Criminal Code Tighter, Still Fuzzy

Russia's long-awaited new criminal code, set to take effect Jan. 1, imposes some stiff penalties for so-called economic crimes, but analysts say it suffers from ambiguities that will make it tough to enforce.

The code replaces the Soviet criminal code of 1960 which, though amended to take into account market-oriented reforms, failed to define economic crimes and therefore has made law enforcement efforts futile.

"The code is an attempt to civilize Russia's market," said Alla Kazakina, a lawyer with Patterson, Belknap, Webb & Tyler who, with her colleague Alexander Dneprovski, wrote an analysis of the new code. "It endeavors to restrict activities of entities and individuals antagonistic to universal values of business ethics."

But she added, "While the code as a whole is a step in the right direction, it is far from the bold stroke needed to fight corruption endemic in Russia today."

The code's drafters decided it would be wiser to impose lighter penalties such as fines and restrictions on first-offenders rather than imprison them and risk transforming them into hardened criminals, Kazakina wrote. The code significantly increases severity of punishment for economic crimes committed repeatedly by individuals, organized groups or those that cause serious harm.

Article 146 states that copyright and related violations are punishable by a fine of 200 to 400 times the minimum wage -- a total currently equivalent to $3,000 to $6,000 -- or by a fine equal to two to four months of the violator's wages or other income. Mandatory labor or imprisonment for up to two years also are possible.

For repeated violations or those committed by an organized group, the fine can be raised by up to 800 times the minimum wage, and imprisonment for as long as five years is possible. Regarding trademark infringement, violations must be shown to be repeated or to have caused great damage.

"So what's the damage which an owner should suffer in order to determine this?" said Eugene Arievich of Baker & McKenzie. If someone trades in counterfeit sneakers, for example, the first shipment is not punishable until another shipment arrives, he said.

Vague definitions of appropriate punishments are also likely to cause problems.

"No one really knows what 'mandatory labor' is," Arievich said.

Under the federal law that puts the new criminal code into effect, provisions regarding "mandatory labor and detainment" cannot be enforced until after a new enforcement code is adopted, Arievich said. And the deadline for that is not until 2001.

Meanwhile, the courts will be left to interpret a lot of vague wording.

"It might make it more difficult to apply the new criminal code because the courts will be limited to a choice between monetary penalties, which are not much, and imprisonment," said Anya Goldin, an attorney at Latham & Watkins. "Until arrests and correctional labor sanctions can be implemented, there is nothing between full-blown imprisonment and monetary penalties."

Despite the widely acknowledged growth of corruption, the new code defines corruption vaguely at best, analysts say, and does not make it easier to prosecute government officials for corruption.

Kazakina's report notes, however, that the new code introduces the concept of "bribery in commercial organizations" and punishes bribery committed among, or by business people for the first time.

The code sets forth provisions on a new group of crimes related to the registration and licensing of entrepreneurial activities. Article 169 makes government officials criminally liable for unjust registration or issuance of licenses, as well as for unwarranted restrictions on commercial activity.

Article 171 introduces "illegal entrepreneurship" as a new offense, defined as performance of entrepreneurial activities without proper registration while harming the interests of individuals, organizations or the state on a large scale, defined as exceeding 500 times the minimum monthly wage.

The code also introduces penalties for money laundering. The intent to create a false entity to obtain credits, tax exemptions, financial advantages or conceal prohibited activity is punishable by imprisonment for four years and a fine of 50 times the minimum salary. Money laundering by an organization on a large scale is punishable by up to 10 years imprisonment with confiscation of property.

But once again, Kazakina's report noted, "on a large scale" is not defined -- which could pose enforcement problems.

One major achievement, Kazakina said, is the formal legalization of transactions involving foreign currency. The new code imposes criminal liability only for transactions involving significant amounts of precious metals, stones or pearls worth more than 100 times the minimum monthly salary.

The code introduces penalties for illegally receiving loans, which is timely, given the number of cases involving submission of falsified information to receive loans, Kazakina's report stated.

Article 186 allows imprisonment of up to eight years for counterfeiting. Such crimes committed by organized groups are punishable by 15 years in prison.

The code sets forth several new articles on violations and abuses in bankruptcy procedures, including a maximum punishment of six years imprisonment for initiating falsified bankruptcy.

Regarding tax-related crimes, tax evasion committed by individuals is punishable by up to three years in prison. Those responsible for evasion by an organization can receive up to five years.