Background

On 11 June 2009 the Parliament of Ukraine adopted three new laws stipulating completely new rules in the eld of ghting corruption, i.e.: “On Principles of Corruption Prevention and Counteraction” No. 1506-VI, “On Liability of Legal Entities for Commitment of Corruption Oences” No. 1507-VI and “On Amending Certain Legal Acts of Ukraine Regarding Liability for Corruption Oences” No. 1508-VI.

Originally, the said laws were to enter into force on 1 January 2010. However, the Parliament of Ukraine postponed their entry into force rst until 1 April 2010 and then until 1 January 2011. Finally, on 21 December 2010 the Parliament of Ukraine cancelled all three new anti-corruption laws with the effect starting from 5 January 2011.

On 7 April 2011 on the initiative of the President of Ukraine, Mr.Yanukovych, the Parliament of Ukraine gave “green light” to the new anti-corruption law “On Principles of Corruption Prevention and Counteraction” of 7 April 2011 No. 3206-VI (the “Law No. 3206”).

The Parliament of Ukraine also adopted the Law of Ukraine “On Amending Certain Legislative Acts of Ukraine regarding Liability for Corruption Offenses” of 7 April 2011 No. 3207-VI (the “Law No. 3207”) aimed at ensuring implementation of the Law No. 3206 i.e. amending the Criminal Procedural Code of Ukraine, the Code of Ukraine on Administrative Oences, the Criminal Code of Ukraine and the Law of Ukraine “On State Service”.

Both the Law No. 3206 and the Law No. 3207 entered into force on 1 July 2011, except for Articles 11 and 12 of the Law No. 3206 related to nancial control and special verication of personal information on persons applying for state of municipal positions that shall enter into force on 1 January 2012.

Denition of corruption

Corruption is dened as one of the following activities:

• when a person uses its ocial powers and related opportunities to receive unlawful benet or a promise/oer of such benet for itself or other persons
• when a person gives, promises or oers unlawful benet to the other person or upon request of the latter to other natural persons or legal entities in order to abet such person to use illegally its official powers and related opportunities

Unlawful benet may be both in the form of material values (e.g. money, property, advantages, discounts, material services etc.) and intangible values received or promised/offered for free or for the price lower than minimum market price.

Persons to be held liable for corruption offenses

(i) Persons performing state and municipal functions (inter alia, the President, the Prime-minister, the members of the Government and Parliament etc.)
(ii) Persons to be treated as the persons performing state and municipal functions (inter alia, officials of the public legal entities receiving salary from the state or local budgets; persons providing public services: auditors, notaries, estimators/appraisers, experts, insolvency ocers, independent intermediaries, members of the labor arbitration, national and foreign arbitrators, while performing their functions, judges of international courts, officials of foreign states and international organizations etc.)
(iii) Persons holding positions related to performing of organizational and executive or administrative and economic functions in private legal entities;
(iv) Officials of legal entities and natural persons if they provide the persons mentioned in paragraphs (i) and (ii) hereinabove or other persons with their assistance with unlawful benet.

Anti-corruption measures

The Law No. 3206 provides for the following measures aimed at fighting corruption:

(i) Restrictions on use of ocial powers and related opportunities for receiving unlawful benet or a promise/oer of such benet for yourself or other persons, e.g. restriction on: (a) unlawful assistance to natural persons or legal entities in performing their commercial activities, (b) unlawful assistance in appointment on a position, (c) unlawful preferences given to natural persons or legal entities, while drafting and adopting regulations, decisions, conclusions etc.
(ii) Restrictions on holding more than one oce\position, except for science and art activities, medical practice, instructor services and refereeing
(iii) Restrictions on accepting presents and donations for decisions, acts or non-acting in favor of the person giving a present or making a donation and restrictions on accepting presents/donations from subordinates, when each present exceeds in price EUR 40 or total price of the presents accepted during a year exceeds EUR 80
(iv) Ban on free of charge services and property to be granted to state and municipal authorities by natural persons and legal entities
(v) Restrictions on work in subordination with close persons, including spouses, children, parents, brothers and sisters, grandmothers and grandfathers as well as persons residing together and sharing a household
(vi) Restrictions applied to persons who ceased to hold position related to performing state or municipal functions, to name but few: (a) ban on conclusion of agreements with the business entities such persons controlled, supervised or were involved in decision-making within one year prior to their dismissal from the position, (b) ban on disclosure or use of information such persons became aware of while holding a position, (b) ban on representing any other person in the cases against the authority they were employed with etc.
(vii) No conflict of interests is allowed
(viii) Compulsory anti-corruption examination of the draft laws, acts of the President and the Government, the ministries and other central executive authorities
(ix) Requirements on transparency of the information provided by persons performing state and municipal functions at the request of other natural persons and legal entities. The following information may not be restricted in access: (a) value and type of benecent and other types of aid, (a) value and type of salaries, payments under agreements subject to mandatory state registration, presents and donations etc

Financial control and special verication of personal information

As it was mentioned above, only two anticorruption measures provided by the Law No. 3206 will be enforced starting from 1 January 2012, i.e. nancial control and special verication of personal information on persons applying for state or municipal positions.

Pursuant to the requirements of the financial control all the persons performing state and municipal functions and ocials of the public legal entities receiving salary from the state or local budgets shall provide an annual declaration stating their rights to property, income, expenses and financial obligations. Moreover, if the said persons open an account in a non-resident bank, they are required to make the relevant notication to the tax authorities. The annual declaration of the President, the Head of the Parliament, the Prime-minister, the members of the Government and the Parliament, the heads and judges of the courts and other state ocials shall be made available to public through publishing in printed media.

While applying for state and municipal positions all the candidates are subject to the special verication of the following personal information: (a) criminal record (for corruption oences in particular), (b) record of administrative corruption oences, (c) accuracy of information set forth in declaration, (d) equity interest rights, (e) medical condition, education etc

Certain consequences of corruption offenses committing

The Law No. 3206 provides for the following specic consequences of corruption oences committing:
(i) Information on the persons brought to liability for corruption oences shall be included to the Unied State Register of Persons who Committed Corruption Offenses
(ii) Laws, regulations and decisions adopted as a result of corruption oences can be cancelled or recognized as unlawful by court
(iii) Agreements concluded as a result of corruption oences shall be deemed as null and void
(iv) Damages and losses caused to the state, natural persons and legal entities as a result of corruption offenses shall be indemnified and unlawfully gained money and property shall be seized.

Liability for corruption ooffenses

Persons held liable for corruption oences may be brought to criminal, administrative, civil and disciplinary liability.

Fines imposed as an administrative liability range from 10 to 500 nontaxable minimum individual incomes (approximately EUR 15 – 750) depending on the particular oence. In addition, seizure of unlawful benet of material value received can be applied.

If a person is brought to criminal liability, the following penalties shall apply: (a) nes amounting to up to 1500 nontaxable minimum individual incomes (approximately EUR 2 250); (b) correctional labor up to 2 years; (c) an arrest up to 6 months; (d) restriction of freedom up to 5 years; (e) imprisonment up to 12 years. Additionally, deprivation of a right to hold certain positions or conduct certain activities up to 3 years and seizure of property can be applied.

Conclusions

Needless to say that after entry into force of the new anti-corruption legislation in Ukraine “rules of the game” both for public and private sectors will considerably change. Hence, the companies operating in Ukraine shall revise their corruption compliance policies in order to survive in the “weald” of numerous rules set forth by the new anti-corruption legislation.

Nataliya Mykolska
Anzhela Makhinova
Vasil Kizil and Partners