International - Written by on Monday, May 20, 2013 1:01 - 1 Comment

Opinion: Anti-bribery in Russia: Russia is on the road & Barry presents at the St. Petersburg International Legal Forum

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Last week Barry attended and presented on a (large) at the St. Petersburg International Law Forum about corruption.

The St. Petersburg International Legal Forum is now an established premier fixture on the legal map in Russia.

There were various slots on corruption.  Ever topical on Wednesday the Russian media (this link is worth clicking through to see the raid) was full of the story about the arrest of the Russian CEO of Societe General Russia on suspicion of bribery (USD$1.5 million to allegedly favourably  alter the terms of a loan in Moscow).

At the Forum Barry presented on International developments (a quick run down on the continuing trend for anti-bribery law creation and enforcement), the UK Bribery Act (coming soon…eventually) and the practical aspects of compliance in a Russian context.

What do I mean by in a Russian context?

Russia’s capitalist economy is barely twenty years old.  You can’t make an omelette without scrambling some eggs and it’s fair to say a large number of eggs have been scrambled in Russia.

But you can’t fail to be inspired, as your walk around the streets of Moscow and St. Petersburg, by the progress which has been made in those twenty years.

It’s not perfect.  There’s still a long way to go.  But whichever way you look at it strides have been taken.

Back to the ‘Russian context’:

For Russian business on the one hand UK Bribery Act and FCPA seem distant.

Yes, there is long arm jurisdiction under both.  But in reality, non-Russian law enforcement will (in most cases) find it hard to enforce.  Getting evidence will be tough (probably even tougher than usual) and Russia’s constitution forbids the extradition of a Russian national to another country.

There is little or no chance of Russians being extradited in orange jumpsuits to face the music in the US.

And yet.

On the other hand, there are three compelling reasons why, in practice, Russians care a lot about anti-bribery and why, whenever we present there we do so to packed houses.

First, Russians don’t like corruption.  Contrary to popular belief Russians do not like having to bribe traffic cops, kindergarden teachers to get their kids in, the planning department to get the permits to refurbish their apartment or anything else for that matter.

No-one would be happier than Joe Blogski or John Doeski if corruption in Russia was a thing of the past.  It isn’t yet (but then corruption is alive and well in the West too).

Second, many Russian businesses want to operate on an international stage. This ranges from setting up shop in London or New York to Russian businesses doing IPO’s on the NYSE, NASDAQ or London Stock Exchange and everything in between.

But perhaps the most compelling of each of the three reasons at the moment is not a general desire to stamp out corruption, the threat of law enforcement or the lofty aspiration of setting up outside Russia.

Instead it is the more prosaic reality that many Russian businesses count western companies as their customers.  Increasingly those Western customers are seeking to impose their own (developing and in some cases ill thought out) anti-corruption compliance on Russian businesses (mindful of the problems third parties in risky places – and Russia is a risky place – can cause).

So Russian businesses, the Russian government and Russian citizens are very interested in anti-corruption.

After explaining that in Russia it was broadly impossible to fire someone suspected of bribery (they would need to be convicted by a criminal court) and that the only two reasons to sack someone were, basically, 1. if they were drunk at work or 2. seriously late, Anton Smirnov of Lovells said a journey of 1000 steps starts with just one step.

The chairman of the panel, the very smart Alevtina Kamelkova Russian & CIS General Counsel of Alcatel Lucent said it would be really helpful if CEO’s of Russian groups demonstrated tone from the top and participated in anti-corruption panels like those running at the Forum.

That would be good too.

But in our view Russia should not beat itself up and likewise the West should not beat Russia up, over its present stage of development.

In world terms the Russian economy is a baby.

Non-Russian labor laws are hardly perfect – but we’ve come across plenty of others with similar flaws from the UK to Asia and beyond when dealing with international internal investigations.

We would like to see some CEO’s of Western businesses taking the time to demonstrate real tone from the top and talk about anti-corruption on similar panels.  Imagine the message that would be sent if the CEO of a Fortune 500 (not under FCPA investigation) took the time…

We agree that every journey starts with just one step. Russia has begun its journey.

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Kieran
May 24, 2013 13:33

I take your point about Russia at least being on a journey…but a journey to what? You fail to address one of the central issues about corruption in Russia – the fact that it is endemic within its political system and that its current ruler rules the country essentially like a mafia boss. Companies can set up compliance programs all they want, but when the country is ruled by a self-serving, corrupt elite which values its own enrichment and power above anything else, those programs amount to squat. It’s only until you have a functioning, objective criminal justice system that operates free of outside influence can you begin to say that Russia is really on the right track to tackling corruption. And that is a long long long way away, as the Magnitsky and Navalny cases, not to mention dozens of other politically motivated cases – illustrate. And it’s especially further away when you watch the “roll back” of Medvedev’s appointments and reforms that Putin is now carrying out.

The Russian economy may be a baby…but it’s a very sick baby.

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