President of Russia Vladimir Putin: Good afternoon, Mr Titov. You have prepared a report, as far as I know.
Commissioner for Entrepreneurs’ Rights Boris Titov: A report, yes…
Vladimir Putin: This report deals with the human rights in entrepreneurship.
Let us get down to work.
Boris Titov: Mr President, this is the seventh time that we present this report.
The institute exists, and we are hard at work. Over these years we have opened offices in all 85 regions. Today, the civil society is proactive in supporting our undertakings with more than 2,000 entrepreneurs’ rights commissioners working across the regions and in Moscow. So, we have drafted yet another report.
Here’s what makes this year special, Mr President. The first thing we wanted to highlight is that there were some positive, albeit very modest, changes. Here’s the report.
Overall, the survey among entrepreneurs that we carry out annually as we prepare this report showed that the share of respondents who noted improvements in terms of the protection of entrepreneurs increased compared to those who have expressed a negative view.
At the same time, there are still quite a few problems, primarily related to the criminal prosecution of business leaders. Unfortunately, statistics on this subject are not very good. So far, more than 80 percent do not believe business in Russia to be a safe occupation. Unfortunately, this indicator has been on the rise.
I want to note that the report contains specific proposals on the problem of criminal prosecution. In fact, a separate report is entirely devoted to this very subject. And it contains a whole set of our proposals.
Allow me to highlight one such proposal that we believe should be implemented. Of course, detention during pre-trial investigation and court proceedings is the biggest challenge. Holding a business owner in custody has a major negative effect on his or her business operations.
We have conducted an opinion poll, asking business leaders what impact the opening of a criminal case had on their business. As many as 54 percent said they went out of business as a result, while over 60 – 64 percent – said prosecution even affected their health. It would certainly be better to have an opportunity of applying other restrictive measures, not only to entrepreneurs, but to everyone.
So we would like to ask you to support our initiative to amend current legislation so that the Supreme Court would consider issuing a special explanation on the possibility of applying bail. Bail would be a restrictive measure.
This interim measure is applied in many countries. We have Article 106 of the Criminal Procedure Code, which stipulates the use of bail, and it is used today, but not very often.
Vladimir Putin: But if it is applied, it is not about changing the legislation, but about the law enforcement practice.
Boris Titov: This is why we are asking the Supreme Court to consider this at its plenary meeting and, perhaps, simply give an explanation to the courts that bail can be used as the immediate restrictive measure. In this case, the courts would need to explain their use of another measure – justify why they did not apply bail.
In our opinion, this would really make a difference; this way business leaders would not dodge their responsibility, but on the other hand, they will continue to be able to carry on their business. Please consider one more figure: an average of 146 workers lose their jobs if a company shuts down.
Vladimir Putin: These are certainly negative consequences.
As for bail, we need to carefully analyse the situation and see. The amount of bail is certainly important here. You understand, if a suspected crime costs billions, and the bail amount is only 10 kopecks, it is not going to work.
On the other hand, it could indeed be an effective tool to investigate the case effectively, while at the same time allowing the company to continue their operations, not having to halt production and not having to dismiss people.
I agree with you; we’ll have to take a look at this. Let's analyse it together and see.
Boris Titov: Thank you, Mr President.
As part of the main report we prepared a separate paper on control, supervision and administrative regulation of entrepreneurial activities.
We had to look very deeply into this problem and we carried out a special research project to this effect by ranking the regions in terms of the administrative pressure businesses face. If you allow me, I would like to share with you some of the highlights from this report.
First, I have to say that there were fewer inspections, and the drop in their number was quite substantial – 41 percent. But there is also the flip side of the coin. Unfortunately, while there were fewer inspections, the number of fines imposed on businesses increased.
The financial burden businesses face is growing. Here is what the overall sentiment is: most business leaders said that they are facing a higher administrative burden, so instead of easing, it actually became even tougher.
Vladimir Putin: Do you mean that while there are fewer inspections, the overall financial burden has increased?
Boris Titov: Yes, but this does not end there. There are other kinds of inspections…
Vladimir Putin: I am sorry, but is this objective data? Is 179 billion a real figure?
Boris Titov: Yes, these are statistics, and the numbers are extremely serious. You see, rulings by magistrate judges account for 3.8 billion rubles…
There is another problem that may explain why businesses fail to report any improvements. You see, old-style scheduled and snap inspections that were supervised by the prosecutor’s office are being replaced by new inspections, including administrative investigations, probes, and special inspections by regional authorities. All these are not supervised by the prosecutor’s office. In fact, the law provides for carrying out inspections without their control.
What we see is that for the Federal Service for the Oversight of Consumer Protection and Welfare the inspections that were not supervised by the prosecutor’s office accounted for up to 25 percent of the files that were opened, and also for 20 percent of all the fines from these special inspections.
The same applies to the Federal Service for Supervision of Natural Resources: more than 60 inspections regarding administrative violations and over 50 percent of all the fines. This means that our oversight bodies even find new kinds of controls that can be used in this day and age.
Vladimir Putin: If I am not mistaken, these are not new kinds of inspections. They existed before, but were not used.
Boris Titov: Yes, they started using these methods in absence of strict control.
Regrettably, there is one more problem. You gave an instruction following which amendments were made to the law to the effect that warnings should by all means be given first and only afterwards should fines be imposed?
Vladimir Putin: Yes.
Boris Titov: There are control supervision organisations that primarily use warnings: the relevant figure for the Emergencies Ministry was 47 percent in 2016 and rose to 66 percent in 2018. These were warnings rather than penalties.
However, at present there are also organisations that rarely issue any warnings. Rospotrebnadzor (Federal Service for the Oversight of Consumer Protection and Welfare) is one of them. Regrettably, this is not functioning yet.
Record-breaking fields where the administrative burden is growing are primarily linked with transport. In other words, these are new control systems. Understandably, there were very low figures there, in fact, there were none but now they are rising.
This applies to the Platon system [toll collection system installed for heavy-duty trucks using Russian federal roads]. This road control leads to serious fines if a set gross vehicle weight or its overall size of a truck are exceeded. Fines of 4.9…
Vladimir Putin. But control is a must.
Boris Titov: Absolutely so, but we believe for the time being that the technology has not been fully thought out because from time to time we have technical breakdowns.
This is a special traffic control system situated straight on the roads. Sometimes a truck will go through several checkpoints. Two or three will not react but the fourth will record a violation. The driver discovers that he has been fined only after some time, when he has already reached his destination.
Vladimir Putin: And why is a fine imposed? For some real violation or not?
Boris Titov: For exceeding the gross weight or the overall size of a truck. You know some trucks are covered with canvas tarpaulins. Due to the wind the size of the truck might change and that is when the driver will be fined. This is automatically controlled.
Vladimir Putin: I see. What do you suggest doing to avoid this?
Boris Titov: We simply note that this has become a heavy financial burden on the transport companies. To begin with, we suggested putting up traffic signs and at least warning the drivers about the system being used on the roads. At least in this case the drivers concerned would know that they had passed through it and could then check.
Vladimir Putin: First of all, they should know that they should not violate certain rules.
Boris Titov: This is perfectly obvious but what we mean here is that many complain that having passed through four checkpoints they were recorded as violators only at one, having already passed through three without any problem.
Vladimir Putin: What are we talking about here? That there was no violation or what?
Boris Titov: This shows that this system still needs to be technically ironed out.
Vladimir Putin: So, am I right in thinking that you are talking about improving it rather than taking it out of service?
Boris Titov: Of course. We should simply make technical adjustments.
Vladimir Putin: Right then I understand what you are getting at.
Mr Titov, here’s what I suggest. I completely agree with you: it’s certainly wrong to punish someone if the cover of their lorry is blown off by the wind, when in fact there was no violation, and it must be dealt with.
And I would ask you to prepare your proposals on key topics, in addition to your large and voluminous report. I can see that you have them.
Boris Titov: Our proposals are listed here as well, in the “Register of Problems of Russian Business” section.
We would like to ask you today to issue an instruction concerning this report (our proposals are included in it as well) – to continue work on this report at the Government analytical centre. This inter-agency working group has worked on our report on the development of the non-primary sector. We propose to continue working with this group.
Representatives of all ministries and agencies that are interested, of the Central Bank, business and experts are working there to consider all our proposals and then formulate the final proposals at the Government Commission.
Vladimir Putin: Ok. Let's do it. Will you also take part in this work?
Boris Titov: I hope so. If possible, we would like to organise the work of this inter-agency working group.
Vladimir Putin: Many things you have just mentioned are unacceptable and must certainly be dealt with, such as the absurdity or the shift of administrative burdens from one type to another, as well as the excessive or inaccurate control on the roads. We cannot allow people to suffer, or specific companies.
Let's take a look at this and work on it.