Corruption in army kills! Report cases of abusing power!

Jan 18, 2017

Anti-bribery and corruption compliance — and the mitigation of associated risk — continue to be some of the main challenges that companies are facing, both in their domestic markets and abroad. On a global level, we see more and more countries promulgating new and more sophisticated anti-bribery and corruption legislation as well as aggressive enforcement by government regulators. Enforcement agencies of different countries are also increasingly cooperating in their fight against corruption. In addition, more countries are introducing individual criminal liability for bribery related offences.

The 2016 Global Overview of Anti-Bribery Laws Handbook offers an excellent overview of the relevant anti-bribery laws in 46 jurisdictions regulating domestic bribery. It covers both private-to-public and public-to-private and corruption of foreign public officials. The handbook also provides practices to mitigate the potential crime liabilities as well as administrative and reputational risks associated with bribery and corruption.

Anti-Corruption legislation of Ukraine 

1. Domestic bribery (private to public)

1.1 Legal framework

Bribery of public officials is regulated under the Criminal Code of Ukraine (Chapter XVII) and the Law of Ukraine “On Prevention of Corruption” of 2014. On 1 September 2014, Chapter XIV-1 of the Criminal Code of Ukraine, which provides for the criminal liability of private legal entities for corrupt practices, became effective.

1.2 Definition of bribery

Ukrainian legislation employs the term “unlawful benefit” rather than “bribery.” Thus, according to the applicable rules, an unlawful benefit may include funds or other assets, benefits, privileges, services or non-material assets that are promised, proposed, provided or received with no legal grounds.

This crime (i.e., proposition or provision of the unlawful benefit) can be committed both by public officials and by private individuals who try to corrupt or has corrupted a public official.

1.3 Definition of public official

The Criminal Code of Ukraine has a broad definition of public official, and includes any individual who exercises public managerial functions on behalf of the state. Under the Law of Ukraine “On Prevention of Corruption,” this concept includes not only public servants, but also municipal officers, managers of public companies, notaries, auditors, experts, judges of domestic arbitration tribunals or other persons who offer public services.

1.4 Consequences of bribery

(a) For the individuals involved in giving unlawful benefits (bribes)

The Criminal Code of Ukraine establishes the penalties for public officials as well as for individuals who corrupt public officials. Depending on the particular facts and possible aggravating circumstances (if any) of a given situation, the penalties on the persons bribing the officials are the following:

  • Penalty of up to EUR5661

  • Up to four years of limited freedom

  • Up to 10 years of imprisonment

  • Confiscation of property 

The penalties on the officials accepting illegal benefits are the following:

  • Penalty up to EUR8,500

  • Up to three years of disqualification form taking certain positions

  • Up to 12 years of imprisonment

  • Confiscation of property 

(b) However, since 1 September 2014, the Criminal Code of Ukraine (as amended) has provided for the criminal liability of private legal entities for corrupt practices. The penalties are as follows:

  • Imposition of penalties of twice the benefit received by the entity or approximately EUR2,833 to EUR42,5000

  • Liquidation of the legal entity

  • Confiscation of property (additional measure) 

1.5 Political contributions

Contributions to political parties are regulated in detail by relevant Ukrainian legislation since 2015. Specifically, contributions cannot be made by certain persons (including foreigners or companies the ultimate beneficiaries of which are foreigners). A legal entity may not contribute more than EUR41,333 within one calendar year to one recipient. Individuals can make contributions for up to EUR20,667 per year to one and the same recipient. Contributions can be made in the form of money, goods, services or any non-material benefit (e.g., intellectual property or free labor of volunteers).

1.6 Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, amongst others)

Ukrainian legislation does not provide for the separate and specific regulation of hospitalities (including, but not limited to, travels, hosted meals and entertainment, among others) that may be lawfully offered to public officials. At the same time, the Law of Ukraine, “On Prevention of Corruption” establishes limitations regarding the value of the allowed gifts that may be presented to public officials.

In particular, Ukrainian legal rules prohibit public officials from receiving any gifts except those corresponding with generally recognized hospitality and within expressly allowed limits. The value of a gift (donation) may not exceed the statutory minimum monthly salary, established as of the date of its receipt. Within a calendar year, an official is not allowed to receive gifts from one source with a value of more than one statutory subsistence allowance for a working person legally applicable as of 1 January of the relevant year. Presently, the value of gifts per occasion should not exceed the equivalent of EUR51 at the current exchange rate, and the total value of such gifts (donations) from one source within a calendar year should not exceed the equivalent of EUR92 at the current exchange rate.

Any gift (donation) made for the purpose of influencing, in any manner, the performance by the public official of his or her duties (e.g., performance or non-performance of any actions), or offered by a subordinated person, is prohibited, even if the value of such gift (donation) is small.

2. Domestic bribery (private to private)

2.1 Legal framework

Private bribery is regulated under the Criminal Code of Ukraine (Chapter XVII) and the Law of Ukraine “On Prevention of Corruption.” On 1 September 2014, the Criminal Code of Ukraine has included Chapter XIV-1, which provides for criminal liability of private legal entities for corrupt practices.

2.2 Definition of private bribery

For private bribery, Ukrainian legislation also operates with the term “unlawful benefit” rather than “bribery.” Thus, according to applicable rules, unlawful benefit may include funds or other assets, benefits, privileges, services and non-material assets that are promised, proposed, provided or received with no legal grounds.

This crime (i.e., proposition, promise, acceptance or provision of the unlawful benefit) can be committed both by public officials and by private individuals who try to corrupt or have corrupted an official of a private company.

2.3 Consequences of private bribery

(a) For individuals involved in giving unlawful benefits (bribes)

The Criminal Code of Ukraine establishes penalty that may amount to approximately EUR397, in addition to confiscation of the unlawful benefit. Also, the bribe-giver may be imprisoned for up to four years.

The corporate officer to whom the unlawful benefit has been given or who has accepted such offer, can be imprisoned for up to seven years and be subjected to confiscation of the unlawful benefit, of other property, and be prohibited to occupy certain positions for up to three years.

(b) Since 1 September 2014, the Criminal Code of Ukraine has provided for the criminal liability of private legal entities for corrupt practices. The penalties are as follows:

  • Imposition of penalties of twice the benefit received by the entity, or, if the benefit cannot be determined, a fine in the range of between EUR2,833 to EUR42,500

  • Liquidation of the legal entity

  • Confiscation of assets (auxiliary to liquidation) 

2.4 Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, amongst others)

Applicable Ukrainian legislation does not provide for a separate and specific regulation of hospitalities (including, but not limited to, travels, hosted meals and entertainment) that may be legally offered to officials of private companies. However, when offering such hospitalities, it is strongly recommended that they ensure that their activities conform with generally recognized reasonability and modesty to avoid the potential treatment of such hospitality as “unlawful benefit,” as provided by the Criminal Code of Ukraine.

3. Corruption of foreign public officials

3.1 Legal framework

Corruption of foreign public officials is regulated under the Criminal Code of Ukraine (Chapter XVII) and the Law of Ukraine “On Prevention of Corruption.” Since 1 September 2014, the Criminal Code of Ukraine has provided for the criminal liability of private legal entities for corrupt practices.

3.2 Definition of corruption of foreign public officials

For corruption of foreign public officials, Ukrainian legislation also operates with the term “unlawful benefit” rather than “bribery.” Thus, according to the applicable rules, unlawful benefit may include funds or other assets, benefits, privileges, services and non-material assets that are promised, proposed, offered, provided or received with no legal grounds.

3.3 Definition of foreign public official

For the purpose of bribery, a foreign public official may refer to any of the following:

  • A person who has a legislative, administrative or judicial function in a foreign country

  • A judge of an international (alternative) commercial arbitration tribunal

  • An official of a public international organization and members of an international parliamentary assembly, among others 

3.4 Consequences of corruption of foreign public officials

Corruption of foreign public officials is regulated under the provisions of the Criminal Code of Ukraine applicable to the domestic corruption of public officials. For more details, please see Section 1.3.

3.5 Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, amongst others)

Applicable Ukrainian legislation does not provide for a separate and specific regulation of hospitalities (including, but not limited to, travels, hosted meals and entertainments among others) that may be legally offered to foreign public officials. However, when offering such hospitalities, it is strongly recommended that they ensure that their activities conform with generally recognized reasonability and modesty to avoid the potential treatment of such hospitality as “unlawful benefit,” as provided by the Criminal Code of Ukraine.

4. Facilitation payments

The Ukrainian Criminal Code does not recognize so-called facilitation payments. Any payment made with the intention/purpose to influence the actions of the recipient, even if the recipient will not exceed or abuse his or her powers, is illegal.

Therefore, cash payments to public officials are very likely to be considered as corruption payments, even if they fall within the value limits described in Section 2 (for permitted gifts).

5. Compliance programs

5.1 Value of the compliance program in mitigating/eliminating the criminal liability of legal entities

The Ukrainian Criminal Code does not specifically recognize a compliance program as an instrument to eliminate the liability of legal entities. The existence of a compliance program, per se, does not preclude criminal investigation or sanctions against a legal entity. However, at the time of determining the punishment for the legal entity, the existence and evidence of concrete steps for the implementation and enforcement of a compliance program shall be viewed as a mitigating factor by the presiding judge and may help to lower the amount of the imposed fine.

As of 1 September 2014, Ukrainian legal entities may be criminally liable for the crime of corruption committed by their employees or other authorized persons (e.g., those acting on the basis of agreement or other agents). It is irrelevant whether such a person was able to commit the corruption crime because the directors or officers of the legal entity have not exercised “due control” over him or her. Consequently, the value of the compliance programs is not only in that it is a mitigating circumstance for punishment, but also in that proper awareness and training among employees and other authorized persons should decrease the likelihood of a corruption event taking place.

5.2 Lack of a compliance program as a crime

The Ukrainian Criminal Code does not view the absence of a compliance program as a crime.

5.3 Elements of a compliance program

(a) Legal framework

The Ukrainian Law on Prevention of Corruption lists the elements of a compliance program.

(b) Recommended practice

It is recommend that legal entities adopt a robust compliance program as a defense strategy to prevent the occurrence of and to mitigate liability for crimes of corruption committed by the legal entity’s employees or other authorized persons. For legal entities that are going to take part in government tenders for over UAH20 million (about EUR666,667 at the current exchange rate), existence of an anti-bribery program and of an Authorized Anti-Bribery Officer is mandatory.

6. Regulator with jurisdiction to prosecute corruption

The Ukrainian legal system includes the National Anti-Corruption Bureau, which is authorized to criminally prosecute corruption cases among highly positioned officials. The State Security Service, the Prosecutor’s Office and some other authorities are authorized to start a criminal investigation for corruption, depending on who the suspect is (individual, legal entity, state official, an international organization, etc.).

1 All figures have been calculated according to the official exchange rate of the euro / Ukrainian hryvna of the National Bank of Ukraine as of 1 March 2016.
*Ihor Siusel is a partner, Mariana Marchuk is an Of Counsel and Olga Shenk is an associate in Baker & McKenzie’s Ukraine office