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New Russia law goes beyond FCPA, Bribery Act

A new Russian law, which went into effect on January 1, 2013, affirmatively requires companies to establish compliance programs.

The law, which was added as Article 13.3 of a broader 2008 Law on Combatting Corruption, is entitled “The Requirement of Organizations to Take Measures to Prevent Corruption” and provides that organizations are required to develop and implement measures to prevent corruption and states that such measures may include the following:

(1) designating departments and officers responsible for preventing bribery and related offenses;

(2) developing mechanisms for cooperation with law enforcement authorities;

(3) developing and implementing standards and procedures designed to ensure ethical business conduct;

(4) adopting a code of ethics and professional conduct for all employees;

(5) establishing means for identifying, preventing and resolving conflicts of interest; (6) preventing the creation and use of false and altered documents.

Other provisions of Russian law provide that companies can be held liable for corruption offenses committed on their behalf or in their interests and for failing to take all measures under their control to prevent corruption.

Although Russia does not have corporate criminal liability, its Code of Administrative Violations provides for fines of up to 100 times the amount of any bribe offered, promised or given by, on behalf of, or in the interests of a legal entity.

Putting all this together, if an employee or a third party acting on behalf of the company pays a bribe and the company does not have all the recommended Article 13.3 measures in place, it has arguably not done everything possible to prevent an act of corruption and faces the possibility of a massive administrative fine.

Thus, Russian law now appears to have gone beyond the FCPA and the UK Bribery Act. As under the UKBA, companies can be held liable for failing to prevent bribery by third parties but there is no “adequate procedures” defense. Moreover, nothing in the law limits its application to commercial organizations or to purely Russian organizations.

All companies operating in Russia should evaluate their local compliance policies and make sure that they satisfy Article 13.3. Such attention to compliance is especially important in light of attempts by both the Russian government and the political opposition to seize the anti-corruption mantle by exposing corruption wherever they find it.

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Thomas Firestone, pictured above, is a senior counsel in the Moscow office of Baker & McKenzie. His practice focuses on corruption risks in Russia, including transactional due diligence and internal investigations. He was previously an Assistant US Attorney in the Eastern District of New York and Resident Legal Adviser at the U.S. Embassy in Moscow. He can be contacted here.

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5 Comments

  1. With a new law requiring companies to have a compliance officer and program in place, under Russian legal system, will that be enough to create professional liability for lawyers acting as Compliance Officers, for negligence or corroboration with a corrupt act?
    In most venues, accountants could enjoy personal and professional liability for falsifying books and records, or even for not acting diligently. Similarly, lawyers can be liable for missing a court deadline.
    Is Russia redrawing the boundaries of liability for a new class of professionals?

  2. I see this law as a political tool helping Putin to keep business/ oligarchs and thus the opposition under control (vide Yukos case in the past), rather than to get Russian business more transparent.

  3. Currently no legal responsibility (i.e. penalties) are yet established by the regulator for the failure of a company to officially nominate responsible employee(s) responsible for preventing bribery and/or related offences, neither is the legal responsibility identified for failure of the Company to work out and maintain the documents and other actions as established per art. 13.3.

    However, as Thomas rightly points out, the anti-corruption battle is launched, the failure of the Company to abide by the art 13.3 requirements can be discovered by the regulator in a planned Anti-Monopoly, General Prosecutor's Office or Internal Affairs departments. This identified failure can lead to issuance of a Regulator’s order to the Company at failure to eliminate the breaches of art. 13.3. Failure to comply with the order and identified terms a disqualification of a Company CEO for the term of up to 3 years. For International Corporations, employing foreign citizens as CEOs, that might mean loss of right to work on the territory of Russia. It shall also be noted that the limitation period of bribery and related offences for the Compnaies is six years since the date the offence happened (not discovered).

    As for Compliance Officers, those to be nominated as responsible for preventing bribery and related offences, the regulator has not yet identified any legal responsibility as of yet.

  4. It should be pointed out that the new law requirements cover all the organisations operationg in the Russian territory. Many NGOs, political parties and social movements, religious organisations have to satisfy these requirements. And there is an opportunity to apply strict these tough rules selectively against political opponents.

  5. In view of the above, could you please share from your experience if the nominated person should be someone from the local Russian entity (in case the Russian entity is part of a larger corporate structure having offices in other countries and locations let's say) or so far there is a globally nominated officer to be responsible on a global level for the adherence to he FCPA and the related Russian law this would be ok and acceptable?


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