Select, but verify

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The business raises strict requirements for potential suppliers trying to bring to a minimum the risks of entering into a contract with a bad faith business partner. Yet, the customer of goods or services may turn out to be a bad faith actor itself when it makes the conditions for partners more stringent without a good reason. To establish the balance of interests and rights of the members of these relationships the legislation of different states provides for the mechanisms regulating the procedure of selection of business partners. Read more in the article of Elena Sokolovskaya, Partner at Pepeliaev Group.

In the current economic environment any member of the market is trying to mitigate the risks. Among other things, each of them is trying to sel ect a reliable business partner, otherwise the company will receive low quality services and bear financial losses if the supplier fails to perform its obligations within the contractual deadlines.

This is why when selecting business partners companies are guided by the principle aut Caesar, aut nihil — all or nothing. In practice, the outcome is that candidates face a growing number of requirements. Such an approach allows for the most qualified, competent and reliable supplier to be found. During the selection process a demand is often made to provide a considerable set of documents confirming the business reputation, qualification and experience.

It is important to understand that the selection of business partners is not uncontrolled and chaotic. Let us look into the foreign experience. Anti-corruption regulations of different countries contain requirements for conducting an audit and recommendations on how to arrange for this process.


The regulation of the procedure for selecting business partners is of a comprehensive nature.

For instance, in France, it is required to assess the risk of corruption of clients, first-level suppliers and intermediaries. The Practical Guide of AFA (Agence française anticorruption) Practical Guide: Anti-corruption due diligence for mergers and acquisitions 2021. URL: https://www.agence-francaise-anticorruption.gouv.fr. provides a detailed methodology including several stages and examples of assessment criteria.

In the US, in the Guide to the FCPA (Foreign Corrupt Practices Act) Guide to the U.S. Foreign Corrupt Practices Act, Second Edition 2020. URL: https://www.justice.gov. it is recommended to assess potential business partners carefully before liaising with them. Moreover, an interim monitoring of such partners is advisable in a number of situations.

Obviously, once the selection procedures are completed a company may refuse to have business relationships with a potential supplier. However, this should be a weighted decision adopted after a careful consideration, especially for entities holding a dominant position on the market.

Here is an example fr om administrative and judicial practice of France. A company has not entered into an agreement with an enterprise for publishing advertisements, because the media outlet is owned by a competing group. This was recognised as an abuse of a dominant position because the refusal was not reasonably justified Cass. Com. 12 juill. 1993, Bull. IV. N 306; CA Paris, ch. 1, sect. H, 23 janv. 1998, Juris-data, N 020056..

What is the state of affairs in Russia and are there prohibitions and limitations for those who conduct a procedure of selecting contracting parties?

Naturally, such procedures exist and the statutory regulation is of a comprehensive nature. By choosing contracting parties one must take account of the provisions of legislation on protecting competition, public procurement and taxation.

A few obvious questions arise. How to find a balance between the requirements of different branches of law? What terms of involvement to offer to and what documents to request from a potential business partner? How to organise the selection procedure itself and how to avoid an infringement of the established prohibitions and restrictions.

You will find the answers in our article at page 13 “Liaising with business partners. Who is in the risk zone?”

The source: Competition and Law

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