Russia has adopted laws banning corrupt officials from participating in government procurement and on the content of the concept of foreign financial instruments

Russia adopted Federal Law No. 489-FZ dated December 28, 2016 "On Amendments to Article 31 of the Federal Law 'On the Contract System in the Sphere of Procurement of Goods, Works and Services for State and Municipal Needs'" and Federal Law No. 505-FZ dated December 28, 2016 "On Amendments to Certain Legislative Acts of the Russian Federation as regards the definition of the concept of 'foreign financial instruments'".

Federal Law No. 489-FZ, which entered into force on January 9, 2017, amends Part 1 of Article 31 of Federal Law No. 44-FZ dated April 5, 2013 "On the Contract System in the Sphere of Procurement of Goods, Works, Services for State and Municipal Needs", which establishes a restriction on admission to procurement of individuals and legal entities convicted of corruption offenses.

Thus, the law introduces a ban on participation in procurement of legal entities subject to administrative punishment for committing an offense under Article 19.28 of the Code of Administrative Offenses of the Russian Federation(Illegal remuneration on behalf of a legal entity). This ban is valid for two years from the date of the decision to impose such punishment (the period is established by analogy with the period of inclusion of information about legal entities in the Register of Unfair Suppliers).

In order to minimize possible risks of re-registration of legal entities to circumvent this prohibition, the normative legal act also supplements the law on procurement with grounds for non-admission in the case of individuals with a criminal record for certain corruption offences.

The previous version of Federal Law No. 44-FZ already contained a ban on participation in procurement if an individual - participant of the procurement or the head, members of the collegial executive body or chief accountant of a legal entity - participant of the procurement has been convicted of economic crimes (until such conviction is expunged from them), as well as if they are subject to a penalty in the form of disqualification or prohibition to hold certain positions or engage in certain activities related to the supply of goods, performance of work, provision of services to legal entities - participant of the procurement.

Federal Law No. 489-FZ supplemented the law on procurement with a similar prohibitionin respect of persons convicted under the main corruption articles of the Criminal Code of the Russian Federation(289. Illegal participation in entrepreneurial activity, 290. Receiving a bribe, 291. Giving a bribe, 291.1. Mediation in bribery). The list of individuals whose criminal record on the above grounds must be paid attention to is supplemented by persons performing the functions of the sole executive body of a legal entity - participant of the procurement.

In order to create conditions for timely receipt by customers of information on the presence of the above-mentioned grounds for refusal of admission to procurement, the General Prosecutor's Office of the Russian Federation together with the Ministry of Economic Development of the Russian Federation is currently working on the issue of automation of collection and storage of this information and integration of the relevant register into the Unified Information System in the field of procurement.

Another adopted regulatory act - Federal Law No. 505-FZ, officially coming into force on June 28, 2017 - is designed to fill the existing legislative gap by establishing a unified concept of foreign financial instruments.

Previously, Federal Law No. 79-FZ dated May 7, 2013 "On the prohibition for certain categories of persons to open and hold accounts (deposits), keep cash and valuables in foreign banks located outside the territory of the Russian Federation, own and (or) use foreign financial instruments", which establishes, among other things, the prohibition for certain categories of persons to own and (or) use foreign financial instruments, as well as other legislative acts referring to this prohibition, did not provide a definition of foreign financial instruments.

This concept was used in Article 51.1 of Federal Law No. 39-FZ "On the Securities Market" dated April 22, 1996, but only in relation to those financial instruments that are allowed to circulate in the Russian Federation as securities of foreign issuers.

This circumstance created a potential for the formation of ambiguous law enforcement practice.

Federal Law No. 505-FZ establishes a single definition of this concept, fixing it in Article 1 of Federal Law No. 79-FZ. It is proposed to understand foreign financial instruments as:

securities and related financial instruments issued abroad;
participatory interests, shares in the authorized (share) capitals of foreign organizations (structures without formation of a legal entity);
contracts that are derivative financial instruments and loan contracts where one of the parties is a foreign entity;
loan agreements concluded with foreign banks and other credit organizations;
trust management of property established in accordance with the legislation of a foreign state, the founder and (or) beneficiary of which is a person subject to the prohibition established by Federal Law No. 79-FZ.

In other legislative acts containing the concept of foreign financial instruments, a proviso is introduced stating that its unified definition is set forth in Federal Law No. 79-FZ. Thus, relevant amendments are introduced, for example, to the laws on state civil service, military service, municipal service, laws regulating other types of service (in the FSB, SVR, Investigative Committee of the Russian Federation, Ministry of Internal Affairs, customs authorities, etc.) and others (more than 20 acts in total).

The explanatory note to the law specifies that the established prohibition includes both direct and indirect (through third parties) possession and (or) use of foreign financial instruments.