ARTEM MOLCHANOV: CHANGING CRIMINAL LAW IS THE WAY TO DEVELOP COMPETITION AND ENTREPRENEURSHIP

Head of FAS Legal Department took part in event in St Petersburg to discuss competition restriction in the context of Russian criminal law policy

On 13 May 2019, Head of FAS Legal Department Artem Molchanov was a speaker at the IX Annual Research-to-Practice Conference of the Corporate Counsel Association – “Personal liability in economic operations as a law enforcement vector”.

The speaker emphasized that competition is a constitutional value in Russia since the Constitution of the Russian Federation guarantees support to competition [1] and economic operations aimed at monopolization and unfair competition are not allowed [2].

Discussing FAS legislative initiatives, Artem Molchanov reported that the norm [3] of the Criminal Code of the Russian Federation on economic crimes still does not formulate officially the basic goals and principles of criminal policy, particularly, in the field of the economy. Therefore, changing the criminal law policy is a way to develop competition and freedom of entrepreneurship.

“Mechanisms of administrative and criminal liability must work efficiently, they should be implemented, and our task as a regulator is to ensure implementation of liability measures, first of all, personal liability”, said Head of FAS Legal Department.

He added: “The entire Chapter 22 of the Criminal Code must be revised significantly and its criminal law prohibitions must be evaluated in terms of public danger. Criminal liability for cartels as the most dangerous type of economic crimes is practically not employed; and at the same time, hundreds of businessmen are sentenced annually for the crimes, which public danger is very questionable. Every year FAS makes several hundreds decisions on cartel cases, around 1500 legal entities are held administratively liable, and administrative fines reach 3 billion RUB. Yet, there are few criminal cases and sentences under Article 178 of the Criminal Code of the Russian Federation”.

“Bid-rigging cartels and anticompetitive agreements between ordering parties, organizers and bidders are the most widespread types of collusions that cause considerable damages to the budgets of all levels, so such actions must be criminalized in a separate part of Article 178 of the Criminal Code of the Russian Federation”, stated Artem Molchanov.

According to the speaker, a new qualifying element should be added to Article 178 of the Criminal Code, criminal liability “thresholds” must be increased and liability tightened accordingly. The grounds for liability relief should be “simplified”: a person that committed a crime is relieved from criminal liability if this person was the first among crime co-accomplices that voluntarily reported the crime, actively assisted its exposure and investigation, and returned unlawfully gained revenue or otherwise make up losses.

“Enabling efficient enforcement, creating opportunities for large-scale interventions, mechanisms should be developed that are aimed at preventing crimes and stimulating such prevention – the so-called information disclosure tool which is used efficiently for administrative liability. The Criminal Code also specifies liability relief, but there is no single fact of its application.  It means that the mechanism should be simplified. Then we will be able to talk about establishing a due mechanism for liability relief, which will be truly in force”, explained Artem Molchanov.

Head of FAS Legal Department also emphasized possibility to individualize liability. Administrative violations can be recognized as committed deliberately and carelessly; guilt under Article 178 of the Criminal Code is characterized exclusively by direct intention, i.e., a top-executive realizes public danger of his / her actions – concluding an anticompetitive agreement prohibited by the antimonopoly law, and foresees possibility or inevitability of publically dangerous consequences (competition restrictions / damages or gaining revenue) – and desires such consequences. In this case liability implicates fines and (or) confinement.

“We had several discussions about these legislative initiatives with the law enforcement bodies, interested executive bodies, NGOs and hopefully, in the near future we will there will hold discussions in public space. We expect that efficient use of these tools will reduce crimes in the form of cartels”, summed up Artem Molchanov.

President of the Corporate Counsel Association, Alexandra Nesterenko concluded that “members of the Association observe a trend towards tightening personal liability of corporate top-executives for violating the law, particularly, for anticompetitive agreements. Open discussions of these issues with FAS help determine the guides for good business behaviour”.

1. Part 1 Article 8 of the Constitution of the Russian Federation

2. Part 2 Article 34 of the Constitution of the Russian Federation

3. Chapter 22 of the Criminal Code of the Russian Federation