Brief overview of the law and enforcement regime
The Ukrainian anti-corruption legal framework consists of the following major segments:
- the anti-corruption legislation itself;
- provisions of the Code of Ukraine on Administrative Offences (the "Administrative Offences Code") and the Criminal Code of Ukraine (the "Criminal Code") regulating corruption-related administrative offences and crimes; and
- legal provisions establishing the rules of conduct of Ukrainian governmental officials, including officials representing Ukrainian legislative, administrative and regulatory bodies (the "Officials").
Starting from 26 April 2015, the main legislative act dealing with combatting corruption in Ukraine is the Law of Ukraine No. 1700-VII "On Preventing Corruption" dated 14 October 2014 (the "Anti-Corruption Law"). The Anti-Corruption Law:
- defines corruption, a corruption offence, an unjustified benefit and, importantly, a gift;
- distinguishes between a corruption offence and a corruption-related offence;
- introduces changes in the groups of subjects of liability for corruption offences;
- provides for an algorithm for preventing acceptance of unjustified benefits and gifts, and for dealing with them when provided;
- introduces several important restrictions aimed at preventing and combating corruption (e.g. restriction on receiving gifts by Officials);
- sets up the rules aimed at preventing corruption in legal entities;
- introduces certain changes related to liability for corruption and corruption-related offences to the Criminal Code and the Administrative Offences Code;
- regulates protection of whistle-blowers;
- emphasises the importance of corporate anti-corruption compliance programmes;
- establishes the ethical conduct rules for certain groups of Officials; and
- tightens the financial control regulation for Officials.
Unlike the U.S. Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act 2010 (UKBA), the Anti-Corruption Law does not have extraterritorial application. Nor does it use the term 'bribery'; however, the legal meaning of the bribery notion under the FCPA and the UKBA is mostly covered by the corruption-related crimes of the Criminal Code (e.g. corruption payments to the officers of private companies and persons rendering public services, exercising undue influence, giving unjustified benefits to Officials, etc.).
In 2014, Ukraine became a jurisdiction, the legislation of which provides for criminal liability of companies, including for crimes of corruption committed by their authorised representatives (please see section below, 'Company liability for corruption offences', for more detail).
Neither the Anti-Corruption Law nor the Criminal Code establish liability of the officers and employees of the company for corruption offences and crimes committed by agents and other third parties, including if they commit them specifically to get business, keep business, or gain a business advantage for this company.
Bribery vs Unjustified Benefits
The notable distinction of the Ukrainian anti-bribery and anti-corruption legislation is that it has never clearly distinguished between corruption and bribery. For instance, the Anti-Corruption Law contains provisions directly or indirectly related to bribery (e.g. gifts to Officials, payment of charitable contributions, membership of NGOs, etc.). Moreover, in 2013, the legal notions of 'bribe' and 'bribery' were eliminated from the Ukrainian law and replaced with the notion of 'unjustified benefits', (i.e. the term 'bribery' is no longer used under Ukrainian law). Therefore, the words 'anti-corruption legislation' or 'anti-corruption legal framework' will be a sufficient equivalent of bribery in the meaning of the FCPA and the UKBA.
Under the New Anti-Corruption Law, the unjustified benefits are defined as money or other property, preferences, advantages, services, non-pecuniary assets, and any other benefits of non-pecuniary or intangible nature that are being illicitly promised, offered, delivered, or received. Under the old anti-corruption legislation, the unjustified benefits were defined as money or other property, preferences, advantages, services, non-pecuniary assets being illicitly promised, offered, delivered, or obtained free of charge or at a price lower than a minimum market value. This definition suggested two tests for classifying benefits as unjustified, being their promise, offer, delivery or obtaining (1) illicitly; and (2) free of charge or at a price lower than a minimum market value. In the definition of the unjustified benefits provided by Anti-Corruption Law, the second test (i.e. price) is missing. Considering that the unjustified benefits are the key category of the anti-corruption legislation, its definition in the present wording gives the law enforcement authorities and courts more discretion in applying the anti-corruption laws and deciding on the guilt of the potential subjects of liability for corruption offences.
Subjects of liability for corruption offences, corruption and corruption offence
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 government officials, as well as public servants and local government officers.
In addition to Officials, Article 3 of the Anti-Corruption Law lists other groups of individuals who potentially can be held liable for committing corruption offences (the "Subjects of Liability"), including:
- persons conferred the same status as persons authorised to perform state or local government functions for the purposes of the Anti-Corruption Law, namely: (i) officers of the public legal entities other than Officials (the "Public Entity Officers"); and (ii) individuals, other than public servants or local government officials, rendering public services (e.g. auditors, notaries, experts, and other persons determined by law) (the "Public Services Officials"); and
- individuals permanently or temporarily holding positions related to organisational, executive, or administrative and economic responsibilities, or persons specifically authorised to perform such duties in any private company in accordance with the law, as well as other individuals performing works for or rendering services to such companies based on respective agreements (in cases provided by the Anti-Corruption Law) (the "Private Company Officers").
The Ukrainian law defines corruption as an activity of Officials and other Subjects of Liability aimed at unlawful use of their powers and related opportunities to obtain unjustified benefits or accept such 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 and other Subjects of Liability or provision of unjustified benefits to them or, at their demand, to other individuals or legal entities, aimed at persuading Officials and other Subjects of Liability to unlawfully use their powers and related opportunities.
The Anti-Corruption Law distinguishes between a corruption offence and a corruption-related offence, which is a novelty in the Ukrainian anti-corruption regulation. A corruption offence is the intended act of corruption, for which the law establishes criminal, disciplinary and/or civil law liability, committed by an Official or other Subjects of Liability.
A corruption-related offence is a wrongdoing that does not fall under the characteristics of corruption but violates the requirements, prohibitions and limitations imposed by the Anti-Corruption Law, for which the law establishes criminal, administrative, disciplinary and/or civil law liability, committed by an Official or other Subjects of Liability.
Liability for corruption offences
The Anti-Corruption Law sets forth criminal liability for legal entities (discussed in section 'Company liability for corruption offences' below), as well as criminal, administrative, civil and disciplinary liability for corruption offences for responsible Officials and other Subjects of Liability.
In accordance with Ukrainian law, unless a corrupt activity constitutes a criminal offence provided by the Criminal Code (e.g. offering, promising, or providing unjustified benefits to an Official), a responsible Official or other Subject of Liability shall be subject to administrative liability for a committed corruption offence (e.g. for violating statutory restrictions regarding receiving a gift/donation).
The Anti-Corruption Law introduced a new wording to or supplemented several Sections of the Administrative Offences Code resulting in the increased administrative liability for corruption offences. This includes establishing administrative liability for violating the restrictions to:
- engage in other paid or entrepreneurial activities (except for teaching, scientific and creative work, as well as some other activities;
- become a member of governing bodies of profitable companies (except when representing the state interests in the governing bodies of such companies);
- receiving gifts;
- violating the financial control requirements;
- preventing and resolving the conflict of interest;
- unlawful use of information which became known during performance of the official duties; and
- failure to take anti-corruption measures.
Additionally, the Anti-Corruption Law introduced a new Article 18846 into the Administrative Offences Code, establishing liability for:
- not observing the lawful requirements (orders) of the National Anti-Corruption Agency of Ukraine (the "Anti-Corruption Agency");
- failing to provide it with information and documents (violation of the statutory terms of their provision); or
- providing knowingly untrue or incomplete information.
The Criminal Code provides for the following types of corruption crimes:
- receiving unjustified benefits;
- receiving the offer or promise of unjustified benefits;
- promising or providing unjustified benefits;
- corrupt payment1 to Private Company Officers;
- corrupt payment to Public Services Officials;
- corrupt payment to an employee of an entity, other than the Official, or a person working for the benefit of an entity;
- unlawful enrichment; and
- unlawful influencing Officials performing state duties.
Penalties for individuals convicted of corruption offences
Depending on the degree and type of a particular crime, the corruption crimes committed by individuals are punishable by (as a single penalty or in combination with the below penalties):
- a fine;
- community works;
- confinement or imprisonment; and, as the case may be,
- deprivation of the right to hold certain office or engage in certain activities for up to three years and confiscation of property and/or special confiscation.
Other legal consequences of corruption activities
Under Ukrainian law, information on persons liable for corruption shall be listed in the Unified Register of Individuals Liable for Committing Corruption Offences within three days upon the coming into force of a respective judgment or upon coming into force of a respective judgment, or receiving by the Anti-Corruption Agency of the paper copy of the internal order of the relevant employer on taking a disciplinary action for committing a corruption or corruption-related offence.
Under Article 22 of the Anti-Corruption Law, performance of duties of an Official or other Subject of Liability shall be suspended if formal charges are filed against such person to initiate prosecution for committing a crime within the scope of his/her official duties. Officials brought to criminal or administrative liability for corruption offences shall be subject to dismissal within three days after a respective judgment comes into force, unless otherwise provided by law.
The Anti-Corruption Law supplemented Article 36 of the Labour Code of Ukraine (the "Labour Code") with a new ground for employment termination, namely concluding an employment agreement (contract) contrary to the requirements of the Anti-Corruption Law established for Officials listed in Article 3, part 1 (1) of the Anti-Corruption Law.
According to Article 53 of the Anti-Corruption Law, whistle-blowers cannot be fired or caused to terminate their employment, or brought to disciplinary liability or be otherwise retaliated (be threatened with retaliation) by their employers in connection with reporting by such whistle-blowers of violations of the Anti-Corruption Law committed by other persons. Article 235 of the Labour Code was amended with a new provision aimed at protecting whistle-blowers or members of their families from such retaliation. The new part 4 of this Article 235 provides that in case such whistle-blowers refuse to be reinstated at their job, they shall be entitled to compensation in the amount of their average salary for six months.
Apart from the aforementioned administrative, criminal and disciplinary liability, Officials violating provisions of the Anti-Corruption Law may be held liable for damages. In addition, they can be forced to eliminate the consequences of their corrupt actions by:
- compensating damages;
- annulling unlawful laws, regulations and decisions initially enacted in the course of corruption activities;
- restoring rights of and compensating damages to the offended companies and individuals; and
- seizing the unlawfully gained property.
The Anti-Corruption Law provides for establishing the Anti-Corruption Agency, a central government body having a special status and tasked with forming and implementing the state anti-corruption policy. The Anti-Corruption Agency is authorised to:
- control and verify financial declarations of Officials, keep and publish such declarations, as well as monitor the Officials' way of living;
- maintain the Uniform State Register of Declarations of Individuals Authorised to Perform State Functions or Local Government Functions and the Uniform State Register of Individuals who Committed Corruption and Corruption Related Offences;
- approve the rules of ethics for public servants and local government officials;
- develop a template anti-corruption compliance programme of a legal entity; and
- cooperate with whistle-blowers, ensure their legal and other protection, and bring to liability those guilty in violating the whistle-blowers' rights related to notifying about possible corruption or corruption-related offences.
Corruption activities investigation and law enforcement bodies
Under the Criminal Procedure Code of Ukraine (the "Criminal Procedure Code"), investigation of the abovementioned corruption offences falls within the competence of the Ministry of Internal Affairs of Ukraine, the Prosecutor's Office of Ukraine and the Security Service of Ukraine.
Investigators of the Prosecutor's Office of Ukraine investigate offences committed by the highest Officials (i.e. Officials who hold positions belonging to the first three categories of public servants established by the applicable law (e.g. first deputy ministers, heads of regional state administrations, heads of Administration of the President of Ukraine, etc.), as well as by judges and officers of the law enforcement bodies). Under the Criminal Procedure Code, after creation of the State Investigation Bureau of Ukraine such cases will be investigated by this Bureau.
The Law of Ukraine No. 1698-VII "On the National Anti-Corruption Bureau of Ukraine" provides for establishing the National Anti-Corruption Bureau of Ukraine (the "Anti-Corruption Bureau"). This Bureau is a new state law enforcement agency authorised with preventing, detecting, stopping, investigating, and exposing corruption offences within its competence, as well as discouraging from committing new ones. The task of the Anti-Corruption Bureau is fighting corruption crimes committed by high public Officials that threaten the national security of Ukraine.
This article appeared in the Third Edition of Global Legal Insights – Bribery & Corruption; published by Global Legal Group Ltd, London.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.