Anna Goldin of Sistema JSFC on The UK Bribery Act

How the UK Bribery Act will affect business in Russia? We talk with Anna Goldin, vice-president of Sistema JSFC, the largest financial corporation in Russia whose shares, in the form of GDRs, are traded on the London Stock Exchange.

Russia does not enjoy a very good reputation as far as fighting corruption goes. Do you think there’s a large element of myth in this sort of perception of Russia?

You just have to read the statements of the President of the Russian Federation, who can judge the problem better than we can. President Medvedev has said that the level of corruption is extremely high. I don’t think he is so far off the mark.

The UK Bribery Act has been described as "the toughest anti-corruption legislation in the world". If we put it into perspective and compare it with similar laws in other countries, like the US Foreign Corrupt Practices Act for instance, how tough would you say this British anti-corruption law really is?

The Foreign Corrupt Practices Act pales in comparison with the British law. Let me give you some examples. In US, the so-called “facilitation payments” are exempt from regulation. These are small gifts made to facilitate some process which is supposed to occur in any event. Under the UK Bribery Act, such payments are not exempt.

The FCPA extends only to corruption of civil servants; the UKBA applies to commercial bribery as well, both to receiving and taking bribes, and covers a wider range of persons.

The UKBA also creates an entirely new offence, of corporate failure to prevent bribery, called ‘corporate offence’. This is the most significant addition to the previous bribery regulation, applying only to those companies with a ‘demonstrable business presence’ in the UK. The only defence to the corporate offence is demonstrating that ‘adequate procedures’ were designed and implemented by a company to prevent bribery.

These are just a few examples, among many other possible ones. The UK law is really much deeper and wider than the FCPA.

Is the UK Bribery Act about procedures? How far does it go to actually combat corruption?

At a minimum, the UKBA has its formal aspects. As mentioned above, the implementation of adequate procedures is the only defence for a company against corruption charges. That is, even if charged with corruption, the company will be able to defend itself if it complies with the correct procedures and has adequate controls. Thus, from this perspective procedures are extremely important.

Importantly, however, the law is not about form over substance. In the guidelines that recently emerged, it was made clear that procedures per se are not enough. Procedures must be followed in substance. It must be shown that management sets an example, defines the anti-corruption spirit of the company; that procedures are upgraded, tested and improved; that compliance is monitored and that the company follows the procedures not merely for protocol but in their substance and entirety.

This is important. Companies won’t be able to get away with simply hiring a lawyer to draw up several volumes of procedures, which then will be put on a shelf to gather dust. That won’t work.

When the UK Bribery Act will come into play, do you think that international clients will tend to give preference to law firms from the UK, the USA or other countries that have a tough anti-corruption law, rather than to domestic ones?

No, I don’t think so. I don’t expect anything like that. I don’t think any company will become more competitive merely because of the new law.

Of course, if you need advice on this law, you wouldn’t hire a Russian firm. I would certainly ask British lawyers about compliance with British law. But this is because of their expertise, not their nationality. In the same way on issues of Russian law, we employ Russian lawyers and on French law - French lawyers.

From the perspective of competitiveness in the field of legal services, the UKBA is completely irrelevant.

So, the law will not contribute to the redistribution of the legal services market towards foreign companies, will it?

I don’t think so. If I need a Russian law firm, one I know well, which I have already checked, with whom I have worked before and have no suspicions about its impropriety, this firm has passed all the procedures and tenders, and the lawyers can provide the expertise I need – I wouldn’t refuse to work with them for the mere reason that someone might have a bias against Russian firms. That would be too much.

I wouldn’t sacrifice some business, or a deal, or a legal case. I don’t want British lawyers to go argue case in a Russian court. I will choose the lawyers whose expertise I need.

At the end of the day we are a Russian company doing business in Russia and we can’t stop buying services here. Legal services are just a fraction of the services we buy. After all, we can’t hire British companies to clean carpets, cook, drive cars and provide all the other services we need.

Law firms are in the same position as the sellers of other services. Companies which are subject to the UKBA will have to check the law firms they deal with: examine the way they operate, do adequate due diligence, insert into contracts certain anti-corruption provisions, and engage them on the basis of relevant procurement and other adequate procedures.