Criminal prosecution of large business in the new conditions: what to keep in mind and what to be ready for

Nataliia Osadchaya, the co-founder of S&P Agency, a Candidate of Legal Sciences, a Lawyer, an adviser on investment risks and conflicts.


We expected that “a new way of life” of Ukrainian business will become easier after the presidential and parliamentary races. However, large investors in Ukraine haven’t noticed any decrease in the number of problems over  the past few years; on the contrary, the difficulties of some of them have even become more global.


Large businesses have faced a significant increase in the number of criminal cases regarding tax, antitrust, environmental, and other issues recently.


The authorities of the Prosecutor’s Office of Ukraine, including the GPU and NABU, intensified their activities recently. The spectrum of “questions” that arise in front of businesses is so wide that any system can be hardly traced. There is a high probability that such problems arise for large companies which are actively investing in Ukraine.

We are talking about criminal cases on causing damage to the state, tax evasion, fictitious entrepreneurship, forgery of documents, abuse of power, misappropriation and embezzlement of property through malpractice, violations of the environmental safety rules, damage to the land, pollution of the atmosphere, violations of the water protection rules – these are only some cases in which the state starts a criminal prosecution against large domestic and foreign businesses.


However, as our experience shows, the evidence in similar criminal cases against our clients is generally very weak. Despite this, business advisers have to take huge efforts to prove the absence of a crime and to stop the criminal prosecution, and restore the reputation of the company and its executives.


Business suffers from a variety of investigative actions conducted within the initiated criminal cases – search raids, the seizure of documents and equipment, the disclosure of bank secrecy, asset seizures, endless interrogations of management, employees and counterparties. All this ends with unspoken actions – eavesdropping and recording telephone conversations, removing information from servers of telephone companies, surveillance, etc. In addition, the entire business community is actively watching the whole process in relation to such companies, as after every high-profile investigative action, any search or inspection, relevant information appears in the media. So, another issue for a business suffering from conflicts is restoring its reputation and refuting this information or sharing its position with the public media.


Interestingly, many of the criminal cases, which have recently been intensified by investigative actions, have been initiated since the time of past power. It should also be remembered that the current law does not provide any terms for the criminal pre-trial investigation if a criminal case has been formally opened before March 15, 2018, and if a company is not suspected. The investigation process can last for years, during which any investigative action can be taken. That’s what is happening today. Limitations of the pre-trial investigation terms, which came into force on March 15, 2018, apply only to criminal proceedings opened after this date. Therefore, if a criminal case was instituted before March 15, 2018, we can forget about any pre-trial investigation period. What’s more, we used to face situations when for preserving the indefinite deadlines of the investigative actions, law enforcers found some old case initiated ages ago, changed the plot, attracted new sides, as a result, there was no time limit anymore! Keep in mind that courts satisfy any petitions of law enforcement agencies representatives in 95% of cases. These are requests regarding temporary access, searches, account and property seizures, bank secrecy, silent investigative actions (including wiretaps), etc. So, the person under the investigative actions is left absolutely disempowered and without any chance to demonstrate evidence of his/her innocence.


So, one can actually submit evidence, but law enforcement agencies do not accept such documents physically. According to the current law of criminal procedure, the person being investigated does not have official status in the specific case before being suspected, therefore, no petition from such a person will be considered, and the documents received by the authorities are simply not included in the case.


Another matter of concern is that criminal cases being filed against large foreign companies that invest plenty of money in the economy, create jobs and pay large amounts of taxes.

All these negative phenomena affect the country image and discourage potential investors. It’s not a secret that foreign investors are interested in the safety of their investments and the level playing field within the legislation. Ukraine still needs to improve this.


Rescuing Businesses

There is no single answer to the question: “Why do businesses face problems?”. Each case is unique. It is clear that the underlying causes of such conflicts do not only relate to legal mistakes. I mean that legal or procedural mistakes not always become the basis for “starting creating problems” for businesses.


As for our experience, a fairly large percentage of our clients who have been the subject of serious prosecution by the state, have made mistakes at the initial stages of building their business processes. This allowed their “opponents” to turn these mistakes into a serious problem. Series of search raids in the company and its counterparties, the seizure of a huge number of documents, interrogations and examinations – all these consequences naturally arise if state bodies become interested in a business.


Resolving one of such cases took us a year of painstaking work, more than a hundred motions to the GPU, over 60 appeals to the court, official help from the diplomatic missions, international organizations and media channels. I’d like to highlight that one year is a strong result of solving such a complex conflict. The process can often last much longer, interfering with normal business processes and destroying the business reputation.


Being One Step Ahead

When the confrontation with law enforcement agencies sharpens, it becomes increasingly difficult to prove the correctness of a business. Both conflict sides possess evidence that goes in their favor. Therefore, the solution to such conflicts is a difficult process, but it is essential for a company. Sure, the victory in conflicts will be the immunity for possible subsequent attacks. Compromise is not the key in such confrontations, it is either defeat or victory. As our experience shows, compromise is an illusion; in fact, it is a sign of a future defeat. Our state has never compromised on business, except only temporarily and solely for the sake of winning in the future. Additionally, let’s not forget the considerable credibility that the new government now has.


Under such circumstances of political and social instability, it is crucial that all risks be calculated at the “zero” stage (it means before signing any contracts or before starting the implementation of any projects). Having this done won’t leave even the slightest opportunity for your opponents to cause problems to your business. Unfortunately, nowadays, we still have to save businesses than to minimize risks at the start. However, businesses learn from mistakes as humans do.


Being one step ahead of opponents is one of such lessons.

Name: Mykola

Surname: Siutkin


Phone: +380443830000

Company address: 10 Redutnaya Street, Kyiv, Ukraine

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