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Unauthorized article about a knowingly bad bill

25 march 2019

The Legislative Activity Commission of the Russian Federation Government held a meeting on January 21, 2019 to review two federal bills, one of which was “On Amendments to the Criminal Code of the Russian Federation and the Criminal Procedure Code of the Russian Federation in Terms of Establishing Responsibility for the Unauthorized Mining and Trafficking of Amber, Jade or Other Semi-Precious Stones”; and the other “On Amendments to the Code of the Russian Federation on Administrative Offenses in Terms of Improving Administrative Responsibility in the Sphere of Production, Use and Circulation of Precious Metals and Precious Stones”.

The bills in their key parts amend Articles 191 and 255 of the Criminal Code of the Russian Federation (with the corresponding amendments to the Code of Criminal Procedure of the Russian Federation) and respectively Article 19.14 of the Administrative Offenses Code.

At their core, the amendments are revolutionary for Russia’s jewelry industry (and extremely negative for its development), since in fact they equate the turnover of the so-called semi-precious stones (the term "semi-precious" is not recommended for use by CIBJO and a number of other global industry organizations) to the turnover of precious stones. Moreover, the punishments for committing crimes and offenses related to the turnover of semi-precious stones are comparable to the corresponding crimes and offenses relating to precious stones.

For reference:

1. In accordance with Article 1 of Federal Law No. 41-ФЗ “On Precious Metals and Precious Stones” enacted on March 26,1998, precious stones in the Russian Federation include natural diamonds, emeralds, rubies, sapphires and alexandrites, as well as natural pearls in their rough (natural) and processed forms. Unique amber formations are equated to precious stones in the manner established by the Government of the Russian Federation. Materials of artificial origin that possess characteristics (properties) of precious stones are not considered to be precious stones.

However, this law does not contain any mention of semi-precious stones.

2. Legislatively, the list of semi-precious stones in the Russian Federation does not have a universal definition. Still, there are two lists of semi-precious stones used for various purposes.

Decree No. 1029 “On approval of the list of semi-precious stones in order to apply Article 7.5 of the Administrative Offenses Code of the Russian Federation” introduced on August 31, 2018 approved the following list of semi-precious stones: “Beryl, including aquamarine, heliodor”.

It must be borne in mind that this list was reduced as a result of negative comments on the original wording during the regulatory impact assessment procedure carried out by the Ministry of Economic Development of the Russian Federation. And the original edition of this list also included tourmaline. Moreover, the interested agencies discussed at their work sessions the inclusion of all minerals and their varieties under Code 7103 10 000 9 of the Foreign Economic Activity Commodity Nomenclature.

For customs purposes, the Eurasian Economic Union (which includes the Russian Federation) has a different list. The Common Commodity Nomenclature of the Foreign Economic Activity of the Eurasian Economic Union and the Common Customs Tariff of the Eurasian Economic Union contain a very extensive list under Code 7103 10 000 9 “Other precious (except diamonds) and semiprecious stones ...” including the following types of raw minerals:

- agate, amethyst, beryl (including aquamarine,               bixbite, vorobyevite, heliodor, goshenite, morganite, rosterite), turquoise, garnet (including almandine, andradite, spessartine, hessonite, grossular, demantoid, carbuncle, leykogarnet, melanite (shorlomite), pyrope, rhodolite, topazolite, uvarovite, tsavorite), jadeite, hairy quartz, kunzite, lapis lazuli, malachite, jade, opal, rhodonite, scapolite, topaz, tourmaline (including achroite, verdelite, dravite, indigolite, rubellite , sibirit, tsilazit, uvit, sherl, elbait), phenakite, chrysoberyl, chrome diopside, chrysolite, chrysoprase, zircon, citrine, charoite, spinel, amber (with the exception of amber formations, which are equated to precious stones).

This list was approved by the Decision of the Board of the Eurasian Economic Commission dated April 21, 2015 No. 30 “On Non-Tariff Regulation Measures” and includes, as it is easy to see, almost the entire range of gemstones from the Blue Book of CIBJO.

Let's compare the texts of the current Article 191 of the Criminal Code of the Russian Federation and the edited version of the bill.

Changes in Article 191 of the Criminal Code

analyt_18032019_eng.png

It is important to note the following:

1. The article operates with such concepts as “making a transaction related to amber, jade or other semi-precious stones knowingly mined without authorization, as well as their illegal storage, transportation and shipment in any form, condition”.

It is not only about persons directly involved in unauthorized mining of the listed crime objects. The range of persons covered by the norm is expanded to those who simply stored or transported the stones “knowingly” mined without authorization mentioned in this article. According to investigators and the court, for example, market dealers, wholesalers and retailers of these stones can be counted among such persons. Allegedly, they could “knowingly” be aware of the “unauthorized” nature of mining associated with these stones. Moreover, the number of dealers involved in this chain, who can be covered by this rule, will probably be limited only by the imagination of law enforcement officers. The question is: Should a retailer check whether stones were mined without authorization or not?

And what about the jewelers purchasing and setting stones in jewelry pieces? Do they have to find out now whether these stones were mined without authorization?

In itself, the concept of "unauthorized" extraction of anything from the subsoil, as soon as this concept falls into the Criminal Code, must be clearly and unambiguously disclosed. However, the concept of unauthorized use of subsoil is found only in Article 23 “Basic requirements for the rational use and protection of the subsoil” of Law of the Russian Federation No. 2395-1 “On Subsoil” enacted on February 21, 1992, which states that one of the basic requirements for the rational use and protection of subsoil is, among other things, the “observance of the legislatively established procedure for providing subsoil for use and the prevention of unauthorized use of subsoil”.

But what does “unauthorized use” mean? For example, if a subsoil user has a license for mining amethyst, will the ancillary mining of rock crystal or smoky quartz be considered unauthorized? And will a person involved in such ancillary mining be subject to criminal prosecution? And there are many such questions, which may be asked.

At a minimum, the law must provide for:

- a clear definition that does not allow ambiguity regarding the meaning of the word "knowingly", that is in what way, through what channels and to what degree of reliability the transaction participant (or the carrier, or the persons storing semi-precious stones) should get information about the “knowingly unauthorized” extraction of stones, so that there are grounds to bring this transaction participant to responsibility;

- a clear definition of what should be considered “unauthorized mining”, the scale at which it is considered unauthorized for a persecuted person in comparison with the authorized mining, if this person is also engaged in the latter;

- protective mechanisms at the disposal of an honest purchaser of stones against attempts to accuse him or her of purchasing stones “knowingly” mined without authorization;

- a specified maximum number of persons in a chain associated with market movement of stones, who are to bear responsibility for their “unauthorized” mining.

2. It is not clear why the norm “in violation of the rules established by the legislation of the Russian Federation” is kept in respect of precious stones (Parts 3 and 4 of Article 191 of the Criminal Code of the Russian Federation), and in relation to “amber, nephrite and other semi-precious stones” it was necessary to introduce the concept of “knowingly mined without authorization”? Although, in fairness, there are no clear rules for all cases in the Russian legislation for the circulation of precious stones. For cases not specified by laws and regulations, there is the rule “What is not allowed is prohibited” used instead of common sense expressed by the formulation “What is not prohibited is allowed”.

3. The introduction of a separate rule for “semi-precious stones” in the Criminal Code of the Russian Federation is basically nonsense, because the amount of transactions involving such stones in the state economy is insignificant, and this is easy to understand by their output and export. At the same time, Russia’s criminal law does not contain articles in the Criminal Code on unauthorized extraction of oil or gas, although it is the theft of oil and gas (that is, their unauthorized extraction) that inflicts huge losses on the state.

4. Establishing a list of semiprecious stones for the purposes of Article 191 of the Criminal Code of the Russian Federation by a decree of the Government of the Russian Federation is much less procedurally subject to public and business discussions than establishing a list in the body of the law (as is done for a list of precious stones). However, the strange nature of these objects ("semi-precious" stones), the list of which is not strictly defined in any law, should in principle not be allowed to be treated as separate objects of criminal law.

In fact, the unauthorized extraction from the subsoil of any materials is a common theft from the state or from a tenant of the subsoil. And for cases of theft there is a special article in the Criminal Code, which is Article 158. By the way, Article 158 of the Criminal Code of the Russian Federation separately mentions the cases of theft from oil pipelines, oil-products pipelines, gas pipelines... So maybe it would be worth making the theft of semi-precious and precious stones a separate element in Article 158 of the Criminal Code of the Russian Federation, also adding the theft of precious metals. This will make it possible to eliminate Article 191 of the Criminal Code of the Russian Federation...

But the main thing is that there should be a transparent and understandable order introduced into the industry, making it possible to legally and comfortably acquire the rights to extract semi-precious stones. And it is even better would be to follow the recommendations of CIBJO and other global industry organizations and stop using the strange term "semi-precious stones". Moreover, it would be good to stop trying to introduce these objects in the field of strict state regulation. The costs associated with the “sovereign supervision” will in this case exceed the value of the market itself... 

P.S.

I gave this title to the article because it was written “without authorization”, without an order and approval “from the top”. So far, such “unauthorized” initiatives are not prohibited in this country. And I consider this bill to be “knowingly” bad because I do not believe that the person who wrote it believed it would do any good for the development of the market for semi-precious stones.

Vladimir Zboikov, Executive Director, ‘Business Russia’ Committee on Precious Metals and Stones, Jewellery Art and Handicraft Industry