How not to return to the 90s:

Ukrainian businesses are facing some of the most challenging times in their history: threats of shelling, loss of raw materials and equipment in conflict zones, significant delays in deliveries at the border, debts and bankruptcies among counterparties, malicious actions from competitors, and raiding. On top of this, law enforcement seems to have taken us back to the chaotic 90s with “mask shows,” constant inspections from various authorities, fines for fabricated violations, asset seizures, harassment of owners, and, ultimately, business closures. So, what can truly protect the interests of entrepreneurs in these situations—not just in theory, but in practice?

Combating Investigator Impunity

One of the primary priorities of the Security Service of Ukraine (SBU) is the protection of state sovereignty, territorial integrity, and constitutional order. However, the SBU has also become one of the most feared agencies for entrepreneurs. How do they manage to get involved in matters outside their jurisdiction?

The answer is simple: investigators from the State Bureau of Investigation (SBI) or the National Police often assign SBU operatives to cases that don’t fall under their mandate. In response, business associations are calling for amendments to the Criminal Procedure Code (CPC) to prohibit SBU officers from participating in criminal proceedings related to business unless the matter falls within their direct jurisdiction.

A key suggestion is for the investigating judge to take a more active role in overseeing law enforcement actions. Since the investigating judge serves as a neutral arbiter before a case is tried in court, giving them more authority to review whether law enforcement agencies are adhering to proper procedures would help prevent abuses. If these amendments are adopted, the investigating judge would be required to ensure that investigations are within the proper jurisdiction, preventing agencies from overstepping their bounds.

Another proposal allows parties involved in criminal proceedings to appeal to the investigating judge if they believe there has been an abuse of power by investigators or prosecutors. This change would force law enforcement to provide well-reasoned responses to petitions, creating an effective means for businesses to challenge illegal actions or inaction by the prosecution.

Abuse in Asset Forfeiture

One of the biggest problems businesses face when law enforcement visits is the seizure of essential machinery and equipment. Investigators often ignore their right to copy data from computers and instead seize entire sets of equipment crucial for operations.

The proposed amendments to the Criminal Procedure Code aim to address this by introducing the concept of “critical property”—assets essential to the functioning of a business. According to these changes, permission to seize such property would only be granted by the court in exceptional cases. The amendments would also close loopholes often exploited by investigators, including preventing the seizure of items not explicitly mentioned in a court order.

Moreover, if the person whose property has been seized is not formally charged within 60 days, and the prosecutor cannot prove the need to continue holding the property, the court would be required to cancel the seizure.

Another important change involves ensuring the owner is present when a motion to seize assets is considered. If the owner is not invited to this hearing, the motion cannot be considered, and the seizure cannot take place without their presence.

There is also a common issue where, after a decision to return temporarily confiscated property is made by the investigating judge, neither the prosecutor nor the investigator acts on it promptly. Under the proposed changes, once the prosecutor receives such a court decision, they would be required to instruct the investigator to return the property within 24 hours.

Challenging the Grounds for a Search and Bail Amounts

One important provision grants individuals being searched the right to review the case materials, allowing them to understand the evidence and justifications behind the search. If the investigating judge’s decision to authorize the search lacks clear reasons and justifications for the need to seize specific property, such a decision can be appealed.

As a result, investigative judges may become more cautious, refraining from issuing search warrants upon the first request from their regular investigators. They will be required to carefully evaluate the necessity of the search and the seizure of the specified property, ensuring that decisions are made based on genuine need.

When investigative authorities are concerned that a suspect might flee or avoid participating in judicial proceedings, they may impose detention as a preventive measure, allowing the suspect the option to post bail. However, prosecutors sometimes misuse this power, setting excessively high bail amounts that the suspect cannot possibly pay, effectively keeping them in pre-trial detention.

To address this, proposed amendments to the Criminal Procedure Code suggest that the maximum bail amount requested by the prosecutor should not exceed the value of the damage caused by the alleged crime. This value would need to be clearly substantiated by an expert’s opinion.

Pre-Trial Investigation Terms

An important update in business law addresses the issue of law enforcement pressure during pre-trial investigations. Starting January 1, 2024, the Verkhovna Rada partially repealed the so-called Lozovoy amendments. Under the previous law, if investigators did not raise suspicions within 18 months of a criminal case being initiated and did not extend this term in court, we, as lawyers, could request the closure of the case from the investigating judge.

However, the removal of this tool means that pre-trial investigations in cases where no suspicions are raised can now drag on indefinitely. This opens the door for law enforcement to exert pressure on businesses for years without actually progressing toward a legitimate investigation or a substantiated accusation.

To remedy this, we propose reinstating the pre-trial investigation deadlines and establishing a clear process for extending them in cases of actual criminal proceedings. Of course, these changes should not apply to investigations involving corruption or serious crimes handled by specialized bodies like NABU.

This is not an exhaustive list of all proposed changes to criminal law that businesses need, but if these changes are implemented, entrepreneurs will gain real avenues for combating injustice and lawlessness. As lawyers, we will also have new tools to protect our clients from the abuses of law enforcement.

Let’s remember that entrepreneurs are the driving force behind our economy—they fund national security and the fight for Ukraine’s independence through taxes, job creation, partnerships, and investment.