On August 14, 2018, new amendments to the Russian Code on Administrative Offenses (Administrative Code) related to bribery by legal entities went into effect. The new provisions establish conditions exempting companies from liability for bribery if those companies assist authorities in uncovering and investigating misconduct.
The amendments also enable courts to freeze assets of companies under investigation for bribery.
These new rules are likely to have an impact on how companies operating in Russia approach bribery perpetrated by employees.
While the Russian Criminal Code (Criminal Code) establishes individual criminal liability for receiving and giving bribes, as well as acting as an intermediary (Articles 290, 291, 291.1), the Administrative Code establishes non-criminal (i.e., “administrative”) corporate liability for bribery, applicable to Russian legal entities and foreign legal entities registered in Russia.
Specifically, pursuant to Article 19.28 of the Administrative Code, the administrative offense of “bribery on behalf of a legal entity” is defined as giving or offering bribes (i.e., money, securities, anything of value) — in the interest or on behalf of a legal entity — to an official with managerial functions, foreign official, or an official of an international organization in return for an act or omission in connection with their official roles. The penalty for this administrative offense varies from three to one hundred times the amount of the given or offered bribe’s value.
One of the recently enforced amendments to the Administrative Code establishes mandatory exemptions from corporate liability for bribery. Specifically, in accordance withArticle 19.28 (subparagraph 5) of the Administrative Code, a legal entity will be exempted from liability for bribery of a domestic official if it provides assistance in i) uncovering the misconduct, ii) conducting an administrative investigation, and iii) detecting and investigating a related criminal offense. Legislators excluded bribery of foreign officials and officials of international organizations from this potential exemption for legal entities, consistent with Russia’s obligations under the OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions.
The amendments that recently entered into force also include a new rule that enables Russian courts to impose an asset freeze on a legal entity under bribery investigation, based on a substantiated motion requesting such a measure filed by a prosecutor. According to Article 27.20 of the Administrative Code, this measure would ensure that legal entities pay penalties for bribery imposed by Russian courts. Under the new rule, the value of assets subject to the freeze must not exceed the potential penalty. If a party disagrees with the court’s decision to impose an asset freeze, it can move for the court to re-consider its decision or appeal the court’s decision.
According to the recently published inaugural Europe-Caucasus-Asia (ECA) Corruption Survey, 65 percent of respondents on Russia note that corruption is a significant obstacle for companies doing business in the country and only 25 percent of respondents are confident in the effectiveness of the Russian anti-corruption laws. These results are reflective of regional problems in the area of corruption and are consistent with the Transparency International’s Corruption Perceptions Index (CPI) ranking Russia 135th out of 180 in 2017 (with the score of 29 on a scale from 100, very clean, to zero, highly corrupt) together with Papua New Guinea, Kyrgyzstan, Honduras, and others. At the same time, the Russian government is undertaking the new legislative initiatives targeting corporate liability for bribery and providing companies with additional incentives to exercise a more transparent and proactive anti-corruption approach.
While it is too early to evaluate the practical impact of these regulatory changes, companies operating in Russia now potentially have a stronger incentive to report bribery by employees and should focus on reflecting these regulatory changes in their anti-corruption compliance programs and approaches.
Maryna Kavaleuskaya is an Associate with Miller & Chevalier. She is a common and civil law trained lawyer. Her practice focuses on matters involving the FCPA, anti-corruption due diligence reviews and compliance audits, business and human rights, and other areas of international corporate compliance. Before starting her LL.M. program at Harvard Law School, she practiced law in Belarus where she focused on high-profile criminal cases. She’s fluent in Russian, Ukrainian, and Belarusian and often works with clients in the Europe Caucasus Asia region.