Ukraine`s EU candidate status requires efforts to align national legislation with EU regulations and to improve the business and investment climate. Several draft laws were introduced recently with this end in mind, some of them remain as pieces of draft legislation, while some of them have already been adopted. This article covers both positive changes and potential risks that businesses operating in Ukraine may face due to these recent developments.
Criminalization of Violation and Circumvention of Sanctions
In January 2025, President Zelensky submitted to Parliament Draft Law No. 12406, which introduces criminal liability for violating and circumventing sanctions. The initiative was triggered by the current absence of an accountability mechanism for such actions that would match their gravity as well as a necessity to align local legislation with the requirements of EU Directive 2024/1226, which obliges member states to criminalize the above actions.
Currently, law-enforcement tends to launch investigations arising from actions related to “russian trail” (e.g. engaging in cooperation with counterparts connected to russia) based on other Articles of the Criminal Code of Ukraine (CCU) (e.g. financing actions intended to violently disrupt the constitutional order, seize state power, or alter Ukraine’s territorial or state borders (Art. 110-2 of the CCU), aiding the aggressor state (Art. 111-2 of the CCU), collaborative activity (Art. 111-1 of the CCU) and others). The broad wording of these articles creates uncertainty as to the exact scope of actions that fall under the latter and triggers practical situations where the same actions are qualified as different crimes. Therefore, introducing a separate article related to violation or circumvention of sanctions may facilitate more accurate qualifications and avoid artificial allegations.
However, the wording of the crime suggested by the Draft Law may create risks of its broad interpretation. Namely, while the concept of violation of sanctions is deemed self-explanatory according to the draft law, the concept of circumvention of sanctions can cover multiple actions. These can be acquisition of assets of sanctioned persons, their transfer, change of form, or taking actions aimed at concealing, disguising the origin or possession of such assets, control over them, the rights to such assets, sources of their origin, location etc.
Such a broad scope of actions may subject companies, especially those having sanctioned individuals in their ownership structures, to procedural pressure by law-enforcement authorities and enhanced scrutiny, as a lot of standard business operations and processes can theoretically be considered as falling under the relevant crime. Even if sanctioned individuals do not have effective control over a business, the company itself may still face prosecution.
Based on positions shared by the authorities and gist of the draft law, it has a strong chance of being adopted, though its consideration is still pending.
Enhancing Corporate Liability in Ukraine
In December 2024, the Ukrainian Parliament passed Law No. 11443, which introduced a set of amendments to the mechanisms for holding legal entities criminally liable.
The background for this step was alignment of Ukrainian legislation with the standards set out by the Organization for Economic Cooperation and Development (OECD), a step important for Ukraine’s EU integration.
Key changes introduced by the law are as follows:
- The usual for Ukrainian legislation “secondary” nature of criminal liability of legal entities (i.e. a concept where an entity can only be held criminally liable if its employee or authorized person was found guilty of committing the relevant crime) is now lifted in cases where money laundering, bribing an official and abuse of influence were committed with respect to a foreign official. Namely, such companies can now be held criminally liable for such crimes even in cases where the responsible individual has not even been identified or prosecuted.
- As for the related risk, this approach leaves the door open for law-enforcement authorities to manipulate various assumptions and selectively choose evidence to exert pressure on businesses.
- The law redefines who is considered to be an “authorized person” within a company, broadening the scope to include individuals acting on behalf of the company based on verbal or written permission. This removes the shield that companies once had in distancing themselves from third-party actors. As a result, it is recommended that internal control systems are robust so as to prevent and detect suspicious actions.
- The law introduces substantially increased maximum fines for legal entities. For serious crimes, fines could rise up to 34 million UAH (the previous figure was 1.275 million UAH) and for particularly serious crimes, up to 127.5 million UAH (the previous figure was 1.7 million UAH).
- In addition, the law introduces non-financial sanctions for committing money laundering, bribing an official and abuse of influence with regard to foreign officials, which include temporary restrictions on a company’s business activities, including bans on public procurement participation, restrictions on licenses, and limitations on receiving state benefits.
- The list of possible additional (non-financial) measures is non-exhaustive, which in practice could lead to selective application of the law.
- The law also introduces a separate procedure for prosecuting legal entities within proceedings related to the above crimes committed with regard to foreign officials, which includes a possibility to impose restrictions on the activities of a legal entity during proceedings. These restrictions can be applied in relation to changes to founding documents or share capital, transactions involving a shareholder’s stake in the capital, significant transactions (for joint-stock companies: at least 10% of assets; for limited liability companies: at least 50%), disposal of any assets, cessation of the legal entity.
These measures are preventive and are applied only before a company is officially held accountable. They require a decision from an investigating judge or court.
Such powers, particularly when exercised without clear evidence, can be misused to put undue pressure on businesses.
For now, the key amendments of the law only concern separate crimes that come under the jurisdiction of the National Anti-Corruption Bureau of Ukraine and are related to foreign officials. However, they could pave the way for broader application to a wider range of crimes under the jurisdiction as well as of Ukraine’s many other law-enforcement agencies.
In practice, this law may challenge businesses to strengthen their anti-corruption frameworks and be vigilant in ensuring that their representatives and intermediaries comply with legal standards. The law’s full impact will, however, depend on its implementation and the willingness of law-enforcement agencies to exercise their new powers in a fair and transparent way.
Legislative Initiatives Aimed at Protecting Business During Criminal Proceedings
In January 2025, Draft Bill No. 12439 was introduced with several promising initiatives aimed at addressing common challenges businesses face when dealing with law-enforcement bodies, which include:
- establishing a clear time limit of up to two months for the seizure of property, with the possibility for multiple extensions;
- strengthening procedural guarantees for the defense, including expanding the list of decisions that can can be appealed during the pre-trial investigation (for example, refusal to cancel the seizure of property, refusal to enlist an expert at the request of the defence and granting a motion to limit for familiarization with case materials);
- introduction of a separate ruling by the investigating judge that addresses violations of the rights of participants in the process; granting the defence the right to request a change of investigative authority, etc.
However, there are concerns that separate amendments provide excessive rights to the defence and could be used by perpetrators in high-profile corruption cases to avoid asset seizures and interfere with crucial evidence. Thus, it remains to be seen if the draft bill will become law and in precisely what wording.
Several draft bills were also introduced following last year`s Decision by the National Security and Defense Council of Ukraine (approved by the President) to introduce effective mechanisms to protect businesses from possible abuses within criminal proceedings, will one of the most significant being Draft Bill No. 10440.
This draft bill suggests protecting business interests in criminal proceedings by, inter alia, involving representatives from the Business Ombudsman Council during the carrying out of searches of entrepreneurs and during execution of decisions regarding access to items and documents. However, such an approach needs further improvement, as the current organizational structure of the Council and the limited number of employees may mean that implementation of such provisions would be impossible.
This draft bill also suggests the possibility of conducting investigative actions within criminal cases investigated by the Economic Security Bureau of Ukraine exclusively by operational units of the latter – a part of a long-awaited limit of broad practice of the involvement of operational units of the Security Service of Ukraine in procedural measures conducted within criminal cases investigated by other authorities. Still, such an amendment may fail to reach its aim in practice due to permission to involve personnel from other pre-trial investigation authorities in cases of “objective circumstances.”
Consideration of the above draft bills is still pending, as are several other bills suggesting changes to the criminal procedure in general and protection of business in particular. However, neither of them provides comprehensive and effective protection of businesses from challenges that the business sector is currently facing, thus leaving a need for further work on relevant legislative changes to be carried out.
