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Partner, Hillmont Partners. James began his career in Ultra High Net Worth private banking as a relationship manager for Russia / CIS in Standard Bank Plc’s Family Office team in London. From 2011 to 2015 he was a member of the management board of one of the largest alcohol producers in Russia/CIS. He is a board member of a number of European companies and a member of the Supervisory Committee of the Alliance for Public Health in Ukraine, one of the country’s largest charities. James has advised numerous large corporates in relation to litigation funding, capital raising, M&A and restructuring
Senior Associate, Hillmont Partners. Oleksandr has considerable experience in successfully representing and protecting the rights and interests of his clients in complex litigation involving multinationals, foreign investors, public entities, the Government and the State. He has extensive knowledge of the civil and commercial legislation of Ukraine as well of relevant laws governing the ownership and use of land
Non-Conviction Based Forfeiture: a View from Ukraine
Systemic corruption is one of the main barriers to the economic and political recovery of Ukraine. Global experience shows that one of the most effective ways to combat corruption is to deprive corrupt people of accumulated proceeds of crime through actions outside criminal procedures.
The attraction of confiscating assets outside of criminal procedures is no different for Ukraine than for other countries around the world that have already adopted the practice, namely when:
— a criminal is hiding from justice and, as a result, cannot be convicted;
— an offender has legal immunity, which protects him from criminal prosecution;
— a criminal has influence and authority which renders criminal investigation and prosecution very difficult or impossible;
— there is insufficient evidence to establish the guilt of the accused beyond reasonable doubt, but enough to do so in relation to the origin of assets on the balance of probabilities.
But is Ukraine today able to ensure the completeness, objectivity and impartiality of cases involving confiscation of assets outside criminal proceedings through its national jurisdiction? The question is, perhaps, a rhetorical one.
Firstly, corruption is deeply entrenched both in the judicial system and in the system of enforcement of judicial decisions, which chronically undermines the practical implementation of non-conviction based asset forfeiture.
Secondly, despite a few failed attempts to legalize the institution of non-conviction based asset forfeiture, an updated regulatory framework has not been established, and the existing framework (Articles 290-292 of the current Civil Procedure Code of Ukraine under the version established by the Law of Ukraine No. 2147-VIII of 3 October 2017) provides for confiscation only after the
entry into force of a conviction in relation to a narrowly-defined circle of individuals.
Thus, the practical application of non-conviction based asset forfeiture through the national jurisdiction is not, for the time being, feasible.
In today’s world the confiscation of assets outside criminal procedures is not simply a domestic matter. In the global economy criminals can move wealth from one country to another in seconds at the press of a button. However, interstate borders have ceased to be a guarantee of safe refuge for corrupt politicians as countries where crimes originated have now adopted laws regarding cooperation (in the sphere of asset tracing and forfeiture) with countries, to which the proceeds of such crimes are funnelled.
In recent years, a number of relevant international agreements have been concluded. Article 54 (1) (c) of the United Nations Convention against Corruption (entered into force in relation to Ukraine on 01.01.2010) states that each State Party:
— will consider the adoption of measures that may be required to confiscate the proceeds of corruption without a criminal conviction in cases where the offender cannot be prosecuted because of death, hiding, absence or in other appropriate cases;
— is required to take such measures to recognize and enforce confiscation orders issued by a court in the jurisdiction of another State Party, as well as measures that may be required to allow its competent authorities, within their jurisdiction, to issue orders for the confiscation of proceeds of corruption originating from abroad.
Thus, the institution of non-conviction based forfeiture opens up wide opportunities for Ukraine to recover assets in foreign jurisdictions, where, first of all, significant national wealth has been misappropriated and, secondly, cases will be considered by an impartial court based on unambiguous, time-tested legislation and relevant legal precedents.
Considering that tens of billions of dollars are believed to have been illegally withdrawn from Ukraine, the cost of their search and recovery in foreign jurisdictions could feasibly reach hundreds of millions of dollars. In other words, returning Ukraine’s stolen wealth requires risking yet more wealth.
In this regard, we draw attention to the rapidly growing market in Europe and the US of litigation funding. The United Kingdom is arguably at the forefront of this industry with funds such as Augusta Ventures Ltd, Balance Legal Capital LLP, Burford Capital, Calunius Capital LLP, Harbour Litigation Funding Ltd, Redress Solutions PLC, Therium Capital Management Ltd, Vannin Capital PCC, Chancery Capital and Woodsford Litigation Funding Ltd1.
But why would such funds be interested in the prospect of investing in projects seeking to recover Ukraine’s stolen national wealth?
Firstly, these funds expect to make a profit: under the terms of cooperation, if a case is successfully resolved in favour of a plaintiff (applicant), the funds will receive (1) the amounts spent by them to finance the case, and (2) compensation for the provision of such financing. The very scale of Ukraine’s stolen national wealth and the familiar jurisdictions involved in its embezzlement make Ukraine an attractive funding prospect.
Secondly, the scale of funds allows them to diversify risk by investing in hundreds of cases simultaneously.
Thirdly, the funds have experience and a team that evaluates cases and understands whether or not they are worth pursuing and the cost of doing so. This is where finance meets law, and litigation funds are where professionals from both spheres apply their knowledge and experience to achieve best practice.
Litigation funds have already entered the Ukrainian market in the private sector. However, the opportunity to fund the Ukrainian State currently does not exist.
The existing system of representing the interests of the State of Ukraine in foreign jurisdictional bodies is based on the requirements of the Procedurefor the Protection of the Rights and Interests of Ukraine during the Settlement of Disputes and the Consideration in Foreign Juridical Bodies of Affairs with the Participation of a Foreign Entity and Ukraine approved by the Decree of the President of Ukraine No. 581/2002 of 26 June 2002 with subsequent amendments.
Based on the aforementioned procedure, the defendant in lawsuits initiated in foreign jurisdictions by the State of Ukraine, as represented by the Ministry of Justice of Ukraine, can only be foreign entities or individuals. In other words, it is practically impossible to initiate actions in the name of the State of Ukraine in foreign jurisdictions against corrupt Ukrainian citizens. Here, legislative changes are needed and are already being worked on.
The National Agency of Ukraine for the Identification, Search and Management of Assets Derived from Corruption and Other Crimes (hereinafter — the National Agency) was created with the purpose of depriving those engaged in corruption of profits and benefits accumulated through criminal activity.
The current version of the Law of Ukraine On the National Agency of Ukraine for the Identification, Search and Management of Assets Derived from Corruption and other Crimes of 10 November, 2015 No. 772-VIII was adopted by the Ukrainian Parliament after lengthy negotiations between different political groups. This undoubtedly affected the quality of the normative material set out by the law and, as a result, the National Agency does not have the range of powers and remedies that are inherent in similar European institutions that would ensure the effective implementation of the task of depriving corrupt officials of the proceeds of crime. This also affects the practicality of representing the interests of the State of Ukraine in foreign jurisdictional bodies, including in lawsuits regarding non-conviction based forfeiture of assets.
The proposed amendments to the Law (No. 772-VIII) provide for the legislative consolidation of the status of the National Agency with regard to the representation and protection of the rights and interests of the State of Ukraine in foreign jurisdictional bodies in cases and disputes regarding assets that originated in Ukraine and which are suspected to be the proceeds of crime. For this purpose, the proposed changes to Law No.772-VIII authorize the National Agency to, inter alia, obtain the full or partial financing of relevant activities, with the subsequent return of such funds and the payment of financing out of funds received by the State of Ukraine through successful litigation in foreign jurisdictions.
The adoption of these legislative changes in conjunction with the progressive revision of a number of other legislative norms governing budgetary formation and financing of public authorities in Ukraine will enable Ukraine to integrate more harmoniously into the global framework for non-conviction based asset forfeiture.
Moreover, such legislative changes will help Ukraine to not only catch up with other countries, but also take a global pioneering role by attracting private funds to deprive corrupt officials of stolen state assets.