On 1 July 2011 the new Law of Ukraine No. 3206-VI “On the Principles of Preventing and Combatting Corruption” (the “New Law”) and the Law of Ukraine No. 3207-VI “On Amending Certain Legislative Acts Related to Liability for Corruption Offences (the “New Liability Law”) became effective (except for certain provisions of the New Law dealing with special checks of the individuals applying for jobs related to performance of the state or municipal functions, and financial control of the property, profits, expenses and financial obligations of certain categories of individuals subject to liability for corruption offences, which come into force on 1 January 2012).
The New Law defines corruption and a corruption offence, establishes liability for corrupt activities for individuals and other violations related to corruption, and introduces several important restrictions aimed at preventing and combatting corruption, including the restriction on receiving gifts/donations by certain groups of individuals subject to liability for corruption offences.
The provisions of the New Law and the New Liability Law, including all restrictions and prohibitions, shall apply not only to the governmental officials, but also to a variety of people, and will directly affect the corporate sector.
Persons Liable for Corruption Offences
Persons who can be held liable for corruption offences now include not only the government officials and public servants, but also persons who provide public services (e.g. auditors, notaries, arbitrators, etc.), foreign officials, officials of international organizations, and company officers and individuals providing unjustified benefits.
The New Law specifically mentions "persons permanently or temporary holding positions related to organizational, executive, or administrative and economic responsibilities, or persons specifically authorized to perform such duties in any private companies in accordance with law" as subjects to liability for corruption offences. The above wording suggests that charges for committing corruption offences can be brought against CEOs, directors and managers of all levels (including HR-managers and office managers) and administrative personnel.
Restrictions on Individuals
The New Law establishes a number of significant restrictions aimed at preventing and combating corruption. For instance, the government officials and some other subjects of liability for corruption offences are prohibited to: (1) use their position to obtain unjustified benefits or accept a promise/offer of such unjustified benefits for themselves or for other individuals; (2) engage in other paid or entrepreneurial activities (except for teaching, scientific and creative work, as well as some other activities) and become members of governing bodies of profitable companies (except when representing the state interests in the governing bodies of such companies; and (3) refuse providing the legally required information to individuals or companies, as well as furnish misleading or incomplete information to them.
Importantly, the New Law establishes a ban for the state and municipal agencies to receive services and property free of charge from companies and individuals, unless otherwise provided by the laws of Ukraine or treaties to which Ukraine is a party.
Liability for Breach of the New Law
The New Law sets forth criminal, administrative, civil and disciplinary liability for corruption offences for responsible persons. Moreover, information on persons liable for corruption shall be listed in the Unified Register of Individuals Liable for Committing Corruption Offences.
The New Liability Law introduces a number of new corruption related types of crimes and offences by amending the Criminal Code, the Administrative Code, and the Criminal Procedure Code of Ukraine.
Gifts and Donations
The New Law bans certain subjects of liability for corruption offences to receive, either directly or through the third parties, gifts/donations from legal entities and individuals (1) for decisions, actions or inactions in favor of the gift/donation giver taken either directly by them or with their facilitation by other officials and bodies; and (2) from subordinates of such persons. These persons, however, may accept personal gifts which are consistent with the generally recognized ideas for hospitality and donations.
Value of such personal gifts/donations, for a one-time gift/donation, should not exceed 50 percent of the minimum salary established on the date of the gift/donation acceptance. The aggregate value of such gifts/donations received from the same source within a year shall not exceed one minimum salary established as of 1 January of the given year. This restriction regarding the value of gifts/donations does not apply to those received from close persons and received as generally available discounts for goods, services, and wins, prizes, and bonuses.
After many years of a rather slow and inconsistent development of regulation of corruption in Ukraine and continuous problem of coordination of the anti-corruption incentives between different branches of the Ukrainian government in this area, and repeated delaying of coming into force and later annulment of the package of the anti-corruption laws, the Ukrainian Parliament finally adopted the New Law and the New Liability Law. The new laws are more consistent and clear, as compared to the anti-corruption package, and generally seem to conform to the world best practices. However, considering that the new legislation introduces a number of new notions into Ukrainian law and that a number of the existing legal acts governing this area have to be brought in compliance with the new laws, enforcement of the new anti-corruption legal framework remains an issue and success of its application will largely depend on interpretation of the new laws by the Ukrainian enforcement agencies and courts which is too early to predict at this stage.