An extract from The Professional Negligence Law Review, 4th Edition

Introduction

i Legal framework

Professionals can face different types of liability, including disciplinary, civil (material), administrative and criminal liability.

Disciplinary liability may result in an employer applying disciplinary measures to an employee for non-performance or improper performance of his or her duties resulting from his or her guilty wrongful conduct.

The Criminal Code of the Russian Federation (the Criminal Code) contains provisions that describe the grounds for criminal liability of professionals. However, most of them relate to violations of safety rules and technical regulations by personnel responsible for compliance with these rules. Separately, criminal liability is established for substantial harm caused to persons by professionals when rendering services (including medical services). There is no corporate criminal liability in Russia.

The Code of Administrative Offences provides for a range of acts of negligence, constituting administrative offences of medical professionals, information technology (IT) specialists and construction professionals. An act is deemed to be perpetrated through negligence if (1) the person has foreseen the possibility of socially dangerous consequences of his or her actions (or omission) but has, without valid reasons, expected that these consequences would be prevented; or (2) the person has not foreseen the possibility of the onset of socially dangerous consequences of his or her actions (or omission), although he or she could and should have foreseen these consequences.

Guilt is a necessary condition for professional liability (excluding civil liability).

For instance, according to Article 28 of the Criminal Code, if a person did not realise the harm and public danger of his or her actions (or omission) or did not foresee the possibility of socially dangerous consequences and should not or could not foresee them because of the circumstances of the case, the act shall be deemed to have been committed innocently.

Also, an act is considered innocent if the person who committed it could not prevent its negative consequences because of some inconsistency between his or her psychophysiological attributes and demands arising from extreme conditions or neuropsychic overwork.

Civil liability may of be the following types:

  1. Contractual liability: when a professional renders his or her services under a civil contract, he or she can be held liable for breach of this contract. In this case, the consequences of violation of the contract are provided for in the contract itself and in the Civil Code of the Russian Federation (the Civil Code). Similarly, if a professional works under an employment contract (not a civil contract) then he or she could face material liability, which entails the provision of compensation for loss inflicted by a party to an employment contract as a result of his or her guilty unlawful behaviour (action or omission).2 This is a specific form of liability with specific limitations.
  2. Non-contractual liability, which includes (1) liability for unjust enrichment; and (2) liability for damage (tortious liability).

The general rules of tortious liability are specified in Article 1064 of the Civil Code, according to which the person who caused the damage to a person or property of a citizen (regardless of his or her professional affiliation) must reimburse it in full. In some cases, the obligation to compensate damage may be imposed on a person who did not cause the damage.

In any case, the person must compensate losses resulting from unlawful behaviour. According to Russian law,3 the losses include the real damage, that is the actual value of the losses incurred or the expenses for recovery and the lost profit.

A difference in legal consequences of professional negligence can be clearly seen in cases of unintentional medical mistakes: these mistakes could not be considered grounds for criminal liability, but injured patients could obtain compensation through a civil case.

The harm caused to the life or health of citizens by activities that create an increased danger to others (a source of increased danger) is compensated by the owner of the source of increased danger, regardless of fault.

If harm is caused by an employee of a legal entity in the performance of its labour, service or official duties on the basis of an employment contract (service contract), the legal entity could face civil responsibility.

ii Limitation and prescription

For civil claims, the limitation period is established in the Civil Code. According to Articles 196 and 200 of the Civil Code, the general term within which claims must be commenced is three years from the date when the person knew or should have known about the violation of his or her rights and about the person who should be a proper defendant for the violation unless otherwise established by law.

In addition, the maximum term within which claims should be commenced in any case should not exceed 10 years from the date of the violation of rights.

There are some exceptions to this rule specified in the Federal Law on the Securities Market for the following professionals (certain cases set out in the Federal Law):

  1. brokers (the limitation period is one year); and
  2. professional participants in the securities market carrying out management of securities (the limitation period is one year).

Another exception is indicated in the Labour Code of the Russian Federation (the Labour Code). An employer may file a claim for compensation of damage caused by an employee within one year.

As for criminal cases, time limits are established in the Criminal Code and depend on the gravity of the crime. The Criminal Code provides the following categories of negligent crimes depending on the nature and degree of social danger:

  1. crimes of little gravity (minor crimes), which are those crimes of negligence for which the maximum term of imprisonment does not exceed three years – for these crimes, professionals may be held liable within two years of the date of commission of the crime; and
  2. medium-gravity crimes, which are those crimes of negligence for which the maximum term of imprisonment exceeds three years. Professionals may be held liable within six years of the date of commission of the crime.
iii Dispute fora and resolution

The civil litigation procedure in relation to professional liability claims is governed by the Civil Procedure Code of the Russian Federation (CPC). Prosecution of criminal claims is governed by the Criminal Procedure Code of the Russian Federation.

Generally, professional liability claims are brought in the courts of general jurisdiction. According to the Federal Constitutional Law on Courts of General Jurisdiction, the appropriate courts consider all criminal cases and all civil and administrative cases on protection of violated or disputed rights, freedoms and lawful interests, except for cases considered by other courts.

Certain professional liability claims may be heard by justices of the peace. According to the Federal Law on Justices of the Peace, the following cases are considered by justices of the peace:

  1. criminal cases for which maximum punishment does not exceed three years of deprivation of freedom, excluding some specific crimes provided for by the Criminal Code;
  2. property disputes, except intellectual property disputes, if the amount of the claim does not exceed 50,000 roubles; and
  3. administrative offence cases if these cases are heard by the justice of the peace according to the Code of Administrative Offences.

Pursuant to Article 28 of the CPC, the claim must be brought to the court located in the place where a company defendant has its registered office or an individual defendant is registered (domiciled). In some cases, as provided in Article 29 of the CPC, the claimant may file the claim with another court; for example, the court located in the claimant's place of domicile if the case concerns recovery of the cost of damage, or to the court located in the place of performance of the labour contract if the claim is based on a violation of a labour contract.

Criminal cases are heard by the court located in the place where the crime was committed.4

Civil claims may be resolved amicably (by way of negotiations) and through judicial proceedings. Even if the claim has been filed with the court and judicial proceedings have started, the parties may conclude an amicable agreement that terminates the court proceedings. An amicable agreement concluded after the start of the court proceedings must be approved by the court.

Criminal claims are heard by the courts. Only criminal cases for crimes of little and medium gravity may be resolved and terminated by reconciliation with the victim in the event that the accused person compensates the damage.5 Reconciliation with the victim is possible only until the point at which the court retires either to pass sentence, in courts of first instance, or to pass judgment, in courts of appeal.

iv Remedies and loss

In accordance with Article 15 of the Civil Code, losses include the real damage (which is the actual value of the losses incurred or of the expenses for the recovery of losses) and the lost profit.

The most common remedy is to file a claim for damages. The burden of proof for the claimant includes proving the fact of damage, the negative consequences, the causal link between the damage and consequences. The fault of the violator is presumed.

According to clarifications of court practice made by the Supreme Court, the court must not dismiss a damages claim simply on the basis of the impossibility of calculating the amount of damages. The court should define the amount of damages based on the case circumstances, according to the principles of justice and in proportion to the violation.

There is no distinct formula for calculating the value of compensation of this kind; the value is totally subjective and depends on the judge's discretion. The most common assessment method is by way of a specialist opinion obtained in an out-of-court procedure or from the results of the court-appointed expert examination.

The injured person may also demand compensation for moral harm. The amount of moral damages for suffering can be established by an agreement between the parties or by a court. In practice, the average amount of moral harm compensation varies from 30,000 roubles to (in the most serious cases) 1 million roubles.

The main problem in recovering damages in Russia is that Russian courts have traditionally been rather reluctant to collect damages because a formalistic approach to evidencing causation is adopted. Even in the event of successful recovery of damages, the amount obtained could be rather small, especially for moral harm. This situation has improved slightly, but successful cases are still far from common.

Specific professions

i Lawyers

Russian law provides for a dualism in the legal profession: on one hand, any person who has not passed any qualifying exams or who does not have a law degree is generally allowed by law to practise law and provide legal services; on the other hand, some specific legal services (e.g., defence in criminal cases) can be rendered only by attorneys at law who have passed regional qualification exams and have obtained the special status of advocate.

Only advocates and persons who have graduated from a law university or have an academic degree in law have the right to represent parties in cases heard by the arbitrazh courts (state commercial courts) and courts of general jurisdiction. The only exception to this rule is the representation of natural persons and legal entities in bankruptcy cases and cases heard by justices of the peace and district courts of general jurisdiction.

Furthermore, non-advocate practitioners bear no professional liability. Their actions are not regulated by any professional standards or specific bodies. They can, however, be held liable for non-performance or improper performance of the services rendered under their contract, according to the terms established in the contract and in the Civil Code.

An advocate's activity is regulated by the Federal Law dated 31 May 2002 No. 63-FZ on Advocate Activity and Advocacy (the Advocate Law) and the Code of Professional Ethics of Advocates, adopted by the First All-Russian Attorneys' Conference.

The Advocate Law provides some special requirements for persons who would like to become advocates, such as obtaining a university law education, having working experience in law and the absence of a criminal record.

The Code of Professional Ethics of Advocates contains a wide range of legal prescriptions that are binding for advocates. Violation of any of these prescriptions may lead to revocation of status as an advocate. Regional exam qualification commissions may decide to take action of this kind upon complaints or recommendations by governing bodies.

In addition, unlike other attorneys, each advocate should insure against the risk of professional liability for violation of the terms of the legal assistance agreement concluded with the principal.6

In practice, lawyers can be held criminally liable for legal advice when its purpose was to facilitate the commission of a crime, in which case, the lawyer providing such advice can constitute an accessory to the crime.

ii Medical practitioners

Under the Federal Law dated 21 November 2011 No. 323-FZ on the Basics of Public Health of the Russian Federation, medical aid has to be rendered according to the rules of medical help, on the basis of clinical recommendations and taking into account standards of medical help. Named acts are adopted by the Ministry of Public Health. Medical practitioners are obliged to follow those regulations.

Pursuant to Article 109 of the Criminal Code 'Causing death by negligence', criminal liability for medical practitioners whose negligent actions lead to the death of a patient is punishable by up to three years' imprisonment with disqualification. Similar actions leading to grievous bodily harm are subject to Article 118 of the Criminal Code 'Grievous bodily harm by negligence', and are punishable by up to one year's imprisonment, with or without disqualification.

A person can be held liable for committing the above-mentioned crimes when the three following conditions coincide: defect of medical aid, death of the patient (grievous bodily harm) and a causal link between these.

Defects of medical care are mainly established during the examination, which determines the causes of negative health outcomes, as well as compliance with the rules of medical help, clinical recommendations and standards.

Liability of medical practitioners for less dangerous violations of law is established in the Code of Administrative Offences (e.g., violations of rules in the sphere of medical product circulation, and violations of legislative requirements in the field of healthcare during abortion procedures).

Medical practitioners may insure themselves against the risk of professional liability.7

iii Banking and finance professionals

Banking and financial activities are governed by the Federal Law dated 2 December 1990 No. 395-1 on Banks and Banking Activity, the Federal Law dated 22 April 1996 No. 39-FZ on the Securities Market, the Federal Law dated 7 February 2011 No. 7-FZ on Clearing, Clearing Activity and the Central Counterparty and the Federal Law dated 29 November 2001 No. 156-FZ on Investment Funds.

The specific consequences of violations of law by banking and finance professionals include the following:

  1. administrative liability according to Article 15.24.1 'Illegal issue or conversion of documents certifying monetary and other obligations' and Article 15.29 'Violation of legislation related to activity of professional participants of the security market, repository, clearing organisations, persons carrying out functions of the central counterparty, joint stock investment funds, non-state pension fund, management companies of joint stock investment funds, share investment funds or non-state pension funds, specialist depositary of joint stock investment funds, share investment funds or non-state pension funds' of the Code of Administrative Offences;
  2. criminal liability according to Article 172.1 'Falsification of financial documents and accounting documents of financial organisations', Article 172.3 'Failure to insert information on money placed by individuals and individual entrepreneurs in financial documents and accounting documents of credit organisations', and Article 312 'Illegal actions in relation to property that is subject to inventory, arrest or confiscation' of the Criminal Code (note these Articles provide for intentional crimes); and
  3. civil liability for violation of the contract or for damage not related to the contract.8

Certain laws establish requirements for some banking professions. For example, a chief of a credit organisation or a chief of the branch of a credit organisation must have obtained higher education qualifications and should have no criminal record. Credit organisations, including banks and joint-stock investment funds, must obtain a licence from the Central Bank. Financial consultants (brokers, dealers) must also have a licence to carry out broker or dealer activities. Numerous violations of the banking laws could be considered grounds for termination of this licence.

iv Computer and information technology professionals

The liability of computer and information technology professionals can be either contractual or tortious as provided above, depending on the specific case.

In other words, the activity of computer specialists is not specifically regulated. They bear general liability according to the Labour Code if they are hired, or according to the Civil Code if they render services based on civil contracts, or if they cause damage.

However, the Criminal Code prohibits some particular computer crimes, such as gaining unlawful access to computer information protected by law,9 violation of rules on use, storage and processing of computer information,10 and unlawful influence on the critical information infrastructure of the Russian Federation.11

v Real property surveyors

In Russia, real property surveyors are named 'cadastral engineers'. Their activity is governed by the Federal Law dated 24 July 2007 No. 221-FZ on Cadastral Activity (the Cadastral law).

The Federal Service for State Registration, Cadastre and Cartography supervises cadastral activity. Cadastral engineers must be members of a self-regulatory organisation of cadastral engineers. They must also enter into insurance contracts covering civil liability for damage caused to clients or third parties when performing cadastral activity in violation of the law; this is a mandatory requirement of the Cadastral Law.12

Cadastral engineers can face civil liability for compensation of damage as described above. The engineer's self-regulatory organisation may also apply disciplinary measures, which could include termination of membership.

vi Construction professionals

Criminal liability for negligence by a construction professional is established in the rules of law of the Criminal Code in the chapter titled 'Crimes against Public Safety'.

According to Article 216 of the Criminal Code, if a violation of safety rules in construction or other works results in grievous bodily harm or major damage, it is punished by imprisonment of up to three years, with or without disqualification. The same actions leading to the death of two or more people is punished by imprisonment of up to seven years, with or without disqualification.

In these cases, a person can be charged with committing a crime only when both the fact of a violation of the special rules and the causal relationship between the violation and the consequences are soundly established.

General conditions of liability for a violation of labour protection requirements (regardless of the sphere of operation) are established in Article 143 of the Criminal Code. Those potentially liable for this crime include the heads of organisations, their deputies, chief specialists, heads of structural subdivisions of organisations, labour protection service specialists and other persons charged with ensuring compliance with labour protection requirements.

Liability for less dangerous violations of law is established in Chapter 9 of the Code of Administrative Offences, titled 'Administrative Offences in Industry, Construction and Energy'.

vii Accountants and auditors

The professional activity of accountants is regulated by the Federal Law dated 6 December 2011 No. 402-FZ on Accounting (the Accounting Law) and the professional standards introduced by the Ministry of Labour and Social Protection. Article 7 of the Accounting Law establishes the following requirements for accountants who perform accounting activity in public joint-stock companies, insurance companies, investments and non-budgetary funds: a university education; experience of no fewer than three of the past five years in accounting or audit; and the absence of a criminal record for economic crimes. Some other requirements apply to accountants performing activities in specific spheres (e.g., leasing, banking and other activities) and as established in applicable laws.

The liability of accountants is provided for in the Labour Code and the Civil Code as stated above.

However, according to the Federal Law dated 26 October 2002 No. 127-FZ on Insolvency (Bankruptcy) (the Bankruptcy Law), accountants could also face subsidiary liability in the event of bankruptcy of an organisation for which they have performed professional activity. According to Article 61.10 Part 2 Paragraph 3 of the Bankruptcy Law, the accountant is presumed to be a person with control of the debtor, and as such can be held subsidiarily liable. Article 61.11 Part 2 Paragraph 2 of the Bankruptcy Law stipulates that the accountant can be held liable for the absence of accounting documents or necessary information in accounting documents if this fact led to obstacles in the bankruptcy case and, therefore, to the impossibility of settling creditors' claims. The liability of the accountants in this case is presumed unless they prove otherwise.

The professional activity of auditors is governed by the Federal Law dated 30 December 2008 No. 307-FZ on Audit Activity (the Audit Law), rules on the independence of auditors and auditor organisations13 and the Code of Auditors' Professional Ethics.14 Pursuant to Article 4 of the Audit Law, the auditor must obtain a certificate of qualification, be a member of an applicable self-regulatory organisation and be included on the register of auditors.

Insurance is not mandatory for an auditor. However, according to Article 13 Part 1 Paragraph 4.1 of the Audit Law, auditors may insure themselves against liability for violation of the contract or for damage caused during performance of the audit activity.

Violation of the law by auditors may have the following consequences:

  1. application of disciplinary actions;15
  2. prosecution for abuse of powers;16 and
  3. civil action for violation of the contract or for damage not related to the contract.17
viii Insurance professionals

Insurance activity is governed by the Law of the Russian Federation dated 27 November 1992 No. 4015-1 on the Organisation of Insurance Activity in the Russian Federation (the Insurance Law).

The Central Bank exercises control over insurance activity.

Insurance activity is performed by (1) insurance companies, (2) reinsurance companies, (3) mutual insurance companies, and (4) insurance brokers, all of whom must obtain the applicable licence from the Central Bank.

The Insurance Law provides special qualification requirements for chief executive officers, chief accountants of insurance companies and other managers.18

Insurers bear civil liability as provided by the Civil Code and described above.

In addition, pursuant to Article 32.5-1 of the Insurance Law, where an insurer violates the law, the Central Bank may issue a ruling with a description of particular actions the insurer must comply with and the term for compliance with the regulation. If the insurer is found to have committed multiple violations, the supervising authority may restrict or prohibit the insurer from entering into transactions and limit or suspend its licence.19

Administrative liability of insurers is provided for in Chapter 15 of the Code of Administrative Offences.

The Criminal Code prohibits both fraud when performing insurance activity20 and providing knowingly false information to the Central Bank (these crimes are intentional).21

Year in review

The legislation related to professional liability changed slightly in 2020.

On 31 July 2020 the President of the Russian Federation signed Federal Law No. 306-FZ on Amendments to the Federal Law on the Securities Market and Certain Legislative Acts of the Russian Federation aimed at protecting unqualified investors.

In particular, new rules make financial instruments and high-risk transactions available to individual unqualified investors only after they pass the tests required by the above-mentioned Federal Law.

The Law provides for a broker's liability for breaches of the established procedure for executing transactions; for example, when a broker executes the orders of a person who has not passed the qualification test or the test regarding breaches of procedure.

If found liable, the broker will be obliged to repurchase the securities from the client at his or her own expense and reimburse all expenses related to the transaction or compensate the client for losses incurred in connection with the conclusion and execution of the contract.

On 13 October 2020 the Ministry of Finance published Letter No. 03-02-08/89387 stating that not only a company, but also its employees should be held liable for breaches of tax law. Ministry officials explained that the offence was committed by a specific person and consequently it was legitimate that the company's fine for the offence and debts incurred as a result should be paid by those who violated the legislation.

Should the tax authorities hold the organisation liable, this could be considered grounds for holding the chief accountant liable for the breach. The Ministry of Finance has noted that if there are sufficient grounds, the chief accountant can be held administratively, criminally and otherwise liable.

Furthermore, holding an organisation responsible for a tax offence does not exempt its accountants from administrative, criminal or other liability under the laws of the Russian Federation if there are relevant grounds for this, nor does it exempt them from the obligation to pay (or remit) the tax, levy, insurance premiums and penalties due.

Outlook and future developments

On 8 January 2020 the President of Russia instructed the government to ensure that amendments to existing legislation are made to exempt doctors from criminal liability for the loss of narcotic and psychotropic drugs (i.e., physicians may be exempted from liability in cases where the loss of narcotic drugs is not connected with intentional illegal dealings and provided that the loss has been duly registered by a special commission). However, the relevant draft law is now under discussion as the explanatory memorandum to the draft states that the proposed amendments do not currently exclude disciplinary or material liability.

Back in 2018 and 2019, the Ministry of Health proposed drafting amendments to the Criminal Code22 to decriminalise the liability of medical practitioners that use high-potent anaesthetic narcotic drugs in their work. The draft was supposed to establish administrative liability for individuals for violation of rules on trafficking narcotic and psychotropic drugs and rules on storage, realisation, transportation, use, import, export and destruction of plants containing such drugs. To date, the President has refused to fully decriminalise that kind of breach or exempt medical practitioners from liability.

Amendments to the Criminal Code on the establishment of separate liability for breaches of bank secrecy have also been proposed. The draft was developed with the participation of representatives of the Central Bank, the Ministry of Interior Affairs and the Association of Banks of Russia, but it has not been published yet.23 The draft increases the maximum penalty for bank secrecy offences to eight years' imprisonment.