Global Investigations Review - The law and practice of international investigations

The Practitioner’s Guide to Global Investigations

Russia

06 January 2017

Hogan Lovells

General context and principles

1          Identify the highest-profile corporate investigation under way in your country, describing and commenting on its most noteworthy aspects as it relates to your country.

One of the most recent high-profile corporate investigations was carried out by the Russian state corporation Deposit Insurance Agency (DIA), which acts as the mandatory state liquidator of insolvent banks, and was with regard to the US$2 billion collapse of Mezhprombank. It led to the subsequent anti-fraud, insolvency and asset tracing litigation in Russia and overseas against the bank’s beneficial owners and directors, including against Mr Sergey Viktorovich Pugachev.

In April 2015, the Russian court issued a judgment holding Mr Pugachev and three other top managers liable for the insolvency of Mezhprombank, ordering them to pay 75 billion roubles, a record amount ordered by the court in the context of Russian insolvencies. The judgment was upheld by the superior Russian courts. Following the grant of the default judgment in the English courts in February 2016, the DIA is also seeking to enforce the Russian judgment in other jurisdictions where Mr Pugachev has assets.

The English High Court of Justice granted a worldwide freezing injunction for in excess US$2 billion over Sergei Pugachev’s assets in connection with the Russian insolvency proceedings. Mr Pugachev left Russia in early 2011, following the collapse of the bank and the opening of criminal investigations. In 2015, pending the hearing in the UK of the Russian extradition request, Mr Pugachev left London in breach of the English court passport order. Mr Pugachev was held to be in contempt of court in the English courts on 12 separate counts, including giving false evidence under oath, selling assets in breach of the freezing injunction and concealment of close to US$150 million. He now lives primarily in France.

The ongoing corporate investigation in Russia over the collapse of Mezhprombank revealed evidence crucial to the successful pursuit of the court proceedings against Mr Pugachev in Russia and internationally. This was done despite the efforts of Mr Pugachev to conceal and destroy the evidence relating, in particular, to such crucial spheres as Mr Pugachev’s de facto control of the bank (he had no formal official position with the bank but implemented a shadow decision-making control system with his personal special stamps authorising key decisions) and his role in the bank’s insolvency, including his actions in siphoning funds out of the bank, placing them outside of the reach of the bank’s creditors, in multiple jurisdiction using a complex web of offshore companies and trusts.

The status of the DIA (acting on behalf of Mezhprombank) as an injured party in the Russian criminal investigation allowed it to use the witness statements and other evidence obtained in the course of the Russian criminal proceedings (with the permission of the investigators) in support of the DIA’s civil law claims in Russia and overseas. It has proved to be extremely useful and allowed it to create a strong prima facie case of fraud necessary to obtain crucial injunctive relief and prevent dissipation of assets.

It was possible to set up a robust system of inter-jurisdictional evidence and information flows. It enabled it to pursue both Russian and international proceedings simultaneously while complying both with the complex requirements of Russian criminal law limiting the scope of the use of the information obtained in the ongoing criminal investigation as well as the English court’s ‘confidentiality club’ restrictions for the use of the information obtained in the English proceedings.


2          Outline the legal framework for corporate liability in your country.

Although Russia has ratified the 2003 UN Convention Against Corruption and 1999 Criminal Law Convention on Corruption, legal entities under Russian law cannot be held criminally liable for any contravention of Russian criminal law, only individuals can be criminally liable.

Russian law provides for administrative liability of legal entities, including fines in the amount up to 100 times of a bribe’s value but not less than 100 million roubles, under the Russian Code of Administrative Offences.


3          In your country, what law enforcement authorities regulate corporations? How is jurisdiction between the authorities allocated? Do the authorities have policies relating to the prosecution of corporations?

In addition to the law enforcement authorities with investigative powers applying to all persons, including corporations, depending on the type of crimes (such as the Investigation Committee, General Prosecutor’s Office, Ministry of Internal Affairs, Federal Security Service), a number of state bodies are competent to regulate corporations. These include, among others, the Central Bank, the Federal Antimonopoly Service, the Federal Tax Service and other multiple federal services and departments in specific economic sectors (e.g., transport, security, healthcare, education). We are not aware of publicly available policies specifically relating to the prosecution of corporations.


4          What grounds must the authorities in your country have to initiate an investigation? Is a certain threshold of suspicion necessary to trigger an investigation?

Russian criminal and administrative law does not specify the exact threshold of suspicion to initiate an investigation. Broadly, it lies within the relevant authority’s discretion and should be based on a reasonable belief of certain facts or grounds supported by evidence. This should give grounds to suspect that there has been a contravention of the law or infringements of a person’s rights (e.g., based on someone’s application, audit and tax reports, or information in the media).


5          Does double jeopardy, or a similar concept, apply to prevent a corporation from facing criminal exposure in your country after it resolves charges on the same core set of facts in another country?

Russian law establishes a general principle of justice, according to which no one can be held liable twice for the same offence (ne bis in idem). This provision is enshrined in the Russian Constitution as well as the Criminal Code and Code of Administrative Offences. A legal entity that commits an offence outside Russia may be prosecuted in Russia if such an offence is contrary to the interests of the Russian Federation, and in cases stipulated in the respective international legal treaty, provided that the legal entity was not found criminally or administratively liable for offence in a foreign state.


6          Describe the principal challenges in your country that arise in cross-border investigations, and explain whether and how such challenges are dependent on other countries involved.

One of the major challenges in relation to Russian cross-border investigations has to do with the transfer of information outside Russia. There is a plethora of issues in this respect mostly connected with the strict regulations protecting various categories of classified information of Russian persons (personal data, personal privacy information, personal correspondence, commercial and state secrets, etc.). The processing of classified information often requires the prior express written consent of a data subject. For example, any processing of personal data requires the express written consent of an employee before it is processed, and includes special requirements for the export of personal data to jurisdictions not considered to provide adequate protection for personal data subjects (such as the United States). A failure to observe personal privacy, business and state secrets’ rules could trigger criminal liability, whereas a breach of personal data requirements would invoke administrative liability.

The routine practice of the DOJ and SEC is to request production of information directly from Russian entities in the course of their global anti-corruption investigations, circumventing the Russian authorities through which such requests should normally be made under the 1999 Russia–US Treaty on Mutual Legal Assistance in Criminal Matters. This practice has caused significant concerns on the Russian side, especially at the time of the heightened geopolitical tension. Various legislative projects of blocking statutes have been circulated for consideration to put an end to this practice.

The other problem has to do with the existing tensions between Russian antimonopoly regulation and US and other extraterritorial anti-corruption statutes. In some Russian court and regulatory cases it has been held that Russian subsidiaries of foreign companies should comply in the first place with local regulation on antimonopoly and anti-corruption, and not with foreign laws on anti-corruption, which have a wider effect than Russian regulations. For example, if a seller enjoys a dominant market position, there is a risk that such use of anti-corruption measures could be regarded as an abuse of dominant position if they are not properly structured (e.g., request for an anti-corruption audit of a distributor; refusal to contract with an unqualified party; termination of contract or suspension of deliveries post-audit; incorporation of such terms into contracts/policies).


7          What bearing do the decisions of foreign authorities have on an investigation of the same matter in your country?

Russia is a party to various international conventions on co-operation and mutual assistance in the area of crime prevention, anti-corruption, anti-fraud, etc. If the decisions of foreign authorities fall within the ambit of the respective convention, the Russian authorities will accept and work with the materials and evidence received from abroad as well as execute requests for legal co-operation, including providing documents, records and other items; executing requests for searches and seizures; locating and immobilising assets for purposes of forfeiture, restitution, or collection of fines; extradition; and recognition and enforcement of civil judgments in criminal matters relating to compensation for damages.


8          Do your country’s law enforcement authorities have regard to corporate culture in assessing a company’s liability for misconduct?

Corporate culture issues have become more important and must be considered in the assessment of anti-corruption compliance measures by companies in Russia. Yet, this practice is just emerging as the authorities are only making their first steps in this direction.


9          What are the top priorities for your country’s law enforcement authorities?

The top priorities of the Russian law enforcement authorities in the economic sector include prevention of financing terrorist activities and money laundering, fighting corruption and bribery, combating tax evasion and prevention of fraud.


10        How are internal investigations viewed by local enforcement bodies in your country?

Internal investigations aimed at uncovering infringements or misconduct and crimes in corporate entities and at ensuring compliance are welcomed by the Russian authorities and regarded as an important part in accomplishing state goals of fighting bribery and anti-corruption, improving the business environment. The sharing of their results with law enforcement bodies could be regarded as a desirable, although not mandatory, step in the company trying to earn credit for co-operation with the authorities.


Before an internal investigation

11        How do allegations of misconduct most often come to light in companies in your country?

The most effective and common sources of information on misconduct allegations tend to be whistleblowers, standard screening processes, tax reporting and compliance. Russian law encourages companies to introduce whistleblowing programmes, such as helpdesks and reporting lines where employees can submit information about any alleged non-compliance. However, there is no formal protection of whistleblowers similar to that found in other foreign jurisdictions. Although various measures to stimulate whistleblower rewards similar to US measures have been constantly discussed in Russia, they have not yet been implemented for fear of a flood of applications.

Audit reviews have been less relevant, as auditors, both external and internal, on the one hand, are mostly dependent on the information provided by the company’s management; on the other, there is a sizeable supply of ‘puppet’ auditors. The auditors’ activism has not been helped by the underdeveloped court practice of holding auditors liable for professional negligence.

Major Russian companies have developed sophisticated screening processes and compliance functions, but for the significant number of other companies, who can only allocate small or a zero budget to these processes, it remains a box-ticking exercise. Against this background the internal audit plays a relatively more important role, as its function, if it operates effectively in the corporate structure, is well established, as opposed to the compliance function, which often has to prove its purpose and its usefulness in many Russian companies.


12        Are search warrants or dawn raids on companies a feature of law enforcement in your country? Describe any legal limitations on authorities executing search warrants or dawn raids, and what redress the company has if those limits are exceeded.

Search warrants and dawn raids are one of the most frequently used investigation tools in Russia. Very often they are associated not only with collection of evidence, but, in the case of ‘black raids’, they are used for illegitimate purposes, for example, in the case of a corporate conflict to deter or even eliminate competitors. Searches must be executed on the investigator’s order or the court’s authorisation if the action is taken on premises where people live. The Criminal Procedure Code provides the limitations on executing search warrants or dawn raids:

  • it should not cause damage to property;
  • private and family life circumstances must not be disclosed;
  • the owner of the premises and at least two attesting witnesses must participate during the execution of the search;
  • an advocate of the person in whose premises the search is carried out may be present; and
  • it should not be carried at night unless there is an urgent need.

In case of violation of rights during searches and dawn raids, such actions may be challenged in court and damages awarded if it is established that they infringed the law.


13        How can privileged material be lawfully protected from seizure during a dawn raid or in response to a search warrant in your country?

In December 2015, the significant Ruling No. 33-P of the Russian Constitutional Court specifically dealt with the protection to be granted and respected by law enforcement agencies during searches in relation to privileged materials. Search and access to privileged information is only possible under a court order specifying exactly the search objects. No sweep search is allowed. It is forbidden to take information from advocates’ files, which have to be marked accordingly, unless the information directly relates to criminal violations by either advocate or its client or other third parties’ crimes; or constitutes instruments of crime or objects whose circulation is limited under the law. No video, photo or other recording related to privileged information is allowed during the search.


14        Are there any privileges in your country that would prevent an individual or company from providing testimony? Under what circumstances may an individual’s testimony be compelled in your country? What consequences flow in your country from such compelled testimony?

It is a basic constitutional right that persons may refuse to provide information that would incriminate themselves, their spouse and close relatives. There are also certain categories of persons who enjoy immunity from giving testimony. They include judges and jurors in relation to the circumstances of their activities on a case; priests in relation to the circumstances that come to their knowledge in confession; parliamentarians (unless they give consent)in relation to their activities, and tax officers – in relation to the information from voluntary declarations of taxpayers. Apart from this, a witness as well a victim of crime shall not refuse to testify under the penalty of criminal liability in the course of the criminal investigation or if ordered by the court in all other circumstances. The law does not specifically differentiate between whether the testimony is voluntary or compelled but leaves it to the judge’s discretion to attach such evidentiary weight to it as it thinks proper depending on the circumstances.


15        What legal protections are in place for whistleblowers in your country?

Unless a whistleblower acts in the context of a criminal case and is threatened, he or she does not have specific protection under the law. The Criminal Procedure Code provides a general rule under which, if a witness is threatened with any illegal actions (including murder, violence, property damage), the court, the prosecutor and investigating officers shall take all security measures to protect such person: anonymisation of the person, monitoring of telephone, providing bodyguards and property security, etc.


16        What rights do employees possess under local employment law that determine how they are treated within a company if their conduct is within the scope of an investigation? What employment rights would attach if they are deemed to have engaged in misconduct? Does it differ for officers and directors of the company?

The rights of an officer or director affected by an investigation do not differ. In the course of the investigation, the employee continues to enjoy the rights of confidentiality and data privacy (e.g., it is illegal to review his or her emails without express written consent; private emails should not be reviewed and stored separately). The affected employee charged with misconduct may be informed about the subject matter of an investigation as well as the right to be provided explanations and evidence in support of its case, and to challenge its results, etc.


17        Are there disciplinary or other steps that a company must take in your country when an employee is implicated or suspected of misconduct, such as suspension or in relation to compensation? Can an employee be dismissed for refusing to participate in an internal investigation?

An employee must co-operate and provide written explanations in connection with investigated matters if he or she is implicated or suspected of misconduct. An employer should request explanations from an employee on the fact of misconduct. The employee’s refusal to participate in an internal investigation shall not by itself be a reason for dismissal or other disciplinary action. There are no disciplinary or other official steps provided in the Labour Code when an employee is implicated or suspected of misconduct, such as suspension or in relation to compensation. In practice, however, employers normally suspend the suspected employee using other legal provisions such as providing additional paid leave, and if the employee consents, changing the employee’s place of work to home or another location.


Commencing an internal investigation

18        Is it common practice in your country to prepare a document setting out terms of reference or investigatory scope before commencing an internal investigation? What issues would it cover?

Normally, Russian companies issue internal orders signed by their general directors setting out the scope of an investigation, the investigated conduct and the committee and its members who will be investigating and reporting back to the director general within a prescribed time frame.


19        If an issue comes to light prior to the authorities in your country becoming aware or engaged, what internal steps should a company take? Are there internal steps that a company is legally or ethically required to take?

The best practice is for the company to investigate the issue and assess whether it should be reported to the authorities. A company itself or its investigators are not legally obliged to report the uncovered issue to anyone, including the state authorities, except in certain situations. The duty to report may arise when the issue relates to a very serious crime punishable with 10 or more years in prison. In this case, under specific conditions, a failure to report could trigger criminal liability for concealing a crime (Article 316 of the Criminal Code). Also, in cases where the issue could affect the price of the publicly traded securities of a company, it has to be disclosed in the company’s official financial reporting as provided for under the Federal Law on the Securities Market dated 22 April 1996 No 39-FZ. Failure to do so may result in civil, administrative and in some cases criminal liability. There is no culture of pro-active reporting in Russia. In practice, companies take individual decisions about whether to report based on the circumstances.

20        At what point must a company in your country publicly disclose the existence of an internal investigation or contact from law enforcement?

There is no legal obligation of a company to disclose the existence of an internal investigation or contact from law enforcement officials, apart from in the situations mentioned above (see question 19).


21        When would management typically brief the board of a company in your country about an internal investigation or contact from law enforcement officials?

Under Russian corporate law, directors must act in good faith and reasonably in the interests of their company. Any serious issue that could expose the company and affects its share value, provided that no further standards and limits are established in the company’s board regulations and internal corporate documents, must be brought without unreasonable delay to the attention of the board for further consideration.


22        What internal steps should a company in your country take if it receives a notice or subpoena from a law enforcement authority seeking the production or preservation of documents or data?

Notices to preserve documents or data from the Russian law enforcement authorities are not usual. Such notices could actually prompt the destroying of documents, therefore Russian authorities tend to be pro-active in seizing important documents and information without notice. In cases where a company receives a document production request from authorities that is lawful, it must comply with it or seek its extension or variation if necessary. Typically, such requests are handled by the company’s in-house counsel who assesses their legality, and finds and preserves the respective data. The appointment of a document custodian is not standard practice.


23        How can the lawfulness or scope of a notice or subpoena from a law enforcement authority be challenged in your country?

Russian law provides a right to challenge, in the courts or in an administrative forum, actions and decisions of state authorities, including law enforcement bodies, if those authorities or bodies violate the company’s rights or interests or create obstacles to the conduct of activities and the exercise of rights or unjustly imposes any obligations.


Attorney–client privilege

24        May attorney–client privilege be claimed over any aspects of internal investigations in your country? What steps should a company take in your country to protect the privilege or confidentiality of an internal investigation?

The attorney–client privilege is known in Russia as ‘advocate secrecy’. Advocate secrecy in Russia applies to any information related to the legal advice provided by a lawyer admitted to the Russian Bar who has the status of an ‘advocate’. If an internal investigation is conducted by a duly retained advocate, it is likely that the information regarding the investigation and obtained in an investigation will be protected by advocate secrecy. It is highly recommended to mark all the documents produced or obtained in the course of an internal investigation as ‘confidential’ and ‘subject to advocate secrecy’ as well as to keep the most important documents and information in the offices or on the servers of the advocates to reduce the risk of their seizure by the authorities.


25        Set out the key principles or elements of the attorney–client privilege in your country as it relates to corporations. Who is the holder of the privilege? Are there any differences when the client is an individual?

The status of an advocate in Russia is required mostly for court representation, especially on criminal cases. The majority of corporate lawyers in Russia are not advocates and the advocate secrecy privilege does not cover information and documents related to legal advice provided by lawyers who are not advocates.

Any information obtained from any client that is related to the relationship of the client with an advocate is covered by advocate secrecy. The advocate shall not be compelled to disclose information covered by advocate secrecy to any state body or be examined as a witness regarding such information. Search and seizure in the offices of an advocate must be authorised by a court. Documents seized from an advocate’s offices may not be used as evidence unless an exception applies (see question 27). There is no difference regarding the advocate secrecy privilege as to whether the client is an individual or a company.


26        Does the attorney–client privilege apply equally to inside and outside counsel in your country?

The privilege only applies to advocates, not lawyers who are not advocates, whether they are inside or outside counsel. Advocates may only practise law as self-employed practitioners through specific Bar institutions, they are not allowed to be employed.


27        To what extent is waiver of the attorney–client privilege regarded as a co-operative step in your country? Are there any contexts where privilege waiver is mandatory or required?

The waiver of advocate secrecy may be regarded as amounting to active assistance in the disclosure and investigation of crimes and, as such, considered as a co-operative step leading to a less severe criminal penalty. It is not typical in practice though. Advocate secrecy is not applicable if:

  • the information in question relates to money laundering;
  • the information in question directly relates to criminal violations by an advocate, an advocate’s client or third parties;
  • the information in question relates to instruments of crime;
  • the information in question relates to goods restricted from circulation in Russia (e.g., drugs, weapons); or
  • it is expressly waived by the client.

We are not aware of any other context where a waiver of privilege is mandatory or required (e.g., to obtain credit for co-operation).


28        Does the concept of limited waiver of privilege exist as a concept in your jurisdiction? What is its scope?

Such a concept does not exist in Russia.


29        If privilege has been waived on a limited basis in another country, can privilege be maintained in your own country?

Russian law has no provisions nor relevant precedents in this regard. We think that there are, nevertheless, arguments to claim that privilege in this case could be maintained in Russia to the extent it has not been waived in another country.


30        Do common interest privileges exist as concepts in your country? What are the requirements and scope?

No, such privileges do not exist in Russia.


31        Can privilege be claimed over the assistance given by third parties to lawyers?

There is no express guidance on this in Russian law. It may be possible, if such assistance is directly linked to the advice provided by the advocate to the client, which is itself covered by advocate secrecy privilege.


Witness interviews

32        Does your country permit the interviewing of witnesses as part of an internal investigation?

Yes, it is permitted. Employee interviews are widely used during internal investigations in Russia.


33        Can the attorney–client privilege be claimed over internal witness interviews or attorney reports in your country?

Yes, if the interview is performed and the reports are produced by an advocate in the course of providing services to the client.


34        When conducting a witness interview of an employee in your country, what legal or ethical requirements or guidance must be adhered to? Are there different requirements when interviewing third parties?

There is no formal legal requirement similar to the Upjohn warning that has to be made to the interviewed employee in the course of an internal investigation. But it is expected that the general principles of law should be followed, such as protection of the individual, avoiding conflicts of interest and breaches of law, and maintaining confidentiality. If an interview is to be relied on in court as evidence, it must be in writing and personally signed by the employee. To enhance its evidentiary force it should be conducted by an advocate who must warn the employee before it starts (and it shall be reflected in the interview protocol) that it has the right not to testify against itself and its relatives. The employee must be aware that he or she could face criminal liability for giving false evidence. The requirements are the same when interviewing third parties.


35        How is an internal interview typically conducted in your country? Are documents put to the witness? May or must employees in your country have their own legal representation at the interview?

Normally the investigator begins the interview with a brief introduction that includes the reason for the interview, appropriate disclosures and planned use of the information obtained during the interview. To assure impartiality and objectivity of an interview as well as its privileged status, it is a good practice to engage, for an interview, an advocate as an external counsel as well as HR and compliance representatives.

When asking the questions, an investigator should always remain neutral and never appear to take sides. The investigator should remain focused, keep the interview on track and move forward to obtain as much information as possible. Relevant issues can be explored with the aid of, where appropriate, open-ended or leading questions. After witnesses answer the questions, it is recommended to put the evidence and documents to them and to ask them to provide explanations, especially in cases of discrepancies between their answers and evidence. The investigator should encourage witnesses to contact them or the company’s management after the interview if they think of anything else that might be relevant to the case. They should also remind the witness of the importance of confidentiality. If necessary, the investigator should prepare the protocol of the interview and ask the witness to sign it. Employees may have their own legal representation at the internal interview but in practice such requests are relatively rare, and normally the employees insist on legal representation only in exceptional cases.


Reporting to the authorities

36        Are there circumstances under which reporting misconduct to law enforcement authorities is mandatory in your country?

See the answer to question 19.


37        In what circumstances might you advise a company to self-report to law enforcement even if it has no legal obligation to do so? In what circumstances would that advice to self-report extend to countries beyond your country?

Even if there is no legal duty to self-report in Russia, it might be advisable to do so when there is a duty of self-reporting in relation to the issue in a foreign jurisdiction, for example, because of the global nature of the company’s business. It might be advisable to consider self-reporting when it is the company’s policy to do so or it is in the company’s interests to inform public investigative authorities, for example, if there is a need to co-operate with the competent authorities to complete the investigation and make it more effective or prevent crimes from taking place. It may also be advisable to self-report when the risk of leaks about the issue is significant and such self-reporting is a part of the risk mitigation strategy. It may also be advisable in cases where public interests and third-party rights and legal interests are significantly affected and non-disclosure generates significant risks.

38        What are the practical steps you need to take to self-report to law enforcement in your country?

It is possible to file a written application to the competent authority identifying the issue with contact details. It is important to make sure that such filing is duly recorded.


Responding to the authorities

39        In practice, how does a company in your country respond to a notice or subpoena from a law enforcement authority? Is it possible to enter into dialogue with the authorities to address their concerns before or even after charges are brought? How?

It is very important to enter into dialogue with the authorities to address their concerns before charges are brought. This could allow controlling the communication and testing it in real time as well as checking the intentions, which might not be evident, and reaction of the law enforcement authority. If this is done the chances of avoiding prosecution are much higher than in the situation where the charges have already been brought. Very often such dialogue is started by telephone and carried out through personal meetings.


40        Are ongoing authority investigations subject to challenge before the courts?

Yes, a party to an investigation usually has the right to challenge the decision of an authority on commencement, or at various procedural steps along the investigation, before a court.


41        In the event that authorities in your country and one or more other countries issue separate notices or subpoenas regarding the same facts or allegations, how should the company approach this?

There are no general blocking statutes in Russia, except for separate regulations that require ‘strategic’ companies (state-owned companies that are especially important for the development of Russian economy) to get a permission to provide information to foreign authorities. There is also the law on protection of personal data and other related laws (see question 45). The company would have to deal with each notice separately complying with the laws of the Russian Federation in the first place.


42        If a notice or subpoena from the authorities in your country seeks production of material relating to a particular matter that crosses borders, must the company search for and produce material in other countries to satisfy the request? What are the difficulties in that regard?

Although the scope of the information production request is normally limited to the territory of Russia, the company must still produce Russian authorities with the information within its ownership, possession or control abroad, for example, in its foreign branch or representative office. Russian law enforcement may require translation of the documents or impose comparatively short terms for production of information.


43        Does law enforcement in your country routinely share information or investigative materials with law enforcement in other countries? What framework is in place in your country for co-operation with foreign authorities?

Russian authorities usually share information with the law enforcement agencies of foreign countries if there is a relevant framework in place and a reciprocity in handling Russian requests for legal co-operation. Russia has a significant number of international and regional agreements and treaties dealing with various aspects of law enforcement with the competent authorities from other countries relating to crime prevention, tax, antitrust, criminal and civil enforcement, extradition, etc.


44        How would you advise a company that has received a request from a law enforcement authority in your country seeking documents from another country, where production would violate the laws of that other country?

We would point out to the Russian authorities the risks of such production in a foreign country and rely on the respective legal opinion of foreign lawyers to prove our case and identify the risks in the dialogue with the Russian authorities. At the same time, we would explore whether a respective waiver of the information transfer to the Russian authorities could be possible to obtain in the foreign jurisdiction in question.


45        Does your country have data protection statutes or blocking statutes? What related issues are implicated by complying with a notice or subpoena?

Russia has data protection laws (laws on personal data protection, privilege, commercial secrets, etc.) and certain blocking regulations that affect major state-owned companies. Normally a legal notice or subpoena requiring the production of information trumps any specific requirements for disclosure of classified information with limited access.


46        What are the risks in voluntary production versus compelled production of material to authorities in your country? Is this material discoverable by third parties? Is there any confidentiality attached to productions to law enforcement in your country?

The refusal to provide information voluntarily could incur penalties imposed by Russian authorities (e.g., fines) as well as the use of enforcement measures to actually obtain the requested information, including searches, or other negative consequences (e.g., the authority may take into account the unwillingness of the company to co-operate when rendering the final decision on the matter). The provided material is discoverable by third parties (usually by other parties to the proceedings) unless it is specifically identified that such materials are confidential, in which case access to the file could be restricted. In criminal matters all files have restricted access.


Global settlements

47        Prior to any settlement with a law enforcement authority in your country, what considerations should companies be aware of?

Companies need to ensure their settlement is final and enforceable and as such confirmed by the court. Under Article 190 of Commercial Procedure Code, it is possible to settle a dispute arising from public and administrative relations. However, a company willing to make a settlement with a law enforcement authority in Russia should keep in mind that such settlements shall be made in full compliance with the law and not violate rights and interests of third parties, otherwise the Russian court will not recognise them.


48        What types of penalties may companies or their directors, officers or employees face for misconduct in your country?

Companies may incur official warnings, fines, or disqualification or suspension of operations. In relation to individuals (directors, officers or employees), in addition to the above-mentioned penalties under the Code of Administrative Offences, the Criminal Code provides for removal of right to hold specific employment positions, compulsory community service, corrective or compulsory labour, confiscation, restriction of liberty, arrest and jail.


49        What do the authorities in your country take into account when fixing penalties?

Application of an administrative penalty in relation to the company depends on the nature of a violation, the property and the financial circumstances, as well as the respective mitigating and aggravating circumstances.

As for the application of penalties in relation to individuals, the following circumstances are considered: the nature of the crime and the character of the guilty person, mitigating and aggravating circumstances, and the effect of a penalty on the person’s family (the latter is taken into account in criminal proceedings).


50        Are non-prosecution agreements or deferred prosecution agreements available in your jurisdiction for corporations?

Such agreements are not available for corporations in Russia.


51        Is there a regime for suspension and debarment from government contracts in your country? Where there is a risk of suspension or debarment or other restrictions on continuing business in your country, what are the options available to a corporate wanting to settle in another country?

If a company has been held liable for administrative misconduct and its operations have been suspended, it cannot participate in any public procurement. The debarment from government contracts applies in cases where the company’s director, member of the executive board or the chief accountant were disqualified for an administrative offence or held liable for economic crimes. Upon expiry of the sanction, such restrictions are not applicable to the company.


52        Are ‘global’ settlements common in your country? What are the practical considerations?

Global settlements have not yet become a common practice in Russia, but there are no restrictions to having such settlements, provided they comply with Russian law.


53        Are parallel private actions allowed? May private plaintiffs gain access to the authorities’ files?

It is a basic constitutional principle that everybody has a right to find, obtain, transfer and share information. Persons willing to investigate any matters do so using their own resources, including any open public resources. Injured parties may enter criminal proceedings as such, and familiarise themselves with all case materials upon the completion of a preliminary investigation. Such person as a private civil claimant may bring a civil claim against the accused person to compensate for the damage caused by the crime.


Publicity and reputational issues

54        Outline the law in your country surrounding publicity of criminal cases at the investigatory stage and once a case is before a court.

Information about a preliminary investigation is confidential and not subject to disclosure according to the Criminal Procedure Code, unless it is provided with the investigator’s consent. Upon release of a judgment, the court shall post it to ensure that all personal data and information on state, commercial and other secrets is excluded. In addition, there is a list of cases on which the publications of judgments is prohibited (public safety, sexual crimes, etc.).


55        What steps do you take to manage corporate communications in your country? Is it common for companies to use a public relations firm to manage a corporate crisis in your country?

Public relations firms are often used by major Russian companies to manage a corporate crisis in Russia. Medium and smaller firms usually handle such matters in-house.


56        How is publicity managed when there are ongoing, related proceedings?

Publicity should be tightly managed having regard to any orders of the court, interests of parties without infringing the procedural rights of all participants, the nature of the proceedings (open or closed) and with careful consideration of the effect of publicity on each proceeding.


Duty to the market

57        Is disclosure to the market in circumstances where a settlement has been agreed but not yet made public mandatory?

In cases where the settlement could affect the price of the publicly traded securities of a company, one has to consider the need to disclose it in the company’s official financial reporting under the Federal Law on the Securities Market dated 22 April 1996 No. 39-FZ.

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