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Ukraine: Criminal Responsibility for Legal Entities Introduced

(June 24, 2013) On May 23, 2013, the Verkhovna Rada (legislature) of Ukraine passed the Law on Amendments to Certain Legislative Acts of Ukraine. (Law No. 2990 [in Ukrainian], Verkhovna Rada of Ukraine website (last visited June 19, 2013).) This Law was adopted pursuant to the European Union–Ukraine Visa Dialogue, which required the reform of Ukrainian anticorruption legislation as a part of the action plan on liberalization of the EU visa regime for Ukraine. (EU-Ukraine Visa Dialogue – Action Plan on Visa Liberalisation, Council of the European Union website (Dec. 14, 2010).)

The new Law allows for criminal prosecution of legal entities and establishes their criminal liability in certain cases. This is a novel provision, not previously known in Ukrainian legislation. At present only individuals, including managers or other company officials, can be subject to criminal responsibility in Ukraine, andlegalpersons can be subject only to administrative andfinancialsanctions under Ukrainiantax, customs, andcompetition legislation.

Under the new Law, a legal entity will be accountable for crimes committed on and in its behalf by its head, founder, official, or other authorized person,if that person is found guilty of terrorism-related offenses, bribery, money laundering, or use of funds derived from illicit traffic in narcotic drugs. (Id. art. 1). However, shortened terms for statutes of limitation are introduced for prosecution of crimes committed by legal entities, and the Law will not apply to public authorities, local governments, other public institutions, and international organizations. (Id.). Non-application of the Law to government institutions andstate-owned enterprises, institutions, and organizations has been seen by Ukrainian legal observers as a factor limiting the ability to fightcorruption among government and municipal officials. (Evgeniy Samus, The Bill No. 2990– What Is It: An Attempt to Fight the Crime, Or …? [in Russian] LIGA.NET (May 21, 2013).)

Legal entities found guilty of committing a crime can be sanctioned under criminal law to a fine, property seizure, or liquidation. The amount of a fine will depend on the severity of the crime and will vary from 5,000 to 75,000 times the non-taxable minimum income of an individual (about US$10,320-$154,900). The confiscation of property can only be used as an additional punishment, and liquidation of a legal entity will only apply in cases in which an authorized person is found guilty of committing a crime related to terrorism. (Law No. 2990, art. 1).

The new Law specifies that if there is sufficient evidence to suspect that an authorized person of a legal entity has committed a criminal offense, an investigator or prosecutor may open a criminal case. Criminal proceedings of legal entities and of their officials will be conducted simultaneously.

The Law does not establish rules of criminal procedure for legal persons. It appears that the guilt of a legal entity directly depends on the guilt of an associated person. (Enterprises Will Be Punished for Crimes Committed by Their Officials: The Parliament Passed a Law on Criminal Responsibility of Legal Entities [in Russian] PROSTOPRAVO (last visited June 14, 2013).)

It should be noted that the Law was passed despite the reservations of the Verkhovna Rada’s Main Scientific and Expert Office (the parliamentary research arm). According to this Office’s official conclusion on the draft Law,

The Law might significantly increase the possibility of the unfair application of legal sanctions to legal entities, create the background for arbitrary restrictions of companies’ economic activities in cases of confiscation of their property, establish new opportunities for corrupt practices, decrease the investment attractiveness of Ukraine, and have a negative impact on the economic development of the country in general. (Translated by author; Conclusion of the Main Scientific and Expert Office of Verkhovna Rada of Ukraine [in Ukrainian], (May 22, 2013), Verkhovna Rada website.)

The Law was recently signed by the President of Ukraine (Law No. 2990, supra) and will come into force on September 1, 2014 (id. Final Provisions, art. 2).

Prepared by Svitlana Vodyanyk, Law Library Intern, under the supervision of Peter Roudik, Director of Legal Research.