New Spe­cial Con­fis­ca­tion: De­spite the Guar­an­tees, Property Rights Are Threat­ened

Kyiv Post Legal Quarterly - - News - Yuriy Pe­trenko Part­ner, Spenser & Kauff­mann 7 Klovsky Uzviz, 14th floor, Kyiv, 01021, Ukraine p.: +380 44 288-83-83; f.: +380 44 288-55-74

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.

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 pro­tec­tion along 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 Agency will 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 dra ing the law on spe­cial con­fis­ca­tion, does not seem to be iden­ti­cal to the Ukrainian version con­cern­ing 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.

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.

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