Halyna Yanchenko, MP, Head of the Verkhovna Rada temporary ad-hoc Commission on Protection of Investors' Rights
February 24 marked the 5th anniversary of the creation by the Ukrainian government of the National Agency of Ukraine for finding, tracing and management of assets derived from corruption and other crimes (ARMA). This state body was founded as a part of the implementation of the action plan for visa liberalization between Ukraine and the EU, following the example of similar state bodies in European countries. However, something went wrong in the Ukrainian case. Instead of managing the criminals' arrested property, for some reason business and even affected parties in criminal proceedings have become victims of ARMA. And the National Agency itself has become an instrument of legal raiding and pressure on business.
Attacks on businesses
Here's how it works. Someone appreciated your apartment. He negotiates with a ‘friendly’ prosecutor or an investigator from the most remote district center, the existence of which you may not even know. When a criminal proceeding is initiated, the prosecutor arrests your apartment and then, according to the law, your property will be transferred to ARMA.
The National agency sells your apartment within 30 days to an unknown ‘shell-company’. During continuous judicial proceedings, this company sells your apartment 5 more times to bona fide purchasers. And that's it. It is almost impossible to return such property to the owner.
Moreover, no one is protected from ARMA - neither a large foreign investor with a worldwide reputation, nor a Ukrainian businessman, nor an ordinary citizen.
Therefore, occasionally the actions of ARMA lead to international scandals, as in the situation with the French retailer «Auchan». The land the investor bought for more than UAH 200 million had been outrageously taken away with the assistance of ARMA and some prosecutors of the Odessa region.
Afterwards ARMA quickly sold it for 20 times cheaper than its real value. The legality of ARMA's actions is being contested in the Supreme Court. However, the land plots have not been returned to the investor yet.
The second example, which Temporary Special Commission of the Verkhovna Rada on Protection of Investors' Rights has encountered with, is the Bratsk Oil Press Plant located in Mykolaiv Oblast. When court made a decision in favor of the owners, the asset hadn't been returned for six months. As a result, the asset was returned not to the owner, but to the liquidator, who saved the property in the hands of people, determined by ARMA.
Ordinary citizens, even those who have suffered a lot in criminal proceedings, are not protected from the loss of their property due to the actions of ARMA. As, for example, the widow of a Danish businessman, owner of the IT company «Ciklum». In 2019 her husband died and while the relatives of the deceased were organizing the funeral, the widow's inheritance in the form of an apartment in Kiev was seized from the widow.
Criminal proceedings were initiated upon the widow's appeal regarding an offence, therefore, the apartment was arrested and transferred to ARMA. For some reason, the National Agency decided to put up for auction material evidence of the criminal case, opened at the request of the widow. I think that any expert, international or Ukrainian, will not understand either the logic or the legal basis of such actions.
Such work of National Agency of Ukraine for finding, tracing and management of assets does not in any way correspond to the goals for which the agency was established and, in my opinion, just dishonors the state of Ukraine by such activity. Today we have to admit, ARMA has become an instrument of pressure on business and legal raiding. The state must urgently fix this.
Reload and reform of legislation
It requires legislative changes in the procedure of managing the arrested property and a full staff ‘reboot’ of the National Agency. With these suggestions, I appealed to President Volodymyr Zelensky.
In addition, in parliament, on February 23rd I registered a new package of legislative changes to restart ARMA. More than 70 people's deputies have become co-authors of these laws.
The package of bills includes amendments to the Criminal Procedure Code (No. 5242) and amendments to the special law on the National Agency for Asset Management (No. 5141). They were created on the basis of the bill No. 3335-1 d. However, controversial provisions that previously caused a discussion in parliament were excluded from them. It has only those fundamental changes that I consider crucial to restore order in the work of ARMA, and, particularly, to protect bona fide property owners.
The first crucial change that is supported by representatives of all fractions in parliament:
ARMA must not sell property until a court verdict. Except for perishable goods and those for which the owner himself has provided written consent for their sale. In the same case of «Auchan», the owner of the land plot, not being a criminal, found out that they were transferred to and sold by ARMA afterwards. And «Auchan» could not react to or influence it in any way. This amount of power ARMA has led to abuse and, therefore, should be limited.
Second change: property owners will be able to independently provide ARMA with a court decision canceling the arrest of their property. It is now the competence of either the prosecutor or the court, which in turn delays the process of returning the assets to the owner, often by months. If the owners of the Bratsk Oil Press Plant had the opportunity to provide ARMA with a court decision by themselves, they would be able to avoid losing their asset.
The third conceptual change: having decided to transfer the property to the management of ARMA, the court is obliged to clearly define the method of such management . That is, either to manage or to sell such property.
By the way, such an approach, when the method of property management is determined by the court, is used in most European countries. Today ARMA determines it independently based on its domestic rules, that is, manually at ARMA's own discretion. The Ukrainian experience has shown that such a scope of ARMA's powers leads to corruption risks, and therefore, it has to be revised.
ARMA should stop attacks on business, thereby spoiling the investment climate in the country, and instead begin to carry out its direct functions - to manage the seized property qualitatively. Both Ukrainian and foreign investors are waiting for that.
The personnel reboot of ARMA is as important as legislative changes. The ARMA has an interim management for over a year now. Therefore, the unlocking of the competition for the selection of a new, permanent head of ARMA, who will be fully accountable for his actions and the activities of the government body, will take place simultaneously with the enactment of amendments to the legislation. If we are talking about reload, then it should be total and absolute.