Is it time to change approaches to bringing businesses to criminal liability?

The institution of criminal liability of legal entities, introduced in 2014, is ineffective. For example, the list of sanctions that can be imposed on businesses is quite limited and unbalanced.

For these reasons, in order to fundamentally change the approach to holding a legal entity liable for committing a criminal offense on its behalf or in its interests, a group of MPs registered in the Parliament the draft Law No. 11443 dated 25.07.2024 «On Amendments to the Criminal Code of Ukraine, the Criminal Procedure Code of Ukraine and Other Legislative Acts of Ukraine on Bringing Legal Entities Liability for Corruption Criminal Offenses in Line with International Standards».

The document proposes to provide for grounds for applying criminal law measures to a legal entity regardless of bringing an individual to justice, expanding the list of criminal law measures and increasing the amount of a fine that may be applied to a legal entity, and the possibility of applying special confiscation based on a court order to apply criminal law measures.

It is also envisaged that the legal entity will be subject to additional (non-financial) criminal law measures. It is a rather broad list of prohibitions on activities for a certain period, namely:

1) to participate in public procurement;

2) to use a license;

3) participate in the privatization of state and municipal property;

4) participate in the lease of state and municipal property (including the extension of the lease agreement);

5) obtain and extend a special permit for subsoil use (including suspension of a special permit for subsoil use);

6) participate in the bodies of social tripartite dialog;

7) purchase bonds of internal state loans of Ukraine;

8) create and participate in the work of self-regulatory organizations;

9) to provide and receive advertising;

10) to carry out sponsorship;

11) participate in public-private partnerships;

12) participate in joint ventures.

In addition, non-financial measures of a criminal law nature will include temporary restrictions on the following rights and benefits:

1) to receive any benefits and assets from the state and the community;

2) to attract, use, and utilize funds from international technical projects and international financial transactions;

3) to receive state aid by business entities (to be a recipient of state aid);

4) acquire the status of a resident of Diia City;

5) receive state and other financial support for export activities.

The Ukrainian National Bar Association's Committee on Anti-Corruption Policy and Compliance, having analyzed the draft, concluded that such a legislative initiative could be widely applied to an unlimited number of cases and business entities, including those of good standing. As a result, it will increase the pressure on business many times over.

In today's reality, when business is already struggling, implementing the provisions of the law as drafted will inevitably lead to a freeze in business activity with all the negative consequences that this entails. And these potentially negative risks outweigh the benefits of implementing the proposed rules by several times.

Therefore, the UNBA concludes, it is advisable to postpone the adoption of the draft law for another time.