Practice Areas Review: Anti−corruption

Overview of Anti-Corruption Regulations in Ukraine



Partner, Dentons



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In Ukraine anti-corruption regulations have been in place for many years; however, they have significantly evolved during the past year. In this article we focus on anti-corruption requirements for private entities and their employees. We will not discuss anti-corruption requirements applicable to government officers or officers and employees of state owned and communally owned entities.

Ukrainian anti-corruption legislation basically includes the following:

On Prevention of Corruption Act (the Anti-corruption Act): This is the underlying anti-corruption regulation; it also introduces the National Agency for Issues of Corruption Prevention as an executive agency responsible for the creation and implementation of state anti-corruption policy;

On National Anti-Corruption Bureau Act: This introduces the National Anti-corruption Bureau as the new law-enforcement agency being responsible for the prevention, reveal, termination, prosecution and investigation of corruption offenses;

On Fundamentals of the Anti-corruption Policy in Ukraine (Anti-Corruption Strategy) 2014-2017 Act: This stipulates actions to be taken by the government in further combating corruption in different sectors;

Code of Administrative Offenses of Ukraine: This establishes the administrative liability of an individual for corruption offenses;

Criminal Code of Ukraine: This establishes the criminal liability of an individual and legal entity for corruption offenses; and

— International conventions such as UN Convention against Corruption, Criminal Law Convention on Corruption, UN Convention against Transnational Organized Crime and EU Civil Law Convention on Corruption. Ukraine participates in the Group of States against Corruption (GRECO).

In Ukrainian law the term “bribe” is replaced with the term “illegal benefit” meaning monetary funds or other assets, advantages, benefits, services or non-tangible assets being promised, offered, given or accepted without legal grounds. Notably, there are no separate regulations for giving, promising, offering or accepting different types of bribes, be it a gift, hospitality, facilitation payments, travel and other expenses or the advantages, etc., as all these bribe items are encompassed within the term “illegal benefit.”

While special regulations exist with respect to gifts to governmental officials (individuals mentioned in points (i) and (ii) below), there is no limitation on gifts to officers and employees of private entities.

The governmental officials are in principleprohibited directly or through other persons to demand, request or receive gifts (regardless of the value) for themselves, or their close relations, from legal or natural persons in connection with performance by such individuals of activities related to the effectuation of functions of the state or municipality. Therefore, in practice, if a private entity is dependent upon a certain governmental agency (e.g., by virtue of licensing, public tender, etc.), such private entity (its officer) is highly recommended not to give any gift to an officer of such agency, because in such circumstance it would be difficult, if even possible, to determine whether an item is simply a gift or rather an illegal benefit.

Ukrainian law defines the term “corruption” to be either of the following activities:

— If an individual uses his official powers and related opportunities to receive an illegal benefit or a promise/offer of such benefit for himself or other persons; or

— If an individual gives, promises or o­ffers an unlawful benefit to another individual, or upon request of the latter to other individuals or legal entities, in order to abet such individual to use illegally his official powers and related opportunities.

In Ukrainian law the term “bribery” is replaced with “corruption offense” meaning an act containing elements of corruption committed by an individual for which act criminal, disciplinary and/or civil liability is established by law. Liability for a corruption offense is stipulated in the Administrative Code and the Criminal Code.

The following three categories of individuals may be held liable for corruption offenses:

(i) Those empowered to perform functions of state or municipal governance (e.g., President, government officials, judges, prosecutors and other public servants);

(ii) Those equalized to ones empowered to perform functions of state or municipal governance (e.g., officers of government and municipal entities, and individual who render public services such as notaries, auditors, evaluators, receivers, arbitrators, etc.); and

(iii) Those who, on a permanent or temporary basis, occupy positions related to performance of organization-and-management and administrative-and-business obligations, or as specifically empowered to perform such obligations in private law legal entities regardless of legal form, as well as other individuals who are not officers and are in labor relations with enterprises, institutions and organizations. The definition of “organization-and-management and administrative-and-business obligations” is provided in Resolution No. 5 of the Plenum of the Supreme Court of Ukraine On Court Practice in Bribery Cases of 26 April 2002.

Administrative liability arises for an officer of a private entity only if he fails to take measures to counteract corruption as required by law after a corruption offense has been detected (Article 172-9 of the Administrative Code). The amount of penalty is in the range of UAH 850 — 2,125.

Criminal liability for corruption offenses with respect to a private entity employee/officer would arise in the following cases stipulated by the Criminal Code:

— Subornation of an employee of an enterprise, institution, organization (Article 354);

— Commercial subornation of an officer of a private legal entity (Article 368-3);

— Office abuse by an officer of a private legal entity (Article 364-1). This liability applies only if the offense resulted in significant damage (UAH 60,900 — 152,249) or grave consequence (UAH 152,250 and more); or

— Office negligence (Article 367).

Possible sanctions depending upon the gravity of an offense: penalty in the amount of UAH 1,700 — 15,300; up to 240 hours of public works, correction works up to 2 years;  arrest for up to 6 months; or imprisonment of up to 7 years.

A private entity employee/officer may be called to criminal liability if he participates in corruption offenses involving government officials (individuals mentioned in points (i) and (ii) above):

— Abuse of power or office (Article 364);

— Acceptance of offer, promise or obtaining an illegal benefit by an officer (Article 368);

— Unlawful enrichment (Article 368-2);

— Offer, promise or giving an illegal benefit to an officer (Article 369); or

— Abuse of influence (Article 369-2).

Ukrainian law does not require disclosure of giving, promising or accepting an illegal benefit, and there is no obligation to self-report crimes in Ukraine. Further, disclosure by an employee to management of an illegal benefit which was promised, offered and/or accepted by such employee does not mitigate the liability under law.

A legal entity can be held liable for corruption related criminal offenses stipulated in Artic- le 368-3 (“subornation of an officer of a private legal entity”), Article 368-4 (“subornation of an individual rendering public services”), Article 369 (“proposal or giving illegal benefit to an officer”) and Article 369-2 (“abuse of influence”), if the offense was committed on behalf and in the interests of such legal entity. Possible sanctions: fine in the amount of not less than twice the value of the illegal benefit or if the value of illegal benefit cannot be established — a fine in the range of UAH 850 — 1,275,000. Such sanction as liquidation does not apply to a legal entity for committing corruption-related criminal offenses.

Article 61 of the Anti-corruption Law requires that legal entities develop and take corruption preventive measures which are necessary and reasonable for preventing corruption in operation of a legal entity and encourage its employees to behave in compliance with laws. However, adoption of an anti-corruption program by private entities is required only if the entity participates in public procurement. In addition to the anti-corruption program, such private entities should also appoint (subject to notifying the National Agency for Issues of Corruption Prevention) an anti-corruption program officer. Requirements to the corporate anti-corruption program and the anti-corruption officer are stipulated in Articles 63 and 64 of the Anti-Corruption Act.

The Foreign Corrupt Practices Act (FCPA) and UK Bribery Act are not a part of Ukrainian law and their violation shall not result in liability under Ukrainian law. In order for the FCPA or Bribery Act or corporate anti-corruption policy of a parent company to become binding on employees of a Ukrainian entity, these should:

— be inserted into an anti-corruption program of the entity; and/or

— become a part of an employment arrangement (in case of employees) or a civil law contract (in case of consultants); and/or

— become a part of internal labor rules (approval of workers’ collective is required) and be countersigned by each employee.