May 2, 2016
It’s been several years since Russia joined the worldwide trend of combating corporate bribery. It all started with the ratification of UN Convention against Corruption back in 2006, but the real milestone was not until the end of 2008, when a corporate bribery became an administrative offence under Art. 19.28 of the Code of Administrative Offences (the “Russian Corporate Bribery Act” or “RCBA”). Although much less wordy, the RCBA is to certain extent similar to the most well-known acts in this area, namely, the US Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act (UKBA). In contrast to them, however, RCBA is still applied in a “stealth mode”, without hitting the newspaper headlines and mainly targeting small and medium-sized enterprises.
Recently, there have been several interesting developments, which we touch upon in this note. Firstly, the Supreme Court of the Russian Federation (the “Supreme Court”) revealed its comprehensive statistical data on the application of the RCBA. Secondly, the scope of the RCBA has been expanded to apply extraterritorially. Thirdly, Russian compliance practitioners have developed a view that a formally missing “adequate measures” defense should nonetheless be available for prudent companies.
The Supreme Court keeps the record of completed investigations and the total amount of fines imposed and has recently published the data for 2015.
The longitudinal analysis of the data for five years ending in 2015 reveals certain interesting facts:
In March 2016, the Russian Parliament has expanded the scope of the RCBA. As of now, “a legal entity that has committed outside the Russian Federation an act falling within the scope of the RCBA shall be liable under the RCBA, if such an act is directed against the interests of the Russian Federation, as well as in cases specified in international treaties to which the Russian Federation is a party, if such legal a legal entity has not been held liable in a foreign state.”
It remains to be seen how widely the “interests of the Russian Federation” are to be interpreted by Russian enforcement authorities, but it is now clear that the absence of presence within Russia is no defense for an entity operating in grey areas of law.
In contrast to its foreign siblings, the RCBA does not expressly provide for the so-called “adequate procedures” defense, under which a company may avoid liability by proving that despite a particular case of bribery it nevertheless had adequate procedures in place to prevent persons associated with it from bribing. However, it is widely believed among Russian compliance professionals that such a defense can nevertheless be derived from the general principles of corporate guilt (“mens rea”), which is defined as the failure to take all necessary measures to comply with applicable norms and rules if the opportunity for such compliance was within an entity’s reach.
Indeed, the argument goes that such de minimis measures (internal policies, trainings for employees, etc.) are already prescribed in Art. 13.3 of the Federal Anti-Corruption Law of Russia, and their absence should signal actionable misconduct. Conversely, such procedures in place should leave the room for “adequate procedures” defense. This theory has not yet been tested in courts. Nevertheless, prudent companies should be proactive in adopting prescribed measures to have this card up their sleeves.
Given the sharp spike in enforcement actions, one immediate step is for companies to review their internal policies with a view to procedures prescribed by Federal Anti-Corruption Law of Russia to ensure compliance.