As previously reported, Russia recently amended its corporate bribery statute (Article 19.28 of the Code of Administrative Violations) to allow companies to avoid prosecution if they assist in the discovery or investigation of the offense or if they can prove that the bribe was extorted.
The same amendment also allowed courts to preliminarily freeze the property of companies under investigation up to the maximum amount of the fine.
On December 27, President Putin signed another amendment to 19.28 which will, this time, significantly expand the scope of corporate liability for bribery.
Article 19.28 allows for the prosecution of a legal entity for any bribe given by it, or a third party “in the interests of” such legal entity. The new version, will, in addition to bribes given in the interests of the defendant company, also cover bribes given in the interests of any other “affiliated” entity (a term not clearly defined in the draft law). It also covers situations where the bribe is given not just to the primary bribe taker (which, under the law, can be a Russian or foreign government official, official of a public international organization or manager of a commercial enterprise) but also to anyone designated to the primary bribe taker receive the bribe.
This means that a company, including any foreign company subject to the jurisdiction of 19.28, could be liable for any bribe “in the interests of” (a term not defined in the law, but clearly much broader than “given by”) any subsidiary, group company, distributor or any other entity “affiliated with” the company given to anyone designated by a primary bribe taker regardless of whether it knew, or had reason to know, of such payment.
Article 19.28 is already vigorously enforced. According to the recently created register of companies convicted under this statute, there were 429 corporate prosecutions under Article 19.28 in 2017 and 280 in 2018 (based on still incomplete statistics for 2018). The revisions to 19.28 will likely lead to an increase in prosecutions.
Moreover, the inclusion of third party liability could result in prosecutions in which Russian companies are prosecuted for and/or admit to paying bribes “in the interests of” foreign companies. Pursuant to standard Russian practice, such third party foreign companies could be explicitly identified by name in court documents, thus inviting additional scrutiny by foreign enforcement authorities such as DOJ, SEC and SFO.
These possibilities, combined with the often arbitrary and unpredictable nature of Russian enforcement practice, make it even more important that companies operating in Russia implement robust compliance programs and conduct thorough third party due diligence. This will help companies avoid situations where they are identified as interested third parties in Russian prosecutions and will also help them avoid prosecution by Russian authorities.
Although Russian law does not have a formal “adequate procedures” defense like the UK Bribery Act, as a practical matter in our experience, a company can defend itself against a 19.28 charge by demonstrating to the satisfaction of courts and prosecutors that it had in place an anti-corruption compliance program which satisfies the elements of Russian law.
Tom Firestone, pictured above left, is a partner in the Washington, D.C. office of Baker McKenzie and also serves as co-chair of the North America Government Enforcement practice and a member of the firm’s Global Compliance and Investigations Steering Committee. Roman Butenko, above right, is an associate in the firm’s Moscow office.