of the Main Research and Expert Department of the Administration
of Verkhovna Rada of Ukraine on the draft Law of Ukraine “On the National Agency of Ukraine for Investigation, Detection and Management of Assets Derived from Corruption and Other Crimes”
To ensure the “inevitability of negative consequences of committing criminal offences, especially corruption, through depriving those responsible of the economic benefits derived from their illegal behavior” the draft Law proposes to fix on the legislative level the institutional mechanism for Search for assets that are subject to arrest, their return and management of the arrested assets as well as determining the legal principles of organization and a separate independent body responsible for conducting these activities – the National Agency of Ukraine for Investigation, Detection and Management of Assets Derived from Corruption and Other Crimes (hereinafter – the National Agency). To align the draft with the applicable legislation introduces a number of amendments to the Code of Ukraine on Administrative Offences (hereinafter – the CUAO), the Criminal Procedure Code of Ukraine (hereinafter – CPC), the Civil Code of Ukraine (hereinafter – CC), the Civil Procedure Code of Ukraine (hereinafter – CPC), the Economic Procedure Code of Ukraine (hereinafter – EPC), the Criminal Procedure Code of Ukraine (hereinafter – CPC), Laws of Ukraine “On Enforcement Proceedings”, “On Banks and Banking Activity”, “On Prevention of Legalization (Laundering) of Proceeds from Crime, Terrorist Financing and Financing of Proliferation of Weapons of Mass Destruction and other legislative acts of Ukraine.
The Main Research and Expert Department, having considered the submitted draft law considers it necessary to make the following comments and suggestions to its provisions.
- The implementation of the provisions this draft law into law enforcement activities, in case of non-observance of strict law and failure to provide real transparency of competitive procedures, may create legal mechanisms for “legalized raiding” of the arrested property through illegal initiation of criminal proceedings against a person, seizure of his/her property, transfer of such property to the management of the National Agency first, then from the National Agency to other pre-defined entities that will utilize such property during the pre-trial investigation and legal proceedings. In practice, in some cases pre-trial investigation and the legal proceedings may last for several years.
- We would like to note that the preamble of the draft law is formulated not entirely correctly. Preamble is an introductory text, indicating the purpose and/or socio-political importance of the relevant law. At the same time, it is not correct to include in the preamble of the draft law the guidance on the scope of application of the law. Moreover, it is believed that the preamble shall not contain legal rules, and provisions specific to the preamble (goals, objectives) shall not be included in the main text of the law.
- The implementation of this draft law will increase the expenditure part of the state budget as pertains to funds for the establishment and maintenance of the National Agency and its territorial bodies, Interdepartmental Commission on the sale of the assets, Commission on External Control and the Unified State Register of Assets Seized in Criminal Proceedings. Given this, according to the requirements of p. 3 of the Article 91 of the Rules of the Verkhovna Rada of Ukraine and Art. 27 of the Budget Code of Ukraine, the draft law shall be attached with the financial and economic feasibility study and related calculations. However, the accompanying documents attached to the draft contain no such study. The message in the Explanatory Note to the draft that “implementation of the mechanisms provided by the draft law can be supported by financial assistance from the European Union under the Contract for Ukraine on the State Development” can hardly be considered proper financial justification, and therefore implementation of the proposed draft law mechanisms shall be carried out using the said assistance.
In addition, the proposal of the draft law on funding of the National Agency using the sources provided by international treaties ratified by the Verkhovna Rada of Ukraine or technical assistance projects (paragraph 2 of Part 1 of Art. 14 of the draft law) is not acceptable as, respectively to the requirements of Art. 2 of the Law of Ukraine “On Sources of Financing of the Government Bodies”, the government bodies shall operate solely through budget financing within the limits provided for by the Law of Ukraine on State Budget of Ukraine for the corresponding year.
- The draft law contains a number of technical and legal flaws and stylistic errors. Thus, subparagraph 2 of paragraph 1 of Part 1 of Article 10 “Rights of the National Agency” of the draft law state that “the failure to provide the National Agency at its request with information, provision of the deliberately false or incomplete information, breach of statutory terms of its provision, notification of third parties that such information is collected on them, is prohibited and entail liability provided by law.” We believe that these provisions based on the title of the Article 10 of the draft law shall not be included in its content.
The title and the text of the draft law use the notion of “crime”, but some articles (for example, paragraph 3 of Part 6 of Article 18 of the draft law) use the notion of “criminal offence”. In order to ensure the unity of terminology we believe that the text of the draft law, to refer to the same legal phenomenon, shall use a single concept – a crime.
Paragraph 4 of Article 5 of the draft law contains a stylistic mistake. It states: “The powers of a member of the tender committee may be terminated by the decision of the tender committee…”. Paragraph 3 of Article 23 of the draft law, which states: “The National Agency upon entry into force of the court decisions on confiscation, special confiscation, which are under its management…” omits the word “assets”.
Paragraph 1 of Part 1 of Article 188-47 of the CUAO states “Non-compliance with the Requirements of the National Agency of Ukraine for the search for and management of assets derived from corruption and other crimes…”. From this we can conclude that the name of the National Agency omits the word “identification”.
To Section I “General Provisions”
- The draft law provides for the establishment of a new central executive body with special status, which will provide development and implementation of state policy for the identification and search for the assets which can be arrested in criminal proceedings, and/or management of the arrested or which are confiscated in criminal proceedings – National Agency (Art. 2 of the Draft Law).
It should take into account that under the general rule (exceptions to which are directly provided by the Constitution of Ukraine or arising from it), objective of the laws of Ukraine is to regulate social relations in their respective areas by establishing the provisions of law, not the formation of various executive bodies.
The Constitution of Ukraine considers the issue of directing and coordinating the work of ministries and other central executive bodies, their establishment, reorganization and liquidation (under the law) to the competence of the Cabinet of Ministers of Ukraine (p. p. 9, 9-1 and 9-2 Art. 116). Therefore, there is a reason to believe that the issue of the establishment of such bodies (including the Agency) shall be settled by the regulations of the Government and not be subject to legislative regulation.
In addressing this issue its also necessary to consider the legal position of the Constitutional Court of Ukraine, which in p. 2 of the reasoning part of its resolution No. 2-rp/99 of March 2, 1999 stated that the laws of Ukraine may be regulate the issue, “whose resolution in accordance with the Constitution of Ukraine falls under the authority of other government bodies or local authorities.”
- As noted above, the draft law defines that the National Agency is the central executive body with special status, which will ensure the development and implementation of state policy on the identification and search for the assets which can arrested in criminal proceedings, and/or management of the assets, which are arrested or confiscated in criminal proceedings. Thus, the legislator, in fact, is to assign the National Agency the special legal status.
In this regard, it should be noted that in the modern doctrine of Constitutional and Administrative Law the government bodies that have special status refer to the bodies whose establishment is directly (or indirectly) provided for in the Constitution of Ukraine and which are not formally assigned to any of the “branches” of the unified government. According to the current legislation of Ukraine, such bodies shall be charged with specific tasks, thy may be assigned a specific procedure for the establishment, reorganization, accountability, as well as the appointment and dismissal of their heads etc. That is, such government authorities in general have, or at least should have a status different from the status of other government authorities. This special status of such bodies shall be determined by the specific tasks that they need to exercise within the powers defined by laws of Ukraine, irrespective of other government authorities.
The legal prerequisites for the establishment of such public bodies are contained primarily in the Constitution of Ukraine (Art. 85), under which such public bodies can, inter alia, include the National Bank of Ukraine, the National Council on Television and Radio Broadcasting, the Security Service of Ukraine, the Central Election Commission.
Within the executive bodies, such bodies include the Antimonopoly Committee of Ukraine, State Property Fund of Ukraine and the State Committee for Television and Radio Broadcasting of Ukraine, whose establishment is also provided for by the Constitution of Ukraine. Thus the Constitution of Ukraine, as we know, implies the existence in the government mechanism (administration) of other government bodies with special status, including in the executive branch.
A characteristic feature of the above bodies that qualify as central government bodies with special status is that they do not form the part of the central executive bodies, a key constituent and personnel functions for which are performed exclusively by the Cabinet of Ministers of Ukraine in accordance with p. 9-1 and 9-2 of Art. 116 of the Constitution of Ukraine. According to them, the Cabinet of Ministers of Ukraine shall establish, reorganize and liquidate, according to the law, the ministries and other central executive bodies; appoint and dismiss at the submission of the Prime Minister of Ukraine the heads of central executive bodies that do not form the part of the Cabinet of Ministers of Ukraine.
Despite the fact that the Constitution of Ukraine does not contain direct instructions concerning the possibility of creating other central executive bodies with special status, Part 2, Art. 24 of the Law of Ukraine “On Central Executive Bodies” provides for that “other central executive bodies with special status may be established by the Cabinet of Ministers of Ukraine.”
In view of the above, the approaches proposed in the draft law on provision of the National Commission with a special status, the procedure for its formation and accountability (Art. Art. 4, 5 etc. of the draft law) can be regarded as being not fully consistent with the relevant provisions of the Constitution Ukraine and laws of Ukraine “On the Cabinet of Ministers of Ukraine” and “On Central Executive Bodies”, which are the basic legislative acts in matters of establishment and functioning of the central executive bodies.
In our opinion, the issue raised in the draft may be completely solved only after amendments to the Constitution of Ukraine, which would predict existence in the government system of not only government bodies with a special status such as the Central Election Commission, the National Council on Television and Radio Broadcasting, the Antimonopoly Committee of Ukraine, but also the executive bodies with a special status, such as the National Agency.
- The draft law proposes to create the National Agency of Ukraine for Identification, Search for and Management of the Assets derived from Corruption and other Crimes. The name of this body in the wording of the proposed draft law raises a number of comments. First, based on the name, the National Agency shall exercise its powers on any assets of appropriate amount, and not only those derived from criminal activity. Secondly, an indication in the title of the National Agency to the corruption is only emotional, and therefore it is unnecessary because the draft law stipulates a single procedure for identification, search for and management of assets derived from any crime. The draft law defines other criteria to be met by the assets to be regulated by the draft. Due to the need to amend the name of the National Agency, the name of the draft law requires amendments as well.
- Definition and ambiguous use of certain terms in the draft law also raise comments. In particular, it is necessary to note that paragraph 4 of Part 1 of Article 1 of the draft law stipulates the definition of the term “asset management”, according to which this is “the activity on disposal of the assets, ie preservation of assets arrested in the criminal proceedings, and their economic value or sale of such assets under this Law, and the sale of assets confiscated in criminal proceedings”. In this definition, one concept is defined through the other concept, and then a second term is defined. Moreover, the definition of “asset management” is not complete, as its content, in accordance with Article 21 of the draft law, is the sale and technological processing of such assets. However, in the definition, this term is mentioned only on the sale of assets.
In addition, the concept “asset management” is used in the draft law in several senses, which is unacceptable because it does not comply with the principle of legal certainty (under which the provision of the law must be formulated with due clarity). When it comes to asset management by the National Agency (for example, in paragraph 1 of Article 19 of the draft law), the concept is used in the sense enshrined in paragraph 4 of Part 1 of Article 1 of the draft law. When it comes to asset management by the companies, organizations or individual entrepreneurs (part 2 of Article 21 of the draft law), in this case, such a concept has a more narrow sense, since under paragraph 3 of Article 21 of the draft law, these entities have no right to dispose of assets assigned to them for management.
- The draft law provides for a number of reasons for which a person may not be elected as the Head of the National Agency. One such reason is the “conviction of a crime, if conviction has not been removed from official records or not canceled as prescribed by law, or who for committing administrative offences is charged with a penalty of deprivation of the right to occupy certain offices or engage in certain activities” (paragraph 2 of Part 3 Article 3 of the draft law). From the contents of the provisions (as amended by the draft law) it follows that if a person for committing an administrative offence is charged with an administrative penalty of deprivation of the right to occupy certain offices or engage in certain activities, he/she can never be the Head of the National Agency, which is not consistent with the nature of administrative liability, which is different from criminal liability in the fact that on the expiry of a certain period a person is deemed to have not been held administratively liable. That it, it means that the provisions of the aforementioned rule (as amended by the draft law) do not comply with Article 39 of the CUAO, according to which “if the person charged with an administrative penalty within a year from the date of the penalty has not committed a new administrative offence, this person shall be deemed not to have been charged with the administrative penalty.”
Moreover, the person “held on the basis of a conviction, which came into force, to criminally liable for committing corruption crimes” (paragraph 3 of Part 3 of Article 3 of the draft law) may not be appointed as the Head of the National Agency. This means that if a person was held criminally liable for committing grave or especially grave violent crimes, profit-motivated crimes etc, it is not an obstacle for appointment to the respective office. Therefore, we believe that this ground should be expanded.
The draft law also provides for a number of reasons early termination of office of the Head of the National Agency, including “the entry into force of a court conviction against him for committing an intentional crime…” (paragraph 5 of Part 4 of Article 3 of the draft law). From this provision it follows that if the Head of the National Agency commits a grave or especially grave careless crime (e.g. violation of traffic rules or operation of vehicles by the persons who drive a vehicle if they have resulted in death of several persons (Part 3 of Article 286 of the Criminal Code of Ukraine)), it is not a ground for early termination of the office. In this regard, we believe that this ground should be expanded.
- Equally controversial, in our view, is the approach of the draft law on the procedure for forming the selection board, which is to select a candidate for the Head of the National Agency (part 1 of Article 5 of the draft law). Paragraphs 2-6 of Part 1 of Article 5 of the draft law state that the selection board shall be composed of one person defined accordingly by the Prosecutor General of Ukraine, Director of the National Anti-Corruption Bureau of Ukraine, Minister of Justice of Ukraine, head of the central executive body implementing the state policy on combating legalization (laundering) of proceeds from crime, terrorist financing and the financing of proliferation of weapons of mass destruction, Minister of Finance of Ukraine. However, unlike paragraph 1, part 1 of the draft law, which sets requirements to the members of the selection board defined by the Verkhovna Rada of Ukraine, paragraphs 2-6 of Part 1 of Article 5 of the draft law set no requirements (from among whom they are selected, their experiences, etc.) to members of the selection board.
- In accordance with paragraph 1 of Article 7 of the draft law “the Head of the National Agency shall appoint the deputies“. One can hardly disagree with the presence of deputies of the Head of the National Agency. However, their number should be determined in the law on the principle of continuity of activities of the government authorities.
- According to paragraph 2 of Article 12 of the draft law “Public control over the activities of the National Agency shall be provided through the Public Council at the National Agency, established and formed by the Head of the National Agency of the nine people on the basis of competition… Competition to establish the Public Council at the National Agency Social shall be carried out by open voting“. From this we can conclude that the draft law does not regulate at least the main stages of the competition, who is eligible to take part in the voting, requirement to the Public Council members etc.
- The draft law does not fully regulate the issue of remuneration of employees of the National Agency. Part 1 of Article 13 of the draft states that “the salary of employees of the National Agency shall consist of a base salary, bonuses for length of service, bonuses for rank, bonuses and other allowances under the law on public service.” Part 1 of Article 8 of the draft states that “the employees of the National Agency are public servants and persons employed under the employment contract with the National Agency”. Accordingly, the salary of persons working under the employment contracts cannot contain additional payments for rank, bonuses and other allowances under the law on public service.
To Section II “Identification and Tracing for Assets”
- Section II of the draft law is entitled “Identification and search for assets” despite the fact that the draft defines and uses throughout the entire text the term “tracing assets.” In this context, the word “tracing” shall be replaced with the word “search” in the title of this section.
- According to paragraph 1 of Article 16 of the draft law, “for the purpose of identification and search for assets, the National Agency: 1) shall, in accordance to the appeals of bodies carrying out pre-trial investigation, prosecution bodies, courts take measures for identification and search for the assets, interact with these authorities to arrest those assets and confiscate them…”. But what exactly are the measures of identification and search for assets is not disclosed at a sufficient level for legislative regulation in the second section of the draft law.
- According to paragraph 1 of Article 18, “International cooperation in the identification and search for assets shall be subject to this Law, international treaties of Ukraine ratified by the Verkhovna Rada of Ukraine, other legislative acts or the principle of reciprocity.” The content of the principle of reciprocity in the draft law is not disclosed.
To Section IІІ “Asset management”
- According to paragraph 1 of Article 19 of the draft law, the “National Agency shall manage the assets that are arrested in criminal proceedings (as a measure to ensure the claim – filed in the interests of the state only), with a prohibition to dispose of and/or use such assets, whose amount or value equals or exceeds 200 minimum wages set as of January 1 of the corresponding year.” It is not determined whether the National Agency will manage the appropriate assets if they are arrested to ensure several claims, only one of which is filed in the interests of the state.
- The draft law does not determine what to do with proceeds (Article 24 of the draft law) obtained by the National Agency from the asset management in the event of cancellation of the arrest of the corresponding assets. Paragraph 3 of Article 20 of the draft law simply states that “… the National Agency shall transfer the funds or make the transfer of bank metals to their rightful owner within three business days from the date he/she provides the details of the account”. Thus the paragraph 8 of Article 21 of the draft simply states that “arrest of asset transferred to management is canceled, National Agency shall within three days return them o the rightful owner, in case of sale or technological processing – return the funds received from it.” It also does not regulate, in that case, who shall compensate the depreciation of fixed assets as a result of their transfer to the management to the companies, organizations or individuals pursuant to paragraph 2 of Article 21 of the draft law.
To Section V “Final Provisions”
- Paragraph 1 of section V of the draft law proposes to note that “this Law shall enter into force from the day following the day of its publication, and shall come into effect three months after the date of entry into force“. These provisions of the draft law, in our opinion, do not meet the requirements of paragraph 5 of Article 94 of the Constitution of Ukraine concerning the enactment procedure. The said constitutional provision establishes: the law shall come into force ten days after its official publication, unless otherwise provided by the law, but not before the date of publication. Based on the position of the Constitutional Court of Ukraine, expressed in the Resolution No. 4-zp dated October 3, 1997, the said constitutional norm is in the systemic connection with the provisions of Section IV “Verkhovna Rada of Ukraine”, especially those that directly regulate the legislative process (subparagraph 1, paragraph 2 of the Resolution). From this it follows that the enactment of the law shall strictly meet the requirements of paragraph 5 of Article 94 of the Constitution of Ukraine. Its literal interpretation makes it possible to conclude that the constitutional provision establishes the general rule for ten-day period for enactment of the law, and instruction “unless otherwise provided by the law” enables the Verkhovna Rada of Ukraine, taking into account various kinds of circumstances, accelerate or delay the entry into force.
A systematic analysis of the relevant provisions of paragraph 3 of Article 22, paragraph 3 of Article 57, paragraph 5 of Article 94, paragraph 1 of Article 152, paragraph 2 of Article 152 of the Constitution of Ukraine demonstrates the existence of a single way of providing the mandatory provisions of the law and legal effect, which is the enactment of a law. Constitutional provisions provide no other ways to legitimize the adopted laws.
On the amendments to the Code of Ukraine on Administrative Offences (sp. 1 p. 3)
- Establishment of administrative liability for “failure to comply with the legal requirements of the National Agency of Ukraine for Investigation, Detection and Management of Assets Derived from Corruption and Other Crimes” (Article 188-47 of CUAO as amended by the draft law) is not fully consistent with the other provisions of the draft law. Thus, suparagraph 2 of paragraph 1 of Part 1 of Article 10 of the draft law states that “the failure to provide the National Agency at its request with information, provision of the deliberately false or incomplete information, breach of statutory terms of its provision, notification of third parties that such information is collected on them, is prohibited and entail liability provided by law.” Thus, neither Articles 188-47 of the CUAP (as amended by the draft law) nor another regulation (as amended by the draft law) provide for the administrative liability for notification of third parties that the relevant information is collected on them.
The sanctions provided for in paragraphs 1 and 2 of Article 188-47 of the CUAO are unduly more severe in comparison with the related sanctions for administrative offences (such as provided by Articles 188-46, 188-44 of the CUAO, etc.).
On the amendments to the Criminal Procedure Code of Ukraine
The draft left aside Chapter 17 “Arrest of the Property” of Section II “Measures of criminal proceedings” of the CPC, which will also require appropriate amendments if this draft law is adopted.
On amendments to the Law of Ukraine “On Enforcement Proceedings”
The draft law proposes to amend Article 3 of the Law of Ukraine “On Enforcement Proceedings”, by supplementing paragraph 1 with the new subparagraph to mention: “The court decisions in criminal proceedings for confiscation, special confiscation, arrest of the property as well as the court decisions on recovery of assets in state revenue and the arrest of property in the proceedings on the recognition of assets unjustified and their seizure in cases prescribed by law shall be enforced out by the Identification, Search for and Management of Assets derived from Corruption and other Crimes.”
Thus the draft law left aside the Penal Code of Ukraine, Chapter 11 “Enforcement of the penalty of the property confiscation” of Section II of the Special Part, which also requires appropriate amendments, as it also regulates the procedure for execution of such penalty as the property confiscation.
Generalization: upon consideration of the draft law in the first reading it shall be returned for revision, taking into account the comments and suggestions.
Head of the Main Department V. І. Bordeniuk