Foreign Entrance for Russian Bribes Has Been Closed

Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, adopted by the Organization for Economic Cooperation and Development (OECD) on November 21, 1997 (hereinafter - the Convention), has been ratified in Russia and will enter into force on April 17, 2012. To date, the Convention brings together 38 countries, both OECD members and countries wishing to join the organization. It is important to note that adherence to the Convention is one of the conditions of Russia's accession to the OECD, and its ratification is another step in that direction.

Roman Shabrov

Muranov, Chernyakov & Partners
+7 495 783-74-50

The Convention aims to encourage member states to fight corruption not only in their territories but abroad. The main obligation of the participants is to establish penalties to its citizens for bribery or attempted bribery of foreign officials (including, at the conclusion of agreements and contracts), and to keep a track of foreign officials who take bribes. Thus, the Convention deals with what is called, in terms of national criminal legislation, "active corruption" or "active bribery" and means a crime committed by a person who promises or gives a bribe, as opposed to the concept of "passive bribery", which means the offence committed by an official who receives a bribe.

By bribe the Convention means intentionally ‘to offer, promise or give any undue pecuniary or other advantage, whether directly or through intermediaries, to a foreign public official, for that official or for a third party, in order that the official act or refrain from acting in relation to the performance of official duties, in order to obtain or retain business or other improper advantage in the conduct of international business’. In addition, the Convention establishes special definition of a ‘foreign public official’, which includes persons who hold appointed or elected positions, and those that serve public functions, for example, the heads of government agencies or state companies.

It is significant that the Convention qualifies this wrong as a criminal offence. At the same time, the sanctions taken by signatory countries must be effective, proportionate and severe, and apply to both individuals and legal entities.

Here I should mention that according to the report of Transparency International, published last year, less than 20% of the countries that are parties to the Convention actively apply its provisions. As for Russia, it adopted a series of measures for its execution prior to the ratification. So, in April 2011 Russia adopted a package of anti-corruption amendments to the Criminal Code, establishing multiple penalties for giving and receiving bribes, as well as for brokering bribes. In addition, criminal law now covers not only companies that give bribes to

foreign officials or officials of public international organization but also foreign officials who take bribes.

Also, in May 2011 the Criminal and Administrative Codes were amended to define the terms ‘foreign public official’ and ‘an official of a public international organization’. In addition, penalties for individuals and legal persons for foreign bribery were tightened (Article 291 of the Criminal Code and Article 19.28 of the Administrative Code).

The undisputed advantage of the Convention is the mechanism for mutual legal assistance in combating these crimes and administrative offences. The member countries are required to provide legal assistance and extradite offenders.

But the institutional and legal significance of the Convention is not so limited to establishing the obligation of the member states to impose criminal penalties for bribery of foreign officials, but in the creation of mechanisms of prevention and detection of corruption.

It contains a number of provisions that are not related to criminal law, but establish certain obligations in respect of accounting, external auditing and internal controls of companies participating in tenders, as well as on monitoring of the implementation of the Convention's requirements. In particular, the documents annexed to the Convention suggest not only to criminalize these acts but also, for example, to prevent the companies guilty of bribery of foreign public officials from participating in tenders for the purchase of goods and services from the government.

The member parties should stop the practice of deducting bribes to officials of foreign states from the taxable income (several have recently been suspected in giving bribes in developing countries).

At the same time, the Convention and related documents do not resolve all the issues that are needed to intensify the fight against corruption. For example, the following matter were not resolved: giving and receiving bribes by private individuals in business, soliciting bribes or supplementary payments; assistance of commercial companies to political parties and candidates; the use of offshore financial institutions; attempts to block effective investigation of cases of corruption and prosecute of the perpetrators.

Muranov, Chernyakov & Partners