Almost a disaster. The decision of the Anti-Corruption Court that may bury the idea of civil confiscation

by Vadym Valko, originally published on UP

More than two years have passed since civil confiscation of illegal assets from officials was introduced in Ukraine. Its advantage is simplified procedure for confiscation of unjustified assets compared to the criminal process.

The first decision in the history of our country on civil confiscation was made this summer. It was regarding assets of the pro-Russian Member of Parliament from the Opposition Platform For Life Ilya Kyva. The High Anti-Corruption Court confiscated 1.25 million UAH of unjustified income from the alleged lease of pulp pit. 

The second case was the lawsuit against Member of Parliament Mykhaylo Volynets. And in the second case, two out of three judges of the HACC bench have chosen the very threatening position that could put an end to the very idea of civil confiscation of illicit assets from officials.

What is civil confiscation?

Civil confiscation is the special procedure that, according to rules of civil process, determines when, under what conditions and in what order unjustified assets of officials can be confiscated by state.

The difference between civil and criminal procedures is that in criminal cases the prosecutor must prove guilt of the accused “beyond a reasonable doubt” (that means that only one substantiated conclusion should be drawn from the provided evidence, namely that the accused is guilty), and confiscation in the civil process provides much lower standard of proof in the form of “preponderance of evidence” or “balance of probabilities” (when the prosecutor is sufficient to provide more convincing evidence than the other party).

This approach is in line with the world’s best anti-corruption practices. The similar institute operates in many countries around the world (UK, Switzerland, Slovenia, etc.).

When can the court confiscate an asset?

In order to confiscate certain asset, the court must establish that it was acquired by the official during the civil service, and its origin cannot be documented and reasonably explained. The burden of proof is shared by both the prosecutor and the defendant.

In order to initiate the procedure of civil confiscation in Ukrainian model, the prosecutor must submit the lawsuit and convincingly prove the fact that:

  1. the asset was acquired after November 28, 2019, when the regarding law was adopted;
  2. there is a connection between the asset and the official;
  3. the official did not have legal income to acquire the asset;
  4. the difference between the value of the asset and the legal income of the official is from 1 million UAH to 6.2 million UAH.

If the prosecutor proves these facts, then the official will have to “interrupt” the prosecutor’s evidence and prove that the asset (or finances necessary for its acquisition) was obtained legally. That means that civil confiscation occurs only after confirmation that the asset could not be acquired for legal income.

In case when the person used income, received by him before taking office, to acquire the asset, the legality of such income must be examined. This conclusion can be drawn from provisions of article 291 of the Civil Procedure Code of Ukraine: “the asset is unjustified if the court does not establish from the evidence submitted to it that the asset was acquired at the expense of legal income”. The European Court of Human Rights also finds that the proof at the level of “balance of probabilities” or “high probability” combined with the inability of the property owner to provide evidence to the contrary is sufficient for the application of civil confiscation.

What about the case regarding apartment of the Member of Parliament Volynets?

Mykhaylo Volynets was the Member of Parliament in 2002-2012, he returned to the Verkhovna Rada in 2019 under the flag of Batkivshchyna. At the same time, he worked in the leadership of trade unions.

In November 2017, Volynets signed the preliminary contract for the purchase of a three-room apartment in Kyiv for the amount of over 7.6 million UAH in an elite residential complex:

  • in December 2017, Volynets paid 4 million UAH as a down payment;
  • in 2018, he paid another 3.6 million UAH, contributing an average of 296,000 UAH per month;
  • in 2019, Volynets did not make any payment, and the last payment for the apartment in the amount of 325 UAH Volynets paid in June 2020, when he has already been a Member of Parliament.

At the same time, from 2002 to 2012, Volynets was also the Member of Parliament. It is logical that the legality of income for this period, if it was used to buy the apartment, should be examined. Moreover, the income received by Volynets in periods between he was the Member of Parliament (2012-2019) should also be examined for legality, as the potential receipt of unconfirmed income by him and then use of such income to purchase the apartment created risks of influencing Volynets as the Member of Parliament by other persons from whom he could get this income.

For instance, the media repeatedly mentioned the connection between Member of Parliament Volynets and the oligarch Rinat Akhmetov. In particular, the son of the Member of Parliament has been working in the Geneva office of the company Metinvest since 2016. Sergiy Golovnyov, editor-in-chief of Business.Censor.net, wrote in his telegram about the connection between Akhmetov and Volynets in the context of involvement of the latter in attempts to reduce ore and coal transportation tariffs for the oligarch.

Moreover, the author stated that it was Volynets that allegedly organized protests of miners in Kyiv when Akhmetov’s DTEK demanded increase of electricity tariffs in 2015.

In September 2020, Akhmetov needed Volynets again, when he could not divide Kryvyi Rig Iron Ore Plant with Kolomoyskyi. Allegedly, the Member of Parliament organized strikes at Kryvyi Rig Iron Ore Plant.

We should also add that Volynets was constantly confused and contradicted himself, when he explained the origin of funds for the apartment:

  • On April 22, 2021, in the interview to Radio Svoboda Volynets explained the origin of 7.6 million UAH for the apartment: “I had savings, in the first place. Secondly, I live with a woman who also made a contribution to this apartment”;
  • in June (June 24, 2021) Volynets’ lawyer wrote in response to the court: “Volynets had enough of his own legally received income and savings to make payments in the total amount of 7.6 million UAH in 2017-2018 “;
  • during the month (July 28, 2021) the position of lawyers changed and they provided new version: “the son supported Volynets with his available money savings and gave him money in the total amount of 1 million UAH, 30,000 USD and 69,000 Swiss francs”. At the same time, Volynets’ son testified at the court meeting that he gave 10.000 USD to his father in January, June and October 2018, but he couldn’t provide documentary evidence of transfer of funds to his father, and there were no gifts from the son in the declaration of Volynets in 2018;
  • two months later (September 30, 2021) Volynets again changed his mind and told the court that he had issued “installment” for the apartment because it was “difficult” to pay the full amount. But if this is true, then what “sufficient savings” can we talk about? Moreover, in 2016, Volynets bought another apartment for 1 million UAH, and in 2018, he bought two parking spaces for over 380,000 UAH. That means that the reality of significant savings is quite questionable.

And despite such contradictions in explanations and possible lack of sufficient income to buy the apartment, two out of three judges (Andriy Bitsyuk and Volodymyr Voronko) decided that only 325 UAH paid by the Member of Parliament in 2020 should be examined for legality. Other payments in the amount of 7.6 million UAH do not need to be examined because Volynets paid these funds before his election to Parliament.

At the same time, in motivating their position, which may become key for all future cases of civil confiscation, judges Bitsyuk and Voronko cited only one paragraph, which states the following: “Only those income that the person has received during his/her term of office are examined for legality. As Volynets was not the Member of Parliament until August 29, 2019, then his income does not need to be examined so far”.

Judges pointed out that in order to determine legal income, they should be guided exclusively by paragraphs 7 and 8, part 1, article 46 of the Law of Ukraine “On Prevention of Corruption”, which apply only to subjects of declaration. And since Volynets was not “the person authorized to perform state functions” for seven years before he became a new Member of Parliament and for this reason his income does not need to be examined.

However, this is pure manipulation, as legal income is “income lawfully received by the person from legal sources”, in particular (and not exclusively) sources specified in paragraphs 7 and 8 of, part 1, article 46 of the Law of Ukraine “On Prevention of Corruption”. Therefore, this list is not the only and exhaustive list of legal income of the person.

That is why the court’s decision in this part contradicts the law and the purpose of introducing the institute of civil confiscation. After all, its essence was that officials could no longer explain existence of expensive property by fictitious “lottery prizes”, “significant savings from the past” or “rich relatives-businessmen”.

Instead, the position of judges Bitsyuk and Voronko, which they set out in their decision, will allow many officials to easily refute claims of the prosecutor’s office about unjustified assets by claiming that the asset was allegedly acquired with funds received before taking office. At the same time, they will not even need to explain whether they had any income or not. Well, judges of the HACC showed very convenient way for dishonest officials.

By the way, the judge-rapporteur Kateryna Shyroka disagreed with position of her colleagues. In separate opinion of the court’s decision she stated that “the validity of acquisition of the asset should be examined in the context of all payments made for the purchase of the apartment”. The judge stated that provisions of the law do not indicate that only income received by the person while he/she took office is subject to examination. Therefore, it was necessary to examine income of Volynets, received from all legal sources before gaining the status of the Member of Parliament, and not only 325 UAH, which he paid during the time he hold this position.

Mention of judge Shyroka regarding the practice of other states on civil confiscation, where it has been formed for years, is also appropriate. In particular, the judge mentions the use of assets in question, tactics of “cash hoard defense”, which means explaining the acquisition of asset by significant savings in cash or gifts of money from family members (relatives, friends). Shyroka states that judges should take into account such defence strategy and meticulously apply methods of establishing the actual circumstances of a person’s acquisition of cash.

***

The very possibility of civil confiscation sends clear signal to dishonest officials that sooner or later their excessive wealth will be assessed by the court and they will not be able to freely use the illegally obtained assets. If officials’ legal income and savings do not allow them to purchase valuable assets, the court may confiscate them. And under the simplified procedure with easier standard of proof compared to the criminal process.

As for the case regarding Volynets, the court should examine the legality of all income that the Member of Parliament used to buy the apartment, regardless the time when he had received it, namely: before becoming the Member of Parliament in 2019 or after. Instead, judges limited themselves to examining the legality of only 325 UAH. This position is completely absurd and jeopardizes the expediency of existence of the institution of “recognition of assets as unjustified and their confiscation by state”.

Judges of the Appeals Chamber can correct this annoying mistake. Today, future of most cases regarding civil confiscation depends largely on their decision.

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