Four Reasons Why a Two-Month Seizure of Property in Criminal Cases Is a Bad Idea

Over the past year, we have witnessed a significant number of new precedents affecting the business sector. These include amendments to the law on BES, discussions regarding the repeal of the “Lozovyi amendments,” and the establishment of the Council for Entrepreneurship Support. These issues have not only engaged the public but also lawmakers, leading to the introduction of Draft Law No. 12439, which has already passed the first reading in the Verkhovna Rada. In the near future, these changes may be adopted in their entirety.

Although the initiative aims to protect businesses from unjustified pressure by law enforcement agencies, some of the proposed changes have caused us significant surprise and concern. In particular, those related to the two-month period for seizing the property of suspects and accused individuals.

Indeed, one of the easiest ways to block business operations is through the seizure of property. In such cases, law enforcement officers confiscate the company’s assets, designate them as material evidence, and file a motion for seizure in court. It is the court’s responsibility to assess the proportionality of the seizure, although this does not always unfold as we would hope. If the court approves the seizure, the company’s property cannot be alienated or used in any way.

Currently, the law does not specify a set period for property seizure. Still, it can be appealed to a higher court, or a motion challenging its groundlessness or inexpediency can be filed with the court of first instance. However, in the new draft law, the authors’ team proposes a two-month seizure period, with the possibility of an extension. According to the lawmakers, this time frame will prevent the unjustified long-term seizure of property in factual criminal cases.

Why such a short period will create serious problems for the criminal justice system. We present four key arguments.

1. A threat to European integration

The proper application of criminal asset confiscation is crucial in the context of European integration processes. 

As stated in the EU Directive on asset recovery and confiscation, effective asset recovery requires the swift tracking and identification of criminal tools and proceeds, as well as the search for property of suspected criminal origin. Such assets should be frozen (seized) to prevent their disappearance. Subsequently, the frozen property is subject to confiscation based on an appropriate court decision within the framework of criminal proceedings.

Ukraine has international obligations to confiscate the proceeds from crime. This is stated in the UN Convention against Corruption, UN Convention against Transnational Organized Crime and other international regulations.

The two-month term for property seizure threatens to undermine Ukraine’s already limited progress in confiscating criminal assets. This is particularly true in complex economic and corruption cases, where gathering evidence and conducting expert examinations require considerable time.

If the seizures are not extended for various reasons, it is likely that the criminal property will be returned to its owners before a relevant court decision is made. This means that even if the criminal origin of such property is proven, it will not be possible to confiscate it. This, as we can see, directly contradicts the relevant principles of EU law, which Ukraine will still need to adopt.

2. Asset recovery from abroad will become nearly impossible

International legal assistance in seizing assets abroad is a complex and lengthy process. It takes a long time to process a seizure request (anywhere from several months to a year or longer). As such, the proposed two-month period would make it impossible to effectively recover stolen funds withdrawn from Ukraine.

In the past two years, in connection with a potential criminal organization within the SPFU, efforts by NABU abroad resulted in the seizure of a luxury yacht worth EUR 5.5 million in Italy, as well as expensive cars in Austria and France. A similar case exists in the practice of the SBI, involving the former head of the Odesa Center for Territorial Recruitment, Yevhen Borysov, who is accused of laundering UAH 140 million to purchase expensive real estate and cars abroad. The accused’s property was searched by representatives of the State Bureau of Investigation, in collaboration with Spanish law enforcement officers, after which it was seized.

If these officials are found guilty after their trials, Ukraine can expect that the funds from these assets will contribute to the state budget. However, to achieve this, they must maintain the already imposed seizure until the final court verdict and enforce these sentences abroad.

Public information about individual cases under investigation by NABU and SAPO highlights the challenges of swiftly seizing property abroad. For example, in the case of Tetiana Krupa, the ex-head of the Khmelnytskyi Regional Medical and Social Expert Team, despite the seizure of more than 150 real estate properties in Ukraine, the investigation still faces difficulties in blocking the suspect’s and her family’s foreign accounts. According to media, the assets in question amount to nearly $2.8 million held in banks in Poland, Switzerland, and Austria.

Therefore, if the provision on urgent seizure is adopted, the recovery of assets from abroad may become impossible.

3. Effective management of seized assets will become impossible

Anastasiia Radina, the head of the Committee on Anti-Corruption Policy, noted that with a two-month seizure period, ARMA will be unable to find managers for such assets. No serious manager would take on the responsibility of overseeing a business or other complex property for such a short period — it would be economically impractical.

Even now, finding managers takes ARMA a significant amount of time. According to our calculations, it takes an average of 1 year and 5 months just to begin the manager selection process. For example, Kvitka Polonyny Sanatorium was transferred to ARMA on April 3, 2023, and the manager selection process via the electronic procurement system began on August 5, 2024. However, the transfer of this asset to ARMA was later canceled.

As part of the ongoing ARMA reform, MPs are proposing a new mechanism for Ukraine, where property owners would make a guarantee payment as an alternative to transferring an asset to the Agency in certain cases. Therefore, it is crucial to ensure that the amendments to the Criminal Procedure Code of Ukraine are developed efficiently to support the effective reform of ARMA.

4. Catastrophic overload of the judiciary system

In 2024 alone, investigative judges of local courts and the HACC considered over 96,000 motions for the seizure of property. The need to reconsider seizures every two months will either result in an excessive overload of the judicial system, which is already understaffed, or in the automatic cancellation of seizures that judges simply won’t have time to review. Therefore, we can predict that the number of motions considered each year will increase significantly.

An illustrative example is the NABU case against the former beneficiary of JSC CB PrivatBank, Ihor Kolomoiskyi, where detectives identified 307 legal entities, nearly 1,000 real estate properties, and more than 1,600 vehicles and ships that were subject to seizure. If a fixed-term arrest is introduced, the constant need to extend this interim measure—particularly for such a large number of properties—will become excessively burdensome for both the pre-trial investigation body and the court.

This is also impractical because assets are seized with the intention of confiscating them if the court issues a guilty verdict. Therefore, the seizure is imposed solely due to the fact that a person is a suspect or accused in a case. As time passes, the basis for the seizure does not disappear—whether two months or more have passed. The same applies to assets seized for damages.

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Pressure on businesses involved in criminal cases is undoubtedly a serious problem today. However, in our opinion, it should be addressed by holding accountable those employees of the criminal justice system who abuse their power to seize property.

In general, to protect the rights of owners of seized property, the special law already include provisions that allow for compensation of losses caused by illegal seizure. Additionally, in April 2024, the PGO approved Standards for prosecutors’ activities in the field of investment protection during pre-trial investigations, which include fundamental provisions on the legality of seizing property.

Therefore, if we are to achieve high-quality solutions to this issue, particularly for complex economic and corruption cases, the term for property seizure should be at least one year. If we are talking about the seizure of property abroad, no such period should be set at all due to the complexities of cooperation between law enforcement agencies in different countries. Additionally, there should be no deadlines set for the seizure of property for the purposes of confiscation, special confiscation, or compensation for damages.

Criminal proceedings generally involve many conflicting interests. However, to foster a favorable environment for entrepreneurs, the effective confiscation of criminal assets must not be hindered. Otherwise, what justice can we talk about?