В настоящей публикации в систематизированном виде изложены основные положения, касающиеся корпоративной ответственности. Особенное внимание уделяется уголовной ответственности юридических лиц, порядку и методам расследования, в том числе, сбору доказательств, средствам юридической защиты и формам сотрудничества со следствием, а также механизмам привлечения корпораций к ответственности. Значительный интерес вызывает информация о перспективах и тенденциях изменения и обновления этой сферы.
Enforcement agencies and corporate liability
Government agencies
What government agencies are principally responsible for the enforcement of civil and criminal laws and regulations applicable to businesses?
Government agencies controlling businesses’ legal compliance include law enforcement agencies (police, prosecutors’ offices, tax authorities), the National Anti-Corruption Bureau, the Antimonopoly Committee, and the National Securities and Stock Market Commission.
Scope of agency authority
What is the scope of each agency’s enforcement authority? Can the agencies pursue actions against corporate employees as well as the company itself? Do they typically do this?
The state authorities mentioned in ‘Government agencies’ have the entire list of standard legal and criminal tools at their disposal, which could damage businesses and their employees. These include accessing information and documents, seizing products or assets, conducting searches, publicising details of the charges against the business and removing leadership. These actions are conducted during a pretrial investigation before the matter is referred to the court.
Simultaneous investigations
Can multiple government entities simultaneously investigate the same target business? Must they coordinate their investigations? May they share information obtained from the target and on what terms?
Yes. For this purpose, the criminal prosecution of a business is initiated under various articles, each controlled by an appropriate investigative authority. Officials from different authorities will often investigate the same business and maximise problems so that they may insist on bribes. Authorities should not coordinate their actions, but it often happens in an informal and unregistered manner. They may share information with each other and present a public access determination.
Civil fora
In what fora can civil charges be brought? In what fora can criminal charges be brought?
It is common in Ukraine for law enforcement authorities to consider regular (legal) commercial transactions to be criminal violations. Businesses are often accused by the state authorities of committing criminal offences, including the following: deliberate violation of the requirements of legislation on preventing and counteracting the legalisation (laundering) of proceeds from crime or terrorism financing; using funds received from illicit trafficking of drugs, psychotropic substances, their analogues, precursors, poisonous or potent substances, or poisonous or potent drugs; bribery of an official of a private law legal entity irrespective of the form of incorporation; bribery of a person providing public services; the offer, promise or giving of an unlawful benefit to an official; and undue influence.
Corporate criminal liability
Is there a legal concept of corporate criminal liability? How does the government prove that a corporation is criminally liable for the acts of its officers, directors or employees?
In 2015, Ukraine law introduced liability of legal entities, known as corporate legal liability. The following criminal law measures are applied to entities in criminal proceedings: penalties, expropriation or liquidation. Grounds for applying such measures include when an employee of a corporation or a person who, pursuant to the laws, the corporation’s official documents or an agreement, is authorised to act on the corporation’s behalf, commits offences on the corporation’s behalf. The offences by which a company can create the conditions for, or obtain, an improper benefit or avoid statutory liability include:
legalisation of income;
use of funds received from illicit trafficking of drugs;
bribing an employee of a business established by order of the state authorities; or
bribing a public official.
Bringing charges
Must the government evaluate any particular factors in deciding whether to bring criminal charges against a corporation?
Any actions of a restrictive nature (retrieval of documents, searches, seizure of property, access to communication networks and telephones) occur only in the event that sufficient grounds and evidence are available to believe that the laws of Ukraine have been violated. At the same time, owing to the courts’ lack of independence and the pressure that is placed on them as the only state bodies that enforce the rule of law, they do not function effectively. Accordingly, law enforcement authorities can violate the rights of businesses, taking advantage of court decisions that give them the power to conduct searches and gain provisional access to objects and documents, and, in some cases, bank secrecy. Thus, instead of having authorities justify their requests for searches or access, judges are forced to make an unjust decision.
Initiation of an investigation
Investigation requirements
What requirements must be met before a government entity can commence a civil or criminal investigation?
As it concerns only criminal practice, a pretrial investigation commences after an investigator or a prosecutor receives a statement of offence or after they independently become aware that an offence has been committed. Such information can be received by them from both open sources (in the media or internet resources) and the company’s official internal documents. Information about an offence is entered into the Unified Register of Pretrial Investigations, where a note on the commencement of investigation is also made.
Triggering events
What events commonly trigger a government investigation? Do different enforcement entities have different triggering events?
According to legislation, to commence an investigation, it is enough to obtain information about an offence committed from any source. Unfortunately, quite often such investigations can be used by law enforcement agencies to achieve their own goals or they are ordered by the company’s competitors. Owing to a lack of evidence, the cases do not even make it to court, but during the investigation the company cannot function properly and perform its contractual obligations owing to searches, questioning or other investigative measures.
Each law enforcement agency has its own jurisdiction by perpetrators or offence category, but owing to insufficient legislative regulation and division of powers, different bodies sometimes simultaneously investigate the same fact.
Whistleblowers
What protections are whistle-blowers entitled to?
A person involved in performing covert operations is protected by the state. To prevent a threat to the life, health or property of a person and his or her close relatives in connection with performing activities to detect a grave offence or exposing an organised criminal group, the law enforcement agencies are required to take special measures to ensure security for that person, such as changing information about him or her or changing his or her place of residence, work or study.
However, in one case, an unknown person testified against the defendant and none of the participants of the case knew who he or she was. After a while, information about the person became available owing to an error by the investigator, who submitted the transcript of the witness to the court for general review, the final page of which contained the original family name of the witness.
Investigation publicity
At what stage will a government entity typically publicly acknowledge an investigation? How may a business under investigation seek anonymity or otherwise protect its reputation?
Information about the commencement of an investigation is indicated in the Unified Register of Pretrial Investigations, where information about an offence is entered. However, access to this Register is restricted to representatives of law enforcement agencies who are responsible for investigating such offences. The public is usually made aware of this information after a notice of suspicion is served. Alternatively, if during the investigation the law enforcement agencies achieve certain desired results, they hold public briefing meetings, which are broadcast via a variety of media.
Businesses are not permitted to keep this information secret. Furthermore, even if a business has not yet been found guilty by judicial decision, the law enforcement agencies will treat it as an offender.
In the event of dissemination of information that degrades a business’s reputation, the court may be requested to refute the information, regardless of who has disseminated it.
Evidence gathering and investigative techniques
Covert phase
Is there a covert phase of the investigation, before the target business is approached by the government? Approximately how long does that phase last?
Operational measures sanctioned by the courts can be taken against businesses over six months. When the defence is properly constructed, the business may learn of this before the official hearing. For this purpose, the lawyer monitors activity concerning the information in official registers, rulings made by the courts on particular business, requests received by bank institutions and information to be requested from business partners.
What investigative techniques are used during the covert phase?
During the covert phase, agencies can access bank accounts and correspondent transactions, and data on official reports to tax and other authorities; seize data provided by the business for state licensing purposes; and gain secret access to telecommunication networks, servers and email accounts of employees. They can also obtain information via the communication channels of corporate leaders and employees. The practice of inserting sleepers into a business is common for the purpose of data collection directly within the office. This allows unlawful activity to be documented most effectively. With the knowledge of such risks, business entities should take a number of measures in respect of their legal safety.
Investigation notification
After a target business becomes aware of the government’s investigation, what steps should it take to develop its own understanding of the facts?
First, the business should obtain information from the state authority concerning the particular investigator, how long the investigation is to last and under what mandate it is being carried out. It can obtain this information via the normal legal channels. Next, it should prepare an action plan and demand the cessation of any action carried out without the participation of a lawyer.
Evidence and materials
Must the target business preserve documents, recorded communications and any other materials in connection with a government investigation? At what stage of the investigation does that duty arise?
As a general rule, regardless of whether there is an investigation or not, a company must keep all the documents concerning its activities for three to 75 years.
Normally, these are accounts and underlying records, originals of commercial and financial documents, contracts, invoices, and acceptance certificates and other documents justifying the deals. For instance, such documents could be requested by the tax authorities when they have any concerns with regard to the transactions of the particular business.
Documents that are generated in the course of correspondence with investigators should be kept properly and without a dateline to have an opportunity to refer them in the event of possible recurrence after closure of the case or occurrence of new concerns from the part of other authorities.
Providing evidence
During the course of an investigation, what materials – for example, documents, records, recorded communications – can the government entity require the target business to provide? What limitations do data protection and privacy laws impose and how are those limitations addressed?
State authorities are entitled to request the documents evidencing an offence. The legislation defines one restriction – they should be relevant to a case and confirm or refute the facts constituting the grounds of raised suspicions. Documents are provided solely on the basis of the court ruling. There are no additional restrictions for requests.
On what legal grounds can the target business oppose the government’s demand for materials? Can corporate documents be privileged? Can advice from an in-house attorney be privileged?
The main ground for obtaining corporate documents is a judgment, which must contain a specific list of documents with necessary data. If a business is required to provide documents not specified in a judgment, it has the right not to comply with this demand or provide them for familiarisation.
Documents are deemed untouchable when they are in the lawyer’s possession. The lawyer will provide legal assistance, conduct legal analysis, determine the attorney-client relationship and obtain expert conclusions, including those concerning the legality of the requests for such documents. To gain provisional access, a court order would need to be granted.
As regards cooperation with an attorney, the advice, counselling, attorney’s clarifications, documents drawn up by the attorney, information stored on electronic media and other documents, and information obtained by the attorney in the course of practising law, are subject to attorney-client privilege and cannot be disclosed according to the law, with no exceptions. The attorney ensures that it is impossible to access or disclose documents in breach of attorney-client privilege.
Employee testimony
May the government compel testimony of employees of the target business? What rights against incrimination, if any, do employees have? If testimony cannot be compelled, what other means does the government typically use to obtain information from corporate employees?
As the grounds for any investigation are documents and witness testimonies, any investigative body will seek the required testimonies from employees. It is advised that all businesses set up specialist juridical workshops to train employees for these circumstances.
A person refusing to testify personally may not be made liable. As the court justifies its decision on the grounds of testimonies stated in the courtroom, the defendant may ask the judge to hear the testimonies.
If the authorities cannot induce anyone to provide testimonies, they may obtain them by recruiting employees and forcing them to make allegations under the threat of criminal liability, bribery or extortion, and installation of hidden surveillance devices in their permanent residence.
Under what circumstances should employees obtain their own legal counsel? Under what circumstances can they be represented by counsel for the target business?
In general, cooperation with an attorney is useful as a preventive measure. Considering that in Ukraine a business can become a target for law enforcement agencies and not always because it has actually committed any illegal act, it is important for business representatives to prepare themselves in advance for possible criminal risks.
If an investigation has already been commenced against a business, an attorney must participate starting from the stage of calling business representatives for questioning as witnesses. The participation of an attorney in any investigation has a positive impact on the building of a future defence and when appealing against illegal actions committed by representatives of the pretrial investigation bodies. Putting up a defence using an attorney is important to avoid unexpected situations during a search and protect rights being violated in court proceedings. It is a common trend in Ukraine for businesses to cooperate with attorneys-at-law, as quite often the investigated cases are multilayered and defendants are investigated simultaneously at several sites or even in different cities. Moreover, a team of attorneys will establish a strategy to ensure effective and comprehensive defence under such circumstances.
Sharing information
Where the government is investigating multiple target businesses, may the targets share information to assist in their defence? Can shared materials remain privileged? What are the potential negative consequences of sharing information?
Prompt communication or receipt of information may serve as the basis for constructing a common defence position when defending businesses. However, the laws of Ukraine do not provide for this kind of exchange of information between companies. Furthermore, this communication could be regarded as disclosure of pretrial investigation information. Only an investigator and a prosecutor may determine the content and scope of pretrial investigation data that may be made publicly available and become known to a certain group of people or the general public, including the other participants in criminal proceedings. Thus, businesses can be held criminally liable for disclosing information beyond the extent permitted.
Entities can share information via their lawyers. Exchanging information directly is not advised because it may be considered an attempt to impede an investigation or cover up the crime.
Investor notification
At what stage must the target notify investors about the investigation? What should be considered in developing the content of those disclosures?
Once a pretrial investigation commences the business notifies the Securities Commission of the damage, whereupon the Commission notifies the investors. If a business fails to provide the notification, it is deemed that deliberately false information has been provided. When such circumstances cause significant material damage to investors, the business has to pay penalties. If it fails to do so, the managers of the business who failed to duly notify of ongoing criminal proceedings are deprived of the right to occupy certain offices or may even receive a jail sentence.
At the same time, the parties that have entered into an investment agreement and have not agreed on changes to the terms thereof, must continue to comply with the agreement, even in circumstances where this may worsen the situation of parties or restrict their rights.
Cooperation
Notification before investigation
Is there a mechanism by which a target business can cooperate with the investigation? Can a target notify the government of potential wrongdoing before a government investigation has started?
Cooperating with investigative agencies is not recommended. In practice, law enforcement agencies can abuse their procedural rights by attempting to force business representatives or owners to cooperate by any means, including acting in a way that avoids interference with the investigation and providing the necessary testimony or documents without a relevant judgment of the court.
As for taxation matters, business entities have the right to a tax compromise by settling the amount and any accruals, which would result in the closure of the criminal prosecution. The parties can make a prior deal with the investigators on the minimum level of liability in exchange for sensitive information or a confession of guilt. Usually, such a deal improves the circumstances of some partners of the business, while considerably worsening the situation for other partners from whom data are sought.
Voluntary disclosure programmes
Do the principal government enforcement entities have formal voluntary disclosure programmes that can qualify a business for amnesty or reduced sanctions?
Ukraine’s current legislation does not provide for any programmes that would qualify a business for amnesty or reduced sanctions.
With regard to taxation matters, business entities have the right to a compromise on tax by settling the amount and accruals, which will result in the closure of the criminal prosecution. The parties can make a deal with investigators in advance on the minimum level of liability in exchange for sensitive information or a guilty plea.
Timing of cooperation
Can a target business commence cooperation at any stage of the investigation?
Yes, but prior to referring a matter to the court. However, the law enforcement agencies (not the business) would be the ones to benefit more from such cooperation.
Cooperation requirements
What is a target business generally required to do to fulfil its obligation to cooperate?
The business is required to submit a guilty plea regarding the alleged crime, cooperate with investigators in respect of testimonies and provide information about other counterparties.
Employee requirements
When a target business is cooperating, what can it require of its employees? Can it pay attorneys’ fees for its employees? Can the government entity consider whether a business is paying employees’ (or former employees’) attorneys’ fees in evaluating a target’s cooperation?
Providing evidence is the personal duty of every employee. When the head of the business asks his or her employees to provide testimonies, they must comply. Nobody is permitted to influence a witness regarding the subject matter of his or her testimony.
Payment of lawyers’ fees may not be considered when assessing the cooperation of the target business.
Why cooperate?
What considerations are relevant to an individual employee’s decision whether to cooperate with a government investigation in this context? What legal protections, if any, does an employee have?
Although cooperation between a business and its representatives with law enforcement agencies is not provided for by current legislation, any corporate employee may, nevertheless, show willingness to cooperate. Alternatively, employees may be forced to cooperate under threat of prosecution or disclosure of compromising material about them. However, this cooperation will not be official.
To protect an employee who is cooperating with law enforcement officers, security measures (eg, preventing disclosure of personal data and identity) can be arranged. According to Ukrainian legislation, if an employee cooperates with an investigation into the prevention and combat of corruption, he or she cannot be fired, forced to resign, subjected to disciplinary action or other adverse influence measures by his or her manager.
Privileged communications
How does cooperation affect the target business’s ability to assert that certain documents and communications are privileged in other contexts, such as related civil litigation?
Given that cooperation of the business with law enforcement agencies is not provided for by the legislation, but such cooperation may take place as a provision of necessary testimony and documents by a business involved in criminal proceedings, it does not necessarily guarantee that such documents will not be used to commence other proceedings, including criminal proceedings.
Resolution
Resolution mechanisms
What mechanisms are available to resolve a government investigation?
During the investigation, a business and its attorney may review investigation materials and participate in investigative and other procedural acts, during which they may ask questions, submit their observations and objections concerning the procedure of actions, and familiarise themselves with the records of investigative actions. As a representative of the business, an attorney is entitled to initiate questioning of defence witnesses, obtain evidence or verify existing evidence, and conduct expert research to establish circumstances crucial to criminal proceedings.
However, there are instances when law enforcement officers fail to send information in response to an appeal filed by a business attorney. This constitutes a ground for an attorney to file complaints with higher authorities or a court on a decision or inaction of pretrial investigation agencies.
Admission of wrongdoing
Is an admission of wrongdoing by the target business required? Can that admission be used against the target in other contexts, such as related civil litigation?
To make a deal with the prosecution, the target business must admit wrongdoing. However, the deal is possible only with the written consent of all those who have suffered damage. If a business wishes to admit its guilt but there is no written consent from the injured party, such a deal cannot be made.
However, should such a deal be made, there is no guarantee that no new investigations against the business will be commenced based on the testimony provided.
Civil penalties
What civil penalties can be imposed on businesses?
Considering that in Ukraine businesses are frequently accused by the state authorities of committing criminal offences, the amount of the penalty depends on the seriousness of the offence.
Furthermore, the Antimonopoly Committee of Ukraine, as the state authority, is entitled to impose penalties on a business for failing to: (i) comply with the Committee’s decisions to terminate violations of antitrust and competition legislation, or for untimely compliance; (ii) to revert to its original state; or (iii) to change agreements that contradict antitrust and competition laws.
A business can also be fined for violation of taxation and currency exchange regulations.
Criminal penalties
What criminal penalties can be imposed on businesses?
Penalties (criminal law measures) such as fines, seizure of property and liquidation can be imposed on businesses. Should they be imposed, the following are taken into consideration: the degree of an offence; the extent of the criminal intent; the extent of damage caused; the nature and amount of unlawful benefits, which had been or could be received by the business; and the measures taken by the business to prevent an offence.
Sentencing regime
What is the applicable sentencing regime for businesses?
Judgments concerning business are mandatory and punitive.
Future participation
What does an admission of wrongdoing mean for the business’s future participation in particular ventures or industries?
If a business makes a deal to admit that it is guilty or when it is convicted by the court, it will mean that the business is capable of committing an offence and is convicted thereof. This is likely to affect its reputation and means it will not be able to cooperate with certain partners pursuant to their compliance policy. If a business is guilty of committing crimes for profit, it is prohibited from taking part in government procurement and receiving government orders.
Businesses and their representatives may be further prohibited from carrying out certain activities.
UPDATES & TRENDS
Recent developments
Are there any emerging trends or hot topics that may affect government investigations in your jurisdiction in the foreseeable future?
Emerging trends34 Are there any emerging trends or hot topics that may affect government investigations in your jurisdiction in the foreseeable future?
Government agencies hear about the problems of business from the law enforcement and controlling agencies and react accordingly. Within the framework of the judicial reform and as a result of systematic dialogues, a number of positive changes have been adopted with the aim of protecting business. Unfortunately, not all representatives of the law enforcement and controlling agencies have changed their approach to performance of investigations, although the new provisions in regard to conducting searches and access for lawyers have had a positive impact on the defence of interests in criminal proceedings. In our experience, this can be particularly noticeable at the stages of consideration by the courts of the lawyers’ motions and claims, which the judges usually satisfy to the benefit of our clients.
The hottest topics in Ukraine are the parliamentary and presidential elections. A change of government may lead to a restructuring of the National Police and the prosecutor’s office, which may increase the powers of law enforcement agencies, or have the opposite effect. We expect that, at least within the first year of the elections, there will be no significant changes that will affect government investigations.
There has been considerable growth in the number of multi-jurisdictional investigations, carried out by joint international investigative groups. First, there has been closer cooperation with Interpol with the aim of establishing a number of limitations for an individual. Secondly, the cases of search and arrest of foreign assets and investigation of cases of international financial fraud have become more frequent – the latter intensified after financial and banking monitoring in foreign jurisdictions, such as the United Kingdom, Switzerland and the United States, was strengthened. Also, British law enforcement agencies have initiated a number of cases against residents of African, South Asian, Russian and eastern European countries, with the aim of confiscating property for which there is no evidence of fair acquisition. Thirdly, the demand for exclusion of individuals from the foreign sanctions lists has grown.
The popularity of accusing businesses of financing terrorism, organising schemes for the systematic embezzlement of budget funds and for not paying taxes (forms of organised crime against the state), regardless of the actual existence of such circumstances, continue to gain momentum.
Авторы: Olha Prosyanyuk, Vitaliy Serdyuk
Источник: https://www.lexology.com/library/detail.aspx?g=d746806a-d9d1-4d92-99e1-835102051ebf&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2019-09-19&utm_term=