HOSTING, ENTERTAINING AND PROVIDING GIFTS TO OFFICIALS: WHAT IS AND ISN’T ACCEPTABLE? ACI Conference, Moscow, March 2011

Russian Anti-Corruption Provisions are Contained in: Federal Law “On Fighting Corruption” No. 273-FZ of December 25, 2008; Russian Civil Code; Russian Criminal Code; Russian Code of Administrative Offences; Federal Law “On State Civil Service of the Russian Federation” No. 79-FZ of July 27, 2004; Other legislative acts.

Definition of Public Officials in Russian Law: “Public Officials” may be defined as officers and employees of federal or regional state bodies belonging to the legislative, executive, or judicial branches of power. NB! The above notion does not include workers of a state owned enterprise, or a state corporation, doctors in a state hospital, or teachers in a public school. The definition of a “Public Official” under Russian law also does not include officers and employees of international organizations. Public Officials are divided into: High-level Officials (with specific legal status) Other Officials

Restrictions related to Giving Gifts to Officials Article 575 of the Russian Civil Code: Prohibits making gifts, except for ordinary gifts the value of which does not exceed 3,000 Russian Rubles: to Public Officials in connection with their official capacity or performance of their functions; in relations between commercial organizations. Exception to the above general rule: gifts received by Public Officials in the course of protocol events, official business trips, or other official events are not prohibited even if they do not meet the above criteria. However, if the value of the gift exceeds 3,000 Russian Rubles, such gift shall be recognized Federal, Regional, or Municipal Property.

What may be considered a Gift: Gratuitous transfer or undertaking to transfer property, proprietary right or right of claim to a third person; Exoneration from a financial obligation for no charge; Promise of gratuitous transfer of property, proprietary right or exoneration from a financial obligation in the future; Gratuitous performance of an obligation that the gift recipient has in respect of a third person.

GIFT VS. FACILITATING PAYMENT

Gift vs. Act of Corruption Corruption includes, without limitation: Misuse of Official Authority; Giving a Bribe; Accepting a Bribe; Abuse of Powers; Corrupt Business Practices (giving or receiving a “Commercial Bribe”).

Art. 17 of the Law “On State Civil Service of the Russian Federation”: Prohibits State Civil Servants to receive any remuneration from individuals or legal entities in connection with performance of their functions (gifts, monetary remuneration, loans, services, payment of entertainment, recreation, travel expenses, etc.). Prohibits State Civil Servants to travel abroad in connection with their official duties at the expense of individuals or legal entities. An exception to the above general rule is made in respect of business trips conducted on the basis of an international agreement, or on a reciprocal basis under agreements between Russian federal, regional, or municipal state bodies and foreign state bodies or international or foreign organizations.

Liability issues: Russian Criminal Code: Misuse of Official Authority (art. 285): imprisonment for the term of up to 10 years; Giving a Bribe (art. 291): imprisonment for the term of up to 8 years; Accepting a Bribe (art. 290): imprisonment for the term of up to 12 years; Giving a “Commercial Bribe” (art ): imprisonment for the term of up to 4 years; Accepting a “Commercial Bribe” (art ): imprisonment for the term of up to 12 years; Abuse of Powers by a person performing management functions in a commercial, or other organization (art. 201): imprisonment for the term of up to 10 years.

Liability issues: Russian Code of Administrative Offences: Illicit Payment on behalf of a Legal Entity (art ) Sanction – fine of up to the triple amount of the transferred money, or triple price of the transferred property, or services, but in any case no less than 1,000,000 Russian Rubles with confiscation of the unlawfully transferred valuables.

Gift, Meal, Entertainment expenses Reasonable Appropriate Customary

Affirmative Defense Modest amount Legitimate business purpose Compliance with laws and regulations Transparency Documentation Separation

Gift Policy Legitimate occasion Value No articles for personal use No gifts when a decision is pending

Meal Policy Legitimate purpose for the meeting Subordinate in time and focus to the meeting Value & Frequency Spouses should not be invited

Lodging and travel policy Proper location Hotel cost Business air ticket Distance and duration of the flight are to be justified by a good faith business reason

Local Policy - Who decides? Local management External Counsel Corporate Compliance

Where to look for guidance? RF Civil Code (Article 575) RF Law on State Civil Service (Article 17) RF Anticorruption Law No. 273-FZ RF Criminal Code (Article 291) What else?...

Internal control mechanism Corporate management commitment Comprehensive Policy & Guidelines Controls over policy implementation Training Employees awareness Management accountability Local monitoring (Management, Finance, Legal) Disciplinary actions