Non-Performance of a Contract or Fraud: The Problem of Qualification

Legislation and law enforcement practice does not sufficiently distinguish between fraud and non fulfilment of obligations set out under a deal. As a result, when there is a B2B or B2G contract in place, cases under article 159 of the Criminal Code of the Russian Federation are often initiated only when there is reason to believe there is a deliberate unwillingness to fulfil an obligation. However, non fulfilment of contractual obligations is a fairly frequent occurrence, and the violated rights of the creditor can be quite effectively protected under civil law. Ultimately, this is at odds with the purpose of criminal law and the principle of economy of criminal repression. Criminal prosecution is a final measure used to protect the interests of society, and should not lead to the excessive criminalization of economic players. What are essentially economic-related disputes can carry with them the tinge of criminality. This can lead to law-enforcement bodies making unjustified intrusions into the way companies operate. It also weakens guarantees in relation to protecting the rights of entrepreneurs, erodes trust, and impedes business activity. Ultimately, this can have a negative impact on the business climate and hinder economic growth in Russia. How does the real social danger of fraud weigh up against the negative consequences of the widespread initiation of criminal cases under article 159 of the Criminal Code of the Russian Federation (whereby contractual obligations are not fulfilled in the course of business activities or corporate conflicts)? Are legislative changes required?