On 15 May 2018 the State Duma of the Russian Federation passed a bill imposing criminal liability for complying with or contributing to anti-Russian sanctions (the "Bill" ) at its first reading.
The current version of the Bill contemplates criminal liability for the following conduct:
- actions or inactions intended to comply with
restrictive measures (e.g. sanctions) imposed by foreign states,
unions of foreign states or international organizations, where such
actions or inactions result in a limitation or refusal to engage in
usual business operations or transactions with Russian persons and
governmental bodies, broadly defined;
In this context, "usual business operations or transactions" mean legal actions intended to fulfill obligations arising from law or a contract, in case such operations (transactions) are freely exercised within usual business or other legitimate activities by persons that do not substantially differ from sanctioned Russian persons and governmental bodies, as well as their controlled persons. It includes inter alia (1) entering into a public contract (i.e. a contract that must be entered into with any person who applied to it), (2) fulfillment of obligations based on continuing contracts, (3) actions that aren't usually refused depending upon a particular counterparty, e.g. opening of a bank account, crediting payments, etc.;
- willful actions by a Russian citizen that contribute to the implementation of restrictive measures (as described above), including by way of providing recommendations or information that might lead to such measures.
Under the version of the Bill that passed the State Duma, violations would be punishable by either (1) fines of up to RUB 600,000 (€8,300) or the equivalent of four years of the convicted person's salary or other income; (2) by restrictions on liberty or mandatory labor for a term of up to four years; or (3) by imprisonment for a term of up to four years with or without a fine of up to RUB 200,000 (€2,800) or the convicted person's salary or other income for a period of up to one year.
All official feedback (from the Russian Government, the Supreme Court of the Russian Federation, the State Duma's committees, etc.) on the Bill was only positive and the Bill was recommended for the second reading. The Bill, however, evoked strong objections in the Russian business sector, including from reputable organizations like the Russian Union of Industrialists and Entrepreneurs (RSPP). Experts noted that the Bill places a lot of companies "between the devil and the deep sea"; besides, many noted its ambiguous and unclear wording that might be interpreted at one's discretion.
Considering these critics, the second reading scheduled for 17 May 2018 was postponed; further news on progress of the Bill is expected later this summer. Some kind of a compromise with business is being sought. According to available statements by various officials, current discussions include contemplating administrative penalties only for the first violation and criminal liability only for a repeated offense. Another possible decision would be to impose criminal liability for contributing to sanctions only, and limiting liability for compliance with sanctions to administrative liability.
In order for the Bill to come into force, it must pass two more readings, be passed by the Federal Council (the upper chamber of the Russian legislature) and then be signed by the Russian President and officially published.
Considering that the Bill, if implemented, could create substantial risks for employees (managers) of a large number of companies (belonging to international groups of companies or seeking to comply with the sanctions for contractual or other reasons), we recommend tracking the status of the Bill.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.