THE LAW SIGNIFICANTLY AMENDING ANTICORRUPTION LEGISLATION IS ADOPTED

Arzinger, Kyiv, Ukraine, 
Tuesday, June 17, 2014

On 04 June 2014 Law No. 1261-VII on amendments to the anticorruption legislation (hereinafter “the Law”) entered into force. The document contains a number of provisions that could materially affect business processes in companies.

Protection of whistleblowers

The Law introduces the category of "whistleblowers" and provides them with state protection for their assistance in identification and disclosure of corruption offenses. In particular, the following protective measures are established:

• Measures provided for by the legislation governing the protection of persons from unlawful attacks (personal protection, visual observation, change of appearance, etc.);

• A ban on dismissal, prosecution or application of other negative interventions to whistleblowers (transfer, certification, change of labour conditions, etc.);

• Permission to report on corruption offenses anonymously;

• Transfer of the burden of proving the legality of decisions made in cases of dismissal due upon notices of corruption offenses to the employer.

Extension of Jurisdiction to Foreigners

From the moment the Law entered into force the enforcement agencies are able to prosecute foreigners who do not live permanently in Ukraine, if they commit a corruption offense outside Ukraine in complicity with Ukrainian officials, including in relation to the offering, promising, providing or accepting an offer, promise or obtaining undue advantage. It should be recalled that earlier foreigners was prosecuted only in cases provided for by international treaties or for crimes against the rights and freedoms of citizens or interests of Ukraine.

Full Criminalization of Bribery in the Private Sector

The Law establishes the possibility to prosecute persons for offering, promising or providing undue advantage to any employee of a company or a person working in the interest of a company as well 1 Legal Alert / Arzinger

as for accepting an offer, promise or obtaining undue advantage. Therefore, employees of enterprises of any ownership type may be prosecuted in the same way as state employees.

Special attention should be paid to the note to the relevant article of the Criminal Code, according to which the person working in the interests of a company, is the person who does the work and is in employment relationship with the company. Apparently, the legislator wanted to extend the application of article on persons who are in civil/commercial relations with the company. However, given the wording adopted article actually extends to only employees of the companies.

Tightening of Sanctions

The Law sets fines for corruption offenses of legal entities in the amount of twice the obtained illegal benefit. If no illegal benefit has been obtained or its amount is impossible to determine, the penalty should be up to UAH 1.275 million, depending on the severity of the offense committed. It should be recalled that since the date so-called Law on occupied territories1 entered into force (end of April 2014), legal entities may be prosecuted under the criminal law for committing corruption offenses.

Also, the liability of individuals is significantly tightened by introducing sanctions in the form of restrictions and deprivation of liberty for almost any corruption offense, in both the public and private sectors.

Additional grounds for bringing a legal entity liable

The Law provides an additional ground for bringing a legal entity liable: a breach of duty to take measures to prevent corruption, assigned to the authorized person of the legal entity by the law or constituent documents, if it resulted in commitment of the corruption offense.

Prevention of Corruption by Legal Entities

The draft version of the Law proposed to establish exact measures legal entities should take to prevent corruption. Such measures included the following: establishing internal rules and procedures for the detection and prevention of corruption, developing recommendations for their use; establishing rules of ethical conduct; creating conditions for confidential notification about violations; determining the persons responsible for compliance, etc.

Adopted version of the Law only establishes the obligation of legal entities to develop and take the necessary and reasonable measures to prevent corruption and encouraging employees to act in accordance with the established rules and regulations. Thus, unlike its draft version, the Law does not contain a list of specific measures. It is expected that an explanation on what measures are reasonable and necessary to prevent corruption will soon be provided by the Ministry of Justice of Ukraine.

Should you have any questions regarding the information contained herein, please do not hesitate to contact us.

Sincerely yours,

Timur Bondaryev

Managing Partner, Attorney-at-Law, Head of Life Sciences & Healthcare Practice

Lana Sinichkina,

Partner, Head of Life Sciences & Healthcare Practice

1 Law of Ukraine "On the rights and freedoms of citizens and legal regime of the temporarily occupied territory of Ukraine" dated April 15, 2014 № 1207-VII. 2 Legal Alert / Arzinger