Enhancing Business Protection in Ukraine: Analysis of Draft Law No. 12439 and Proposed Amendments to the Criminal Procedure Code

On 19 February, the Verkhovna Rada Law Enforcement Committee recommended that Parliament adopt draft law No. 12439 in the first reading as a basis. The draft law was introduced by MPs Serhii Ionushas, Maksym Pavliuk, and others.

The draft law was developed in collaboration with the Council for Entrepreneurship Support, established by the President and the National Security and Defense Council in January 2024 to protect businesses. According to the authors, the proposed amendments aim to strengthen guarantees protecting entrepreneurs from unjustified pressure by law enforcement agencies.

We have analyzed this draft law concerning its impact on the work of criminal justice bodies in the anti-corruption sector. 

Brief conclusions

• Although the draft law includes several positive changes that significantly strengthen business protections during criminal proceedings, it requires further refinement and comprehensive additions.
• The most critical issue is the proposal to introduce a two-month limit on property seizure, with the possibility of extension. This would unnecessarily burden pretrial investigation bodies and the courts while hindering the effective recovery of criminal assets. 

What we suggest?

• extending the property seizure period from 2 to 12 months and eliminating the time limit for cases involving property seized abroad;
• limiting the right of proceedings participants to appeal investigating judges’ decisions denying the cancellation of property seizure and setting time limits for materials review. Instead, they should have the opportunity to appeal such decisions in relation to separate rulings made by courts of the first instance;
• maintaining a specialist’s powers as currently outlined in the Criminal Procedure Code of Ukraine;
• supplementing the draft law with amendments to implement the State Anti-Corruption Program (SAP), including simplifying the process for obtaining temporary access, eliminating the involvement of witnesses, and improving property seizure for the purpose of “extended” confiscation;
• do not introduce mandatory participation of the initiators of the procedural action when considering motions for temporary access.

What is it like now?

Regarding the seized property. Currently, property seizure in criminal proceedings is indefinite and remains in effect until canceled. The Criminal Procedure Code of Ukraine does not explicitly allow the owner to request that the investigator, prosecutor, or court transfer the seized property for safekeeping. That is regulated exclusively by the Resolution of the Cabinet of Ministers of Ukraine.

Regarding appeal control and oversight by first-instance judges. Participants in criminal proceedings cannot appeal an investigating judge’s decision denying the cancellation of property seizure or decisions setting time limits for reviewing case materials. The court of first instance does not have the authority to issue separate rulings on violations of obligations by participants.

Regarding the registration of criminal proceedings. Formally, the Criminal Procedure Code of Ukraine prohibits an investigator or prosecutor from refusing to register criminal proceedings. However, a different practice has developed due to the frequent abuse of this right by applicants.

Regarding the authority of specialists and injured parties. Injured parties cannot independently apply to the court for temporary access. Also, the investigator and prosecutor are not required to provide them with an extract from the Unified State Register of Pretrial Investigations. A specialist can provide information and conclusions within their area of expertise.

Regarding the timeframe for consideration of motions for temporary access. The court is not bound by a specific time frame within which such a motion must be examined.

Regarding the failure of participants in criminal proceedings to appear for consideration of their motions. The Criminal Procedure Code of Ukraine does not specify the consequences of the prosecution’s failure to appear for the consideration of its motions regarding the application of security measures or permission to conduct secret investigative actions. Also, there are no consequences for the initiator if they fail to attend the session to consider the issue of temporary access.

What is proposed in the draft law?

The list of amendments proposed by the authors of the draft law is extensive, so we will focus on the key positive and problematic aspects.

The key problematic provisions include:

1.  the seizure of property in criminal proceedings can be imposed for two months, with the possibility of extension;
2.  a property owner will be able to request that an investigator, prosecutor, or court transfer the seized property for safekeeping;
3.  a decision by an investigating judge denying to cancel the seizure and to set or not set a time limit for reviewing the court materials can be challenged before an appeal;
4.  a specialist’s powers will be limited to identifying persons, objects, and traces.

At the same time, there are also positive aspects in the draft law:

1.  criminal proceedings will be registered only when there is sufficient evidence of the commission of an offense;
2.  an injured party’s powers will be expanded, specifically allowing them to request temporary access from the court and receive an extract from the Unified State Register of Pretrial Investigations;
3.  the consideration of motions for temporary access by an investigating judge will be limited to a period of 15 days;
4.  judges of the first instance will be authorized to issue separate rulings on procedural violations.

What is important to change?

Criminal proceedings involve many conflicting interests. Unfortunately, there are instances where pretrial investigation bodies misuse their powers to exert pressure on businesses.

However, while declaring the goal of creating a favorable environment for entrepreneurs, it should not unnecessarily complicate the work of criminal justice bodies, as this would hinder the effective prosecution of various categories of criminal offenses. Moreover, businesses also have an interest in the effective investigation of criminal offenses committed against them.

We have identified the provisions that we believe will be more harmful than beneficial.

1.   The seizure of property for two months and the transfer of the seized property for safekeeping

The authors of the draft law propose limiting the seizure of property during a pretrial investigation to two months, with the possibility of extending this period for the duration of the entire criminal proceedings.

Although the investigating judge’s control over the term of seizure can be seen as positive, given that there are currently no effective means for periodically assessing the duration of interference with property rights, the excessively short period proposed by the authors could lead to problems in implementing this security measure. It may also result in an excessive overload of the pretrial investigation body and the court.

In 2024 alone, investigative judges of local courts and the HACC considered over 96,000 motions for the seizure of property. The need to extend the term of property seizure every two months could significantly increase this number.

It is important to note that the pretrial investigation body sends rulings on the seizure of property to various state bodies each time. When it comes to the seizure of property abroad, there are significant challenges with prompt implementation, as demonstrated by a number of such cases.

Additionally, the proposed provisions of the Criminal Procedure Code of Ukraine do not address situations where the term of the pretrial investigation expires, the indictment is sent to the court, but the court does not have time to consider a motion to extend the term of the seizure.

Furthermore, lawmakers propose allowing the transfer of seized property for safekeeping. However, it is important to note that the authors of the document do not clarify which entity, and under what circumstances, such property will be transferred for safekeeping by the decision of the investigator, prosecutor, or court.

Moreover, in the context of the ARMA reform, the authors of the revised draft law 12374-d propose introducing a guarantee payment mechanism, where the owner of the seized asset will pay a certain amount to retain the property in their possession.

Therefore, we propose increasing the period for which property can be seized from 2 to 12 months, removing the time limit in cases where property is seized abroad, and improving the process for extending the term of seizure when sending an indictment to the court. It is also necessary to refrain from legislating the safekeeping of such property until this concept is comprehensively defined and regulated.

2. Expanding the appeal review and control of the investigating judge

Several amendments to the draft law propose allowing certain participants in criminal proceedings to appeal the refusal to cancel the seizure of property and the decision to set a time limit for reviewing case materials.

In our view, these amendments are unjustified and could place an excessive burden on appellate courts.

Challenging the refusal to cancel the seizure of property serves as a mechanism for verifying the legality and justification of the seizure, allowing participants to use it alongside appealing the initial seizure decision to the court of appeal.

If the proposed amendments are adopted, the same seizure could effectively be appealed twice, contradicting the purpose of seizure review and violating the principle of procedural economy. Furthermore, with the introduction of time-limited seizure of property, owners or holders will already have sufficient judicial oversight regarding the legality and justification of ongoing restrictions on their property rights, making these amendments unnecessary.

The academic community also does not support allowing parties to appeal decisions on setting time limits for reviewing case materials (Article 290 of the Criminal Procedure Code of Ukraine), as the benefits of such an appeal would not outweigh the procedural costs.

In addition to these proposals, the draft law will allow judges to issue separate rulings in response to procedural violations by participants. We see these innovations as positive. However, unlike the solutions mentioned above, such participants should have the right to appeal to a higher court, as defined in other procedural codes.

Therefore, in our opinion, court decisions on refusal to cancel the seizure of property and on setting a time limit for reviewing materials of the pretrial investigation should not be appealed to the appellate instance. But separate rulings issued in the event of violations of procedural obligations or improper performance of them by participants in criminal proceedings should be subject to such appeal.

3. Narrowing a specialist’s powers

The proposed change, removing a single comma in the provision regarding the powers of specialists, could unintentionally limit their authority to provide certificates and conclusions on a wide range of issues beyond just the identification of persons, things, and traces, as well as the retrieval of information from technical means.

This restriction could have a detrimental effect on the quality of pretrial investigations, as specialists play a crucial role in offering expert explanations on various complex professional matters that investigators or prosecutors may not be able to handle.

In practice, especially in corruption cases, specialists often play a vital role in providing detailed explanations in financial and economic sectors, which are crucial for ensuring a high-quality investigation.

Therefore, the powers of a specialist should not be restricted solely to the areas of identification of persons, things, and traces, or the retrieval of information from technical means.

What does the draft law lack?

There are many comments on the existing Criminal Procedure Code of Ukraine regarding the quality of individual legislative provisions. Individual suggestions for their improvement are outlined in SAP activities, which have not been implemented for a long period due to various reasons.

Therefore, since the legislator has decided to amend the Criminal Procedure Code of Ukraine, it is advisable to address the issues raised in the draft law through the lens of the SAP requirements.

1.   Allow for the seizure of property for the purpose of “extended” confiscation

Under the Criminal Procedure Code of Ukraine, the court may confiscate property from corrupt officials and individuals involved in the legalization (laundering) of criminal proceeds if the legality of such property has not been confirmed (Article 100, Part 9, p. 6-1 of the Criminal Procedure Code of Ukraine). However, in practice, this provision is rarely applied, primarily due to the lack of a clearly defined procedure for seizing such property, which allows criminals to effectively conceal it.

A potential solution could be to amend Article 170 of the Criminal Procedure Code of Ukraine to include a new basis for the seizure of property, such as the presence of sufficient grounds to believe that there are no legal grounds for acquiring property rights.

2.   Simplify temporary access procedures

One of the most time-consuming processes when obtaining temporary access is the personal submission of a ruling and the personal retrieval of things and documents. However, since property owners do not always resist such access, it would be appropriate to provide an alternative option to send a ruling and receive the necessary information remotely, via electronic communication.

This approach would align with activityhttps://dap.nazk.gov.ua/zahid/204/ 3.3.2.1 of the SAP and help avoid wasting the time of all participants in criminal proceedings on physical movement, offering a more economical solution.

In addition, according to the provisions of the draft, investigators and other initiators will be required to participate in all sessions to consider motions for temporary access. By the way, local courts and the HACC granted nearly 227,000 such motions in 2024. However, this will unnecessarily burden the investigation and is not aligned with the goal of simplifying temporary access procedures, as outlined in the SAP.

3.   Remove the requirement for witnesses during investigative actions

Digital progress has long replaced the need for witnesses in investigative actions. Continuous video recording is a much more versatile and reliable tool for documenting the process.

The removal of the outdated provision in the Criminal Procedure Code of Ukraine regarding the involvement of witnesses has long been outlined in paragraph 3.3.2.1 of the SAP and should be implemented without delay.

We propose to amend this draft law by replacing the concept of witnesses with continuous recording of the course of investigative actions.

 Conclusions

Transparency International Ukraine recommends refining this draft law. The adoption of the draft law in its current version will have a more negative than positive impact on the investigation and consideration of criminal cases.

In our opinion, the draft law should be improved as follows.

1. Increase the period for which property can be seized from 2 to 12 months, remove the time limit in cases where property is seized abroad, and improve the process for extending the term of seizure when sending an indictment to the court.
2. Refrain from making changes to the safekeeping of property until appropriate amendments are comprehensively developed in the context of the ARMA reform.
3. Do not allow appeals against the decisions of investigating judges to refuse to cancel the seizure of property and the decision on setting a time limit for reviewing materials.
4. Provide the opportunity to appeal separate rulings made in case of violations of procedural obligations or improper performance of them by participants in criminal proceedings.
5. Maintain specialists’ powers as currently outlined in the Criminal Procedure Code of Ukraine.
6. Add amendments to the draft law that will simplify obtaining temporary access, allow conducting investigative actions without involving witnesses, and introduce a new basis for seizing property for “extended” confiscation.
7. Do not introduce mandatory participation of the initiators of the procedural action when considering motions for temporary access.