A new bill allows law enforcement agencies to interfere in business operations without any evidence of wrongdoing

Under the guise of combating bribery of foreign officials, lawmakers have radically overhauled the entire procedure for holding legal entities criminally liable.

These new provisions create ample opportunities for arbitrarily obstructing business operations, and their scope extends far beyond the investigation of crimes involving the bribery of foreign nationals.

Criminal Liability of Legal Entities Under the New Rules

As of September 1, 2014, legal entities in Ukraine have become subject to criminal liability if certain categories of crimes were committed in their interest or on their behalf, including the legalization (laundering) of property obtained by criminal means, the creation, leading a criminal group or criminal organization, the use of funds derived from the illicit trafficking of narcotic drugs, certain corruption offenses, crimes against the foundations of national security, sexual offenses against minors, terrorism-related crimes, and others.

On December 4, 2024, the Verkhovna Rada adopted Bill No. 11443 amending the Criminal Code and the Code of Criminal Procedure to improve mechanisms for holding legal entities liable for bribing officials of foreign states, which grants investigators and prosecutors broad discretion in restricting business activities.

The need for its adoption was explained by Ukraine’s aspiration to join the Organization for Economic Cooperation and Development (OECD), which requires ratification of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Bill No. 11443 radically changes the procedure for holding legal entities liable for criminal offenses committed on their behalf and/or in their interests. Among other things, it introduces the possibility of applying additional (non-financial) criminal law measures to legal entities, involving restrictions on certain types of activities. From now on, legal entities will also be subject to a measure to secure criminal proceedings in the form of restrictions on their activities.

Prior to the adoption of this bill, in order to effectively restrict the rights of a legal entity, it was necessary to prove in court that its officials had committed specific crimes, which required a corresponding conviction.

Furthermore, criminal proceedings against a legal entity could only be initiated after a notice of suspicion had been served on one of its officers, alleging that specific crimes—an exhaustive list of which is provided—had been committed on behalf of and in the interests of that legal entity. Only from that point onward could certain measures to ensure the conduct of criminal proceedings—related to the investigation of a crime committed by its officers—be applied to the legal entity.

Currently, the legislature is repealing the requirement that a company employee be served with a notice of suspicion before restrictions on the legal entity’s rights may be imposed. Furthermore, the law explicitly states that restricting the activities of a legal entity does not even require the identification of the individuals who directly committed the crime.

Thus, once the law takes effect, it will suffice to establish only the factual circumstances that may indicate the legal entity’s involvement in the commission of crimes (in effect, this amounts to mere presumption) in order to substantially restrict the activities of such a legal entity.

As a result, taking appropriate measures to ensure criminal proceedings will not require serving a notice of suspicion on the individual or issuing a guilty verdict.

By simplifying the procedure for applying measures to secure criminal proceedings against a legal entity, the legislature is simultaneously expanding the list of restrictions that may be imposed on a legal entity even before a verdict is rendered in the case.

The bill introduces the possibility of applying a measure to secure criminal proceedings against legal entities, such as restricting the legal entity’s activities. This is analogous to a preventive measure applied to individuals.

If there are sufficient grounds to believe that a legal entity may take actions to evade liability or obstruct the pretrial investigation, restrictions may be imposed on it regarding:

• amending its founding documents;
• entering into significant legal transactions;
• disposing of assets (property);
• dissolution of the legal entity.

In addition to expanding the list of measures to ensure criminal proceedings that may be applied to a legal entity, the bill also expands the list of criminal law measures that are imposed by a court judgment.

Previously, criminal law measures such as fines, confiscation of property, or liquidation were applied to legal entities. Once the amendments take effect, the following additional (non-financial) measures will be introduced:

• a ban on participating in procurement;

• a ban on using a license;

• a prohibition on participating in privatization;

• a ban on participating in the lease of state and municipal property;

• a ban on obtaining Diya City resident status, etc.

Opportunities for abuse are expanding

A safeguard against potential abuse of these expanded powers is that decisions on restrictions will be made by investigating judges based on motions filed by investigators and prosecutors.

At the same time, every attorney practicing in the field of criminal defense knows that in Ukraine, judicial oversight is a mere formality and does not actually function. A judicial practice has developed in which investigating judges do not examine the validity of the suspicion or evaluate the evidence.

Supposedly, all these actions are to be carried out by the court when considering the case on its merits, while the investigating judge merely establishes the person’s involvement in the crime, as an independent outside observer would. At the same time, investigating judges also point out that during the pretrial investigation phase, the investigation is ongoing, evidence is being gathered, and theories may change.

This state of affairs provides unscrupulous law enforcement officers with ample opportunities for abuse when initiating asset seizures, searches, and pretrial measures. Law enforcement officials are effectively relieved of the need to prove the validity of their assumptions (versions) or suspicions, or to provide evidence to support them.

It is not uncommon for prosecutors, when seeking pretrial measures, to use a formulation such as “unidentified persons committed a crime at an unidentified location and at an unidentified time,” and investigating judges accept this, noting only that assessing the validity of the suspicion falls outside their jurisdiction.

With the entry into force of the law officially restricting business activities, law enforcement officials must “establish” the factual circumstances indicating the legal entity’s probable involvement in the commission of crimes, as well as state that there are grounds to believe that such a legal entity will evade responsibility or obstruct the investigation.

Moreover, such assumptions do not even need to be supported by evidence, since the investigating judge will not examine them anyway. Later, when the need to restrict the business’s operations no longer exists, the investigation’s version of events may change, and law enforcement may conclude that the legal entity was not involved in criminal activity after all.

The restrictions will be lifted, and no one will be held accountable for imposing them, since the bill does not provide for any compensatory mechanisms to remedy the harm caused by the application of measures to secure criminal proceedings against a legal entity.

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The authorities constantly declare an uncompromising fight against the harassment of businesses by unscrupulous law enforcement officials: special agencies and working groups are created, memorandums are signed, and laws are passed.

But instead of addressing the root cause of unlawful pressure on businesses—namely, the de facto absence of judicial oversight during the pre-trial investigation phase—lawmakers are passing laws that, on the contrary, expand opportunities for abuse. It seems that in the near future, businesses will be left to deal with the problem of unlawful pressure on their own.