Anti-Corruption & Compliance Forum 2016
Fragile Compliance systems - Possible risks and liabilities
27 September 2016
Ario Dehghani
Counsel Redcliffe Partners
Agenda
1. Possible liability risks according to Ukrainian law
2. Possible liability risks according to FCPA (U.S. Foreign Corrupt Practices Act)
3. Possible liability risks according to UKBA (UK Bribery Act)
4. Hot topic 2016
Поднятие пороговых показателей для
целей получения разрешения АМКУ (тест 1)
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1. Possible liability risks according to Ukrainian law
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Compliance obligations by law (1)
1. Civil, Commercial and Employment Law
 Art. 92, Part 3: general requirement for directors “to act in the interests of the company, in good faith and
reasonably, and within the limits of their powers“:
 possible full civil liability based on tort law (Art. 1166 et seq. of the Civil Code), contractual law
(Art. 653(5) of the Civil Code) including loss of profits (Art. 132 of the Code of Labour Laws);
 possible derivative suit from the shareholders (Art. 28, para. 8, of the Commercial Procedure Code,
as effective since 01/05/2016).
2. Law of Ukraine On Joint Stock Companies
 Art. 63, Part 1: officers of public company bodies shall:
- act in the company's interest; and
- comply with requirements of the legislation, provisions of the charter and other documents of the
company.
 Art. 63, Part 2: officers of public company bodies shall be liable to the company for the losses caused to
the company by their actions (omission), in conformity with the law:
 possible full civil liability towards company.
Поднятие пороговых показателей для
целей получения разрешения АМКУ (тест 1)
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Compliance obligations by law (2)
3. Law on Preventing Corruption
3.1. Company’s obligations
 Art. 61, Part 1: the legal entity ensures the development and adoption of measures that are
necessary and reasonable for preventing and combating corruption in its activities.
 Artt. 62 - 64 with further rules and requirements, inter alia:
- companies participating in a tender for more than UAH 20 million or companies with a
4. Criminal
Code
shareholding
of more than 50 per cent owned by the state or municipality must have a
compliance programme in place and a compliance officer appointed;
 possible full civil liability towards company and third parties (based on Civil Code).
3.2. Officer’s and founder’s obligations
 Art. 61, Part 2: Officers and founders of legal entity to provide regular evaluation of corruption
risks and to implement appropriate anti-corruption measures:
 possible full civil liability towards company and third parties (based on Civil Code);
 additional possible liability under the Code of Administrative Offences (fine up to UAH 6,800).
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Compliance obligations by law (3)
4. Law on Public Procurement
 Art. 17, Part 1, para. 10: Ukrainian companies participating in large public tenders:
- to put in place an anti-corruption policy consisting of rules, standards and measures for
detecting, fighting and preventing corruption; and
- to designate a person to be responsible for the implementation of that policy;
 possible exclusion from tender;
 possible damage claims connected to the violation (based on Civil Code).
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Further liability risks for individuals (1)
5. Possible criminal and administrative liability for individuals
Individuals can commit criminal offences arising from their actions for the company and violating
criminal law, inter alia including violations within the following areas:
 Bribery: Artt. 368 - 369 of the Criminal Code:
 average risk: fine in the amount between UAH 17,000 - 25,500 (app. EUR 580 - 880)
or imprisonment for 2 - 6 years;
 maximum risk: fine in the amount of UAH 34,000 or imprisonment for 12 years.
 Fraud: Art. 190 of the Criminal Code:
 average risk: fine up to UAH 850 or imprisonment up to 3 years;
 maximum risk: imprisonment for 12 years.
 Embezzlement: Art. 191 of the Criminal Code:
 average risk: fine up to UAH 850 or imprisonment up to 4 years;
 maximum risk: imprisonment for 12 years.
 Anti-competitive actions: Art. 1661, 1662, 1664 of the Code of Administrative Offences:
 risk: fine up to UAH 510 (e.g., procedural violations in AMC proceedings or imposition of unfair terms of
contract).
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Further liability risks for individuals (2)
 Data privacy and data protection: Artt. 231 - 232 of the Criminal Code; Art. 18839 of the Code of
5.
Possible criminal
and administrative liability for individuals
Administrative
Offences:
 risks: fine up to UAH 136,000 (app. EUR 4,700) – disclosure of a trade/banking secret (criminal offence);
UAH 34,000 (app. EUR 1,175) – disclosure of personal data (administrative offence).
 Money laundering: Art. 209 - 2091 of the Criminal Code:
 average risk: imprisonment for 3 - 6 years;
 maximum risk: imprisonment for 15 years.
 Tax evasion: Art. 212 - 2121 of the Criminal Code:
 average risk: fine in the amount up to UAH 51,000 (app. EUR 1,760);
 maximum risk: fine in the amount of UAH 425,000 (app. EUR 14,690).
 Environmental non-compliance: Art. 236 of the Criminal Code:
 risks: imprisonment for 5 to 10 years.
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Further liability risks for individuals (3)
6. Other possible liability risks for individuals
Individuals can suffer liability arising from actions for the company, violating several regulations, inter
alia covering the following areas:
 Product safety (foodstuffs): Art. 64 of the Law on Principles of and Requirements to
Safety and Quality of Food Products:
 average risk: fine in the amount between UAH 7,250 to 43,500 (app. EUR 250 to 1,500);
 maximum risk: fine in the amount of UAH 108,750 (app. EUR 3,760).
 Product safety (non-food products): Art. 15 of the Law on General Safety of
Non-Food Products:
 average risk: fine in the amount between UAH 25,500 to 51,000 (app. EUR 880 to 1,760);
 maximum risk: fine in the amount of UAH 85,000 (app. EUR 2,940).
 Product liability: Art. 23 of the Law on Protection of Consumers’ Rights:
 average risk: fine in amount between UAH 85 to 850;
 maximum risk: fine in the amount of tenfold price of the product at issue
or UAH 1,700.
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Further liability risk for companies
1. Civil Code
 Art. 1172, Part 1: damages caused by employees are to be reimbursed by the company that employs them.
 possible full civil liability.
2. Criminal Code
 Art. 96-7, Part 1: fine in the amount up to double the amount of the undue advantage.
 Art. 96-7, Part 2: fine in the amount up to UAH 850,000 (app. EUR 29,100) if a company does not receive
any undue advantage or if the amount of the undue advantage cannot be calculated.
 Art. 96-6, Part 1: mandatory liquidation (in limited cases, e.g., crimes against state safety, financing of
and terrorism, propaganda of war, etc.).
 Art. 96-6, Part 1: confiscation of property (only in the event of mandatory liquidation).
3. Law on Protection of Economic Competition
 Art. 52, Part 2: fines up to 10% of the yearly worldwide turnover of the infringer’s group of companies
(cartel, bid-rigging, abuse of dominance), or, if the amount of undue advantage exceeds 10% turnover, up
to threefold amount of the undue advantage.
 Art. 52, Part 2: fines up to 5% or 1% of the yearly worldwide turnover (for less severe infringements).
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2. Possible liability according to FCPA
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Enforcement of FCPA Penalties
Criminal
 Corporations and other business
entities:
‒ up to USD 2,000,000 or twice
the benefit received from the
payment.
 Officers, directors, stockholders,
employees, and agents:
‒ up to USD 100,000 or twice the
benefit received;
‒ imprisonment up to 5 years.
Civil
 The Attorney General or the SEC may
bring civil claims, civil actions for injunctive
relief, including:
‒ claims under False Claims Act; and
‒ claims against any firm or any officer,
director, employee, or agent of a firm,
or stockholder acting on behalf of the
firm, who violates the anti-bribery
provisions.
 Shareholder and derivative actions
claiming loss to the corporation.
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Enforcement of FCPA penalties in Ukraine
International treaty between Ukraine and the U.S. regarding criminal matters
 Treaty between the United States of America and Ukraine on Mutual Legal Assistance in
Criminal Matters:
 entered into force: 27/02/2001;
 possible immobilisation and forfeiture of assets connected to a crime enforced by
Ukrainian authorities;
 possible restitution of advantages received by a crime enforced by Ukrainian
authorities;
 possible collection of fines enforced by Ukrainian authorities;
 any other form of assistance not prohibited by the laws of Ukraine, including
assistance for U.S. authorities to imprison persons based on U.S. law in Ukraine;
 Ukrainian nationals cannot be extradited to the U.S. (Art. 22 of the Constitution;
Art. 589(1).1 of the Criminal Procedure Code).
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Recent cases with focus on ex-US companies
Some FCPA Penalties
2008-2016
Siemens,
Germany
Total S. A.,
France
HP Russia
USD 772 million
2014
USD 1,6 billion
2008
Alstom,
France
USD 795 million
2016
USD 400 million
2010
USD 108 million
2009
BAE Systems, UK
Archer-Daniels-Midland,
USA, Germany and
Ukraine
USD 398 million
2013
USD 338 million
2010
USD 53,8 million
2013
VimpelCom,
The Netherlands
JGC Corporation, Japan
USD 185 million
2010
USD 218,8 million
2011
Technip S. A., France
Daimler AG,
Germany
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3. Possible liability risks based on UKBA
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UK Bribery Act Penalties
Offences
 General offences:
Penalties
 Individuals:
 offering, promising or giving
a bribe;
 up to 10 years
imprisonment; and/or
 requesting, agreeing to
receive or accepting a
bribe;
 unlimited penalty fine.
 bribing a foreign public
official.
 Specific offence:
 corporate offence – failure
to prevent bribery.
 Corporations:
 unlimited penalty fine.
 Debarment from public
contracting.
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Enforcement of UKBA penalties in Ukraine
International treaty between Ukraine and UK
 Agreement between the Government of the United Kingdom of Great Britain and Northern
Ireland and the Government of Ukraine concerning the Restraint and Confiscation of the
Proceeds and Instruments of Criminal Activity other than Drug Trafficking:
 entered into force: 01/04/1997;
 possible restraint or confiscation of assets and instruments related to a crime and
placed in Ukraine and, if requested, transfer to the UK;
 enforcement by Ukrainian authorities;
 imprisonment is outside the scope of this Agreement.
 European Convention on Mutual Assistance in Criminal Matters:
 entered into force for Ukraine 09/06/1998;
 mutual assistance between Ukraine and UK authorities in execution of letters
rogatory, provision of evidence, service of process, etc., besides, inter alia,
imprisonment;
 assistance by Ukrainian authorities.
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4. Hot topic 2016
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What’s next?
ISO/DIS 37001
 Standard for anti-bribery management systems.
 A series of measures to prevent, detect and address bribery, inter alia:
 adopting anti-bribery policy;
 appointing a person to oversee anti-bribery compliance;
 appropriate training;
 risk assessments;
 due diligence on projects and business associates;
 implementation of financial and commercial controls; and
 reporting and investigation procedures.
 Publication expected to be published in September, October or “late” 2016.
 ISO certification by independent third parties will be possible.
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Thank you for attention!
Ario Dehghani
Counsel, Head of Compliance, Redcliffe Partners
+38 044 390 2259
E-mail: [email protected]
www.redcliffe-partners.com
Redcliffe Partners, 75 Zhylyanska Street, 01032 Kyiv, Ukraine
Redcliffe Partners LLC is a Ukrainian limited liability company (with identification code No. 35912194) and a law firm.
Registered office is at 75 Zhylyanska street, Kyiv, Ukraine 01032.
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