Judges are expected to assess damages – Newspaper Kommersant No. 232 (7433) dated 12/14/2022

The Constitutional Court (CC) will check the provisions of the Criminal Code, which allow equating the amount of criminally obtained income to the total value of the contract, at the conclusion of which the ban on restricting competition was violated. If the court finds contradictions in such practice, then this may be a reason to change the general approaches, experts hope. The way the courts now calculate the amount of income and damage is a big problem for business, recalls business ombudsman Boris Titov.

The Constitutional Court accepted for consideration the complaint of Samara businessman Sergei Shatilo, according to the website of the court. He contests the provisions of Art. 178 of the Criminal Code (restriction of competition) in the part that allows the courts to consider the proceeds from the transaction as illegally obtained income.

Mr. Shatilo was found guilty in 2019 of attempted restriction of competition and sentenced to three and a half years in prison (a higher authority replaced the real term with a suspended one). Signs of a cartel were revealed during bidding for maintenance and repair of medical equipment. At the same time, the court concluded that the intent of the defendant was aimed at extracting income in the amount of the concluded contracts – a total of 768 million rubles, which is a particularly large amount.

The applicant does not agree with this approach, his lawyer Vyacheslav Zemchikhin told Kommersant: income should be calculated taking into account the costs necessary to fulfill the contract. According to an expert assessment, the amount of income from this transaction could range from 0 to 11 million rubles, while the court charged the businessman with the entire cost of the contract, that is, in fact, we are already talking about revenue. Meanwhile, the lawyer recalls, Art. 178 provides for liability for restricting competition if it caused major damage or resulted in the extraction of income on a large scale. And we are talking about income, Mr. Zemchikhin insists, otherwise the FAS would not have initiated amendments to this article in 2020, proposing to replace the concept of “income” with revenue. Such proposals did not find support either in the Supreme Court or in the Federation Council: its committee on economic policy recommended that the government provide for an approach in which the calculation of illegally extracted income is made taking into account the expenses incurred by the organization. As a result, the FAS amendment was never adopted, the lawyer notes, but now it turns out that the courts are implementing it in practice. Therefore, the applicant asks the Constitutional Court to clarify the disputed norm and give it an interpretation that would exclude the voluntaristic approach of the law enforcer.

Presidential Commissioner for the Protection of Entrepreneurs’ Rights Boris Titov notes that the problem faced by the businessman is general and applies to all economic structures. Both the investigation and the court very often recognize as damage the entire amount of the operation or disposal of property, and not the size of the reduction in the property mass or the loss of some benefits as a result of unlawful acts. If the Constitutional Court recognizes the norm of Art. 178 unconstitutional, then this will require an adjustment of its text and may become a reason for fixing some universal methods in the Criminal Code, the Ombudsman hopes.

“The very concept of damage means that as a result of certain actions, something was unfairly taken away from someone, something was unfairly deprived,” Mr. Titov explained in a comment to Kommersant. “In the case of cartels, they deprived other market participants of possible profit. Well, this is how it is necessary to conduct an examination, calculate the profit that was obtained illegally. That is profit, not gross revenue. And the profit in practice is often no more than 7% of the contract amount. Do you feel how the “damage” is immediately reduced by 14 times? Or you can offer another algorithm: income for the purposes of Art. 178 of the Criminal Code to be defined as the difference between the income (proceeds) received as a result of illegal actions and the income that would have been generated without taking into account illegal actions.

Pen & Paper lawyer Vadim Klyuvgant doubts that the Constitutional Court under the current conditions will break the established practice that has existed for many years. If this does happen, then theoretically this approach can be extended to other offenses in the economic sphere, he argues. However, in any case, this will not affect the norms of the Criminal Code on theft, according to which entrepreneurs are most often prosecuted, the expert warns: they are not talking about income as a sign of a crime. The criminalizing sign of theft is the size of the stolen, and this is legally a completely different substance, Mr. Klyuvgant clarifies. The construction, in which the level of public danger of an act in the sphere of the economy is made dependent on the amount of income, he calls initially vicious, since it allows criminalizing any economic activity, because it is always carried out with the aim of generating income. Either the act itself (for example, a corruption conspiracy) can be criminal, if it has a high degree of public danger, or an act that caused serious and specific damage that can be calculated and proved, the lawyer insists. And for the application of economic sanctions, including the recovery of income from an illegal transaction, there are enough civil law instruments and criminal repression is excessive here, he concludes.

Anastasia Kornya