Corporate investigations in Russia are conducted in a heavily regulated environment. They are further complicated by numerous practical challenges. Observing the legal and factual requirements is like navigating through a minefield. Below I briefly describe some of the pitfalls.
Whistleblowers are not specially protected under Russian law. Currently, the State Duma is only considering a draft law aimed at protecting whistleblowers who report corruption. Whistleblowers therefore have to be protected by the company itself. Many employees, however, do not sufficiently trust the local management. Further, most whistleblowers do not simply allege violations, they accuse specific employees or the management of personal misconduct. Often the main trigger for reporting an actual violation is a personal grudge. Many whistleblowers thus prefer to report anonymously, which makes it harder to assess the allegations. However, these anonymous whistleblowers may be as credible as those who disclose their identity.
Data protection requirements
The transfer of personal data requires the consent of the relevant employee and a data transfer agreement with the local company. Since the employee must consent to the transfer of data to each specific data recipient, all participants in the investigation must be named. Even stricter requirements apply to data transfer to countries such as the US which are not considered to provide adequate protection to personal data. Problems can be caused if the employee revokes their consent. Additional consent to the inspection of business correspondence is required if the local company has not adopted internal rules prohibiting the use of office communication means for private purposes. The cross-border transfer of personal data must also comply with data localisation requirements.
Interviews with employees
Employees are free to choose whether or not to participate in an interview. Most employees, however, will agree to an interview, especially if they are asked to do so by the local company’s general director or the foreign shareholder. There is generally no need for representatives of a union or workers’ council to be involved. The employee should not be encouraged to bring a lawyer to the interview, at least not for an informational interview. It is not advisable to let representatives of the local company be present at the interview. Experience shows that the best results can be achieved if the interview is conducted in Russian by a small external team. Audio or video recording is only permitted with the employee’s written consent.
There is no general attorney-client privilege under Russian law. Only the results of the work of specially licensed advocates on client matters are protected. These results fall under what is known as advocate secrecy and are barred from being used as evidence for the prosecution. The advocate status, however, entails restrictions which significantly complicate the advocate’s employment at a law firm or in-house. For this reason, few Russian lawyers are admitted to the bar, and measures to protect this privilege are usually not required. It is for the investigators to take practical measures to protect the results of the investigation. Apart from that, the investigators must consider what is required to maintain privilege protections under other jurisdictions — in particular the US attorney-client privilege.
Cooperation with authorities
Given the deficiencies in the current enforcement practice of the Russian authorities — in particular in the fight against corruption – parallel investigations are quite rare in practice. Should there still be an overlap with a state investigation, the authorities are considered to be adversaries; the local personnel’s main focus will be to protect the company against the actions of the authorities. The protective measures to be taken differ depending on the investigating authority and the type of violation investigated. The company is generally not obliged to inform the authorities of the commencement of internal investigations or to report on its results. External advisors are subject to disclosure obligations if there is suspicion of money laundering or terrorist financing.
A company can apply disciplinary measures only if the investigation complies with the strict requirements of Russian labour law. Disciplinary measures for a specific violation must be imposed within a month of the violation being uncovered. There is also an overall limitation period for disciplinary measures, which commences when the violation occurs. To base disciplinary measures on the results of an interview, the employee must be asked after the interview to provide written explanations for the alleged misconduct. The employee can only be suspended from work during the investigation if they agree to this. Since Russian labour law is very employee-friendly, the company may not be able to impose adequate measures even in cases where the violation is proven and all formal requirements are met.
Should the investigation reveal a violation, the question of self-reporting to the Russian authorities arises. Self-reporting to exclude or mitigate potential liability is an option available to the company and its representatives for a number of violations. The self-reporting option for companies for bribery was only introduced in August 2018. To benefit from self-reporting, it is usually necessary that the authorities have not yet otherwise learned of the violation. However, there are often uncertainties about how to apply the relevant provisions of the law, and fundamental concerns regarding cooperation with the authorities. Therefore self-reporting is currently advisable only in exceptional cases.