THE RUSSIAN CONSTITUTIONAL COURT HAS CONFIRMED THAT ADMINISTRATIVE FINES MAY BE REDUCED “BELOW THE MINIMUM THRESHOLD”

15.02.2013

Pepeliaev Group advises that the Russian Constitutional Court in its Resolution No. 1-P dated 17 January 2013 laid down a versatile legal position, according to which it should be ensured that the amount of an administrative fine is appropriate by having regard to the nature and other features of a specific administrative offence as well as to the material and financial positions of the offender. Therefore, if the amount of the administrative fine is significant, the fine may be reduced below the minimum threshold.

 
Facts of the case
 
A company went to the Constitutional Court to challenge article 19(8)(5) of the Russian Code of Administrative Offences regarding administrative liability for the failure to provide information to the antimonopoly authority. This company had been held administratively liable for failing to comply with its obligation to provide information at the antimonopoly authority’s request. The fine was RUB 300,000 which is the minimum administrative fine established by this provision. The company’s representatives went to the state ‘arbitration’ courts (which handle, among other things, disputes involving state authorities) to challenge the resolution that imposed administrative penalty in the form of the administrative fine. The arbitration courts ruled that this resolution was legitimate and upheld it. In its claim to the Constitutional Court, the company pointed out that the disputed provision established an incommensurably severe penalty and that even this minimum penalty was onerous for the business.
 
Conclusions of the Constitutional Court
 
The Constitutional Court ruled that article 19(8)(5) of the Russian Code of Administrative Offences was at odds with the Russian Constitution. This provision, together with the Code’s rules for imposing administrative penalties, establishes that a legal entity may be held administratively liable in the form of an administrative fine from RUB 300,000 to RUB 500,000 as set out in the Code.
 
The Constitutional Court in its Resolution pointed out that the legislature is not entitled to establish penalties for an offence at its own discretion. Even the minimum fine set out in the relevant provision may have a negative impact on the material position of many legal entities. As a result, this administrative penalty may turn into an instrument for suppressing economic independence and initiative and may excessively restrict the freedom of enterprise and the right of ownership. Any restriction of the right of ownership and the freedom of economic activity should be based on general principles of law and should be fair, adequate and commensurate. According to the relevant constitutional requirements, liability should depend on the gravity of the offence, the scope and nature of damage, the degree of the offender’s culpability and other important factors.
 
In its Resolution, the Constitutional Court pointed out that if the legislature establishes significant fines without any options for them to be replaced by another form of penalty, it must introduce the appropriate rules for imposing and carrying out administrative penalties that will, among other things, take account of the material and financial position of the person on whom the liability is imposed. This can be achieved in different ways, for example by imposing an administrative fine in an amount lower than the statutory minimum. 
 
The Constitutional Court demanded that the federal legislature amend the Code of Administrative Offences accordingly, so that the penalty for this violation of antimonopoly legislation could be imposed having regard to all facts of the case. Until these amendments are made, the minimum amount of the fine imposed based on this provision may be reduced by the court or antimonopoly body.
 
What to think about, what to do
 
The Constitutional Court’s position was that the nature of the administrative offence, the material and financial position of the offender and other important facts that may affect the case should be taken into account when considering an administrative offence case. This will ensure that an administrative penalty is fair and appropriate. Moreover, according to the court’s position, an administrative penalty may be “lower than the minimum” administrative sanction. This position of the court is versatile and may apply to any category of administrative offence cases.
 
Advisory support
 
The lawyers of Pepeliaev Group’s Administrative Law Defence of Business have extensive experience of successfully representing clients in cases on administrative offences and will help companies and their officials to make the most effective use of the new options for defending their rights and legitimate interests. They are also ready to analyse the actual facts and evaluate the prospects of any category of administrative offence cases at any stage of administrative proceedings.
 
Contacts
Elena Ovcharova
Head of Administrative
Law Defence of 
Business Group,
Pepeliaev Group
Tel.: (495) 967-00-07
 
Elena Lazareva
Senior Associate,
Pepeliaev Group
Tel.: (495) 967-00-07
e.lazareva@pgplaw.ru
 

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