In 2009 moratorium was declared on checks of private entrepreneurs but the number of administrative cases initiated by controlling bodies decreased insignificantly. Is a controlling body always right and what is to be done if there are doubts about its rightfulness? What is minor offence and in what cases can a court  release from responsibility on the basis of insignificance?  These and other questions were answered by Eduard Maksimovich, Deputy Chairman of the Economic Court of Minsk, and “Argument” Law Group senior partner Denis Aleinikov within the framework of his own ‘The Letter of the Law’ program.

What are the categories of cases over which the Economic Court considers disputes with controlling bodies presently?    

Main category where we deal with the state bodies and results of their controlling activities, are administrative cases. These are the most cases considered by the Economic Court as a result of check-ups: the number of administrative cases considered by the Economic Court in 2009 is 2467.

Administrative cases, in turn, can be subdivided into two categories: the cases considered by the EC on administrative materials that came from controlling bodies, and the cases on verification by the EC of legality and validity of regulations already adopted by the controlling bodies on administrative cases. There is one more category of cases over which we dispute with controlling bodies: appealing actions or inactions of officials of state bodies and non-normative legal acts. Consideration of these cases takes place in accordance with the procedure stated in the Code of Practice of the Economic Court of the Republic of Belarus.

What was the change in the number of administrative cases on the work of controlling bodies last year?  

In fact, the number of such cases has changed insignificantly. Still, it decreased: if in 2008 it was   2565, in 2009 it became 2467.

In 2008 there was no moratorium on the checks, as for 2009 such moratorium was declared by the Head of State. Why was the decrease of administrative cases so insignificant? 

After adoption of Decree No. 689 ‘On Suspension of Controlling and Supervisory Activities’ we can say about the change in nature of protocols of administrative cases which come to the Economic Court as well as about the change in proportion of cases coming from different bodies. For example, the number of administrative cases which come from the tax inspectorate, on the contrary, increased in 2009, and those from other bodies, such as the State Control Committee,  the Department of Financial Investigations, internal affairs bodies – somewhat decreased.

There was also a change in the character of imputed administrative offences.  As a result of well-timed control, there was an increase in the number of administrative materials on offences which had been evident either during raid checks or were reported to controlling bodies. This is, for example, i. 12.35 “Violation of Legislative Requirements for Marking of Goods with Control (Identification) Marks”. Facts of violation of these requirements are evident on markets, at places of selling goods, trade kiosks.  There was an increase in the number of administrative cases envisaged by Part 4, i. 12.17 of ‘Administrative Offences Code’ especially as regards transporting when, in the course of operative activities, vehicles carrying goods are stopped and no accompanying documents are found which confirm legality of these goods. As a result of these activities, relative protocols are drawn up.

What do statistical data show as regards cases - initiated, considered, dropped - in the context of controlling bodies?   

Besides the main ‘supplier’ of administrative materials, that is, tax inspectorates, one can also mention internal affairs bodies: during 2009, 135 administrative cases were initiated, 52 – from the Department of Financial Investigations of the State Control, 5 – from the State Control Committee, and several administrative cases came from the Department of Protection of the Ministry of Internal Affairs. Administrative cases for violation of price formation (i.12.04, 12.06) initiated earlier by Minsk Regional Executive Committee stopped coming. Like no other body it felt the declaration of moratorium on checks.

How often does the court disagree with the position of the controlling body stated in the materials of the check? 

Circumstances which exclude administrative process are envisaged by i. 9.6 of the Administrative Offences Procedures Code of the Republic of Belarus. They are: non-occurrence of event of an administrative offence, absence of an administrative offence in a deed,       termination of imposition of an administrative offence, adoption of a legislative act eliminating administrative responsibility. There are more than these ones, I just mentioned the most frequent, which envisage termination of an administrative process with respect to a natural person. Same basis is applied with respect to legal entities and individual businessmen. The Economic Court   drops administrative cases more often because of absence of an administrative offence in the deed.

Let me give you an example from judicial practice of Minsk Regional Economic Court. Interregional Department of the Department of Financial Investigations was carrying out a check on an open joint-stock company in our region. As a result of the check, it was found that on  its territory a private unitary enterprise lends a storage building in which woodworking capacities are located and material for woodworking is kept on the territory in front of the storage. The controlling body pointed out that the timber belonging to this unitary enterprise  is out of the area rent by the leaseholder.  This became the reason for the controlling body to draw up a protocol with respect to the given which was the lessor. The administrative offence consisted in keeping the goods (timber) on its territory without documents confirming their proper acquisition and delivery. For all participants to this administrative process as well as for persons who were somehow involved in this situation it was evident that the timber belongs to another organization, i.e. leaseholder and, while unloading it, laborers just got out of the area rented by the private unitary enterprise.

On considering the above administrative case, the Economic Court came to the conclusion that the given open joint-stock company can not be held responsible for the administrative offence imputed to it. Minsk Regional Economic Court determined this administrative case should be dropped and this decision was upheld by the higher instance.

Enumerating the reasons for termination of administrative processes I mentioned termination of imposition of an administrative offence. It often happens that components of administrative cases that come to the Economic Court balance between a penal act and a deed which can be qualified as an administrative offence. First of all this applies to illegal conducting of a business for which a corresponding article of the Penal Code envisages criminal responsibility. The difference is in the amount of profit received in the course of this illegal business conducting and depending on this amount either criminal or administrative responsibility will ensue.

In accordance with the Administrative Offences Procedures Code, we necessarily send the cases in which we detect signs a criminal offence to law-enforcement bodies for assessment of these deeds from criminal and legal point of view. After that, in case of termination of criminal prosecution or  refusal to instigate criminal proceedings, the controlling body has one month to submit this material to the Economic Court for bringing the person to administrative activity. Non-observance of this one month period often becomes the basis for termination of the proceedings.

In what cases an administrative proceeding can be dropped because of its insignificance?

In such cases when a person who committed administrative offence practically didn’t violate rights and legitimate interests of other persons, interests protected by the State. It is important to note that insignificance should be in no way connected to the amount of money appearing in the case, to the cost of goods, the amount of profit received, earnings etc. Insignificance is a deed containing signs of an administrative offence which caused minor damage to the rights and interests protected by the State.      

Can you give an example when a case in which a considerable sum of money appeared, was dropped because of its insignificance? 

We often encounter following situations. Certain spare parts of cars should be necessarily certified, but at the moment of the check the documents confirming the quality of them were not available. Indeed, here we have a case of administrative offence and the quantity of these spare parts was insignificant. But at the session of the Economic Court we found that several spare parts had in fact been certified on the territory of Belarus. Thus, these spare parts could not endanger either life or health of people in case they would have been sold and used. These documents were available but they didn’t have them on him when he was selling those parts.  In situations like this a natural person can be relieved of administrative responsibility and the case can be dropped.

In legal practice of the Economic Court there was a case when an agricultural unitary enterprise required grain processing equipment. The enterprise acted very conscientiously, in accordance with the relevant legal procedure it announced and held a tender which was won by a certain  private entrepreneur. He supplied the equipment worth of 80 mln roubles. As regards its price and quality this equipment fully satisfied the enterprise, but when controlling bodies started a check it was found out that the invoice is not valid. On the one hand, there are signs of administrative offence here: the head of the agricultural enterprise, acting discreetly and  conscientiously, could have checked the invoice of the contractor, as there are relevant databases for this. But, on the other hand, damage to the rights and interests protected by the Code, was not caused as the equipment, even supplied with the invalid invoice, was in order and was already put into operation. .       
In this case, despite high cost of the equipment, we had all the reasons to apply i. 8.2 of ‘Administrative Offences Code’ – ‘Insignificance’. Сorrespondingly, we relieved those involved of administrative responsibility according to it.

There are many criteria for assessment of an offence as a minor one and all of them are assessed in totality. For example, one can’t regard the offence as minor if was committed repeatedly and its elements were the same.  Likewise, an administrative offence will not be regarded as an insignificant one when we talk about goods and objects which can cause damage to human life and health.  If we talk, for example, about children’s clothing which was sold without documents confirming its quality even in small quantities and for a short period of time, and even if amount of money involved was small, but the quality of this clothing seems to be doubtful and is hazardous for life and health of our children - then insignificance is out of the question.  The same goes for foodstuff.

How many administrative cases were dropped by courts because of their ‘insignificance’?  

110 administrative cases have been dropped due to their insignificance, the remaining ones were actually stopped because of absence of signs of an administrative offence and on the expiry of term for bringing to administrative responsibility.    .

Does the executive committee have the right to annul the state registration of a private businessman for some minor violation of legislation? What is the attitude of the Economic Court to this?

The reasons for cancellation of a private businessman’s activities are stated in ‘Provision on Liquidation, Termination of Private Entrepreneurship’ approved by Decree No. 1 of the President dated January 16, 2009. The activities of an individual businessman can be cancelled in case his state registration is annulled.

One of the reasons for annulling of a state registration is non-payment in full by an individual businessman of a single tax, VAT, in fixed amount, in the established order. According to ‘Provision on State Registration’ in case  reasons for cancellation of a state registration are found, the controlling bodies can approach the registering body and require it to take the decision on the annulment of the state registration.

At first glance, it may seem that annulment of a state registration will entail unconditional termination of this businessman’s activities. But after the annulment of the state registration the registering body should also address the court with the statement about termination of this individual businessman’s activities. And we think that in this given case the Economic Court should not be just an observer and deal only with formal approval of annulment cases which terminate activities of private businessmen. If the lawmaker related the issue of such termination to competence of the Economic Court, then the Economic Court as the economic court of the state should find out whether it is economically reasonable to take the side of the registering body, are there grounds for taking the decision on annulment.

As a result of consideration of quite a number of cases on requirements of registering bodies we worked out a procedure and see that in a few instances, before consideration of a case by the court an individual businessman already paid the single tax,  eliminated all his shortcomings which caused annulment. We have examples when a businessman at the court session gave his reasons and submitted documents which showed that actually his business activities were the only source of income – not only for him but also for his family with small children. In my opinion,  termination of activities of such businessman will entail serious consequences, that is, impossibility in future to register himself as an individual entrepreneur and conduct a business. Thus, the businessman and his family will lose the source of income.  So termination of businessmen’s activities in regional centers, in rural areas is, at the same time, a social problem.

That’s why the Economic Court considers each particular case separately and quite often does not agree with the registering body.

That is, the Economic Court may disagree with the decision about annulment of a private entrepreneur’s activities?

The Court can refuse the decision about annulment of a private entrepreneur’s activities. If we do not agree with the decision to terminate a private businessman’s activities, then in its determination the Economic Court asks the registering body to take necessary measures aimed at restoration of the businessman’s rights or to give the latter the possibility to continue his business activities in future.

There is a category of cases on which the Economic Court considers complaints coming from businessmen and organizations against decisions on administrative cases taken by controlling bodies. Against what controlling bodies were complaints lodged to Minsk Regional Economic Court most of all?  Did the number of such complaints increase in general?

The number of complaints against controlling bodies did increase. In 2008 there were 26 such complaints, in 2009 – already 41. Not all of them were accepted by the Court as quite often they were lodged with certain violations. In 2009 the Court accepted for proceedings only 16 complaints against decisions on administrative cases.

As for controlling bodies whose decisions were appealed most of all, they can be listed in the following order: the State Control Committee – 6 complaints, the Department of financial Investigations – 5, Customs – 1, tax inspectorate – 4.

Why were only a small number of complaints from private businessmen accepted for proceedings?  

I would say that the persons who are the subjects of administrative proceedings, do not read relative documents quite attentively. As a rule, state bodies in the end of each determination state the procedure of its appealing quite in detail. So it’ll be enough just to read carefully the established procedure of appealing.

When businessmen try to appeal the decision on a case of administrative offence, they don’t pay attention to the fact the following is stated in it: ‘the determination which has not yet come into force, can be appealed during ten days through the body which passed this determination’. Quite often they try to go directly to the court but that is wrong as they should lodge a complaint to the Economic Court but do it through the body which passed the decision. The complaint is accepted by the controlling body and together with the administrative case is directed to the Economic Court.

Will this 10 days’ term be considered as missed if there was a technical inaccuracy in lodging the complaint?   

Of course, the term is considered missed if a businessman didn’t manage to do it within the term given by the Code. Nevertheless, there is a procedure of restoring this period if the person gives valid reasons for his delay. If the businessman read the determination inattentively and got confused as to where to appeal to, the term, as a rule, will be restored. But may be not restored either, if the businessman tries to appeal for the fourth or the fifth time to appeal but by his own fault didn’t do it in a proper way.  When returning the complaint for the first time, the Economic Court always points out all inaccuracies to be corrected.

There is an opinion which came from our users: “Businessmen think that if a controlling body took the decision on an administrative case, then it can be appealed in the court but in fact it will be quite useless”. To what extent is such opinion justified? 

It seems to me this is just a stereotype: the Economic Court does uphold complaints against decisions of controlling bodies and, out of complaints accepted for consideration in 2009, half were satisfied.  Not all of the proceedings were dropped: a number of materials were sent for re-consideration to the same state body.  

On what grounds were proceedings dropped last year after complaints against decisions on administrative cases of other bodies?  

The grounds were absence of an administrative offence in a deed and failure to prove guilt of the person with respect to which an administrative proceedings were instigated, adoption of  the legal act of the Republic of Belarus eliminating administrative responsibility.

What exactly were the state bodies the complaints against which were upheld?  

The complaints against decisions by the State Control Committee were upheld twice, also by the Department of Financial Investigations and Tax Inspectorate.

Frequently an entrepreneur, especially a foreign investor, analyzing our legislation in the field of administrative responsibility, complains that fines are very high and responsibility is too strict. How does the court react if it receives materials from the body investigating the case, and sees that in fact there was an offence but the fine for it does not correspond to the deed and the person who lodged the complaint, insists it should be adequate? Can the court determine that imposed sanctions should be decreased?

Degree of sanctions of ‘Administrative Offences Code’ is high enough as well as fines imposed for this or that administrative offence.   One can’t say that nothing is being done in this direction: just the other day, on the 23rd of February, changes and amendments to various codes including ‘Administrative Offences Code’ of the Republic of Belarus also modifying sanctions of particular articles on administrative offences.  For certain types of administrative offences they decreased. For example, in i. 23.75 dealing with violations in conducting security service, minimal fine started from 50 basic values and the offence of the licensee who carries out security activities could just be lack of a copy of the license at the workplace of a security guard. This could be regarded as an administrative offence with the responsibility starting from 50 basic values.

Presently, the lower bottom was significantly decreased (now 10 basic values), and the Economic Court has the possibility to impose a fine adequate to committed offences.

As an administrative penalty according to part 8, i. 12.13 a warning was introduced. I think, there will be more changes to ‘Administrative Offences Code’: practice of courts and life itself will prompt us what else is be changed so that the imposed offence for an administrative offence should correspond to hazard posed for society.

The Code can not determine concrete responsibility with respect to concrete offence, there is always some range.  How correct does a controlling body apply responsibility within this range?    

Items of ‘Administrative Offences Code’ envisage imposing of sanctions. In an item either lower limit is set, for example, from 10 basic values, or it is absent – up to 20% of a contractual sum. In this case we consult general norms of the Code and say that the fine, imposed on an individual businessman, could not have been less than two basic values and on a legal person – less than ten basic values.

When an individual entrepreneur acknowledges his guilt and regrets it, when there are evident signs of an administrative offence, when we see that public hazard of it is not significant and the fine is imposed for the first time – then economic courts, as a rule, resort to minimal penalties.

The Chairman of the High Economic Court of the Republic of Belarus, Victor S. Kamenkov, summing up the results of activities of Minsk Regional Economic Court in 2009, emphasized that we are an economic court, a specific court and we are supposed to see the economic problem that is hidden behind this or that dispute and issue, which we consider within the limits of our competence.  There should be no cases when decisions of the Economic Court would lead to termination of economic activities even within one concrete private entrepreneurship. This is the very unit of our economy which creates and forms our budget and we should not forget about this while considering each case. Behind each enterprise we must see real people and the problem which will be created by unreasoned and unjustified action of a court.

What would you wish our users whose cases on administrative offence are being considered presently?