The draft federal law On Amending Certain Legislative Acts of the Russian Federation has been drawn up by the Ministry of Justice in accordance with the Presidential Instruction of 13 January 2012.

The draft law is designed to increase the measures of accountability for the heads of non-profit organisations, state and municipal unitary enterprises, as well as joint stock companies whose controlling stake belongs to the state, established by the Russian Federation and municipal entities, for failing to properly carry out their official duties, thereby causing substantial harm to the legally-protected interests of the state and society.

Article 1 of the draft law proposes making amendments to Note 1 to Article 285 of the Criminal Code of the Russian Federation to include heads of state-owned companies, state and municipal enterprises and joint stock companies with state ownership into the category of officials.

At the moment, responsibility for failing to fulfill or for improper fulfillment of their duties due to a dishonest or careless attitude to service causing considerable damage or entailing the substantive breach of rights and legitimate interests of citizens or organisations or the legally protected interests of society or the state is defined by Article 293 (Neglect of Duty) of the Criminal Code of the Russian Federation. Furthermore, this offence can only apply to officials listed in the Note to Article 285 of the Criminal Code of the Russian Federation (Abuse of Official Powers). Currently, the Note to Article 285 of the Criminal Code of the Russian Federation states that persons who discharge the functions of a representative of Government on a permanent or temporary basis, or by special authority, or who perform organising and regulative and administrative functions in state bodies, local self-government bodies, state and municipal institutions, state  corporations, and also in the Armed Forces of the Russian Federation, in other troop and military formations of the Russian Federation, are classified as officials. 

In accordance with Article 120 of the Civil Code of the Russian Federation, a state and municipal institution is a non-profit organisation which may be set up by the Russian Federation, a constituent entity of the Russian Federation or a municipal entity.

Also, in accordance with Article 71 of Federal Law No. 7-FZ of 12 January, 1996 On Non-Profit Organisations, a state corporation is a non-profit organisation established by the Russian Federation.

Thus, heads of non-profit organisations established by the Russian Federation, constituent entities of the Russian Federation, or municipal entities in the form of state or municipal institutions and also state corporations established by the Russian Federation may be brought to justice for neglect of duty under Article 293 of the Criminal Code of the Russian Federation. 

At the same time, according to Article 39 of Federal Law No. 178-FZ of 21 January, 2001 On the Privatisation of State and Municipal Property, the rights of shareholders of open joint stock companies, or participants in limited liability companies, shares and stakes in whose authorised capital are owned by the Russian Federation and are not assigned to federal state unitary enterprises or federal state institutions, are exercised on behalf of the Russian Federation by the Government of the Russian Federation and/or an authorised federal executive agency or in cases provided for by the federal law by a state corporation, while the rights of shareholders in open joint stock companies whose shares are owned by a constituent entity of the Russian Federation or a municipal entity and are not assigned to state or municipal unitary enterprises or state or municipal institutions, are exercised on behalf of the constituent entity of the Russian Federation appropriately by bodies of state authority in the constituent entity of the Russian Federation or by local self-government bodies.

According to Article 113 of the Civil Code of the Russian Federation and Article 2 of Federal Law No. 161-FZ of 14 November 2002 On State or Municipal Unitary Enterprises, a unitary enterprise is a for-profit institution not vested with the right of ownership in the property assigned to it by the owner of property. The rights of the owner of property that is assigned to a unitary enterprise are exercised on behalf of the Russian Federation or a constituent entity of the Russian Federation by bodies of state authority of the Russian Federation or bodies of state authority in the constituent entity of the Russian Federation within their competence as laid down by the acts defining the status of these bodies.

In addition, the definition of officials under the Note to Article 285 of the Criminal Code of the Russian Federation does not include the heads of the state company Russian Automobile Roads, which is a non-profit organisation established by the Russian Federation in accordance with Federal Law No. 145-FZ of 17 July 2009 On the State Company Russian Automobile Roads and on Amendments to Certain Legislative Acts of the Russian Federation.

The heads of the aforementioned state and municipal unitary enterprises and joint stock companies, as well as the heads of the state company Russian Automobile Roads, which is a non-profit organisation, are not covered by the Note to Article 285 of the Criminal Code of the Russian Federation; consequently the institution of criminal proceedings against them under Article 293 (Neglect of Duty) of the Criminal Code of the Russian Federation and under Articles 285¹ (Inappropriate Spending of Budget Funds) and 285² (Inappropriate Spending of Funds from State Non-Budgetary Sources) of the Criminal Code of the Russian Federation does not appear possible since they bear responsibility not as officials but as persons discharging managerial functions in for-profit or other organisations (Article 201 of the Criminal Code of the Russian Federation).

At the same time, the legal nature of the powers exercised by these managers (administration of state or municipal property, implementation of certain state objectives and functions, the rendering of state and municipal services and the like), and the procedure for appointing them to the post, suggest the advisability of equating such persons with officials, since it is currently virtually impossible to institute criminal proceedings against them for failing to properly carry out their duties, thereby causing considerable damage or substantive breach of the rights and legitimate interests of citizens, or organisations, or the legally-protected interests of society and the state.

In view of the above, it appears reasonable to add to the list of officials named in the Note to Article 285 of the Criminal Code of the Russian Federation the heads of state companies, state and municipal unitary enterprises, and joint stock companies whose controlling stake belongs to the state or municipal entities.

In accordance with Subclause 1.1 of Clause 1 of Presidential Executive Order No. 1392 of 16 November 1992 (in the 26 March 2003 wording with amendments dated 30 June 2012) On Measures To Implement Industrial Policy When Privatising State Enterprises, the “controlling stake” shall mean any form of ownership in the capital of the enterprise which guarantees the absolute right to adopt or decline certain decisions at a general meeting of its participants (shareholders or stakeholders) and in its governing bodies, including the existence of the “golden share”, the right of veto, the right of direct appointment of directors and the like.

In order to increase the liability of officials, the draft law also proposes adding to Article 293 of the Criminal Code of the Russian Federation part one providing responsibility for neglect of duty entailing particularly large-scale damage, which involves an amount of over 7.5 million roubles, by analogy with large-scale and particularly large-scale damage fixed in Article 285¹ (Inappropriate Spending of Budget Funds) of the Criminal Code of the Russian Federation. 

Article 2 of the draft law proposes supplementing Article 7.32 of the Code of Administrative Offences of the Russian Federation with a new part (Part 4) establishing liability for acts or omissions resulting in the failure to fulfil obligations set out in a contract for the delivery of goods, performance of works or the rendering of services for the needs of the customer which is the state or municipal entities, causing substantial damage to the legally-protected interests of the state and society unless such acts or omissions entail criminal liability. This offence shall apply to officials, individual businessmen and also legal entities. According to Article 2.4 of the Code of Administrative Offences, the head of an organisation, the founder (owner), or someone engaged in entrepreneurial activity without forming a legal entity shall be classified as officials.

For the purposes of excluding an arbitrary interpretation of this norm, the draft law proposes referring this category of cases to the authority of a court of law. In this instance, only a court meeting in session can determine the “materiality” of damage caused.

The draft law will be considered at a Government meeting.