NEW LEGISLATION ON INSPECTIONS AND PROVIDING A LEGAL BASIS FOR THE EXTENSION OF AN ADMINISTRATIVE SUSPENSION OF ACTIVITY

Pepeliaev Group advises that 1 August 2011 saw the entry into force (except in relation to specific provisions which are to come into force at other times) of Federal Law No. 242-FZ On amending particular items of the legislation of the Russian Federation concerning issues of carrying out state control (supervision) and municipal control.

Substantial amendments have been made to Federal Law No. 294-FZ dated 26 December 2008 On protecting the rights of legal entities and individual entrepreneurs when state control (supervision) and municipal control are carried out (the “Law on Inspections”), as well as to a series of other items of legislation in various sectors. These changes concern inspections for particular branches of activity, establishing administrative liability for preventing the lawful activity of the inspectors or avoiding an inspection, while the new legislation has enacted the procedure which has developed in court decisions for an administrative suspension of activity to be extended and a temporary ban on activity to be applied. We set out below what we view as the main provisions for business in the new regulatory regime.

AREA OF CONTROL (SUPERVISION)

The list of areas of activity and types of control to which the Law on Inspections does not apply has been codified and amended (examples are state control over clearing transactions, supervision of the national payment system, customs control, etc).

There are changes to the list of control or supervision activities in relation to which separate federal laws may determine the specific features:

Excluded: control in the area of circulating and protecting information, over the circulation of firearms, ammunition and cartridges for them, over the circulation of narcotic substances and psychotropic agents, as well as customs control.

Added: fire supervision; the supervision of the conduct of lotteries, of the arranging and conduct of gambling, and of the activity of non-profit organisations; and the control (supervision) of the territory of a special economic zone.

NOTIFICATION OF START OF BUSINESS ACTIVITY

There is an extension of the list of the specific types of business activity in relation to which, when they start to be carried out, an obligation is triggered to notify the state authority exercising control (supervision) that the activity has started. These are:

• the production of standard units, standard samples and measuring apparatus;
• the production of containers and packaging;
• the manufacture of furniture;
• the manufacture of devices for personal protection;
• the manufacture of fire safety products;
• the manufacture of low-voltage equipment;
• the manufacture of building materials and products;
• the provision of social services.

DELEGATING SUPERVISORY AUTHORITY AND IDENTIFYING THOSE WHO ARE TO EXERCISE IT

The new version of the Law on Inspections provides for it to be possible for the powers of a federal or regional state control (supervisory) authority to be transferred to the appropriate authorities of a constituent entity of the Russian Federation or a municipal control authority.

At the federal level, the list of the officers of inspecting authorities and their powers must be established by the Russian President or Government. In constituent entities of the Russian Federation, these matters are to be established by that constituent entity’s senior executive state authority, while with municipal bodies, a legal municipal act of the local administration seems to be required.

ADMINISTRATIVE RULES FOR INSPECTIONS

In addition, the procedure for developing and adopting rules for federal state control authorities to carry out inspections is to be determined by the Federal Government. In relation to state authorities of constituent parts of the Russian Federation and municipal institutions, such procedures are to be established by regulatory acts of the relevant constituent parts of the Russian Federation.

ONGOING STATE CONTROL (SUPERVISION)

One new point of the law is a regime for ongoing state control or supervision over facilities posing particular danger. These include dedicated facilities for using atomic energy, dangerous production facilities and hydraulic facilities. The regime itself, the procedure for inspections to be carried out under it and the list of particularly dangerous facilities in respect of which it is being introduced, are to be established by the Federal Government.

PLANNING INSPECTIONS AND UNPLANNED INSPECTIONS

In the annual plans of inspections to be carried out, as well as the name of a legal entity, reference must be made to the names and locations of its branches, representative offices, and standalone structural subdivisions whose activity is also part of the planned inspection.

Planned inspections may be carried out twice or more within a three-year span in relation to entities conducting business in the area of supplying heating or electricity, energy conservation and energy efficiency or in the housing sector. The Federal Government is to establish a list of such types of activity and how often planned inspections may be carried out in relation to them.

The prosecutor’s office may demand that an unplanned inspection be carried out to supervise compliance with laws based on materials and communications forwarded to prosecuting authorities.

TIMEFRAME FOR AN INSPECTION

A maximum overall time limit of 60 working days has been established when an inspection is conducted of the branches, representative offices, and standalone structural subdivisions of a legal entity doing business in more than one constituent entity of the Russian Federation. At the same time, the time limit for each inspection to be performed in relation to a legal entity carrying out its activity in more than one constituent entity of the Russian Federation is to be established separately in relation to each of the legal entity’s branches, representative offices, and standalone structural subdivisions.

Federal laws governing relationships in different areas of economic activity have also been amended. Amendments have been made to the regulation of state control (supervision) and municipal control in the areas of transport, communications, construction, energy, agriculture, natural monopolies, trade in specific types of products, advertising, gambling, immigration, health, the protection of consumer rights, the protection of state secrets, information and personal data, environmental protection, industrial, nuclear, radiation, fire and transport safety, as well as other sectors. Such changes are aimed at ensuring that the provisions of Federal Law No. 294-FZ dated 26 December 2008 On protecting the rights of legal entities and individual entrepreneurs when state control (supervision) and municipal control are carried out accord with the provisions of other federal laws governing specific types of state control (supervision) and the particular features for carrying out measures of control over different types of business activity.

PROCEDURE ENACTED FOR EXTENDING AN ADMINISTRATIVE SUSPENSION OF ACTIVITY AND APPLYING A TEMPORARY BAN ON ACTIVITY

When the duration of an administrative suspension of activity has finished, a check is made as to whether the circumstances have been eliminated which served as grounds for the administrative punishment of a suspension of activity to be imposed. Should these circumstances not have been eliminated, a new record of an administrative infringement will be drawn up. A temporary ban on activity may be imposed and the administrative punishment of a suspension of activity may be applied again.

If there is a temporary ban on activity, the officer who drew up the record of the temporary ban affixes the seals to and closes up the premises and places where goods, other items of significant value and cash registers are stored. Other measures are also taken by the officer to ensure that the measures necessary for the temporary ban on activity are put in place by the legal entity, individual entrepreneur or lawful representative of a legal entity set out in the record relating to the temporary ban on activity.

Recommendations

Pepeliaev Group’s lawyers have professional experience of preparing companies, their officers and their employees for inspections to be carried out by state control and supervisory authorities and municipal control authorities. We provide support while measures of control are being carried out, and represent companies and their officers in court and before administrative authorities in cases concerning administrative infringements. We are ready to provide the full range of legal services in connection with preparing for and the carrying out of inspections, as well as with the application of administrative liability measures.

For further details, please contact:

in Moscow – Elena Ovcharova, Head of the Administrative Defence of Business Group, at (495) 967-00-07 or by e-mail; Nataly Travkina, Senior Associate, at (495) 967-00-07 or by e-mail

in St Petersburg - Sergey Spasennov, Partner, Head of St. Petersburg office, at (812) 333-07-17 or by e-mail