Starting from 1 July 2011, the main legislative act dealing with combating corruption in Ukraine is the Law of Ukraine No. 3206-VI "On the Principles of Preventing and Combating Corruption" dated 7 April 2011 (the "Anti-Corruption Law"). The Anti-Corruption Law defines corruption and a corruption offence, introduces several important restrictions aimed at preventing and combating corruption (e.g. restriction on receiving gifts/donations by government officials), establishes a number of new administrative offences and crimes in the anticorruption area, and imposes mandatory financial reporting requirements on officials and public servants.
The term "officials" is not defined in the Anti- Corruption Law per se. However, it speaks of the 'individuals authorised to perform state or local government functions' and covers officials, as well as public servants and local government officers (the "Officials").
The Ukrainian law defines corruption as an activity of Officials aimed at unlawful use of their powers and related opportunities to obtain unjustified benefits or accept a promise/offer of such unjustified benefits for themselves or other individuals, as well as a promise/offer of unjustified benefits to Officials or the provision of unjustified benefits to them or, at their demand, to other individuals or legal entities, aimed at persuading Officials to unlawfully use their powers and related opportunities.
A corruption offence, in the meaning of the Anti-Corruption Law, is the intended act of corruption committed by subjects of liability for corruption offences for which the law establishes criminal, administrative, civil and disciplinary liability.
The Law on Amending Certain Laws of Ukraine to Bring Ukrainian Legislation in Compliance with the Standards of the Criminal Law Convention on Corruption dated 18 April 2013 (the "Amending Law 2013") introduced important amendments to the Anti-Corruption Law related to the categories of subjects of liability for corruption offences. Now it is clear that not only company officers, but all its employees may be held liable for corruption offences as 'individuals' providing unjustified benefits to Officials and other subjects of liability for corruption offences (except for senior officers and other management of private companies), or to other persons, if instructed by them, were placed in a separate category of subjects of liability for corruption offences.
As opposed to the U.S. Foreign Corrupt Practices Act ('FCPA') and the UK Bribery Act 2010 ('UKBA'), the Anti-Corruption Law does not have extraterritorial application. It also does not deal with bribery. In fact, as of 18 May 2013, when the Amending Law 2013 came into force, the legal notions of 'bribe' and 'bribery' were eliminated from the Criminal Code of Ukraine and other applicable legislation and replaced with the notion of the 'unjustified benefits' (i.e. the term 'bribery' will no longer be used under Ukrainian law).
Before the Amending Law 2013 came into force (i.e. before the legislator removed the legal notion of the 'bribe' from the Ukrainian legislation), the qualification of offering or rendering non-pecuniary services, benefits and advantages as the corruption offence subject to administrative liability did not raise many questions. The courts were consistent in recognising the pecuniary nature of the bribe. In the other words, non-pecuniary services, benefits and advantages (e.g. positive characteristic or appearance in mass media, offering prestigious jobs, etc.) were not considered as a bribe and, therefore, would not result in criminal charges against the liable individuals. However, the practice of distinguishing between a corruption offence of offering or giving property, money, and other pecuniary benefits and services as a criminal offence of bribe offering or bribe giving under the Criminal Code or an administrative offence under the Administrative Code was inconsistent and unpredictable.
Under the Amending Law 2013, the unjustified benefits are defined as money or other property, preferences, advantages, services, non-pecuniary assets being illicitly promised, offered, or delivered. Therefore, the clarity in qualifying offering or rendering non-pecuniary services, benefits and advantages as the administrative corruption offence no longer exists and now businesses should pay even closer attention to evaluating each case of gift giving or providing hospitality/entertainment not only to Officials but also to other subjects of liability for corruption offences.
On 6 June 2013, the President of Ukraine signed the Law on Amending Certain Laws of Ukraine (Related to Implementing the Action Plan for Liberalisation of the EU Visa Regime for Ukraine Regarding Liability of Legal Entities) (the "Company Liability Law"), which will come in force as of 1 September 2014, if not annulled prior to 1 September 2014, as was the case in 2011. Introduction of the company liability for corruption offences will be the new experience for Ukraine. Before, charges for corruption offences could only be brought against company officers and employees.
Neither the Anti-Corruption Law nor the Criminal Code establish liability of the officers and employees of the company for corruption offences committed by agents and other thirds parties, including if they commit such offences specifically to get business, keep business, or gain a business advantage for this company. Similarly to the UKBA, facilitation payments allowed by the FCPA are not permitted under Ukrainian law.
The Company Liability Law provides that courts, while imposing criminal fines and calculating their amounts for the companies found guilty in committing corruption offences, will have to take into account, in particular, the measures taken by the guilty company to prevent corruption, which is similar to the 'adequate procedures' defence available under the UKBA. In view of that the prospective criminal fines for the companies may amount up to the equivalent of approximately $161,400, Ukrainian companies should become serious about introducing complex and sophisticated anti-corruption compliance programs.
The Ukrainian law distinguishes between a simple gift and unjustified benefits. For the gift to be qualified as unjustified benefits, a person must give money or other valuables to an Official with an intent that the Official performs or (refrains from performing) certain actions in that person's favour. However, there are still no apparent de facto procedures for the gift giving to Officials. The Anti-Corruption Law bans Officials and some other liable individuals from receiving gifts or donations from companies and individuals for decisions and acts in favour of the gift giver, and from subordinates of such persons. Officials and some other liable individuals, however, may accept personal gifts consistent with the generally recognised ideas of hospitality. The Anti-Corruption Law establishes a value threshold for gifts, currently being in the amount equivalent to approximately USD 60 to USD 120, which is a new experience for Ukraine.
Hospitality/entertainment is not directly dealt with by the Anti-Corruption Law. However, its provisions regulating gifts to Officials apply to hospitality/entertainment by analogy. Therefore, each case of hospitality/entertainment should be thoroughly evaluated and preferably supported by the legal opinions of the outside legal counsel.
The new Ukrainian anti-corruption legal framework is more consistent and clear in comparison to the earlier legislation, and generally seems to conform to the world's best practices. However, considering that the new legislation introduces a number of new notions into the Ukrainian law and that many of the existing legal acts governing this area have to be brought in compliance with the Anti-Corruption Law and other applicable laws, the enforcement of the new anti-corruption legislation remains an issue, while the success of its application will largely depend on interpretation of the new laws by the Ukrainian enforcement agencies (which system, structure and authorities are currently being reorganised) and courts.
Originally published in Expert Guide : Fraud & White Collar Crime 2013
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