Nataliia  Osadcha

Nataliia Osadcha, the co-founder of S&P agency, an adviser on investment risks.

Nataliia Osadcha, the co-founder of S&P agency, an adviser on investment risks.

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Criminal prosecution of large business: what to keep in mind


Nataliia Osadcha, the co-founder of S&P agency, an adviser on investment risks.

We expected that “a new way of life” of Ukrainian business will differ from an old one. 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 have even become more global.

Large businesses have faced a significant increase in the number of criminal cases regarding both tax and non-tax issues recently.

The authorities of the Prosecutor’s Office of Ukraine, including the GPU, 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 and so on, we can list these issues for hours.

The pieces of evidence in the criminal cases against our clients are very weak. Despite this, business advisers have to take huge efforts to prove the absence of a crime and to stop the criminal prosecution of a company and its leaders.

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.

Most importantly, the law does not establish specific timing for investigating such cases. The investigation process can last for years if there are no suspected persons. Limitations of the pre-trial investigation terms, which came into force on March 15, 2018, apply only to criminal proceedings opened after March 15, 2018. Therefore, if a criminal case was instituted before this date, we can forget about any pre-trial investigation period. What’s more, we used to face situations when for preserving the “unlimited time” 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…

According to our practice, courts satisfy any petitions of law enforcement agencies representatives in 95% of cases. So, the person under the investigative actions is left absolutely disempowered and without any chance to demonstrate evidence of his/her innocence.

Well, you actually can submit evidence, but law enforcement agencies do not accept such documents physically. According to the current law of criminal procedure, one does not have an official status in the specific case before being suspected, therefore, authorities won’t accept any petitions or documents from such a person.

Another matter of concern is that criminal cases are being filed against large foreign companies that invest plenty of money in Ukraine, create jobs and officially pay all taxes.

All this affects the country image and discourages potential investors. First and foremost, they 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 are no answers to the question: “Why do businesses face problems?”. Each case is unique. The underlying causes may come not only from the legal sphere.

Many of our clients who suffer from different illegal actions 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 from three to five years, completely or partially paralyzing the workflow of the business.

Being One Step Ahead

Usually, when the confrontation with the state bodies, especially law enforcement agencies, is on the level or rapid escalation, making a point becomes too difficult for an investor. Both sides possess evidence that goes in their favors. We can easily predict which side will be protected by the court of our country.

Under such circumstances, 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 like humans do.

Being a step ahead of the opponents is one of such lessons to learn.