Companies operating in Russia can now exclude themselves from liability for bribery by way of self-reporting to the Russian law enforcement agencies. Based on changes to the Russian Administrative Offences Code which entered into force on 14 August 2018, legal entities will be released from such liability if they enabled the
- uncovering of the relevant violation (by the company);
- conduct of an administrative investigation (against the company); and/or
- uncovering, disclosure and investigation of the related criminal offence (committed by individuals acting in the interest of the company).
The legislative changes also authorise the prosecutor’s office opening the investigation against a legal entity to freeze its assets based on a court decision in order to secure the penalty payment.
The self-reporting will release the company from penalty payments under Article 19.28 of the Administrative Offences Code (Unlawful remuneration on behalf of legal entity). Under this provision, legal entities can be fined an amount up to 100 times the value of the bribe. In contrast to other jurisdictions, this release includes 100% of the penalties and is mandatory; it is not subject to the discretion of the law enforcement agencies or courts.
The new self-reporting rules apply to all types of bribery except for bribery of foreign public officials. The Russian legislator chose to exclude such bribery from the self-reporting rules in order not to deviate from the OECD Convention on Bribery of Foreign Public Officials in International Business Transactions of 21 November 1997, which was acceded by Russia and does not provide for comparable rules.
The benefits of the self-reporting will be limited to the reporting company itself. The individuals who made the bribe payments in the interest of the company – typically its employees and agents – will continue to face prosecution under the relevant provisions of the Russian Criminal Code. These individuals may only benefit from separate leniency provisions of the Criminal Code, e.g. under Articles 204 (Commercial bribery) and 291 (Bribery of officials).
Since Russian enforcement practice is currently focused on small-scale bribery with minimum fines being imposed (please see our Corporate ABC Report for 2017), probably only a few companies in Russia will actually submit self-reports. However, the new rules may help companies to dismiss employees who have participated in bribe payments (given that committing a bribery offence alone does generally not constitute grounds for termination under Russian employment law). The employer may now credibly threaten to report the offence to the prosecutor’s office as this would no longer result in its own liability.