On some aspects of the use of the trust management in the Russian Federation as a tool to prevent conflicts of interest

Gorokhova Svetlana Sergeevna PhD in Law Associate Professor, Department of International and Public Law, Financial University under the Government of the Russian Federation 109456, Russia, Moskovskaya oblast', g. Moscow, ul. 4-I veshnyakovskii proezd, 4, kab. 414 Swettalana@yandex.ru Other publications by this author

Due to the possible occurrence of a conflict of interests, or not conditioned by anything other than the official position of a person, the obligation to transfer securities, participation shares, shares in the authorized (stock) capitals of organizations to the trustee is fixed by Russian legislation within the framework of the institute for prevention and control of conflicts of private and public interests of state and municipal employees in the process of performing their direct duties. responsibilities, as well as a number of other categories of citizens involved in public administration. It should be noted that such a solution is not a domestic know-how, and in one way or another is used in the anti-corruption and anti-conflict policies of a number of states. The states that have rules governing the possibility of transferring distressed assets to trust management, instead of their complete alienation, include the USA, Canada, Chile, Albania, and some others. Some States are in the process of discussing similar legislative initiatives, for example, Mexico. However, an overwhelming number of countries in the modern world impose prohibitions or strict restrictions on the ownership of securities by government employees and their participation in commercial activities. At the same time, the legislation of most states does not establish trust management of such property as an alternative to the alienation of securities and shares in commercial companies. Where such a practice exists, not simple trust management is used, but its qualified types, for example, a "blind" trust, in which the trustee completely changes the composition of the employee's assets during the management process, thereby depriving him of the opportunity to make managerial decisions under the influence of personal interests, since the employee simply does not know in which companies he is interested in lobbying.

In our case, nothing like this happens.

According to Part 2 of Article 17 of Federal Law No. 79 "On the State Civil Service of the Russian Federation", ^[1] in the event that an employee's ownership of securities (participation shares, shares in the authorized (stock) capitals of organizations) leads to a conflict of interests, or may determine it, a civil servant is obliged to transfer the securities belonging to him securities, and other agreed property in trust management in accordance with domestic civil legislation.

Federal Law No. 273 of December 25, 2008 "On Combating Corruption",^[2] also contains a norm (Article 12.3.) providing for the obligation to transfer securities (participation shares, shares in the authorized (stock) capitals of organizations) to trust management in order to prevent a conflict of private interests of a government representative with the public interests of the state and society. 

The wording of this article is virtually identical to the previously cited Part 2 of Article 17 of the Federal Law "On the State Civil Service of the Russian Federation", except that in it the category of "civil servant" is replaced by a list of persons who are subject to the obligation to use the services of a trustee. To date, this list contains the categories of citizens presented in Figure 1.

Fig.1 List of persons subject to the requirement to transfer certain types of property to trust management^[2]

With regard to state and municipal employees, the obligation to delegate to trust managers the management of securities, shares (participation shares, as well as shares in the authorized (stock) capitals of organizations) is also fixed in Part 6 of Article 11 of the Law "On Combating Corruption",^[3] moreover, no reservation is made in this norm that that such a transfer should be carried out if the possession of the listed types of property leads or may lead to a conflict of interests. Which is a certain kind of competition of norms that makes the same proper behavior of the subject dependent on different conditions.

Detailing the list of positions of civil servants at the federal level is carried out by the Decree of the President of the Russian Federation "On the Register of positions of the Federal State Civil Service"^[4]. A similar Register at the level of a subject of the Russian Federation is established by a law or other act of the relevant subject. The positions of the municipal service are fixed by acts at the level of local self-government, according to the register of such positions in the subject of the Russian Federation on the territory of which municipalities are geographically located.^[5]

The established obligation to transfer certain types of property to the trustee also applies to employees of the Central Bank of Russia holding positions included in the list approved by its Board of Directors. This position was introduced by Federal Law No. 231-FZ of December 3, 2012, adopted in connection with the entry into force of the Federal Law "On Monitoring the Compliance of Expenses of Persons holding Public Positions and Other Persons with their Incomes."^[6]

There is no complete clarity about which list in this case we are talking about. Since, Part 2 of Article 90 of Federal Law No. 86 FZ "On the Central Bank of the Russian Federation (Bank of Russia)",^[7] does not bind the requirement for an employee to transfer securities belonging to him, etc., to a trustee with any list. Although parts 1 and 3 of the same Article 90 establish a number of prohibitions for employees of the Bank of Russia holding positions, the list of which is approved by the Board of Directors. And, in the latter case, we are obviously talking about the List of positions of employees of the Central Bank, which are subject to prohibitions and restrictions provided for in paragraphs 1-3 of Part 1 and paragraph 3 of Part 3 of Article 90 of the Federal Law "On the Central Bank of the Russian Federation (Bank of Russia)".^[8] This list, as can be seen from the name itself, is not relevant in the case of the provision on the mandatory transfer of specified types of property to the trustee. Therefore, when interpreting the provisions of Article 12.3 of the anti-corruption law, most likely, one should be guided by the list of positions of employees of the Central Bank who do not have the right to work part-time, under a contract, hold positions in credit and other organizations, as well as those who are obliged to notify the Board of Directors of the acquisition of shares and shares in the authorized capital of credit organizations,^[9] adopted before the Law "On Combating Corruption" and establishing that all employees included in the system of the Bank of Russia are required to notify the Board of Directors of the acquisition of shares and participation interests in the authorized capital of credit institutions (other legal entities) within the prescribed time. It is probably logical to conclude from this that the obligation to use the services of a trustee to prevent a conflict of interests related to the ownership of property also applies to all employees of the Bank of Russia.

As can be seen from the text of Article 12.3 of the Federal Law "On Combating Corruption", the considered obligation to transfer property to trust management, aimed at preventing conflicts of interest and corruption risks, is also extrapolated to employees holding certain positions in organizations created to implement tasks assigned to federal authorities, state corporations, public law companies, state extra-budgetary funds, as well as other organizations established on the basis of federal laws. This requirement is fixed in addition to the Federal Law "On Combating Corruption", also in the Decree of the Government of the Russian Federation "On the extension to certain categories of citizens of restrictions, prohibitions and obligations established by the Federal Law "On Combating Corruption" and other federal laws in order to combat corruption",^[10] and also additionally duplicated by legal acts of federal bodies the authorities and in local acts of similar organizations themselves.^[11]

In this context, attention should be paid to the fact that the extension of similar requirements to employees of organizations whose founders are the subjects of the federation and municipalities is still not provided for by law, although this task was outlined in paragraph 2 of the sub-paragraph. "b" item 1 of the National Anti-Corruption Plan for 2018-2020, approved by By Decree President of the Russian Federation No. 378.^[12] As part of the implementation of the provisions of the said decree, the Government in 2018 introduced Bill No. 601000-7 to the State Duma of the Russian Federation,^[13] which proposed to extend the anti-corruption restrictions to a number of organizations in the constituent entities of the Russian Federation. However, this project was withdrawn on July 8, 2020, in connection with which, the deadlines for the implementation of the task have obviously moved beyond the time limits of the anti-corruption National Plan for 2018-2020. It should be noted that the said bill did not provide for the expansion of the above list of employees and employees obliged to use the services of trust managers at the expense of persons filling a position on the basis of an employment contract in an organization created to perform tasks assigned to state bodies of the constituent entities of the federation or local authorities, although this would be very appropriate, since regional and municipal organizations, the range of which is very impressive, are very often created to perform the functions of public authorities, respectively, using budgetary funds and public property. Suffice it to say that, only at the regional level, these are institutions of healthcare, veterinary medicine, education, science and culture, municipal, pharmaceutical, environmental, dealing with social issues and many others. ^[11]

Returning to the current version of the regulatory consolidation of the use of the institute of trust management for anti-corruption and anti-conflict purposes, we note that in accordance with Article 19 "Settlement of conflicts of interest in the civil service" of Federal Law No. 79 "On the State Civil Service of the Russian Federation"^[1], for the purposes of this very law, the term "conflict of interest" is used, established by Part 1 of Article 10 of Federal Law No. 273 "On Combating Corruption".^[2] At the same time, the legal definition of a conflict of interest is a situation in which the direct or indirect personal interest of a person in a position involving the obligation to take measures to prevent and resolve a conflict of interest affects or may affect the proper, objective and impartial performance of his official (official) duties and (or) the exercise of powers.

It is clear that such a definition implies additional explanations, and, therefore, Part 2 of the specified Article 10 clarifies what is assumed by personal interest, namely: the possibility of obtaining income in the form of money, other property (including property rights and property-related services, the results of work performed), or any benefits (advantages) by the official himself, as well as persons who are closely related or related to him (parents, spouses, children, brothers, sisters, as well as brothers, sisters, parents, children of spouses and spouses of children), citizens or organizations with which the obligated person, or persons who are with him in a close relationship or property, are related by property, corporate or other close relationships.

According to Article 11 of Federal Law No. 273 "On Combating Corruption", an employee is obliged to take measures to prevent any possibility of a conflict of interest, and in the event of a conflict (potential conflict) to notify his direct supervisor in writing. The head, in turn, must take measures to prevent or resolve a conflict of interests, which measures may find expression in changing the official or official status of an employee who is a party to the conflict of interests, up to his removal from the performance of official duties, and (or) in his refusal of personal benefits that caused the conflict. Prevention and settlement of a conflict of interest to which a state or municipal employee is a party, as an option, are carried out by recusal or self-recusal of the employee. Well, as already noted, in order to eliminate the conflict of interests, the current Russian legislation provides for the obligation to transfer securities and other conflict-prone assets to trust management for the previously designated list of persons.

This legal obligation was introduced by Federal Law No. 329-FZ of November 21, 2011 in connection with the improvement of public administration in the field of combating corruption. He also made corresponding amendments to a number of federal laws.

It should be noted that there are quite a lot of legislative acts that actually literally replicated the norm of the Law "On Combating Corruption", and there is no need to talk about subordinate normative acts – there are more than a dozen of them. However, in fact, all of them do not define the details of the algorithm of actions of obligated subjects, only referring them to Russian legislation in general, or civil legislation in particular. Thus, article 12.3 of the Law "On Combating Corruption" contains a reference to civil legislation regulating the trust management of property as a civil contract. This determines additional issues related to the application of civil legislation in the context of administrative and legal relations. Based on judicial practice, the transfer of property to trust management does not limit the right of the founder of the management to dispose of the management object.  In this regard, there are reasonable doubts about the effectiveness of the transfer of conflict-prone property by employees and other persons, in simple trust management, as a way to prevent (prevent) conflicts of interest.

Separately, we note that, on the basis of the Federal Law "On the Government of the Russian Federation",^[14] members of the Government are obliged to transfer securities owned by them, etc., to trust management for the duration of their position, regardless of a possible (or existing) conflict of interests. The same is provided for the Ambassador Extraordinary and Plenipotentiary of Russia to a foreign state or the Permanent Representative of the state to an international organization with headquarters in a foreign state. ^[15] As, in other matters, and for the employees of the customs authority, in accordance with the provision provided for in Article 3 of Article 7 of the Federal Law "On Service in the Customs Authorities of the Russian Federation".^[16] The situation is similar with employees of the internal affairs bodies, employees of the federal fire service, employees of the penal enforcement system, as well as the system of compulsory execution of punishments. There are several points that attract attention here.

Firstly, for the listed employees, as well as for members of the Government and for Extraordinary and Plenipotentiary Ambassadors (unlike other categories of state civil servants), mandatory (unconditional) trust management is provided for the duration of the exercise of powers. Secondly, for customs officers, unlike all other persons mentioned in Article 12.3 of the anti-corruption law, there is an obligation to transfer only their own shares (blocks of shares) in the authorized capital of commercial organizations, and to transfer to trust management, shares and other income-generating securities, based on the above norm, they they shouldn't.

This raises certain questions, and leads to the conclusion that it might be necessary to unify approaches in various legislative acts, at least to the list of property and property rights subject to conditional or unconditional transfer to trust management in order to avoid conflicts of interest. In addition, attention is drawn to the fact that, although there is a transfer obligation, but only for the employees themselves (officials or employees), no obligations are provided for their family members, and therefore, there are no restrictions on the ownership of securities, for example, minor children of an official, although, it is obvious that the management of these assets will be carried out by the official himself, as the legal representative of the minor.

In addition, as already noted, in these cases, the unconditional transfer of the agreed property to the trustee is provided, that is, this requirement is even more stringent, there is no alternative, but the details of the transfer mechanism are also missing here. And again, everything is limited to a reference to civil law. Which, by the way, is not itself free from certain problems, taking into account its application in administrative legal relations.

Analysis of information extracted from various legal forums, communities and websites shows that many state (municipal) employees and other categories of citizens falling under the scope of art.12.3 of the Law "On Combating Corruption", they are experiencing very strong difficulties regarding the actual implementation, the obligation assigned to them to transfer securities (participation shares, shares in the authorized (pooled) capitals of organizations) to trust management, as well as in connection with determining the presence or absence of the possibility of a conflict of interest in their particular case.

Accordingly, they are trying to find answers to topics of concern to them by asking questions about the following plan: "I, a civil servant in the tax authorities (IT support department, inherited shares of large Russian companies. Should I transfer them to trust management if in the course of my activities I cannot influence these companies in any way in order to generate income?".

Moreover, it is noteworthy that the answers of even professional lawyers to such questions (not to mention other, less qualified participants in the discussion), basically boil down to the fact that the simplest solution to the problem is the transfer (in fact, fictitious) of ownership of these assets to a spouse, relative, acquaintance, etc. That is, we see confirmation that many do exactly that (which they advise others to do), formally overcoming the requirements of the legislation on the need to take measures to prevent a conflict of interests.

In fairness, we note that there are other options for advice, and, at best, the author of the question is offered: "independently determine the presence of a conflict of interest or personal interest based on legislative regulations and the reality of being. In case of doubt (or for reinsurance), you can send a notification about inheriting securities to the appropriate conflict resolution commission and ask to inform whether this provokes a conflict of interest or personal interest."

It should also be said that employees (employees) address similar issues at the place of service (work), as evidenced by the appearance of such documents as, for example, "Methodological recommendations on certain issues concerning the possibility of ownership by employees of internal affairs bodies, federal state civil servants and employees of the Ministry of Internal Affairs of Russia securities",^[17] in which it is explicitly stated that the recommendations were developed in connection with numerous appeals of persons serving in the internal affairs bodies. However, the analysis of these (and rather lengthy) recommendations, by and large, does not add anything new to the clarification of the situation, and his summary, in general, can be reduced to the fact that, yes, an employee (employee) can own securities, but all of them must be transferred to the trustee under the relevant contract. Moreover, characteristically, neither the deadlines nor any details of the procedure for transmitting the recommendations also do not contain.

Based on this, there are reasonable fears that in the case of employees applying to the commission for the settlement of conflicts of interest, and these commissions themselves may also experience serious problems with the qualification of a particular case.

Not to mention the fact that in some cases, an employee owns such a meager package of unprofitable securities that the conclusion of a paid trust management agreement with them can significantly exceed the value of the price of the securities themselves. However, the profitability (non-profitability, or unprofitability) of shares owned by an employee (employee), other securities (shares, units, etc.) does not affect his obligation to transfer them to trust management in cases prescribed by law.

Here, by the way, it should certainly be recalled that, in accordance with the law, failure by a person who is a party to a conflict of interest to take measures to prevent or resolve a conflict of interest is an offense that can lead to his dismissal. Such a measure of responsibility for persons who have allowed a conflict of personal and public interests is provided for in Part 6 of Article 11 of Federal Law No. 273 "On Combating Corruption", and, in this case, dismissal must be carried out in accordance with Russian legislation. Thus, the failure of a civil servant to take measures to prevent and resolve a conflict of his own personal interests with public ones entails the dismissal of an employee due to loss of trust in accordance with Article 59.2 of the Federal Law "On Combating Corruption". Dismissal takes place on the basis of a report on the results of an audit conducted by the department for the prevention of corruption and other offenses of the personnel service of the relevant state body. If the report on the results of the audit was sent to the commission for the settlement of conflicts of interest, also on the basis of the commission's recommendation. And, although a civil servant has the right to appeal (to the commission of the state body on official disputes or to the court) his dismissal, damage to his business reputation may nevertheless have already been inflicted.^[18]

So, having considered the issues of legislative regulation of trust management of property in relation to the anti-corruption policy of the state, we believe it is necessary to dwell in more detail on one by-law, the only one reliably defined at the moment as containing at least some specific instructions on the actions of an employee in the process of transferring property to trust management. We are talking about the Order of the Prosecutor General's Office of Russia dated August 30, 2016 No. 531 "On the transfer to the trust management of prosecutorial employees, federal state civil servants, other employees of bodies and organizations of the Prosecutor's Office of the Russian Federation of securities belonging to them (participation shares, shares in the authorized (stock) capitals of organizations)".^[19] The designated order is structured as follows.

Paragraph 1 lists persons who have the obligation to take necessary and sufficient measures to prevent or resolve conflicts of interest in connection with the possession of public prosecutor's employees and other employees of bodies (organizations) of the Prosecutor's Office of Russia of securities (participation shares, shares in the authorized (stock) capitals of organizations).

Paragraph 2, firstly, details the list of positions in which prosecutors and other employees are required to provide information about their own (as well as their spouse and minor children), income, property and property obligations. Secondly, it establishes additional responsibilities for them, namely:

transfer to trust management in accordance with civil legislation securities, etc., in a conflict-prone situation within 30 days from the date when the obligated persons became aware of a potential or real conflict of interests;

prior to the transfer to the trust management, as soon as it becomes known about the occurrence of personal interest or a possible conflict, inform the managers in whose subordination they are in writing about it.

When staying outside the place of service (work) (business trip, vacation, etc.), as well as in other cases when there is no possibility of written notification, report this using any available means of communication, and if possible, provide notification in writing.

Paragraph 3 prescribes the manager, who has received notification of a possible or real conflict of interests of his employee or employee, to immediately take measures to prevent (resolve) this conflict. As can be seen from the text of paragraph 2, the explanation of the term "immediately" is not given, but based on the analysis of the further text of the act, it can be concluded that we are talking about hours, maximum, days, since further, the same paragraph states that if the adoption of these measures does not fall within the competence of the person, if a person receives a notification, then he must send a report to a higher supervisor within a day.

Paragraph 4 has the form of a blank norm, and determines that consideration of notifications on the occurrence (possibility of occurrence) of a conflict of interests must be carried out in accordance with the procedure established by the orders of the Prosecutor General of the Russian Federation No. 209 "On the procedure for Federal Civil servants of bodies and organizations of the Prosecutor's Office of the Russian Federation on the occurrence of personal interest in the performance of official (official) duties, which leads to or it may lead to a conflict of interests",^[20] and, No. 489 "On Approving the Procedure for Notifying Employees who Fill Certain Positions on the Basis of an Employment Contract in Organizations Created to Perform Tasks Assigned to the Prosecutor's Office about the facts of any persons contacting Them in order to incite them to Commit corruption offenses and take measures to prevent any possibility of a conflict of interest."^[21] Order No. 489, by the way, has already expired, and is currently in effect Order No. 751 " On the approval of the Regulations on the procedure for notifying the heads (representatives of the Employer) of bodies and organizations of the Prosecutor's Office of the Russian Federation by prosecutorial employees, federal state civil servants and employees filling certain positions on the basis of an employment contract at the University of the Prosecutor's Office of the Russian Federation about the facts of contacting them in order to incite corruption offenses and organize verification of the information provided."^[22]

Paragraph 5 of the Order under consideration obliges employees (employees) to immediately inform the head of the conclusion of the trust management agreement, with the provision of a copy of the agreement within 5 days from the date of its conclusion, and submit information to the appropriate personnel department

The sixth point of the Order includes a rather abstract instruction to the person responsible for the prevention of corruption and other offenses - to ensure the study of the contract on the transfer to the trust management of the property of the employee (employee) submitted by him. If there are grounds, conduct an audit of compliance by employees (employees), requirements for official behavior and conflict of interest resolution. Taking into account the fact that there are, in fact, no administrative requirements (for example, there is no affinity of the principal with the trustee), it is likely that we are talking about compliance with the requirements of civil legislation, which looks quite peculiar in the context of the order.

The seventh point is devoted to the issues of responsibility of employees (employees) for non-compliance with the requirements for notification of the occurrence (possibility of occurrence) of a conflict of interest, failure to take appropriate measures to prevent (resolve) it.

The final, eighth point, assigns to the Main Personnel Department of the Prosecutor General's Office of the Russian Federation, to the prosecutors of the subjects, and a number of other senior officials, control functions over the execution by employees (employees) of the requirements of the legislation on the procedure for owning securities and on the grounds for transferring them to trust management.

So, summarizing all of the above about the content of the considered Order, it is possible to graphically reflect the entire prescribed algorithm as follows (Figure 2).

Fig.2 Procedure of actions in the process of settlement of a possible conflict of interests related to the ownership of securities by an employee (employee) (shares in the authorized share capital, etc.)

Analyzing the procedure presented in Figure 1 for transferring the agreed assets to trust management in the framework of preventing a possible conflict of interests, it should be noted that:

The advantage of this by-law is a fairly well-defined sequence of actions for the governing structures, personnel support bodies, departments responsible for the prevention of corruption and other offenses and regulatory authorities.

A positive point is that for employees (employees), the stages and terms of interaction with the head (other involved structures) in the process of resolving a possible conflict of interests related to the ownership of securities (participation shares in the authorized share capital, etc.) are also defined.

From the point of view of constructing legal structures, there are also few questions to this act, since it formally contains all the necessary elements of such structures: the authority of the employer, the obligation of the employee (employee), the procedural aspects of fulfilling the relevant powers and duties, and also indicates the legal responsibility of the obligated persons.

However, this act is aimed specifically at regulating intra-organizational relations of a subordinate type, and in no way provides additional explanations on the actions of employees (employees) related to the specific implementation of the duties assigned to them outside the framework of official relations. Therefore, the questions are: whether all the securities owned are transferable; to whom it is possible and to whom it is impossible to transfer assets to trust management; whether the absence of affiliation is an important factor in choosing a trustee; what form should the trust management agreement have in order to have the evidentiary value of fulfilling obligations to the interests of the service; and many others, which were mentioned above.

Taking into account all the above conclusions, it can be concluded that in general, both at the legislative and subordinate levels, as well as at the level of methodological recommendations, there is currently no necessary and sufficient basis for effective legal implementation of the provisions provided for in Article 12.3 of the Federal Law "On Combating Corruption", and so there are no necessary conditions for their high-quality performance.

Therefore, we believe that even if we take as a basis the concept of the transfer to the trust management as one of the effective tools for the prevention of the conflict of public and private interests in the form as it exists at the moment (and in this case, there is reasonable doubt, including related to the fact that a simple trust management does not eliminate the possibility of the influence of the Trustee to manage the assets; does not ensure the independence of the Trustee; does not preclude knowledge of the principal on the composition of their assets and, therefore, of personal interest; in many cases unprofitable for the assets because they do not provide gradation of property in terms of profitability and cost; does not solve issues of personal interest in the case, if assets are held by a family member of an employee; difficult to implement for a number of reasons: the presence of problematic or unresolved issues in the legislation; the lack of clear rules of action; for more, sometimes not justified by the costs of implementation, etc.), then obviously you should develop a procedure for the transfer to the trust management of securities, shares, shares in the authorized (share) capital of organizations under the legislation of the Russian Federation on combating corruption, which would contain the answers if not all, then most of the questions related to such transfer, and facilitate its implementation is not only for the authorities or individuals, but primarily for those who, in fact, obliged to transfer private property in trust.