23 June 2013
Dmitry Afanasiev moderates at a workshop taking place during the St. Petersburg International Economic forum

On the last day of the St. Petersburg International Economic Forum (SPIEF-2013) Boris Titov summed up the results of his first year as the Commissioner for Entrepreneurs’ Rights. According to the Vedomosti newspaper, the workshop was full to capacity (see Article entitled Titov: “Still It’s Possible to Do Business in Russia”, Vedomosti.ru, 22.06.2013, by Lilia Biryukova)*. Dmitry Afanasiev, Chairman of Egorov Puginsky Afanasiev & Partners Law Offices, who moderated the workshop, thanked the audience for coming despite the fact that on the previous night there had been parties to celebrate Vladimir Putin’s approving the amnesty for economic crimes.

Titov reminded everyone that the amnesty was a way forward  but there was difficult work still to be done: cases would have to be reclassified from Article 159 of the Russian Criminal (fraud) to Article 159.4 of the Criminal Code (entrepreneurial fraud), having entered into force in late 2012. We may not agree with having the cases terminated following the amnesty, reinitiated the following day, as Mr Titov put it. “Amnesty is an unpopular measure the President has decided on, it runs contrary to the public opinion and this has been a bold move,” — the commissioner praised Vladimir Putin.

Having reported the figures related to his activities (735 applications received, 260 of them reviewed and removed from the control list, 1172 people applied to the regional commissioners, of which 551 applications have been handled), quite unexpectedly Titov concluded that the situation regarding the rights of businesses was not that serious in Russia reviewing the number of applications, Mr Titov said that he expected a greater flow.

“It is still possible to do business in Russia”, Titov concluded. He also added that 70 to 80% of the conflicts with authorities arose from internal conflicts between businessmen of the consideration should be that  opening a mediation centre under the auspices of Delovaya Rossiya or Opora Rossii similar to the centre at the Russian Union of Industrialists and Entrepreneurs. In response to this suggestion, Vladimir Strashko, Vice President of the Chamber of Commerce and Industry (TPP) called for avoiding duplication and the consideration should be working together based on the existing institution under the auspices of TPP (The International Commercial Arbitration Court).

Citing a number of successful cases (an example was a case where the claim of a small company engaged in funeral services asking to initiate proceeding against a head physician informing the competitor which was dismissed), Mr Titov then gave the floor to other speakers. Andrey Nazarov, Vice President of Delovaya Rossia and a main developer of the economic amnesty draft bill was pleased to say that such a large-scale amnesty had not occurred in the  60 years following the “cold summer of 1953”. Therefore, in order to avoid a “cold summer of 2013” a number of criminal articles had to be removed from the initial amnesty draft. As a result, as per his estimates, about 5000-6000 people out of 9500 will be released from imprisonment. In answer to Vedomosti’s question on whether the estimate takes into account the fact that not all of the prisoners will be able to compensate for the damages established (which is a mandatory condition of the economic amnesty), he nodded persuasively and said that the above 5000 people included those who had already compensated or were capable of compensating for the damages.

The atmosphere continued to be positive and the mood was lighted by a number of jokes: Mr Nazarov promised that in case multiple penalties are introduced on the economic articles instead of imprisonment, this will create funds for compensation of the Pension Fund deficit, and Chung Yong-jin, Korea’s Commissioner for Foreign Investments, said that he usually attracted investors by his informal way of communication, just like “a family doctor”. But then Igor Zubov, Deputy Minister of Internal Affairs, took the floor subdued the buoyant atmosphere.

He began by saying that not all of those entrepreneurs who may soon be released did repent, that the wrongdoing started taking the shape of business entities, tax crimes have almost become a norm and the officially existing M&A departments of companies are involved with corporate raiders. Finally, the corruption and the damage to the state apparatus has been initiated by the entrepreneurial community giving bribes. Moving on to the civilizing  of the Criminal Code, Zubov said that the initiation of a criminal case based on a victim-impact statement alone is an achievement but in reality a lack of such statement does not imply there is no crime. Sometimes a victim is involved in shady ventures, and corporate raids are often based on the illegal actions of those taken over (competitors take advantage of their rival’s weak points).

Finally Zubov stated that the openness of the investigative branch of the Ministry of Internal Affairs: a commission involving social activists and lawyers was formed there, for which purpose the secrecy of investigation had to be sacrificed. That is why, according to Zubov, the Ministry of Internal Affairs expects the same openness from the business community, i.e. information from the companies’ security departments and assistance with examinations.

Alexander Brechalov, President of Opora Rossii, immediately expressed the feeling of the entrepreneurial community saying that he disliked the tones of Mr Zubov’s speech, as everything possible should be done for the society to begin a meaningful dialogue with the business community as it generates jobs and taxes. “And speaking about damages, should the damages compensation multiply in all headline-making cases involving officials, such funds will be sufficient to form a couple of state budgets,” Brechalov parried.

Yana Yakovleva, Chairperson of NCP Business-Solidarnost (Business Solidarity) argued with Mr Zubov as well saying that businessmen were not saints and it was the state that was to ensure that bribery should not be the quickest way to revenues. Besides, she cautioned Mr Nazarov and Mr Titov against unreasonable lobbying of multiple penalties instead of actual prison terms as the law enforcement authorities tend to estimate damages as the full amount of a transaction or revenue, which is absolutely wrong.

The tension was defused by the businessmen asking questions (specifying how they can address Mr Titov or thanking him for his work and assistance) and Mr Afanasiev trying to narrow down the long forewords of the questioners to get them to come to the point in view of the tough timelines. Finally, Vassily Boiko-Veliky (Chairman of the Board of Director of Vash Finansovy Popechitel (Your Financial Guardian) Group and President of Russkoye Moloko (Russian Milk) company), the last one to take the floor (in his amazing wine-red suit and cowboy booted ensemble) said that proceedings against him as per Article 159 of the Criminal Code had been dragging on for eight years due to no evidence and asked whether Mr Titov’s program provided for plans to reform the judicial system. Mr Titov indicated that he would take care of it.

Mr Afansiev himself summed up the results of SPIEF-2013 for the business community: it was a miracle, a dialogue between the business community and the state happened, and if businessmen were earlier considered as enemies, today they are enemies no longer, but almost friends and it’s likely that very soon the public will realize that businessmen are people as well.

You can see the video from SPIEF-2013 round table entitled “Commissioner for Entrepreneurs’ Rights — the First Year Results” con the Forum site following the link.

*the Vedomosti article is given below.


Dimitry Afanasiev

Dimitry Afanasiev

Limassol, London, Moscow