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COVID-19 Corporate Crime and Regulatory Issues in Russia

COVID-19 Corporate Crime and Regulatory Issues in Russia

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The COVID-19 lockdown will not last forever. Some of the Russian regions have already lifted the lockdown regime. Operating both during and beyond the lockdown could throw up novel and unexpected corporate crime and liability risks for businesses. Resuming or increasing business operations as restrictions ease will entail risk.  A resumption plan addressing logistical and operational complexities will be essential, but this should also take account of legal risks as part of overall risk mitigation measures.

This summary prepared by Sergey Yuryev and Mikhail Ivannikov aims to create business awareness of potential criminal and regulatory risks (and possible follow-on claims down the line) associated with operating or re-opening their businesses in and post-lockdown while risk of exposure to the virus remains. 

1. Could your business face criminal (or administrative) liability for exposure or risk of exposure to COVID-19 to (1) staff or (2) business partners and the public, under existing laws or new measures to combat the virus?

No specific legislation in respect of criminal (or administrative) liability has been introduced in Russia in response to COVID-19. However, existing provisions of the Criminal Code of Russia (Criminal Code) and Code on Administrative Offences of Russia (Administrative Code) are applicable and provide for criminal and administrative liability for individuals and companies for exposure or risk of exposure of COVID-19.

It is noted that under Russian law only individuals may be criminally liable, legal entities may bear only administrative liability.

The Russian Supreme Court issued special Reviews No. 1 dated 21 April 2020 and No. 2 dated 30 April 2020 relating to the application of Criminal and Administrative Codes to the COVID-19 pandemic and confirming liability for the following offences:

Administrative liability

  • Violation of health and safety and epidemiological rules or failure to comply with anti-epidemic measures during emergencies in the event of a threat of the spread of a dangerous disease or when a quarantine has been introduced within a specific territory (Article 6.3 of Russian Code on Administrative Offences);

  • Failure to comply with legal requests or instructions from an authorised body regarding anti-epidemic measures for example a quarantine order issued to a person who has returned from abroad (Article 6.3 of Russian Code on Administrative Offences);

  • Non-compliance with the rules applicable during the state of emergency or high-alert regime (except for the breach of health and safety and epidemiological rules described above) (Article 20.6.1 of Russian Code on Administrative Offences).

Criminal liability

The violation of health and safety and epidemiological rules which cause mass disease through negligence or create the threat of mass disease or cause death by negligence may be subject to criminal prosecution.

2. Could senior management or other company representatives face criminal or other liability for any such exposure or risk of exposure?

Yes, a company’s management and officers responsible for the offences indicated in the paragraphs above may bear administrative and criminal liability.

3. What are the potential penalties for (1) the business and (2) its management?

Administrative

  • Fines of up to RUB 300,000 (EUR 3,750) for individuals;

  • Fines of up to RUB 500,000 (EUR 6,250) for company officials or disqualification from holding certain positions for up to three years;

  • Fines of up to RUB 1,000,000 (EUR 12,500) for individual entrepreneurs or administrative suspension of operations for up to 90 days;

  • Fines of up to RUB 1,000,000 (EUR 12,500) for legal entities or administrative suspension of operations for up to 90 days.

Criminal

  • Fines up to RUB 700,000 (EUR 8,750) or imprisonment for up to seven years.

4. Have prosecutors or regulators brought any cases so far?

At the time of publication, there are no confirmed cases of such prosecution, however we may expect a number of such cases once the quarantine measures begin to be relaxed.

5. Are there any specific measures mandated for companies continuing to operate or resuming operations during the pandemic, concerning exposure to staff, business partners and/or the general public?

According to Presidential Decree of 2 April 2020 (Number 239) each Region of the Russian Federation shall adopt its own adequate measures to minimize threat of exposure COVID-19.

Therefore, each region of Russia may adopt its own set of rules and regulations in response to the COVID-19 pandemic.

For example, the self-isolation regime has been extended in Moscow and the Moscow Region until 31 May 2020. Only industrial and construction companies are permitted to restart operations as of 12 May 2020 and people must wear masks and gloves in public places and working places. Mandatory social distancing rules are in force and people are only permitted to leave their home for essential reasons. (Moscow Mayor Decrees dated 5 March 2020 No. 12-UM; 4 April 2020 No. 40-UM; 11 April 2020 No. 43-UM as amended and supplemented).

Other Russian regions apply broadly similar measures, however such measures largely depend on the epidemiological situation of the particular region.

There are is also Federal Guidance in respect of measures to be implemented, for example the Letter of the Minister of Labor No. 14-2/10/P-3710 dated 23 April 2020 in respect of the recommendation to work remotely; Letter of Rospotrebnadzor No. 02/7376-2020-24 dated 20 April 2020 in respect of recommendations for the organisation of workplaces and enterprises during the COVID-19 outbreak.

6. What potential liability could there be for civil claims by (1) staff and (2) business partners or members of the public in respect of infection (or other health issues) allegedly connected with a business’ operations during lockdown or in the aftermath? How might liability arise? Could companies face class-actions/ group claims?

The Russian Civil Code permits such claims potentially, however so far none of such claims have arisen.

The scope of the claims may be extremely wide and shall largely depend on the acts or omissions of business or the failure to comply with applicable regulations.

According to the Civil Code any person (group of individuals) may claim damages caused by wrongful acts (or indeed failures to act) if there is a direct causal link between the wrongdoing and the damage suffered. Clearly, there may be issues with proving the causation and Russian courts interpret causation restrictively.

Companies may face class-actions or group claims which are possible under Chapter 22.3 of the Russian Civil Procedure Code and 28.2 of Russian Arbitrazh (Commercial) Procedure Code. It is however noted that such claims have not been commonplace in Russia due to the procedural complexity of applicable procedures.

This is the Russia chapter from the global comparative CMS Expert Guide to COVID-19 Corporate Crime & Regulatory Issues.

By Sergey Yuryev, Partner, and Mikhail Ivannikov, Attorney at Law, CMS

Russian Knowledge Partner

Founded in 1993, Egorov Puginsky Afanasiev & Partners is the leading full-service law firm in the CIS with offices in Russia, Ukraine and Belarus and associated offices in the UK, the USA and Cyprus.

We advise its clients in many areas of law, including: dispute resolution in Russia and abroad, corporate law, M&A, antitrust issues, project finance and PPP, restructurings and insolvencies, energy and natural resources, property management and privatization, environment, technical regulation and industrial safety, banking and finance, intellectual property, criminal law, real estate and construction, taxation, family and labour disputes, marine and transport law, and international trade and customs.

We combine high academic qualifications, internationally acknowledged moral and ethical values, senior partners' professional experience and practical abilities with the vigour and knowledge of younger attorneys that enables thus providing clients with reliable, first-class service according to both Russian and western standards through a flexible structure.

All News about, and Legal Analysis by, Egorov Puginsky Afanasiev & Partners can be found here.

Firm's website: www.epam.ru

 

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