The campaign for the submission of annual declarations by individuals authorized to perform state or local government functions is coming to a close. And although the topic seems to have been thoroughly examined and discussed for quite some time—since the process for filing e-declarations was introduced back in 2016—debates still arise regarding the necessity of requiring officials of private-law legal entities to file declarations.

There are frequent cases in which pre-trial investigation authorities and officials of the National Agency for the Prevention of Corruption attempt to hold accountable individuals who hold positions involving organizational, managerial, or administrativeand economic duties in private-law legal entities for failing to file annual declarations.

Article 3 of the Law of Ukraine “On the Prevention of Corruption” defines the list of entities to which this Law applies.

In particular, paragraph 3 of Part 1 of Article 3 of the Law of Ukraine “On the Prevention of Corruption” establishes that the entities subject to this Law are: persons who permanently or temporarily hold positionsrelated to the performance of organizational, managerial, administrative, or economic duties, or who are specifically authorized to perform such duties in private-law legal entities, regardless of their organizational and legal form, as well as other individuals who are not public officials and who perform work or provide services under a contract with an enterprise, institution, or organization—in the cases provided for by this Law.

Although the Law does not specify in which “cases provided for by this Law” the Law of Ukraine “On Preventing Corruption” applies to public officials of private-law legal entities, the NACP has chosen to interpret the legislation on its own and requires officials of private-law legal entities—whose founder is the state or in whose authorized capital more than 50 percent of the shares (stakes) are owned by the state—to file declarations.

Such actions by the NACP clearly exceed the scope of its authorized powers, as this agency is not authorized to independently determine which entities fall under the scope of the Law or to interpret the provisions of the legislation.

At the same time, classifying a person as a subject to whom the Law of Ukraine “On Preventing Corruption” applies does not mean that such a person is required to file an annual declaration or to report significant changes in their financial status, since the concepts of “persons subject to the Act” and “persons required to file declarations” are not identical.

Thus, paragraph 15 of Part 1 of Article 1 of the Law defines “persons required to file declarations” as the persons specified in paragraph 1, subparagraphs “a” and “c” of paragraph 2, and paragraph 4 of Part 1 of Article 3 of this Law, and other persons required to file a declaration in accordance with this Act.

Furthermore, Article 45 of the Law establishes an exhaustive list of persons required to file an annual declaration—namely, persons authorized to perform the functions of the state and local self-government.

In accordance with the Law of Ukraine “On Preventing Corruption,” the entities specified in paragraph 3) of Part 1 of Article 3 of the Law may not be members of the Selection Committee for the position of Head of the National Agency, they are prohibited from using their official powers or their position and the associated opportunities to obtain an unlawful benefit for themselves or others, including the use of any state or municipal property or funds for private interests; for committing corruption or corruption-related offenses, such persons may be held criminally, administratively, civilly, and disciplinarily liable in accordance with the procedure established by law. However, such persons are not required to file declarations.

The practice of pretrial investigation authorities in conducting pretrial investigations into the failure of a person specified in para. 3) of Part 1 of Article 3 of the Law, fails to file an annual declaration (Part 1 of Article 366-1 of the Criminal Code of Ukraine), since, according to the note to Article 366-1 of the Criminal Code of Ukraine, thethe persons subject to declaration are those who, in accordance with Parts 1 and 2 of Article 45 of the Law of Ukraine “On Preventing Corruption,” are required to file a declaration as a person authorized to perform the functions of the state or local self-government.

At the same time, as noted above, the list of persons specified in Article 45 of the Law is exhaustive.

Thus, by a ruling of the Pechersk District Court of Kyiv dated June 3, 2019, in Case No. 757/39517/18-p (http://www.reyestr.court.gov.ua/Review/82328588) the proceedings in the case seeking to hold PERSON_1 administratively liable for committing an offense under Part 2 of Article 172-6 of the Code of Administrative Offenses were dismissed due to the absence of an administrative offense.

In the aforementioned ruling, the court noted that PJSC “Ukrainian Railways” is a legal entity under private law, and that officials of PJSC “Ukrainian Railways” are individuals holding positions within a legal entity under private law; therefore, in accordance with para. 15 of Part 1 of Article 1 and Part 1 of Article 45 of the Law of Ukraine “On Preventing Corruption,” they are not considered declarants and are not required to file a declaration in accordance with the requirements of Part 1 of Article 45 of this Law.

Given the foregoing, it can be concluded that the Law of Ukraine “On Preventing Corruption” does not specify cases in which individuals holding positions related to the performance of organizational, managerial, or administrative and economic duties, or who are specifically authorized to perform such duties in private-law legal entities regardless of their organizational and legal form, or who provide services under a contract with an enterprise, institution, or organization, are considered persons subject to this Law. This loophole leads to arbitrary interpretation of the provisions of the law by NACP officials.

At the same time, even the independent classification of such persons as subjects to whom this Law applies does not require them to file an annual declaration of a person authorized to perform state or local self-government functions, since the persons specified in para. 3) of Part 1 of Article 3 of the Act are not subject to the declaration requirement.