Legal analysis of the main flaws of the draft law #4057

Regulations of the draft law #4057 on recovering monetary funds, valuables, and income from them to the state budget without conviction distorts the international standards on the confiscation of assets enshrined in the United Nations Convention against Corruption and EU Directive 2014/42/EU on the freezing and confiscation of instrumentalities and proceeds of crime. 

The draft law shifts the burden of proving the legitimate origin of the assets onto the property owner, which happens in exceptional cases even in the developed countries.

Thus, according to the draft law, to confiscate the property, during the criminal proceedings a prosecutor shall only prove that the property belongs to the third party who received this property from the suspect of the criminal proceedings instituted in accordance with a number of articles of the Criminal Code (No. 191, No. 368, No. 368 (2), No. 369 (2), No. 209, No. 255).

The property shall be confiscated on the basis of a court ruling unless the owner or the third party prove the legitimate origin of the property in question and the amount of the property meets the income officially declared by the property owner.

Not all owners will be able to prove the legitimate origin of their property, since the obligation to declare property does not extend onto all individuals and legal entities. Thus, it might be very difficult to determine whether the third party was a bona fide acquirer.

In exceptional cases, international standards of assets confiscation provide for partial shifting of the burden of proof onto the defendant.

At the same time, the prosecutor shall prove that the property may be derived from proceeds of crime of the defendant. There can be an exception – extended confiscation which allows to confiscate all the property of the owner who cannot prove its legitimate origin. However, it is possible only on the basis of a previous court ruling that establishes the fact of a relevant crime committed by the defendant. This is provided for by Article 5 of EU Directive 2014/42/EU on the freezing and confiscation of instrumentalities and proceeds of crime. The draft law #4057 violates this international standard, as it allows extended confiscation without conviction, before the crime is proven.

The draft law does not establish an obligation to notify the owner that the procedure of recovering their property to the state budget has been initiated.

It is only mentioned that the prosecutor shall notify the attorney of the suspect about such a claim, although no details are provided as to in which way and within which period of time it shall be done.

According to the international standards of confiscation of proceeds of crime, timely notification of the owner and all the concerned parties about the government’s plans to confiscate their property is a mandatory guarantee of property rights protection.

For example, in the USA, the notification is delivered directly to the owner through various means of communications (SMS, email, post office letter) and published in public domain in the public available sources. A certain period of time is provided for all the concerned parties to claim their legal interest in the property. The procedure and the rules for presenting such motions are clearly written out.

The draft law #4057 neglects this fundamental requirement, creating such a mechanism of assets confiscation when the owner will be notified about the confiscation post factum and will not be able to contest it. 

The draft law obligates the court to consider the motion within 10 days after it is submitted to court. At the same time, the property owner does not have to be present at the court sitting when the motion is considered. Nevertheless, one of the four issues to be settled by court is the issue whether the suspect or the third party can prove the legitimate origin of their property. The draft law provides for the possibility of filing an appeal against the court ruling. The court ruling shall be served to the person who owns the property to be recovered to the state budget. If the court ruling is not appealed against, it shall be immediately implemented.

This approach poses a threat to the fundamental right to private property which, according to Article 41 of the Constitution, is “inviolable; the expropriation of objects of the right of private property may be applied only as an exception for reasons of social necessity, on the grounds of and by the procedure established by law, and on the condition of advance and complete compensation of their value; confiscation of property may be applied only pursuant to a court decision, in the cases, in the extent and by the procedure established by law.”

The RPR stresses that already existing enacted laws and statutes allow to confiscate assets of Yanukovych and his associates – even if it was transferred to the third party – without introducing additional amendments to the legislation.

To this end, during the criminal proceedings a prosecutor shall prove the illegitimate origin of the property in line with Articles 96-1 and 96-2 of the Criminal Code of Ukraine and obtain a court conviction.

The law on special confiscation was already adopted by the Verkhovna Rada in February 2016 to implement the action plan on the introduction of a visa-free regime for Ukraine and received a positive opinion and approval of the European Union experts.

The year before – in February 2015 – legislative amendments were introduced to allow extended confiscation of property the legitimate origin of which has not been proven, regardless of whether it is connected with crime, in the civil or criminal proceedings after the person was convicted of a corruption crime. If the defendant flees from prosecution or is put on the wanted list, s/he can be convicted in the absence of the defendant.

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