YURIY PETRENKO, Partner, Spenser & Kauffmann
Expanded grounds for use of special confiscation and ambiguity of the scope of powers of the National Agency of Ukraine for identifying, tracing and management of assets may prevent due property rights protection. The debate is likely to end either at the Constitutional Court of Ukraine or at the European Court of Human Rights.
The package of anti-corruption laws includes the laws “On amendments to the Criminal Code of Ukraine concerning improvements in the field of special confiscation in order to eliminate corruption risks of its usage”, “On Amendments to the Criminal Procedure Code of Ukraine on specific seizure of assets in order to eliminate its usage for corruption purpose” and the Law “On the National Agency of Ukraine for identifying, tracing and management of assets derived from corruption and other crimes.”
Despite the declared transparency and fight against corruption, these legislative changes may have the opposite effect in view of the following.
According to the new changes, there are two grounds when the property is subject to arrest: if a third party obtained property free of charge from the suspect, accused or convicted or purchased such property at a price significantly below market; or knew or should have known that the purpose of the transfer of property is to avoid confiscation.Although a special confiscation cannot be applied to the property of a good faith purchaser, acquisition of such property should not be automatically viewed as an evidence of the purchaser’s bad faith. Even if the person knew that the previous owner of the property acquired it illegally, it is very difficult to prove in practice, especially if the property was purchased at the market price.
Subject to Art. 10 of the Law, the National Agency of Ukraine for identifying, tracing and management of assets derived from corruption and other crimes can submit claims for recognition of agreements to be null and void, obtain any kind of information (including information involving bank secrecy), make requests for information outside the context of specific criminal proceedings even without having to explain the reasons for that. At the same time, the agency cannot make an independent assessment of the assets. For this purpose, it will involve third-party companies intended to optimize the management. There are no specific criteria and principles of assessment of seized assets, as well as of the selection of entities to do it. This casts a shadow of a doubt on the objectivity and transparency in the implementation of assessment procedures in practice.
Article 1 of Protocol 1 to the Convention for the Protection of Human Rights and Fundamental Freedoms of 1952 protects property rights that, as the ECHR pointed out in Marckx v. Belgium, Sporrong and Lönnroth v. Sweden cases, means such protectionalong with maintaining a fair balance between the public interests and the rights of individuals. However, these principles may be violated in case of, for example, liquidation of a bank,because the funds put into it by the National Agencywill be returned to a person only within the limit of 200 thousand hryvnias.
In addition, the EU Directive on the freezing and confiscation of instrumentalities and proceeds of crime in the European Union of 3 April 2014, used as a guide for drafting the law on special confiscation, does not seem to be identical to the Ukrainian versionconcerning the new powers of public authorities.
Significant gaps in legislation will definitely entail many high-profile trials in Ukraine. The end of the debate as to the scope of the use of a special confiscation may be put by the Constitutional Court of Ukraine, and the prospect of claims against Ukraine to the European Court of Human Rights for abusive seizure and confiscation of the property is also quite certain.
