On April 26, the Anti-Corruption Committee of the Verkhovna Rada considered in the second reading the draft law No 5173 “Draft Law On Amendments to the Law of Ukraine ‘On Corruption Prevention’ (on Improving Certain Aspects of Declaration)”.
Among the MPs’ suggestions, the provisions were supported to amend the Law of Ukraine “On the National Agency of Ukraine for Finding, Tracing and Management of Assets Derived from Corruption and Other Crimes” to create Article 21-1 on the settlement of relations on the management of seized property in exceptional cases.
As of now:
The National Agency of Ukraine for the Finding, Tracing and Management of Assets Derived from Corruption and Other Crimes (or ARMA) is an important element of the anti-corruption infrastructure. This is a state body of Ukraine, which was created by analogy with the bodies for recovery and asset management, which operate in the European Union.
It is worth noting that the specialized law was adopted by MPs in the absence of effective regulations for the management of seized assets in criminal proceedings to preserve their economic value. Therefore, it is clear that the result of the legislative initiative could not envisage all the challenges which the institution that is to take care of property seized in criminal proceedings might face.
The relevant legislation regulating activities of the ARMA envisages the commercial component in the matter of asset management. The managers to whom ARMA transferred assets, in addition to maintaining the economic value of assets, only think of making profit from asset management.
However, in recent years the National Agency has come across a number of assets whose continuous performance is a guarantee for security of certain regions of Ukraine. These assets, which are economically unprofitable under this form of management, require significant financial costs or resources that are available only to the state, as well as a socially oriented approach rather than a commercial one.
What is suggested:
These changes suggest amending to the Law of Ukraine “On ARMA” with a provision that in exceptional cases a procedure will be envisaged to transfer the management of assets, seized in criminal proceedings, to an enterprise, institution, organization belonging to the Ministry, or another central executive body based on the Cabinet of Ministers of Ukraine’s decision without applying transfer procedures. These are the situations when there is a risk of emergencies or negative consequences for the population, society, sectors of the economy, national security and defense of Ukraine.
The ARMA should notify the Cabinet of Ministers of such an asset within 3 working days from the moment of detection of risks of negative consequences. The Cabinet of Ministers instructs the relevant ministry or CEB to study the situation and develop, together with the ARMA, a draft decision on the application of the procedure for transferring the seized asset for management in exceptional cases, and its justification.
The decision of the Cabinet of Ministers on the asset management in exceptional cases should ensure the preservation of their value and prevent emergencies.
In case of seizure lifting, the property is returned to the owner in accordance with the Law “On ARMA.” What is more, it should be noted that the amendments prohibit the alienation of the asset by the manager when applying the above-mentioned procedure for asset transferring in exceptional cases.
Given the variety of assets that can be transferred to the management of the ARMA, including assets that are crucial for the life of individual regions, national security, defense capabilities of Ukraine, the need to change the law considering the existing experience of the seized assets transferring is necessary. CHPs in Lviv oblast, the airport in Odesa, and other assets are the illustrative examples of the fact that it is impossible, without the engagement of state resources, to ensure the proper continuous performance of such important assets.
The need to engage the Cabinet of Ministers in exceptional cases, as well as relevant ministries and relevant business entities is extremely important for the realization of the state interests, the implementation of criminal proceedings and the preservation of the economic value of assets.
It is also worth noting that this draft law should eliminate major issues in a small, albeit important, part of the management of seized (frozen) assets. However, it is necessary to understand that the relevant ARMA legislation needs to be balanced and systematically improved. Challenges that the judicial system and the defendants of criminal proceedings create in the field of finding, recovery and management of seized assets should be resolved, through balanced changes that will not undermine ARMA’s capacity.
The analysis was prepared by Oleksii Danyliuk, TI Ukraine’s legal advisor.