Why have forensic economic assessments become a problem for businesses, and how does this relate to Ukraine’s investment climate?
Зміст
Mykola Orekhovsky recently claimed that the Economic Security Bureau had fabricated evidence in the case concerning the alleged embezzlement of state funds at JSC “Ukrgazvydobuvannya”. According to him, the charges are based on an expert assessment that was carried out with numerous violations and without taking into account the specific nature of the enterprises.
And this is by no means an isolated case.
A tool that has become a problem: why expert opinions in economic cases have become a threat to business
In an exclusive comment to ThePublic, lawyer Gennadiy Kapralov explained that, in practice, the biggest problems in criminal proceedings against businesses arise from issues related to the methodology of economic, commodity and valuation expert opinions.
“This applies, first and foremost, to cases where not all objective pricing factors are taken into account when determining the market value of goods, works or services. In particular, product specifications, logistics costs, currency risks, delivery terms, warranty obligations, production costs and other components that directly affect the final price may be overlooked,” notes Gennadiy Kapralov.
According to him, this issue becomes particularly relevant in criminal proceedings relating to public procurement, commercial activities, the management of state property, the use of public funds and corporate disputes, where determining the amount of damages is often a decisive factor in the subsequent legal assessment of a person’s actions.
“Another problem lies in the formulation of questions put to the expert. The content of the questions and the initial data significantly influence the final outcome of the expert opinion. In complex economic cases, even a minor change in the calculation method can lead to significantly different conclusions regarding the presence or absence of losses,” explains the lawyer.
He also emphasises that, despite the provisions of Article 243 of the Criminal Procedure Code of Ukraine, the defence has the right to independently engage experts to conduct expert examinations. However, in practice, the findings obtained at the initiative of the pre-trial investigation body are often decisive for the further course of the case.
“Consequently, the defence is forced to spend considerable resources on refuting or reviewing conclusions that have already been drawn. Another problem lies in the lack of full standardisation of methods for assessing damages in complex commercial and corporate disputes. As a result, different experts, analysing the same documents and facts, may reach fundamentally different conclusions, which raises doubts regarding the predictability and consistency of the application of the law,” says Gennadiy Kapralov.
From reputation to finances: a document that could destroy your business
According to the lawyer, this is a systemic problem that directly shapes the investment climate in Ukraine. The consequences for companies can be extremely serious. Decisions regarding the notification of suspicion to an individual, the freezing of assets and accounts, the conduct of searches, restrictions on business activities, or the filing of claims for damages are often based on expert opinions. Even if these opinions are later found to be incorrect or the criminal proceedings are closed, the business may suffer significant financial and reputational losses.
For many companies, the very fact of criminal prosecution carries the risk of losing business partners, investors, access to credit and the ability to participate in public tenders.
Furthermore, this issue directly affects the investment climate. The predictability of judicial and law enforcement practices is one of the most important criteria for investors when assessing risks. If companies are not confident that economic indicators are objectively determined in criminal proceedings, this undermines trust in the entire legal system.
“Therefore, this is not an isolated problem. It is systemic, as a significant number of proceedings concerning business-related offences are in fact based on determining the amount of damages, and expert opinions often form the basis for subsequent procedural decisions,” concludes Gennadiy Kapralov.
The problem can be resolved by amending the legislation and strengthening the accountability of experts
The lawyer is convinced that the risks of using insufficiently substantiated or contradictory expert opinions may arise during preliminary proceedings conducted by various investigative bodies. Therefore, the main problem lies in the absence of adequate procedural safeguards that would ensure the greatest possible objectivity of expert opinions and a level playing field for all parties involved in their assessment.
To resolve this, both legislative changes and improvements to law enforcement practice in the investigation of economic crimes are required. An effective solution is only possible through a comprehensive approach that strengthens procedural safeguards, raises standards for expert testimony and ensures genuine adversarial proceedings between the parties.
Among the ways in which issues related to expert evidence in economic cases can be addressed, Gennadiy Kapralov cites:
- strengthening the procedural rights of the defence when commissioning and carrying out expert reports, in particular regarding participation in the preparation of questionnaires, the provision of materials for examination, and requests for additional or repeat expert reports.
- developing the principle of equal treatment of the parties when assessing expert opinions. Expert opinions commissioned by the defence in accordance with Article 243 of the Criminal Procedure Code of Ukraine must be assessed by the courts on an equal footing with expert opinions obtained at the initiative of the pre-trial investigation authorities.
- Development of uniform, transparent and publicly accessible methods for determining damages and the market value of assets in criminal proceedings. These methods must be reproducible, verifiable and understandable to all parties involved in the proceedings.
- The introduction of mechanisms for the independent review of expert opinions in complex economic cases, particularly where the expert opinion itself is the primary basis for determining the amount of damages.
Furthermore, existing mechanisms for liability for knowingly false expert opinions and breaches of professional standards need to be improved, and judicial oversight of the commissioning and assessment of expert opinions needs to be strengthened.
Hennadiy Kapralov is a solicitor. He graduated from the Yaroslav Mudryi National Law University (where he studied law). He subsequently served as an investigator with the National Police. He later worked at the Central Office of the State Bureau of Investigations – in the Department for the Investigation of War Crimes. He has been practising as a lawyer since January 2022.
