16:08 27.11.2020


What are the risks for ARMA's activities posed by potential legislative changes?

5 min read
What are the risks for ARMA's activities posed by potential legislative changes?

Vitalii Syhydyn, Acting Head of ARMA

Given the uniqueness of ARMA within the system of state authorities in Ukraine, the legislation adopted five years ago to regulate the activities of the Agency proved to be extremely imperfect in practice. ARMA's experience convincingly shows that without comprehensive and well-thought-out legislative changes, the institutional capacity of the authority is endangered, which, in turn, can lead to violations of the state's international obligations, in particular, in terms of European integration and visa liberalization.

The presence of institutional shortcomings and the inconsistency of special and procedural legislation hinder the effective work of the Agency. This is confirmed by experts from reputable anti-corruption organizations, in particular, Transparency International Ukraine. In their new report on the analysis of anti-corruption infrastructure in Ukraine, the representatives of this organization emphasize the following problematic aspects in the Agency's activities:

- insufficient material and technical support of ARMA. ARMA's budget is   actually a budget for functioning, but not development;

- presence of threats to the political independence of the authority;

- lack of opportunities to influence decisions on transfer of seized assets into ARMA’s management, which creates a number of problems in the process of their management.

To address these issues, directly related to the Agency's powers, ARMA summarized its own experience and, in cooperation with the people’s deputies of Ukraine, participated in the development of a comprehensive draft law to improve the efficiency of ARMA (draft laws №3335 and №3335-1).  

Key innovations of the draft law developed upon participation of ARMA:

1. Introduction of a full-fledged pre-seizure planning institute, granting ARMA the status of a participant in criminal and judicial proceedings. It is essential to participate in decisions on the transfer of seized assets to the Agency, because, when taken into account, the expert opinion of ARMA’s representatives will help avoid numerous situations where the transferred assets for objective reasons can not be effectively managed;

2. Granting ARMA the authority to preserve seized property, which is not subject to transfer into management under the contract or sale at auction;

3. Preventing legal sabotage of seized assets management by the owner and third parties. This can accomplished through amending the procedural codes, which will specify the priority of criminal seizure and eliminate the possibility of blocking the actions of ARMA and the execution of court rulings in criminal proceedings through the provision of civil, commercial or administrative lawsuits;

4. Expansion of opportunities to fill the state budget at the expense of added value, generated by the management of funds placed on ARMA’s accounts in the state bank;

5. Resolving the issue with the organization of the sale of seized property by attracting the best organizers and increasing the demand for assets.

However, the draft law №3335-1 recommended by the specialized Anti-Corruption Committee of the Verkhovna Rada of Ukraine lacked the support of parliamentarians. As a result, the deputies recommended finalizing the document and sending it for a second reading.

Unfortunately, in the course of revision, this draft law actually lost its constructive potential. Most of the norms that could institutionally improve the work of ARMA were removed. Instead, the document contains provisions, the adoption of which will have a number of negative consequences for the institution of management of seized assets, in particular:

1) The green light is given for legal sabotage of ARMA's work. The destructive practice of using often pseudo-legal grounds to block the asset management process by filing lawsuits in courts of non-criminal jurisdiction is legitimized;

2) The idea of ​​creating a pre-seizure planning institution is destroyed. ARMA is not granted the status of a participant in criminal and judicial proceedings, which prolongs the practice of transferring assets that cannot be effectively managed into management;

3) Asset management through selling in electronic auctions is actually destroyed. The authors of the draft law significantly narrow the list of assets to be sold and make it impossible to acquire ownership of legally acquired property before the court ruling. This means that potential buyers of such property will have no guarantees of protection and, consequently, no motivation to buy assets;

4) The practice of corrupt officials’ expensive property (cars, valuables) transfer to ARMA into management becomes impossible, as the threshold of the value of assets to be transferred to the Agency is significantly increased - UAH 1 million (currently over UAH 400,000). Therefore, the state will not receive dividends from the management of such property.

It is extremely unsettling that the authors of the draft law, despite the special status, authority to form and implement state policy in the field of asset finding and tracing, actually subject ARMA to ostracism, refusing a reasoned discussion on the proposed changes. This is a destructive approach, because the value of ARMA's proposals is because they are based on specific experience in the management of seized assets, rather than on theoretical assumptions. As a result, such experiments threaten the loss of ARMA's functional capacity as one of the elements of Ukraine's anti-corruption infrastructure.