Monday, May 17, 2010

Informal relations

I am trying to understand the situation with tobacco lobbyism in Russia.

Lobbyism is not defined in any Russian law, but it was actively developed in shadow without any regulation from the part of the state. So it is difficult to draw any line between lobbyism and bribery. Many of Russian officials like the word 'lobbyism' just because it sounds better than 'corruption' or 'kickback'.

In most of cases it is hard to prove any connections between who is considered to be a 'lobbyist' and his 'client'. Informal relations of public officials and businessmen in Russia are strong and complicated. And the state does not have enough will to fight against corruption. Many Russian experts consider corruption to be a part of state management.

In USA and in Europe the serious attempts were made to stop practice of paying bribes in developing countries. Some of western companies (for example, Siemens and recently - Daimler)were punished for that practices. "Daimler AG and three subsidiaries resolve Foreign Corrupt Practices Act investigation and agree to pay $93,6 million in criminal penalties. Combined criminal and civil penalties of $185 million to be paid", - US Department of Justice told in the release (Daimler made improper payments to foreign officials in at list 22 countries including Russia to assist in securing contracts with government customers for the purchase of Daimler vehicles).

Daimler case seems to be not typical. Usually there are no direct schemes of giving bribes in Russia. All the schemes are sophisticated.
Is it a bribe if the company hires the consultant whose friend is a friend of public official who will take the decision the company really needs?
Is it 'corrupt practice' if the world famous company hires the wife of president's friend?
Is it 'a bribe' if the company cooperates with intermediary company owned by prime minister's friends (or any top manager's friend) to supply the big ammount of production for state controlled giant?

I have doubts about the effectiveness of US Foreign Corrupt Practices Act (and its European analogue) if we are talking about cases like that.

Unfortunatelly foreign companies on Russian market have to play according to local rules. If they will not pay bribes, their business in Russia will be ruined. They will not be as effective as those who use corrupt practices. So in fact the law urges western companies to use more sophisticated schemes or to do corrupt practices outsourcing.

I think transnational companies that worked in Russia for quite a long time know about that practices. And they are smart enough to avoid direct connections with the 'lobbyists'. Whether or no it will be interesting to check it.

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