For the attention of companies' general directors and heads of legal departments

Pepeliaev Group advises that on 25 February 2014, the Russian Constitutional Court adopted Resolution No. 4-P in which it recognised as universal the position that an administrative penalty may be imposed lower than previously stipulated set out in Resolution No. 1-P dated 17 January 2013. However, the Court has imposed some limitations on it being applied.

Background

In its Resolution No. 1-P dated 17 January 2013, the Russian Constitutional Court found that the provision of article 19.8(5) was inconsistent with the Russian Constitution as that provision, in conjunction with the rules established by the Russian Code of Administrative Offences for imposing a penalty, allowed for a legal entity to bear liability in the form of a fine ranging from RUB 300,000 to RUB 500,000.

In accordance with the legal position of the Russian Constitutional Court, when an administrative case is being considered, the following should be taken into account: the character and circumstances of the administrative offence, the offender's property and financial position, as well as other material circumstances which are relevant to the case, in order to ensure that fair and commensurate administrative penalty be imposed. Therefore, the court found that an administrative penalty may be lower than the lowest limit of the relevant administrative sanction previously set.

The court noted that when legal entities are held administratively liable, the sanction should be commensurate with the nature and gravity of the offence; that the consequences for a legal entity should be assessed if such sanction is applied and the damage that was inflicted further to the offence; and that other material circumstances should be taken into account which make the penalty individual in nature when a certain sanction is imposed.

However, before the Constitutional Court passed Resolution No. 4-P dated 25 January 2014, inconsistent practice had been in place since, when the administrative case were considered and revised,

  • some commercial ('arbitration') courts believed the legal position set out in Resolution No. 1-P of the Constitutional Court to be universal and extended it to other administrative offences, lowering the fines in accordance with the nature and circumstances of the offences committed;
  • other commercial ('arbitration') courts believed that the position may be applied with limitations (thus, it was possible to impose penalty in the form of a fine which is lower than the lowest limit, only in relation to sanctions provided for by article 19.8(5) of the Russian Code of Administrative Offences).

The universality of the legal position and the restrictions on an administrative penalty being applied which is lower than the lowest limit

The Constitutional Court passed Resolution No. 4-P dated 25 February 2014, in which it recognised the legal position to be universal that an administrative penalty may be imposed lower than the lowest limit. This means that this position is applicable to any categories of administrative cases. At the same time, the court has limited its applicability only to extraordinary circumstances when courts take decisions (when administrative cases are both considered and reviewed), as to impose an administrative fine as a non-alternative measure to prevent administrative penalty the minimum amount of which is set in the provision regarding administrative liability in the amount of RUB 100,000 and more.