OPOSICIONES Y CONCURSOS

4.1

General

Compliance issues are currently high on the list of priorities for all multinational companies doing business in Ukraine and for the Ukrainian government, for a number of reasons. First, there is a clear perception that the problem of corruption in Ukraine is significant, a fact borne out by the 2014 Transparency International Corruption Perceptions Index which ranks Ukraine 142 (out of 175 countries). Secondly because, in an effort to address Ukraine’s corruption

problem, new anti-corruption legislation was introduced in Ukraine in October 2014, which made it necessary for multinational companies to take another look at their compliance policies and procedures. Lastly, all of the above developments have been occurring against the backdrop of the introduction of the United Kingdom’s Bribery Act, the enhanced enforcement in the USA of the Foreign Corrupt Practices Act and the increasing level of cooperation between

enforcement authorities across the USA and Western Europe in terms of the oversight and regulation of the business conduct of their companies overseas, particularly in high risk emerging markets.

4.2

Ukrainian Anti-Corruption Legislation

Applicable Anti-Corruption Legislation

On 26 April 2015, the new Law of Ukraine “On Prevention of and Counteraction against Corrupt Practices in Ukraine” (the “Anti-

Corruption Law”) entered into force. The Anti-Corruption Law sets

forth the main principles for combating corruption, criteria for the in- house Anti-Corruption Officer and establishes certain obligations for the owners and managers of companies in preventing and combatting corruption. In addition, relevant amendments to the Criminal,

Administrative Violations, and Criminal Procedural Codes of Ukraine entered into effect at the same time as the Anti-Corruption Law and many additional changes to these statutes were adopted in 2015. It is

expected that further laws and regulations aimed at combatting corruption will be adopted in 2016.

Corruption Misconduct

The Anti-Corruption Law defines corruption misconduct as an intentional act which has the features of corruption, and is performed by a covered person (as defined below) who is subject to criminal, administrative, civil, and/or disciplinary liability. Corruption itself is defined as (i) the use of the authority and the relevant possibilities related thereto granted to a covered person due to his/her occupying a certain position, in order to receive improper benefits, or to accept an offer/promise of such improper benefits for himself/herself or for other persons; as well as (ii) an offer/promise, or the actual granting, of improper benefits to the above-mentioned covered person or, upon the request of such covered person, to other persons in order to

facilitate improper use by such covered person of his/her authority and the relevant possibilities related thereto.

Covered Persons

The following persons, among others, are now subject to liability for corruption: (i) Ukrainian civil servants, (ii) foreign civil servants, (iii) officers of international organizations, (iv) officers of legal entities, and (iv) “public service providers”, i.e., the persons who provide public services even though they are not civil servants, such as auditors, notaries, experts, evaluators, arbitrators, and other persons who provide public services.

Although the Anti-Corruption Law covers the corruption misconduct of officials of legal entities (i.e., commercial bribery), it does not make legal entities subjects of liability. Nevertheless, as of 1 September 2014, legal entities may face sanctions for the corruption offenses of their officers and employees, in accordance with the Criminal Code of Ukraine.

Gifts

The Anti-Corruption Law prohibits a covered person from receiving any gifts other than in accordance with the generally recognized principles of hospitality and within the expressly allowed limits. Such limits are calculated based on the rate of the official minimum monthly salary. At any one time, the value of a gift may not exceed one times the amount of the statutory minimum monthly salary (approximately US$ 52 at the current exchange rate) at the time when the gift is given. Within a calendar year, a covered person is not allowed to receive gifts from one source with a value of more than twice the amount of the monthly subsistence level for a working person, which is established on the first of January of the calendar year in which the gift is given. Because the amount of the statutory monthly salary and of the subsistence level are regularly changed, updates as to its currently applicable level should be obtained before any decision regarding the gift is made.

Any gift made for the purpose of influencing a government official’s exercise of his functions is considered a bribe, even if its amount is negligible.

Transparency Requirements

The Anti-Corruption Law provides for certain types of information which cannot be classified as information with limited access

(confidential), and to which access, therefore, cannot be limited by its owner. Such information covers, in particular, the data regarding any types of remuneration and/or charitable assistance received by a civil servant.

Financial Control and Limitations on State Officials’ Activities The Anti-Corruption Law expressly requires that a state official take active measures to prevent any conflict of interests. If such a conflict arises, then the state official is required to immediately disclose it.

In addition, information about a state official’s property, income, expenses, and financial obligations must be declared and is subject to public disclosure.

State officials are not allowed to have any income in addition to their salaries, apart from the income received from medical or sports judging practice, teaching or artistic or scientific activity. Also, for one year after the resignation, former state officials are prohibited from occupying positions within, consulting or representation of interests of the companies which they have monitored within 12 months prior to their resignations.

Liability

Any losses and/or damages caused by corruption misconduct must be duly compensated to the state and/or to another injured party,

including an individual or company. Moreover, decisions of a state body adopted as a result of corruption offense must be cancelled by a superior body. Transactions made with violations of the Anti-

Corruption Law may be challenged in court.

4.3

Elements to Ensure Compliance

(i) The Anti-Corruption Law does not indicate any mandatory actions that could reduce the risk of violations or would mitigate the sanctions or other negative consequences. However, the precautions that would protect a company from being penalized under the U.S. or European anti-corruption legislation (e.g., adoption of policies, monitoring and investigation, etc.) can be implemented in Ukraine, too. The adoption of the Anti-Corruption Program is mandatory for fully or partially state (or municipal) owned companies and for private companies that wish to participate in state or municipal tenders.

(ii) The Anti-Corruption Law contains a list of the subjects that need to be addressed in the Anti-Corruption Program,

establishes how often the officer should communicate/report to the management and owners of the company on the measures and issues related to corruption prevention. However, legal entities can add their own chapters to their anti-corruption programs and, thus, tailor them to their specific needs. In order to be enforceable in Ukraine, any Anti-Corruption Program (compliance policy) that may have been developed by the company’s foreign headquarters needs to be localized, translated into Ukrainian (or, at minimum, into Russian) and communicated to employees according to a specific procedure.

(iii) Under the Ukrainian laws applicable to employment and privacy, establishing hotlines or investigating whistleblower reports about compliance breaches requires a separate evaluation by qualified and experienced Ukrainian counsel in each particular situation to decrease the risk of claims for invasion of privacy or illegal processing of personal data. (iv) Similarly, although conducting an “anti-corruption due

diligence investigation” of potential business partners and intermediaries before engaging in business activity with them is certainly recommended in order to confirm that Ukrainian laws are not being violated.