LawFlash

Update: Russian Draft Law to Criminally Prosecute Directors and Officers for Sanction Compliance

April 11, 2022

A draft law submitted for consideration to the State Duma—the lower chamber of the Russian parliament—would amend the Russian Criminal Code to make compliance with sanctions a criminal offense for directors and officers, punishable by severe penalties, including long-term imprisonment. If adopted, the law would significantly impact many individuals and businesses in Russia, and companies would need to adjust their strategies toward Russia accordingly.

Specifically, the draft law proposes to amend article 201 of the Russian Criminal Code. This article criminalizes an abuse of authority by persons performing managerial functions in a commercial or other type of organization if such person uses their authority contrary to the lawful interests of that organization and for the purpose of deriving unlawful benefits and advantages or to harm others, provided that such act has resulted in substantial damage to the rights and lawful interests of citizens or organizations or to the legally protected interests of Russian society or the state.

PENALTIES

The draft proposes to amend this article to the effect that if the act is committed for the purpose of implementing a decision of a foreign state, union of foreign states, or international organization to introduce restrictive measures against the Russian Federation, such act must be punishable by:

  • a fine in an amount of up to 1 million rubles ($12,378) or in the amount of the salary or other income of the convicted person for up to five years or without such a fine, or
  • compulsory labor for up to five years with or without deprivation of the right to occupy certain posts or engage in certain activities for up to three years, or
  • imprisonment for up to 10 years with deprivation of the right to occupy certain posts or engage in certain activities for up to three years.

WHAT ACTIONS WOULD TRIGGER INDIVIDUAL PROSECUTION?

Taking into consideration a guidance of the Russian Supreme Court, expressed in its Resolution No. 21, dated June 29, 2021, an individual can be prosecuted under article 201 of the Criminal Code if she or he:

  • is deemed to have managerial powers within an organization whether commercial or non-profit (being its chief executive officer (general director), a member of the board of directors, or a person temporary empowered with fulfilling such functions);
  • uses such powers against the organization’s interests with a view of either deriving benefit (for themselves or for others) or causing harm to others;
  • takes actions which are directly linked to their functions but are not required to be fulfilled or which are objectively not made in the organization’s interests, as well if they are contrary to the aims and tasks for which they were empowered; and
  • takes actions, as a result of which the organization suffers damage (e.g., financial losses, normal work interruption, reputational damage).

IMPLICATIONS OF THE LAW IF ADOPTED

If adopted, this law will grant authorities a broad discretion to prosecute both Russia’s own citizens as well as citizens of other countries. The Criminal Code applies to nationals of any state, whether Russia or another country, for offenses committed in Russia as well as for offenses committed outside Russia if such was directed against the interests of the Russian state or Russian nationals.

Given its sweeping nature and grave effects, the draft has been heavily criticized by prominent business associations, both international and Russian.

As of the date of this LawFlash, the draft has not been scheduled for hearing at the State Duma.

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CONTACTS

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Ukraine Conflict Task Force
Giovanna M. Cinelli
Joanna Christoforou
Dmitry Ivanov
Bruce Johnston
Grigory Marinichev
Michael Masling
Kenneth J. Nunnenkamp
Georgia M. Quenby
Christina Renner
Melanie Ryan
Vasilisa Strizh
Carl A. Valenstein
Heather Sears
Alexey Chertov
Jiazhen (Ivon) Guo
Katelyn M. Hilferty
Nicola Kelly
Christian Kozlowski
Daniel Lopez Rus
Charles C. Rush
Eli Rymland-Kelly
Valentina Semenikhina