On 1 July 2011, the new Law of Ukraine "On the Prevention of and Counteraction against Corrupt Practices in Ukraine" (the "New Law") entered into force (except for certain provisions concerning income declaration by state officials, which will become effective on 1 January 2012).

The New Law sets forth the main principles for combating corruption. Also, certain amendments to the Criminal, Administrative Violations, and Criminal Procedural Codes of Ukraine entered into effect at the same time as the New Law.

Expanded Scope of Covered Persons

The New Law considerably expands the scope of persons, who are subject to liability for corruption misconduct. In addition to Ukrainian civil servants, it now includes foreign civil servants, officials of legal entities and their authorized representatives, and "public services providers", i.e., persons who provide public services, but who are not considered to be civil servants, such as auditors, notaries, experts, evaluators, judges of arbitration courts, and other persons who provide public services.

Importantly, the New Law covers not only corruption misconduct involving government officials, but also the corruption misconduct of officials of legal entities (i.e., commercial bribery). Nonetheless, the New Law does not include legal entities as subjects of liability.

Sanctions

The New Law provides generally that any losses and/or damages caused by corruption misconduct must be duly compensated to the state and/or to another injured party. The amount of such compensation must be determined by a court. In addition, all income, gained as the result of corruption misconduct, will be confiscated in favor of the state. The recipient of any undue benefits or services must pay their value, as determined by a court, to the state budget.

Most importantly, all decisions of a state body (including permits, licenses, registrations, etc.) adopted as the result of a corruption offense may be cancelled by a superior body or challenged directly in court at the request of an interested party.

Gifts and Hospitalities

The New Law changes the regulation of the acceptance of gifts by government officials by prohibiting a person covered by the New Law from receiving a gift in the cases either for any decision, act, or non-act in the interest of the person who is giving such gift, or in connection with the use of the covered person's authority.

Having said this, the New Law nonetheless expressly allows, except in the above-mentioned cases, a one-time gift to a covered person with a value not exceeding 50% of 1 official minimum monthly salary (i.e., currently UAH480 or approximately US$60), provided that the cumulative value of all gifts received from one source during one year should not exceed 1 official minimum monthly salary effective as of January 1 of the relevant year (i.e., currently UAH960 or approximately US$120). This permitted acceptance of gifts by government officials must be made "in compliance with the generally recognized acceptance of hospitalities."

Since the New Law has no express provisions on hospitalities, i.e., the providing or paying for travel, accommodations, meals, and entertainment of government officials, this means that the currently existing legislation on the giving and acceptance of such hospitalities must be followed as applicable.

Conflicts of Interests

The New Law expressly requires that a state official must take active measures to prevent any conflict of interests from arising. If such a conflict arises, then the state official is required to immediately disclose it to his/her superior. The laws and regulations that define the authorities of the relevant state body and the procedure for the providing of certain types of public services and the performance of its activities are required to envisage the procedure for and the ways of settling conflicts of interests.

Limitations on State Officials' Activities

State officials are prohibited from concurrently engaging in any other paid activities, except for artistic, teaching, scientific, or sports instruction and/or judging. Entrepreneurship is also prohibited, including being a member of any governing body or supervisory board of any company.

Moreover, for one year after the resignation or other termination by a government official from state service, such former official cannot be hired by any entity that fell within the gambit of his/her supervisory powers during the year that preceded such former official's departure from state service.

Also, within one year after his/her departure, a former official cannot be a representative of anyone in any case, in which another party is the state body from which the former state official has departed.

Conclusion

The enactment of this new anti-corruption legislation is essential for Ukraine, as it evidences that Ukraine has taken another step forward toward meeting the established international standards in the fight against corruption. The New Law provides several effective tools for use in the President's official anti-corruption campaign, which now needs to be implemented in practice by the necessary political will of all of Ukraine's civil servants and government authorities, as well as its political and business elites.

This article has been prepared by specialists of ABLV Corporate Services based on mass media publications. Specialists of ABLV Corporate Services provide legal and tax advise, including advise on international tax planning, establishment of holdings, trade, investment, and protection structures, purchase of real estate and other assets, as well as advise on change of residence and acquirement of residence permits. More detailed information on services provided by ABLV Corporate Services can be found at http://www.ablv.com/ru/services/advisory