Anti-monopoly legislation: recovery of unlawful income in favour of the government is constitutional under certain conditions

17.07.2009

Legal Update No. 50

Goltsblat BLP advises that Resolution of the Constitutional Court of the Russian Federation No. 11-P “On Checking the Constitutionality of Clauses 2 and 4, Article 12, and Articles 22.1 and 23.1 of the Law of the RSFSR ‘On Competition and Restriction of Monopolistic Practices on Commodity Markets’ and Articles 23, 37 and 52 of the Federal Law ‘On Protection of Competition’” (the Resolution) was adopted on 24 June 2009. The Resolution recognised the provisions indicated above as being consistent with the Constitution of the Russian Federation in the established constitutional legal interpretation.

The case considered the constitutionality of Russian legislative provisions regulating the manner and terms for commercial entities to remit, on the basis of a demand from the anti-monopoly authority, the part of their income deriving from violation of the anti-monopoly legislation.

The Court held that application of this government control to offenders against the anti-monopoly legislation cannot, in itself, be considered an illegal restriction of rights and freedoms but that the constitutional principles of fairness, balance of public and private interests, equality before the law, proportionality and commensurateness of state sanctions, clarity and lack of ambiguity of rules of law must, at the same time, be observed.

In particular, the Resolution concludes as follows:

  • The sanction in the form of recovery of income deriving from violation of the anti-monopoly legislation in favour of the government is intended to compensate the government for indeterminable expenses incurred by it in neutralising the negative socio-economic consequences of the violation; since it is compensatory in nature, the sanction might be applied in conjunction with other sanctions, in particular fines (for instance, those envisaged by the Code of Administrative Offences of the Russian Federation).
  • Since the legislation does not envisage otherwise, if an entrepreneur is not found guilty, no money received from violating the law can be recovered in favour of the government. To do so, the anti-monopoly authorities must, therefore, prove that the entrepreneur is, in fact, guilty.
  • Provisions of the above-mentioned Law of the RSFSR and Federal Law impose no restrictions on issuing a court order to a group of persons but income should be recovered proportionally from each of the group participants; the anti-monopoly authority is, therefore, expected to determine the amount illegally received by each participant in the group.
  • Considering that the Russian legislation fails to stipulate any specific period of limitation applicable with respect to this sanction, and amounts payable to the government are to be enforced through court actions, the general period set by the civil legislation of the Russian Federation is applicable.

For additional information, please contact:

Eugenia Borzilo, Head of Group,
Corporate/M&A,
Goltsblat BLP;
T: +7 495 287 44 44
E: info@gblplaw.com

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