Long arm jurisdiction - are you subject to the law?, Russia, US Foreign Corrupt Practices Act & Dodd Frank - Written by on Monday, May 9, 2011 3:02 - 4 Comments

Russian & UK Prosecutors: Friends again? Unethical Russian business watch out.

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Last week the new London Ambassador of the Russian Federation Alexander Yakovenko met with, Richard Alderman, Director of the Serious Fraud Office the lead UK investigation and prosecution agency for bribery.

Mr. Yakovenko took up his post at the end of January 2011. Before his appointment, Dr. Yakovenko served as Deputy Minister of Foreign Affairs of the Russian Federation.

Russia-UK law enforcement rapprochement?

Strained relations between the UK and Russia law enforcement agencies are no secret.

The UK failed to extradite Andrei Lugovoy from Russia as prime suspect in London Polonium 210 poisoning of Andrei Litvenenko.  Similarly, the UK has refused to extradite Boris Berezovsky to Russia.

Yet the Russian embassy website reports the two spoke of strengthening cooperation between Russian and British law-enforcement agencies paying special attention to the UK Bribery Act which will take effect on July 1.

Russian business prime Bribery Act target for the SFO

Last week we reported that Richard Alderman told us that investigating and prosecuting unethical Russian parent companies and their UK offshoot businesses was something the SFO was very keen to do if they won business advantage to the detriment of UK PLC using bribery.

Given the most recent (2008) Transparency International Bribe Payers Index ranks Russian businesses as the most likely to engage in bribery when doing business overseas out of the 22 countries listed it is a fair bet that the SFO has its sights set on investigating some Russian businesses.

We were surprised by the SFO’s clear enthusiasm to investigate Russian businesses.  We highlighted to the SFO the enforcement and evidential difficulties.  They were not phased by these and if there is a rapprochement between the two countries enforcement agencies then the bar we described to the SFO to investigate Russian companies drops significantly.

Irrespective of a closer relationship with Russian law enforcement the SFO made clear that they would target UK subsidiaries as well as their Russian parents and, if necessary, be prepared to test the scope of the long arm jurisdiction of the new Bribery Act before the courts.  Richard Alderman has said on many occasions that he wishes to build a body of case law to clarify some areas of uncertainty around the scope of the Act.

Russia getting tough on Bribery?

In two recent cases US DOJ Foreign & Corrupt Practices Act investigations have spawned Russian corruption investigations.  Specifically Daimler Chrylser and Hewlett Packard.

Meanwhile last week Dmitry Medvedev the Russian president signed into law new Russian anti-bribery legislation.  The new law imposes steep fines (based on a multiplier principle) in relation to the payer and receiver of bribes.

In his former role as Deputy Foreign Minister Mr. Yakovenko spoke about the Russian applications to join the WTO and the OECD saying that joining the OECD and the WTO was part of Russia’s effort to become more attractive to investors seen as a key ingredient to Russian economic development. Dmitry Medvedev said only a few weeks ago that cooperation with the OECD was a top priority for Russia.

The OECD said last week that the passing of the new Russian Anti-corruption law:

paves the way for Russia to join the OECD’s Anti-Bribery Convention and become a member of the OECD’s Working Group on Bribery. This may take place at our 50th Anniversary Week and Ministerial Council Meeting in Paris on 25 and 26 May.”combined with Russia’s strong desire to accede to join the OECD”

So will Russia’s actions match its tough words.  Perhaps Winston Churchill best summed it up in 1939 with his 5 cents on Russia:

“I cannot forecast to you the action of Russia. It is a riddle, wrapped in a mystery, inside an enigma; but perhaps there is a key. That key is Russian national interest.”

Unethical Russian business should beware.

The SFO has it in its sights using the sweeping new powers under the Bribery Act.

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Fred Harrison
May 14, 2011 2:38

Given the Russian authorities’ apparent eagerness to prosecute Alexey Navalny, Russia’s leading corruption fighter, the SFO’s optimism seems a bit misplaced, if not naive. See: http://www.ft.com/cms/s/0/265120c6-7b3a-11e0-9b06-00144feabdc0.html#axzz1MJljV5tI

Barry & Richard
May 14, 2011 3:01

Hello. Agreed. That said the Russian prosecutors have recently assisted overseas investigators. So for example we understand from sources close to the investigations that they have assisted in the context of the Daimler Chrylser Investigation and the HP investigation.

When we met with Richard Alderman he was very realistic about dealing with Russia. Even against that backdrop the SFO are keen to engage with Russian corporates.

Will it happen. We’ll have to wait and see.

However, any rapprochement (which we assume would only take place if in the circumstances of an individual case it served Russia’s interests) would simply make it easier than the SFO had otherwise assumed.

Thanks for the comment by the way. We agree that investigating and prosecuting corruption which has a Russian element can present formidable challenges – which is what we told the SFO.

Fred Harrison
May 14, 2011 5:43

I certainly agree that the SFO needs to engage with Russian business. Awareness of rising compliance requirements is very limited. But, if the SFO wants successful prosecutions, it’s going to have to engage with the Russian public — with consumer groups, private investors, labour organizations, regional media, and those ordinary folk who understand that kickbacks and bribes ultimately come out of their pockets. The SFO needs whistleblowers and activists like Navalny, who understand that the Bribery Act and FCPA are valuable tools they can use to fight corruption. I very much doubt the Russian authorities will be supportive of this.

May 19, 2011 13:07

I totally agree, there will be no support whatsoever from the Russian authorities to fight corruption, as corruption is a vital tool for the Russian government Bosses to survive. Furthermore, businesses is Russia since late 80’s get used to pay bribes to government otherwise they wouldn’t be able to exist or be as successful as they are now.
I believe that Mr. Navalny will be arrested and prosecuted for his activities, which may harm the regime on international arena.

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