In 2022, Ukraine began the process of joining the Organization for Economic Cooperation and Development (OECD). An important element of this is ratification Convention on Combating Bribery of Foreign Public OfficialsTherefore, in order to bring Ukraine closer to OECD standards, on December 4, 2024, the Verkhovna Rada of Ukraine adopted the Law of Ukraine “On Amendments to the Criminal Code of Ukraine, the Criminal Procedure Code of Ukraine and other legislative acts of Ukraine regarding the improvement of mechanisms for holding legal entities accountable for bribery of officials of foreign states” (hereinafter also referred to as Law No. 4111-ИХ).
12/26/2024 Law No. 4111-IX entered into force, which provide for the possibility of applying special confiscation regarding legal entities.
Legal entities, by virtue of their nature, cannot bear classical criminal liability for committing a criminal offense directly by them, but criminal legal measures may be applied to them.
What changes does Law No. 4111-IX provide?
From now on, legal entities will be able to apply special confiscation. According to Part 2 of Article 96-1 of the Criminal Code of Ukraine, special confiscation will also be applied on the basis of a court decision to apply criminal law measures to a legal entity.
As provided for by the updated Article 96-2 of the Criminal Code of Ukraine, special confiscation will be applied simultaneously with measures of a criminal nature in criminal proceedings regarding the commission of criminal offenses for:
- Article 209 of the Criminal Code of Ukraine (legalization (laundering) of property obtained by crime),
- Article 369 of the Criminal Code of Ukraine (offer, promise or provision of an unlawful benefit to an official),
- Article 369-2 of the Criminal Code of Ukraine (abuse of influence)
regarding officials provided for in Part 4 of Article 18 of the Criminal Code of Ukraine, to money, valuables or other property of a legal entity, if it:
- was obtained as a result of committing a socially dangerous act and/or is income obtained directly from the use of such property;
- was intended (used) for financing or material support of a socially dangerous act, or reward for its commission;
- was the subject of a socially dangerous act, except for property that is returned to the owner (legal owner), if it is not established - it becomes the property of the state;
- was used as a means of committing a socially dangerous act, except for property that is returned to the owner (legal owner), who did not know and could not have known about its illegal use.
From now on The following are also recognized as officials:
- officials of foreign states (persons holding positions in a legislative, executive or judicial body, jurors, in a local government body or autonomous entity on the territory of the state, other persons performing state functions for a foreign state, in particular for a state, local body or state, municipal enterprise),
- foreign arbitrators, persons authorized to resolve civil, commercial or labor disputes in foreign states in an alternative judicial procedure, officials of international organizations (employees of an international organization or any other persons authorized by such organization to act on its behalf),
- members of international parliamentary assemblies, of which Ukraine is a member, and judges and officials of international courts.
Thus, the proposed changes relate to the commission of criminal offenses provided for in Articles 209, 369 and 369-2 of the Criminal Code of Ukraine and to foreign officials.
For example, the director of a Ukrainian company offers an improper benefit to a member of the Polish parliament to support a bill that will create favorable conditions for the company's activities. Since such an act falls under Article 369 of the Criminal Code of Ukraine, the company may be subject to a type of criminal law such as special confiscation.
According to the amended Part 2 of Article 96-3 of the Criminal Code of Ukraine, the grounds for applying criminal measures to a legal entity regardless of the criminal prosecution of an individual, there is factual circumstances indicating:
- the commission of a socially dangerous act by its authorized person, founder (participant), ultimate beneficial owner or member of the supervisory board on behalf of and/or in the interests of a legal entity,
- failure to ensure the implementation (fulfillment) of the obligations imposed on an authorized person of a legal entity by law or constituent documents to take measures to prevent corruption (supervision and/or control over the actions of persons acting on behalf of a legal entity or on behalf of its authorized persons, who are members of its collegial bodies or employees), which led to the commission of a socially dangerous act on behalf of and/or in the interests of the legal entity,
- committing a socially dangerous act on behalf of and/or in the interests of a legal entity with the knowledge of its authorized persons, founder (participant), ultimate beneficial owner, member of the supervisory board,
which falls under the characteristics of an act envisaged p.209, 369, 369-2 Criminal Code of Ukraine regarding officials provided for in Part 4 of Article 18 of this Code.
Therefore, The adopted amendments separately introduce the possibility of applying criminal law measures to legal entities, regardless of the identification of the individual whose actions or inaction fall under the characteristics of the relevant act.
To which entities can special confiscation be applied?
Special confiscation, when committing a socially dangerous act against officials of foreign states in cases provided for in Part 2 of Article 96-3 Criminal Code of Ukraine, can be applied to private and public law entities of residents and non-residents of Ukraine, including enterprises, institutions or organizations, international (non-governmental) organizations, other legal entities (except for state authorities, authorities of the Autonomous Republic of Crimea, local governments, mandatory state social insurance funds, and the Deposit Guarantee Fund of individuals).
Peculiarities of applying special confiscation to legal entities.
If money, valuables or other property has been fully or partially converted into other property, the fully or partially converted property shall be subject to special confiscation.
If the confiscation of such property at the time the court makes a decision on special confiscation is impossible due to its use or the impossibility of separating it from the legally acquired property, or alienation, or for other reasons, the court shall issue a decision on the confiscation of a sum of money corresponding to the value of such property.
Special confiscation does not apply to money, valuables and other property that are subject to return to the owner (legal owner) or are intended to compensate for damage caused by a criminal offense.
It is important to note, that according to Part 2, Article 5 of the Criminal Code of Ukraine, the law on criminal liability, which aggravating criminal liability or otherwise worsening the situation, does not have retroactive effect in time.
Thus, based on the provisions of Article 5 of the Criminal Code of Ukraine regarding the inadmissibility of retroactive effect in time of a law that increases criminal liability, special confiscation cannot be applied to legal entities for those criminal offenses that were committed before the entry into force of Law No. 4111-IX.
Thus, Law No. 4111-IX expanded the list of legal instruments to combat economic crimes and corruption and allowed the application of special confiscation to legal entities in cases provided for by the Criminal Code of Ukraine.
If you have any questions regarding the application of special confiscation, please contact our law firm for professional advice.
