Ukraine: Global Legal Insights. The Ukraine Chapter To Bribery & Corruption 2018 5th Edition

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 combatting 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. However, recently there have been discussions among some members of parliament about the need to make its application extraterritorial, in particular to prohibit corruption of foreign Officials. Nor does the Anti-Corruption Law 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.) and the legal meaning of the bribery notion under the FCPA 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.). However, the legal notions of 'bribe' and 'bribery' were eliminated from the Ukrainian law a few years ago 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 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 the 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, as well as members of supervisory boards of public banks, public companies and public for-profit organisations (the "Public Entity Officers"); (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 (iii) representatives of NGOs, scientific and educational institutions, and relevant experts of contest committees created in accordance with the Law of Ukraine on the Public Service;

• 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 who are not officers but perform works for or render services to such companies based on respective agreements (in cases provided by the Anti-Corruption Law) (the "Private Company Officers");
• duly registered parliamentary candidates, presidential candidates, as well as local councils and government candidates; and
• individuals who: (i) receive funds and property in the course of implementing in Ukraine technical and other assistance (including grant-in-aid) programmes in the anti- corruption area (either directly or via third parties, or as otherwise may be provided by a relevant programme (project); (ii) systematically, within a year, provide services related to implementing the anti-corruption policy standards, if financing of (payment for) such work/services is provided within the framework of a technical or other assistance (including grant-in-aid) programme in the anti-corruption sphere; and (iii) are managers or members of the governing bodies of NGOs and non-profit companies engaged in the anti-corruption activities and/or participating in taking measures aimed at fighting and preventing corruption.

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.

The Anti-Corruption Law gives significant attention to prevention and regulation of the conflict of interest. Under this Law, the key for establishing a potential or real conflict of interest of Subjects of Liability is discovering their private interest that may affect the objectivity and impartiality of their decisions or performance of their official or representative duties. The Anti-Corruption Law defines a private interest as any tangible or intangible interest of a person, including the one caused by his/her personal, family, friendship, and other outside-of-duty relationships with individuals and legal entities, including those arising from membership in and activities of political, religious and other NGOs. The conflict of interest may arise if the restrictions established by the Anti-Corruption Law are violated (e.g., those related to receiving gifts, new employment after quitting the public ice, etc.).

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 and corruption-related offences for responsible Officials and other Subjects of Liability.

The Anti-Corruption Law introduced a new wording to or supplemented several Sections of the Administrative Offences Code resulting in increased administrative liability for corruption-related 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 conflicts 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 crime:
• 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 of Officials performing state duties.

Penalties for individuals convicted of corruption offences

Depending on the degree and type of a particular crime, 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; and
• 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 of the coming into force of a respective judgment, or receipt by the Anti-Corruption Agency of the paper copy of the internal order of the relevant employer on taking disciplinary action for committing a corruption/corruption-related offence.

Under Article 22 of the Anti-Corruption Law, performance of duties of an Official or another 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 otherwise face retaliation (or 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 whistle-blowers refuse being reinstated at their job, they shall be entitled to compensation in the amount of their average salary for six months. The above should be considered, in particular, during the workforce restructuring.

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. Anti-Corruption Agency

Under the Anti-Corruption Law, the Anti-Corruption Agency is 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, in particular, to:

• control and verify financial declarations of Officials, keep and publish such declarations, as well as monitor the Officials' way of living;
• control compliance with the statutory restrictions regarding the political parties
• financing and financial reporting;
• 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;
• develop a template anti-corruption compliance programme for legal entities; and
• cooperate with whistle-blowers, ensure their legal and other protection, and bring to liability those guilty of violating whistle-blowers' rights related to notification of possible corruption or corruption-related offences.

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