Amendments to Legislation on Property Seizure Procedure and their Implications for Business
On 9 December 2015 the President of Ukraine Petro Poroshenko signed Law No.2540а "On Amendments to the Criminal Procedure Code of Ukraine regarding some issues of property seizure to eliminate corruption risks in its application" adopted by the Parliament of Ukraine on 10 October 2015 (hereinafter the Law). Further it will be published and come into effect on the next day following its promulgation.
At the same time, having analyzed the provisions of the Law, we consider it necessary to emphasize the main changes in the Criminal Procedure Code of Ukraine, which are as follows:
1. The lawmaker has listed the signs, of which even one would suffice for seizure of the relevant property (part 1 of Article 170 of the Criminal Procedure Code of Ukraine). Thus, property may be attached, if there is sufficient evidence that it:
- is an object, tool or instrument of crime;
- is a proof of crime;
- has been obtained by criminal means;
- is proceeds from crime;
- has been obtained with proceeds from crime;
- may be confiscated and is applied to a suspect, accused or convicted;
- may be subject to special confiscation regarding third parties/a legal entity;
- may secure a civil action
2. Also, the Law provides for changes in part 1 of Article 170 of the Criminal Procedure Code of Ukraine stating that " seizure of property shall mean temporary deprivation of the right to alienate, dispose of and/or use property, if there are sufficient grounds to believe that it … (has at least one of the above signs)".
It is worthwhile noting that the current wording of the mentioned article of the Criminal Procedure Code of Ukraine provides for denying a person the right to alienate certain property, while the possibility to prohibit the use and disposal of the property owned by it is stipulated only as an alternative.
At the same time, the wording used in the adopted Law may lead to violations of the rights of persons who own or dispose of certain property by creating a legal uncertainty as to its application in practice. Thus, law enforcement officers may interpret the said provision as a necessity to deprive a person simultaneously of the right to alienate and of the right to use and dispose of the relevant property, which may entail negative consequences for such persons.
3. Unlike the current wording of the Criminal Procedure Code of Ukraine, which provides for the right to seize property owned by a particular person, the relevant Law establishes the right to seize property owned, used or disposed by the relevant person.
Thus, cases of broad interpretation of the mentioned provision on behalf of investigators and the latter’s initiation of seizure of property that is not owned by a person, but, for instance, is leased by it, are likely to occur.
4. In addition, the above Law extends the list of persons, whose property may be subject to seizure. Thus, according to the updated wording of part 2 of Article 170 of the Criminal Procedure Code of Ukraine, apart from property belonging to a suspect, accused or convicted, it is also possible to seize property of third parties and legal entities, to which measures may be applied under criminal law.
Third parties, whose property may be attached according to provisions of part 2 of Article 170 of the Criminal Procedure Code of Ukraine, are those who have obtained or bought property from a suspected, accused or convicted without payment or in exchange for an amount much lower that its market value, or who knew or should have known that the purpose of such transfer was to get proceeds from property obtained by means of crime, to conceal a crime and/or to avoid confiscation.
It should be emphasized that to avoid violations of third parties’ rights in form of abuses on the part of law enforcement agencies the Law stipulates that the mentioned information regarding the procedure for third parties to acquire property should be established by a court based on sufficiency of evidence.
Moreover, the Law prohibits attaching property owned by a bona fide acquirer. In view of the above provision, it is advisable to keep all documentary evidence of legality of property acquisition to avoid possible negative consequences, such as its seizure in criminal proceedings.
5. To secure the rights of owners and users of attached property, the above Law provides for the following in part 3 of Article 171 of the Criminal Procedure Code of Ukraine: "In case of temporary seizure of property during a search or examination carried out based on a ruling of an investigating judge as provided by Article 235 of this Code, a request for seizure of such property should be filed by an investigator or prosecutor within the next day upon its seizure, otherwise the property should be immediately returned to the person it was taken from."
As it appears, the mentioned provision is supposed to guarantee the persons, whose property was attached during an interrogation without a relevant court order, its immediate returning, if the investigator violates the statutory period for seeking an seizure order.
6. In addition, to promptly inform persons about the court’s conclusions on whether their property should be subject to seizure, the Law has amended part 7 of Article 173 of the Criminal Procedure Code of Ukraine in the light of the fact that an seizure order should be immediately served upon its adoption to an investigator, prosecutor, suspected, accused, representative of a legal entity, to which the proceedings relate, to a suspected, accused, convicted, or to third parties that were present during its announcement.
If such persons were absent when the order was announced, a copy thereof should be sent to them no later than the next business day upon its adoption.
To sum up the above, the analyzed Law No.2540а, though aimed at elimination of corruption risks related to the seizure of property, contains a number of drawbacks that may largely affect the guaranteed rights of persons to own, use and dispose of property held by them. However, reality-based conclusions regarding the applicability results of the Law will be possible only after its practical implementation.
Kind regards and best wishes,
Counsel at Arzinger Law Office