain professional activities for up to six years.

A person who has committed an offense of active commercial bribery covered by Article 204 of the Criminal Code may be released of criminal liability if he or she actively aided in detecting or prosecuting this offense, and either the commercial bribe was extorted from him or her, or he or she voluntarily reported the commercial bribe to criminal law enforcement authorities. A person who aided in commercial bribery may be released of criminal liability on the similar grounds (excluding the ground of extortion).

(b)        For the company/legal entity

Please see comments in section 1.4. (b) above.

2.4       Limitations applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)

Generally under Russian law, acts of hospitality as a means for the establishment and maintenance of business contacts and a favourable atmosphere of cooperation are not prohibited. The most important restrictions apply against corruption and similar activities that may qualify as a crime and/or administrative offense. In order to make a correct determination of applicable limitations and qualification of possible breaches of anti-corruption and other applicable legislation while providing acts of hospitality, it is essential to understand who the counterparty is and what the purpose of the act is.

3. Corruption of foreign public officials

3.1       Legal framework

Corruption of foreign public officials is prohibited pursuant to the Russian Criminal Code and the Code of Administrative Offences.

3.2       Definition of corruption of foreign public officials

Article 291 of the Criminal Code prohibits the provision of a bribe to foreign public officials and officials of public international organizations. This article also covers the provision of a bribe through intermediaries.

3.3       Definition of foreign public official

“Foreign public official” is defined in Article 290 of the Criminal Code as any person who is appointed or elected to an office in the legislative, executive, administrative or judicial body of a foreign state, including a public administration or enterprise. An official of a public international organization is an international civil servant or any person authorized by such an organization to act on its behalf.

3.4       Consequences of corruption of foreign public officials

Corruption of foreign public officials is subject to the same rules as domestic bribery, specifically Article 291 of the Criminal Code and Article 19.28 of Code of Administrative Offences.

3.5       Limitations applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)

Please see section 2.4 above.

4. Facilitation payments

Russian law does not recognize facilitation payments, and in most cases, such payments could qualify as bribes, and thus, prohibited by law.

5. Compliance programs

5.1       Value of a compliance program to mitigate/eliminate the liability of legal entities

The requirement on companies to take enhanced measures to prevent corruption is contained in Federal Law No. 273 “On Combatting Corruption.”

For legal entities and individuals in Russia, administrative liability is fault-based. The Code of Administrative Offences defines fault of a legal entity as a failure to take all measures within its power to comply with the code’s requirements. Therefore, a legal entity may raise, as a defence, the measures it has taken to prevent bribery on its behalf.

Since 2014, Russian courts have started to recognize and uphold this defence, thus discharging legal entities from liability if a strong compliance program was in place.

5.2       Absence of a compliance program as a crime

The absence of or material defects in the Russian entity’s internal compliance program does not qualify as a crime under local law. However, enforcement practice at the moment includes an increasing number of prosecutors’ actions and court cases in connection with inspections of Russian entities on their compliance with the requirements of Federal Law No. 273 “On Combatting Corruption,” specifically on measures taken by the companies to prevent corruption.

5.3       Elements of a compliance program

Article 13.3 of Federal Law No. 273 “On Combatting Corruption” requires all organizations to develop and implement measures to prevent bribery and specifically recommends the following:

(a) Designating departments, as well as structural units and officers who will be responsible for the prevention of bribery and related offenses

(b) Cooperating with law enforcement authorities

(c) Developing and implementing standards and procedures designed to ensure ethical business conduct

(d) Adopting a code of ethics and professional conduct for all employees

(e) Determining the means for identifying, preventing and resolving conflicts of interest

(f) Preventing the creation and use of false and altered documents

Official guidance as to how the measures should be taken by the legal entities has been prepared by Russia’s Ministry of Employment, in cooperation with several public associations, and released in November 2013. The comprehensive guidance includes clarifications of the legal frameworks in terms of Russian, international and foreign laws, as well as practical recommendations for implementing the requirements of the abovementioned article.

6. Regulator with jurisdiction to prosecute corruption

Russia’s legal system does not have a specific regulator with exclusive responsibilities to prosecute corruption cases.

A bribery criminal investigation can be initiated by the territorial subdivision of the Investigative Committee of the Russian Federation. An administrative case against a legal entity on the basis of Article 19.28 of the Code of Administrative Offences can be initiated by a territorial public prosecutor’s office.

 


Baker McKenzie – CIS, Limited White Gardens
9 Lesnaya Street
Moscow 125047
Russia

Alexander Bychkov

Alexander Bychkov is a partner at the Moscow office of Baker McKenzie. He is co-head of the Firm’s CIS Tax Practice Group and head of its CIS customs practice, which includes professionals working in the Firm’s Almaty, Baku, Kyiv, Moscow and St. Petersburg offices. Alexander specializes in advising multinational clients on tax, customs, compliance and general commercial matters. In addition, he is a member of the Firm’s Healthcare and Pharmaceuticals Practice Group.

alexander.bychkov@bakermckenzie.com

Tel: +7 495 787 2700

Baker McKenzie – CIS, Limited White Gardens
9 Lesnaya Street
Moscow 125047
Russia

Roman Butenko

Roman Butenko is an associate at Baker McKenzie’s Moscow office. He specializes in the area of compliance and dispute resolution. Roman’s work includes advising on the structuring of corporate and commercial compliance investigations and audits, conducting such investigations and audits, as well as advising on other anti-corruption issues.

roman.butenko@bakermckenzie.com

Tel: +7 495 787 2700

Baker McKenzie – CIS, Limited White Gardens
9 Lesnaya Street
Moscow 125047
Russia

Alexander Monin

Alexander Monin is a corporate/commercial partner at the Moscow office of Baker McKenzie. On a regular basis, he advises clients on the compliance review of potential agents and distributors and on the introduction of corporate compliance and risk management programs in their Russian subsidiaries. He also conducts the training of Russian personnel (legal and non-legal) and generally advises international companies on all compliance-related aspects of doing business in Russia.

alexander.monin@bakermckenzie.com

Tel: +7 495 787 2700