Having no problems: how big business should defend itself

Nataliia Osadcha, Co-founder of S&P Agency, Investment Risk Advisor.
Published specifically for Kyiv Post Doing Business.

“A new life” of Ukrainian business was expected to be improved. However, over the last few years, the burden of problems for big investors in Ukraine has not been reduced. On the contrary, the problems have become greater in extent and severity.


Ingenious raiding tricks

Big business has been confronted with an increasing number of criminal cases, both tax-related and non-tax-related. The Ukrainian Prosecutor General’s Office has become much more active. The range of “issues” is so diverse that it is rather difficult to identify a system in their diversity. The only thing we can say almost for certain is that such problems arise in relation only to big companies, which are actively investing in Ukraine. This includes initiating criminal cases based on the facts of the following: economic damage caused to Ukraine (if a private company has established business relationships with state companies), exceeding authority by officials (if a private company has bought state property) and unauthorized seizure of land, although a company had a lease.

The legal and evidentiary basis in the criminal cases that are filed against our clients is very weak. Despite this, we have to do a huge amount of work to prove the absence of a crime and stop criminal prosecution against a company and its leaders. This is only the top of the iceberg. Business suffers from a variety of investigative actions, which are conducted within the framework of criminal cases initiated. These are searches, seizures of both documents and equipment, disclosure of bank secrecy and arrests of assets. All this ends with secret investigating actions, e.g. listening and recording of telephone conversations. Most importantly, the law has no time limits for the investigation period of such cases. If there is no suspicion in the case, it can drag out for years. Consequently, any investigative actions may last for such a long time. As practice shows, in 95% of cases courts satisfy any petitions of representatives of law enforcement bodies. Therefore, a person, against whom “investigative actions” are conducted, is absolutely disempowered and cannot even present evidence of his innocence.

More precisely, you can submit evidence, but law enforcement agencies do not accept such documents. According to the current criminal procedural legislation, a person does not have an official status in the case before being suspected, therefore, no petition will be considered. It is also disturbing that criminal cases are brought against large foreign companies that invest huge amounts of money in the economy, create jobs and officially pay all taxes. All this affects the image of the country and discourages potential investors.

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There is no single answer why businesses have problems. Each case is individual. Implications can be found not only in the legal sphere. Many of our clients who suffer from illegal actions of state bodies have made mistakes in the initial stages of business processes. This allowed their opponents to turn mistakes into a serious problem. Cascades of searches in the company and counterparties, the seizure of a huge number of documents, interrogations, examinations – all these consequences naturally arise if the business is “interested” by state bodies. In order to resolve one of these cases, it took us a year of painstaking work, over a hundred petitions to the GPO, more than 60 appeals to the court, official help from the diplomatic missions, international organizations and the media. I note that the year for such complex conflicts is a very rapid result. Often they can last from five to seven years, completely paralyzing the work of the business.


One step ahead

As a rule, when the confrontation with state bodies constitutes a serious escalation, it becomes increasingly difficult for an investor to prove his or her rightness. Both sides have at their disposal evidence proving violations of their opponents, and it is quite easy to predict which decision the court will announce. In such circumstances, it is important to calculate the risks. Having done this, you deprive opponents of the slightest opportunity to create a business problem. Unfortunately nowadays we are working more on saving business instead of just minimizing their risks. However it is common for a person as well as for business to learn from his or its own mistakes. To be one step ahead of the opponents is one of such lessons.

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