New state and municipal control

The scope of the Law

Law No. 248 has come to replace Federal Law No. 294-FZ dated 26 December 2008 “On protecting the rights of legal entities and individual entrepreneurs during state control (supervision) and municipal control”. It is aimed at shifting the emphasis from checks, towards preventing offences and granting more guarantees to controlled entities when they interact with authorities.

The provisions of the Law will apply until the end of 2024 when only certain types of state control (supervision) are organised and implemented. The list of such activities is set out in Federal Law No. 170-FZ dated 11 June 2021 which has amended specific legislative acts in connection with Law No. 248-FZ being adopted.

The scope of the new Law, as compared with Law No. 294-FZ, has practically not changed. It also provides for a wide range of types of control (supervision) which were fully or partially excluded from the scope of regulation.

Its provisions do not apply to tax, currency and customs control, control over credit institutions and banking groups; issuers’ compliance with the laws regulating joint-stock companies and securities; control in the sphere of public procurement and procurement under Law No. 223-FZ; money laundering; antitrust control and other matters. Therefore, the guarantees established by the new law of the protection of rights of controlled entities do not apply to cases when such rights are being violated during the exercise of control (supervision) that is excluded from its scope. 

Types of control (supervision) activities

The Law has extended the list of control and supervisory activities that involve direct communication with a control body (on-site activities) and without such communication (off-site activities).

In addition to the pre-existing types of control (field and desk audits, a sample purchase and unannounced inspections), a number of new on-site activities have been added:

• A monitoring purchase, as opposed to a sample purchase, is carried out for the purpose of the subsequent forwarding of products, goods, results of work performed or services supplied for expert examination and for testing from the perspective of their conformity to mandatory safety and quality requirements.
• A sampling inspection is carried out by selecting samples of products (goods) at the place where these are stored, utilised or sold in order to confirm their conformity to mandatory safety and quality requirements. Once the inspection has been completed, products (goods) are returned to the person from whom they were taken.
• A visit for inspection purposes is carried out via interaction with a particular controlled entity (the owner (user) of a production facility) at the location (place where operations are carried out) of the controlled entity or a controlled facility. The inspection is carried out without any prior notification of controlled entities; while the latter must ensure unhindered access to the building (premises) for the inspector.

In addition to checking compliance with mandatory requirements, inspectors are entitled to carry out an on-site inspection within the scope of off-site control and supervision activities.

• An on-site inspection implies a visual assessment of compliance by a controlled entity with mandatory requirements at the location (place where operations are carried out) of the entity or controlled facility. Controlled entities are not informed about an inspection, and no contacts are allowed between the inspector and the controlled entity.

The extension of the list of control and supervision activities is aimed at reducing the number of desk and field audits. The Law establishes that a field audit can be carried out in exceptional cases when it seems to be impossible to make sure that the controlling body has full and accurate information, or if it is impossible to evaluate the activities of a controlled entity without being on-site within the scope of other control activities. The Law has reduced the timeframes for desk and field audits; now, it will not go beyond 10 business days (cf. Law No. 294-FZ establishes a 20-day period).

Informing about control and supervision activities

The unified audit register has been transformed into the Unified register of control (supervisory) activities, and the register is operated by the Russian General Prosecutor’s Office.

The new register is being set up for the purposes of recording preventive and control and supervisory activities, resolutions adopted during same and gathering information concerning the results of a review of complaints filed by controlled entities. On the one hand, this will allow a business to track all information regarding inspections with respect to it, while, on the other, control and supervisory bodies will have full information concerning the ‘track-record’ of a controlled entity when resolutions are issued (sanctions are determined).

A QR-code will be attached to the documents drafted during control and supervisory activities. This will allow for going to a web page containing records of the inspection during which the document was drawn up.

A prohibition is being established on control (supervisory) activities about which information has not been entered in the Unified Register by the start of such measures.

Revoking the results of control and supervisory activities

Law No. 248-FZ provides for the revocation of resolutions adopted based on the results of any control and supervisory activities conducted with gross violations. Law No. 294-FZ allows for such revocation with regard to the audit results only.

The Law enumerates 12 gross violations, one of which is carrying out control and supervisory acts that are not allowed for such type of activities. There was no such violation previously.

Mandatory pre-trial complaints procedure

The Law introduces a mandatory pre-trial complaints procedure for certain types of control (supervision) allowing business entities to challenge decisions of a control (supervisory) body or actions (an omission) of its officers.

The Russian Government’s Resolution No. 663 dated 28 April 2021 has approved a list of 62 types of federal state control (supervisory) activities to which the mandatory pre-trial procedure applies. The List includes the types of control (supervision) related to the activities of 19 governmental agencies, including the Federal Tax Service, Federal Service for the Supervision of Environment, Technology and Nuclear Management (Rostekhnadzor), Federal Agency for Tourism (Rosturism), Federal Service for Labour and Employment (Rostrud), Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing (Rospotrebnadzor), Federal Service for Surveillance in Healthcare (Roszdravnadzor), and the Ministry of Trade and Industry (Minpromtorg).

• Complaints procedure. A complaint should be filed electronically using a uniform platform of state and municipal services and/or similar regional portals of state and municipal services (except for cases when a complaint contains sensitive information or documents pertaining to state or other secrets protected by the law). A specialised service “A complaint against a decision of a control agency” has been created on the portal of governmental services.
  When a complaint is filed by a businessman, a simple electronic signature is permitted. If a complaint is filed by a company, it should be signed by an enhanced electronic signature only.
• Filing deadline. A complaint against a decision or actions (an omission) of officers can be filed within 30 calendar days after the date when a controlled entity became or should have become aware of the violation of its rights. A complaint against an order should be filed within 10 business days after its receipt.

An authorised body will review the complaint within 20 business days after it has been registered. A decision on the complaint will also be posted in the account of the controlled entity on the uniform portal not later than a day after it has been adopted.

Transitional provisions

Provisions concerning regional state and municipal control should be approved by 1 January 2022. Before that, Law No. 294-FZ will apply.

Control and supervisory activities which were not completed by 1 July 2021 will be carried out in accordance with the provisions of the regulations that were in effect on the starting date of such activities.

What to think about and what to do

We recommend that companies should:

• Analyse the need for complying with the mandatory pre-trial complaints procedure to avoid losing their right to court protection;
• Take into account that electronic communications with control and supervisory bodies will be carried out along with traditional paper communications until the end of 2023. To avoid missing deadlines or any other adverse consequences, both methods of communication should be timely monitored;
• Monitor any regulations to be adopted in the near future taking into account that the relevant mechanism will fully operate after such regulations have been approved.
  
  

Help from your adviser

Pepeliaev Group’s lawyers are ready to provide you with assistance in preparing for an audit and to offer legal support for business during control and supervisory activities, taking into account the new protection mechanisms which are envisaged by Law No. 248-FZ.

We are also ready to provide any required legal support concerning the matters of new legal developments, as well as to protect the interests of your company and of your employees in disputes with administrative bodies that may arise in the context of control and supervisory activities.