By the end of this year’s spring term on 28 July 2019, three new bills on counter-measures to the anti-Russia sanctions had been submitted to the State Duma. Even though none of these bills has passed the first reading yet, they give an insight into Russia’s future strategy for countering the sanctions – criminal liability for facilitating the imposition of new sanctions as well as protection of crucial economic sectors from the negative impact of sanctions. If passed, these counter-measures would be substantially less severe than initially proposed – in particular, there would be no criminal liability for sanctions compliance in Russia (please see our Review of 2018). These are the details of the bills regarding which the State Duma will continue deliberations after the summer break:
Criminal liability for public dissemination or transfer of information relevant to sanctions
Draft Law 710099-7, submitted by Duma Member M.V. Emelyanov on 15 May 2019, would introduce a new offence to the Criminal Code which would make individuals punishable for:
- Public dissemination of (i) information relating to sanctioned Russian citizens or organizations, or (ii) any information, provided that its dissemination made it possible to impose anti-Russia sanctions; and
- Transfer of any information to (i) organizations incorporated under the laws of states taking so-called unfriendly actions (i.e. the U.S. or EU member states), (ii) organizations controlled by such states, or (iii) citizens of such states affiliated with these organizations, provided that this information transfer made it possible to impose anti-Russia sanctions.
The maximum penalty under this offence is up to five years’ imprisonment with a fine of up to RUB 5 million and a ban from certain professions for up to ten years.
The bill on criminal liability was supplemented by Draft Law 710110-7, which would also incorporate a formal prohibition of the punishable actions into Federal Law 127-FZ “On measures (counter-measures) in response to unfriendly actions of the United States […]”.
The main purpose of these bills is to protect companies that maintain relations with sanctioned persons from being added to U.S. sanctions lists. If adopted, they could significantly complicate the transfer of information relating to Russian persons from Russia to companies in the U.S. or EU member states. However, the bill on criminal liability received negative feedback from the upper house (Federation Council), which criticized in particular that its broad scope could cover “whatever you like”. That the bills will become law in this form is therefore rather unlikely.
Expulsion from Russian banking system of payment processors that comply with sanctions
Draft Law 734964-7, submitted by Duma Member V.M. Resnik on 19 June 2019, would amend Federal Law 86-FZ “On the Central Bank of the Russian Federation […]” to authorize the Bank of Russia to maintain a list of “unreliable” payment processors, which would be:
- Legal entities which have unilaterally terminated an agreement ensuring the informational/technological interaction between settlement participants within one month after settlement participants or their beneficial owners, shareholders or subsidiaries are added to foreign sanctions lists; and
- Legal entities which, directly or indirectly, control or are controlled by the above legal entities.
Russian credit institutions would not be allowed to enter into relevant agreements with these unreliable payment processors. Existing agreements would have to be terminated within six months of the counterparty’s listing as an unreliable service provider. The credit institution could not be held liable for the termination by the service provider.
The new restrictions regarding sanctions compliance would apply only to payment processors, but not to payment system operators or payment infrastructure providers.
This bill is a response to the processing center CJSC PC Cardstandard’s unilateral suspension of business involving bank cards issued by AO AKB Evrofinance Mosnarbank on 12 March 2019 after the bank was added to a U.S. sanctions list. According to the bank’s website, Visa and Master-Card suspended the bank's membership in their payment systems due to the listing, which resulted in the blocking of Visa/MasterCard cards abroad, and the blocking of the cards by CJSC PC Cardstandard in Russia. To date, there is no publicly available information on the chances of this bill becoming law.