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10 03 / 17

You should conduct “pinpoint” risk-based monitoring

Kliment Rusakomsky,

The managing partner and founder of PARADIGMA law group

The company’s CEO position is quiet vulnerable, especially in cases of a carefully planned attack.  For example, the code of Administrative Offences of the Russian Federation contains about thirty articles, according to which head of the company can be charged with an administrative offence.

There is a considerable quantity of sanitary regulations, for breach of which administrative responsibility may arise. These regulations may overshadow work of virtually every company and personally of CEO’s work – by themselves and by virtue of labour protection law.

What is more, precise compliance with these regulations is often impossible. Some people think that sanitary regulations and labour protection law are related only to public catering or dangerous manufacturing. However, it is not the case. With the said regulations you can easily spoil a life of a software developer or a magazine editor.

Legal grounds for administrative prosecution are used not only by civil officers for bribe-taking, but also by merchants for bargaining, termination of business or alteration of contract. For example, in our practice there were cases where one party had to continuously carry out certain activity subject to the prescribed provisions. In the listed cases, administrative prosecution shall be ground for claiming within the provisions of contract. The prosecution documents become an evidence in the commercial proceedings.

Besides, company’s CEO may be held criminally liable for about twenty different offences. While usually people are aware about tax or insolvency offences, and heads of companies take into account such risks, cases of criminal liability for infringement of copyright or non-payment of salary are much less known or are simply not understood by the accused persons.

It is important to keep in mind that even an attempt to prosecute a person might form a good informational reason for “black” PR.

Even if the company’s CEO conducts his business reasonably and in good faith, and performs his duties in the right way, it can reduce the risk level, but will not eliminate it completely. Head of company does not always have an opportunity to explore all the information necessary for decision-making.

Employees with delegated powers might not be able to cope with their duties, understand or do the work on time, but liability still will be imposed on the CEO.

You should take into account the fact that when there is a formal duty to prove fault, regulatory authorities and law-enforcement bodies will not try to prove it. In particular, courts of first instance often show a perfunctory approach in relation to proof of fault: in fact, judges oblige the persons, who are held to be responsible, to prove their innocence. At the same time, absence of adversarial and justifying skills of the state representatives together with presence of a well-prepared legal defence shall allow you to efficiently resist to prosecution practically at all grounds. Basic rule in this situation: do not waste your time and do not neglect details.

It is important to note that a skillful legal defence is also able to create quite good informational causes and a foundation for good public relations with the company and personally with CEO.

Numerous and hardly practicable legislation and rules are not only a Russian problem. However, this problem may become apparent in different forms. While there is a “consumer extremism” and litigiousness in western countries, in Russia there is an “administrative aspect”, which is shown through redundant powers of state bodies, abuse of their duties and procedures purely in commercial purpose. It is essential to conduct “pinpoint” risk-based monitoring in order not to let catch yourself off guard.

Summary:

- Do not think that sanitary regulations and labor protection relate only to public catering and dangerous manufacturing.

- In some cases, administrative prosecution is the reason for claiming under a contract.

- If there is a formal duty to prove fault, regulatory authorities and law-enforcement bodies will not try to prove it.

- While there is a “consumer extremism” and litigiousness in western countries, in Russia there is an “administrative aspect”, which is shown through redundant powers of state bodies, abuse of their duties and procedures purely in commercial purpose.