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Business Security: Non-Conventional Remedies
Ukraine is a promising place for doing business. The government declares a strong commitment to protecting investments. Nevertheless, business security and a fair attitude of the authorities remain the key concerns of investors entering Ukraine.
In practice the issue is twofold: law-abiding businesses often face excessive pressure due to abuse of the criminal justice means by local law-enforcement bodies. Conversely, business often does not find adequate protection from the state when it becomes a victim of unlawful actions. Very limited statutory rights provided to such companies by law makes the situation worse.
The means of pressure vary: groundless institution of criminal proceedings, searches, seizures, excessive investigations or even explicit threats. Summarized in countless reports and articles, the above problem was so tangible that it even triggered the adoption of “Dawn Raids Stop” laws. Nevertheless, the traditional remedies against pressure on business lack efficiency, as most of them suggest complaining to the very same authority responsible for pressure.
The same goes for habitual remedies against ineffective investigations suggesting that the authority or official handling the investigation should be approached.
The above resulted in high demand for non-conventional remedies to protect businesses. The several institutions described below might be of assistance for such purposes.
The Business Ombudsman Council
The Business Ombudsman Council is an independent institution established in 2015 and founded by the EU and several countries (the US, the UK, France, Germany, etc.). The Council has already proven its effectiveness in countering malpractice against businesses of all sizes and origins.
This may include groundless prosecution; application of disproportionate coercive measures such as searches, seizures, questioning; different procedural breaches; the failure by authorities to comply with a court decision; repeated attempts by the authorities to attach the property after the courts refused to do so; groundless attempts to prevent imported goods from entering Ukraine or export from the country, etc.
As each case is unique, it is an in-house or outside counsel`s task to correctly identify violations and draft a well-reasoned complaint meeting the admissibility criteria.
For instance, before lodging a complaint the company should exhaust at least one level of administrative appeal (if applicable). Also, just like other ombudsman formations, the Council cannot consider cases that have been subject to any court or arbitral proceedings. The temporal limit of the Council’s supervision is one year from the moment that the alleged violation occurred.
By 2021 the Council rejected almost half of the complaints against law-enforcement bodies due to the failure to comply with admissibility criteria. Thus, due attention to the formal requirements should be paid to obtain the Council’s attention.
Furthermore, a key to reach an effective and timely result is to proactively communicate with the Council. A failure to comply with the Council’s request for additional documents or clarifications may result in the dismissal of the complaint.
The declared term of consideration of a case by the Council is around 3 months. According to our observations, the result is usually reached even faster, though some complicated cases may require more time and effort.
When it comes to the imminent risk of irreparable damages to business, the Council may react there and then. In this type of case, it is the counsel’s task to correctly identify the necessity of such an urgent reaction. For instance, in one of our cases, we identified to the Council that the police’s decision to initiate freezing of the company’s bank accounts on questionable grounds would immediately cause the business to rupture and the inability to pay wages to hundreds of employees. This complaint got a prompt reaction from the Council and the issue was resolved.
The Council regularly meets with the relevant authorities to convey its standpoint and recommendations regarding complaints received. The Council may also send written recommendations to the senior management of the authorities at issue.
The Department of Criminal Law Policy and Investments Protection at the Prosecutor-General’s Office
One of the big steps for business protection was the establishment in 2020 of the Department of Criminal Law Policy and Investments Protection within the Prosecutor-General`s Office. Its task is to counter illegal interference with business activity.
The Department provides a forum for dialogue between high-profile prosecutors and businesses on issues of concern related to the criminal justice system.
Furthermore, upon a company complaint, the Department has a wide range of powers to address the matter. For instance, it may commence monitoring of respective criminal proceedings to determine whether the actions of investigative authorities were lawful. The Department may also study case files, instruct prosecutors and investigators, overturn their decisions, etc.
In one of our cases, the Department even took the case under its procedural supervision, having appointed its prosecutor in charge of the group of prosecutors in the case. As a result, the Department acknowledged that the allegations against the company were ill-founded and the criminal proceedings were closed due to the absence of corpus delicti.
The Department may, at its discretion, decide on the exact measures to be taken within the case, though it may also adhere to the company’s request.
There are no particular admissibility criteria for complaints to be filed. As a matter of practice, the procedural irregularities and other violations depicting pressure on a business must be identified to succeed.
The Department`s response is prompt — it usually considers complaints within a couple of weeks. The result can be noticed even earlier — in one of our cases, business malpractice on the part of the tax police ceased to exist on the next day the complaint was filed with the Department.
Thus, in some cases, the mere fact that the business is ready to fight for justice and the Department’s attention to the case may be sufficient to stop the unlawful actions of law-enforcement bodies.
International and local business associations take advocacy measures to protect their members against unlawful pressure by law-enforcement. The most prominent ones are the American Chamber of Commerce, European Business Association, Union of Ukrainian Entrepreneurs, etc.
Membership in such associations offers a presumption of trustworthiness, as companies are subject to scrutiny prior to their admission. The associations are thus perceived by the authorities as a voice of honest business that should be heard.
Such associations have become a platform for dialogue between the management of key law-enforcement and businesses.
As an example, the American Chamber of Commerce has signed memoranda with the Prosecutor-General`s Office, the National Police and other authorities. To protect the legitimate interests of its members, the ACC holds regular meetings with the management of the said authorities and may bring up specific cases for discussion. Additionally, the ACC may directly address local-level authorities with the issues of its members’ concern. The ACC may step in for its member company if there is a prima facie case of bad faith actions on the part of the authorities.
Where applicable, a wisely developed business protection strategy should include all possible remedies. For instance, we recently brought the case of our client to the attention of the ACC, the Department, the Council and the embassy. It concerned a multi-million fraud with the client’s assets. Such strategy resulted in a transfer of the criminal proceedings to the highest possible investigative authority and acceleration of the investigation.
A foreign investor may also seek support from the embassy of its country. The embassy may step in to protect the interests of the company in one way or another in line with diplomatic protocol.
When an embassy brings a case to the attention of local authorities, the issue usually becomes a matter of high priority for the officers involved, as Ukraine’s reputation in the international arena is at stake.
UkraineInvest/the Commission on Business Protection Issues and Investments Climate Improvement
UkraineInvest is the Ukrainian government’s investment promotion office, which was created in 2016 to attract foreign direct investment and assist existing investors to expand their businesses in Ukraine. Being part of the government, this institution communicates directly with high-profile officials. UkraineInvest collaborates with the Commission on Business Protection Issues and Investments Climate Improvement created by the Cabinet of Ministers with powers to consider complaints by business and raise its concerns before key law-enforcement bodies. This may help to highlight the issue of an unfair attitude and address it.
The European Court of Human Rights
Proceedings at the European Court of Human Rights are quite lengthy, but addressing this Court might be beneficial in various ways.
As a matter of practice, the mere fact that the case is accepted by the ECHR (which dismisses more than 90% of incoming applications) disciplines the authorities, as it shows that the company is determined to seek justice using even international arbitration mechanisms.
In general, the ECHR accepts cases after all domestic remedies are exhausted. Consequently, companies must go through all levels of domestic courts before reaching the ECHR. Nevertheless, in certain cases, there are no effective remedies, which open the possibility to file an application before the ECHR immediately.
It is thus for the counsel to properly identify the issue and apply to the ECHR in a timely manner, bearing in mind that the temporal limit of the Court’s supervision is six months after the violation occurred. The time limits are expected to be reduced to four months from August 2021.
In a Nutshell
The attitude of Ukrainian authorities towards business still needs to be improved. In our experience, any business operating in Ukraine may eventually encounter all the imperfections of the criminal justice system. This is where non-conventional methods of business protection may be helpful. The task of a counsel is to identify the best possible remedies in a given case and to use them wisely.