Russian President Putin recently submitted a new anti-corruption bill to the Russian parliament.
The proposal has two significant aspects.
First, it would amend Article 19.28 of the Russian Code of Administrative Violations (which was previously amended in 2011 to impose liability on corporations for bribery, including domestic and foreign, public and private) to provide that companies can avoid liability in domestic bribery cases if
(i) they assist in the discovery or investigation of the bribe or
(ii) the bribe has been extorted.
Second, the proposal would allow courts to freeze the property of corporations under investigation for bribery up to the maximum amount of possible fine.
Given Russian practice, we can expect the amendments to pass relatively quickly and with few changes. Therefore, companies operating in Russia should start considering the draft legislation and its possible impact on their businesses now.
The amendment about exoneration is derived largely from Russian criminal law which contains similar provisions for cases involving individual defendants. Based on our experience, the corresponding criminal law provisions are often applied arbitrarily, based on prosecutors’ subjective assessments of whether a company has adequately assisted law enforcement or whether the bribe payment actually involved extortion. Therefore, companies should be cautious when deciding whether to make self-disclosure.
As in the United States, decisions should be made on a case by case basis considering various factors, including the state of the company’s compliance program, possible penalties and possible collateral and public relations consequences.
The state of the company’s compliance program is particularly important as there have been cases where Russian authorities have decreased fines and even exonerated companies from liability based on their compliance programs. However, enforcement and judicial practice on these points are inconsistent and will likely remain so until clearer guidance is issued by the legislature or Supreme Court.
The proposed amendment about asset freezing is aimed at ensuring the future payment of any fines. Preliminary freezing could have serious consequences for a company’s business, especially if the amount of expected fine is significant, which may, in turn, affect the company’s decision about self-disclosure and cooperation.