14.04.2017 — Corruption in Russia Rising: Russia Ascended to 16th Place in Corruption in Business Rating

According to the research published by the international audit company Ernst & Young, Russia’s corruption is on the rise. In 2017 Russia took the 16th place rising from the 18th place among 41 EMEIA countries.

Ernst & Young’s research is based on the survey conducted among board members of major companies, top managers and mid-level managers, as well as other employees.

According to this year’s survey, more than half of those surveyed (66%) consider corruption to be widespread in the Russian business. In 2015 this opinion was only shared by 60% of those surveyed, with Russia being on the 18th place. The top 3 countries where corrupt practices are most often include this year: Ukraine (88%), Cyprus (82%) and Greece (81%). 

13.04.2017 — Supreme Court: Receiveables under Government Contracts May be Assigned

The Supreme Court has resolved an interesting dispute on April 13, where the central legal issue was whether the law prohibiting the winners of mandatory tenders to assign their rights under the contract effective from 1 June 2015 is applicable to assignment of receivables under government contracts to third parties.

In the case at hand, the claimant acquired the receivables arising out of the government contract. Works were performed and accepted, but not paid by the municipal authorities; as a result the claimant initiated a lawsuit. The court of first instance approved the claim in part, whereas the appellate and cassation courts reversed and denied the claim on the basis that receiveables under governmental contracts may not be assigned, and therefore the assignment of rights was an invalid transaction as contrary to the law.

The Supreme Court, however, supported the position of the court of first instance. The Supreme Court stated that the existence of debt under the contract was not disputed by the municipal authorities, while non-payment could not be justified by reference to Art. 448 (7) of the Russian Civil Code. According to the Supreme Court, this Art. 448 prohibits merely the transfer of the obligations arising out of the government contract relating to the performance of works themselves; at the same time law does not prohibit the assignment of receivables. Therefore, after the works under the government contract have been performed and accepted, the receivables under government contract may be assigned 

12.04.2017 — Amendments to Russian Administrative Offence Code: Minimum Fines for Cartels Doubled

The Federation Council has approved the bill on amending Art. 14.32 of the Russian Administrative Offence Code, which envisages liability for concluding antitrust agreements. The bill differentiates between different types of such agreements in establishing the amounts of fines. In respect of horizontal agreements (cartels), the minimum amount of fine for companies is doubled. On the other hand, maximum fines for vertical agreements are reduced. The law also changes the amount of fine for officials.

Previously the fine for companies varied from 0.01 to 0.15 of the revenue or the expenses associated with buying the goods (services, work) in question, but no less than RUR 100,000 (approx. USD 1,790). For officials, the fine ranged from RUR 20,000 to 50,000 (approx. USD 360 to 900), or disqualification from 1 to 3 years. The necessity to amend the legislation was caued by the increase in antitrust violations as reported by the Federal Antimonopoly Service.

The amendments foresee an increase in the minimum fine amount for conclusion of horizontal (cartel) agreements: to up to 0.03-0.15 of the total revenue or the expenses but no less than RUR 100,000 (approx. USD 1,790), or RUR 40,000-50,000 (approx. USD 710 to 900) for officials (the possibility of disqualification remains). At the same time, the fine for vertical agreements is reduced and will range for companies from 0.01 to 0.05 of the total revenue; for officials starting from RUR 15,000 to 30,000 (approx. USD 340 to 540).

11.04.2017 — Supreme Court: Owner Cannot Be Deprived of Property Due to Cadastral Error

The Supreme Court has upheld the position of a property owner, who was found by lower courts to have no legal title to land plot due to cadastral error as a result of a lawsuit, initiated by his neighbor. In the case at hand, the cadastral map of two neighboring land plots was drawn up incorrectly, resulting in their partial overlapping. Lower courts recognized this to be a sufficient ground to deprive one of the land plot’s owner of his legal title thereto. However, the Supreme Court disagreed with this approach, moreover, the Supreme Court proposed to analyze the cadastral engineer’s liability.

The property owner filed a lawsuit, claiming that the court declares that his neighbor lacks legal title to the neighboring land plot. The claim was based on cadastral error in overlapping of the neighboring land plot’s borders with the borderline of the claimant’s own land plot. The court of first instance and the appellate court granted the claim, depriving the owner of his property rights based on the errors made by the cadastral engineer.  

However, the Supreme Court disagreed, stating that the legislation does not list cadastral error among the statutory grounds for termination of property rights. The Supreme Court also noted that lower courts should have specified the procedure for elimination of these cadastral errors and additionally analyze the issue of the cadastral engineer’s liability. Decisions of lower courts were reversed and the case was remanded. 

10.04.2017 — State Duma Has Ratified Protocol on Subsidiary Role of European Court of Human Rights

Protocol 15 to the European Convention on Human Rights appends the Convention by formalizing the subsidiary role of the European Court of Human Rights (ECHR) in relation to domestic legal systems, and by including the reference to the states’ margin of appreciation in interpreting the Convention. The Protocol also reduces the deadline for submitting an application to the ECHR from 6 to 4 months since exhaustion of domestic remedies.

The Protocol to an extent implements the previously proposed approach of the Constitutional Court of the Russian Federation, under which the decisions of the ECHR inconsistent with the Russian Constitution as interpreted by the Russian Constitutional Court are not enforceable in Russia. Whether such an inconsistency exists, is determined by the Russian Constitutional Court itself, which therefore practically is entitled to decide whether to enforce the decision of the ECHR or not.

Human rights activists disapprove of the decision to ratify Protocol 15. According to the experts, the officially proclaimed subsidiary role of the ECHR in practice may be used by Russia to enforce decisions of the ECHR at its own discretion. Nonetheless, notably, Protocol 15 is currently ratified by 33 other countries among 46 countries in the Council of Europe.