In 2017, Ukraine implemented several anti-corruption steps based on its contractual obligations per loan arrangements with the EU and the IMF1. However, the speed of implementation is slow, which is frustrating for international financial organisations, as well as the broader business community.
Notwithstanding, in 2017 the following anti-corruption steps were taken:
- changes to the Law “On the Prevention of Corruption” with regard to electronic wealth declarations for public officials (“E-Declarations”2);
- adoption of the Standard anti-corruption programme for legal entities; and
- adoption of several methodological recommendations by the National Agency on Preventing Corruption (the “NAPC”3).
However, while much discussed in 2017, an anti-corruption court4 has not yet established.
The E-Declarations mechanism introduced in 2016 requires persons authorised to perform state functions and functions of the local authorities to submit to the NAPC annual online reports setting out details of their assets, income, expenditures and financial obligations. The list of such persons includes high-level political figures, such as members of parliament and government, as well as judges, public officials, officers in the prosecutor's office and others.
In March 2017, the list of persons obliged to file E-Declarations was controversially extended by the Parliament to:
- members of anti-corruption, non-governmental organisations;
- presidential, governmental and parliamentary candidates, as well as candidates for other state bodies specified in the Law “On the Prevention of Corruption”;
- officers of public legal entities who are members of the Supervisory Board of state-owned banks or stated-owned commercial organisations; and
- persons obtaining money or property within technical support programmes, including non-repayable financial aid or other support in the sphere of preventing corruption;
- heads of public councils or other non-commercial organisations – as well as members of the management bodies of such public councils and organisations – if they perform activity related to corruption prevention, and/or take part in the development, monitoring and assessment of anti-corruption standards and policy in Ukraine; and
- persons who regularly provide services related to the implementation and monitoring of anti-corruption policy of Ukraine if they are paid from technical support, including non-repayable financial aid or other support in the sphere of preventing corruption.
The Parliament also abolished an obligation to submit E-Declarations for certain categories of military servicemen participating in the Anti-Terrorist Operation in the East of Ukraine.
2. Adoption of the Standard Anti-Corruption Programme for Legal Entities
In March 2017, the NAPC adopted a standard anti-corruption program for legal entities (the “Programme”). This Programme is obligatory for:
- companies taking part in public procurements, if the value of procurable services or goods is equal to or exceeds UAH 20 million.; and
- legal entities more than 50% owned by a state or municipal enterprise that have more than 50 employees and a turnover for the most recent financial year exceeding UAH 70 million.
The Programme contains a list of anti-corruption measures required by the Law “On the Prevention of Corruption”. However, according to the recommendations issued by the NAPC, a company may delete provisions which are not relevant to its particular business, or make amendments to the same.
The Programme can also be voluntarily implemented, partly or completely, by any company. Adopting the Programme can help a company to conform with Ukrainian law.
3. Adoption of Methodological Recommendations by the NAPC
The NAPC adopted the following range of recommendations, the majority of which are applicable to state and local authorities:
- recommendations for persons providing anti-corruption training;
- recommendations for authorities concerning the handling of whistle-blowing reports;
- recommendations concerning the prevention and regulation of conflicts of interest; and
- recommendations concerning the development and implementation of an anti-corruption programme for legal entities (applicable to state and local authorities, as well as for certain private companies participating in public procurement).
The private sector may use these recommendations, but is not obliged to do so. These recommendations do, however, highlight the authorities' various approaches, and it is advisable to consider their informative and explanatory character.
4. Anti-Corruption Court
The draft law "On a Higher Anti-Corruption Court" was registered in the Parliament on 22 December 2017, but has not yet been adopted. It establishes the requirements for judges, the procedures to select the judges, and the jurisdiction and status of the court, as well as guarantees of the court’s independence.
It was expected that the court would have jurisdiction over cases being investigated by the National Anti-Corruption Bureau of Ukraine (“NABU”) and the Specialised Anti-Corruption Prosecutor’s Office (“SAPO”). However, according to the draft law, the exclusive jurisdiction of the High Anti-Corruption Court does not include all investigations of NABU. Meanwhile, the scope of jurisdiction has been increased, and now includes investigations of the National Police of Ukraine and the State Bureau of Investigation.
5. Anti-Corruption Strategy for 2018-2020
On 29 September 2017, the NAPC published the new Anti-Corruption Strategy for 2018-2020, which has yet to be adopted by Parliament. The Strategy is mostly focused on the public sector. The principle strategies outlined for the next two years include the following:
- establishment of a Higher Anti-Corruption Court;
- the adoption of new legislation to control lobbying;
- clarification of the list of corruption crimes under the Criminal Code of Ukraine; and
- the creation of a register of legal entities which have committed corruption violations, with the aim to exclude same from future public tenders.
The strategy also includes a statement that after the establishment of a Higher Anti-Corruption Court, the imposition of criminal measures on private companies should be increased. Therefore, it seems private companies should also begin to consider the establishment and implementation of anti-corruption compliance systems to prepare for the likely increase in liability risks.
By Ario Dehghani, Counsel, Head of the Compliance Practice, and Viktoria Shevchuk, Junior Associate, Redcliffe Partners
1. IMF loan contracts, EU Macro-Financial Assistance contracts, EU Member State Building Contracts and the Visa Liberalisation Action Plan.
2. This is a contractual obligation of the State of Ukraine based on the Visa Liberalisation Action Plan of 22 November 2010.
3. The NACP was established based on the contractual obligations of the State of Ukraine according to the Visa Liberalisation Action Plan of 22 November 2010, and the Memorandum of Understanding between the European Union as a lender and Ukraine as a borrower dated 22 May 2015.
4. This is a contractual obligation of the State of Ukraine based on the Memorandum of Economic and Financial Policies dated 27 February 2015 between the IMF and Ukraine.