The text of a draft bill criminalizing compliance with anti-Russian sanctions started circulating via unofficial sources on April 5, 2022. According to the media, it was submitted to the Russian State Duma (lower chamber of Parliament) on April 4, 2022.
Currently, Article 201 of the Russian Criminal Code “Abuse of Authority” provides for liability of executives of companies who (a) use their authority against the company’s interests and (b) receive personal gains for themselves or third parties or inflict damage against third parties’ rights, if (c) such actions result in substantial damage to the interests of individuals, or companies, or society, or the state.
The bill updates part 2 of Article 201 by criminalizing the decisions/actions aimed at complying with foreign sanctions against Russia – decisions by a foreign state, union of states or international organizations imposing restrictive measures against Russia. Technically, the wording of the bill implies that the sanctions in question were imposed against the Russian state. It is unclear whether compliance with sanctions imposed against Russian individuals and companies are also covered by the bill.
If this draft becomes law, it is likely that any decisions/actions taken by a company’s executive based on sanctions against Russia may result in criminal liability and potentially prosecution. Examples of such actions include refusal to perform outstanding obligations or suspending deliveries due to export control limitations.
The bill targets those who are knowingly and intentionally involved in implementing foreign sanctions against Russia.
It may affect the following executives of the company complying with the sanctions regime:
- the general director,
- board members,
- members of the management board,
- their proxies,
- individuals performing administrative duties in the company.
The in-house legal team and external counsel may also be at risk of being prosecuted as accomplices depending on their advice.
The general rule is that a criminal investigation of the “abuse of authority” is launched following on from a criminal complaint filed by the company within which the abuse of authority took place (in this case, that would be the company seeking to comply with the foreign sanctions).
However, if the offence has inflicted damage to the interests of other companies, individuals, society or the state, the prosecution may be launched without that company’s complaint. It is likely that actions based on foreign sanctions will be interpreted as those against the Russian state, companies and citizens. Hence, the prosecution may likely be started without any criminal complaints from the company.
At the same time, an action may be qualified as an “abuse of authority” only if it is against the company’s interests. The company may claim that its interests are defined by the company itself (its executives, shareholders, board of directors) and they were not violated. This defence argument may hinder the prosecution because the “violation of the company’s interests” test will not be met. However, in practice we believe that the violation of the interests of the Russian state, companies and citizens will likely be sufficient for the law enforcement authorities to ignore the company’s position.
In practice, substantial damage is defined on a case by case basis. Normally it should be defined by an expert report with an analysis of the impact of the actions/decisions on the state, companies and citizens.
The draft bill provides for the following penalties for individuals (there being no concept of corporate criminal liability in Russia) for implementing foreign sanctions:
- Fine of up to 1 million rubles or five years worth of income of the defendant,
- Forced labor for up to five years with deprivation of the right to hold certain company positions for up to three years, or
- Imprisonment for up to 10 years with deprivation of the right to hold certain company positions for up to three years.