The ESBU offers pre-trial settlement of economic offences. What do lawyers say?

The idea has sparked an active discussion among business and lawyers. In particular, Attorney at Law Yevgeniy Riyako considers this initiative to be a logical stage in the evolution of the ESBU, but warns that without clear safeguards, it may not work or create new risks.

What does the Bureau of Economic Security offer?

The ESBU proposes to change the approach to economic and tax offences, replacing the classic punitive model with a pre-trial settlement mechanism. We are talking about an algorithm when a business:

• acknowledges the fact of the violation,

• pays additional taxes, fines and additional contributions (in particular, to funds such as the Armed Forces of Ukraine),

• criminal proceedings are closed without a lengthy investigation and trial.

As an argument for the effectiveness of this approach, the Director of the Bureau cites the French instrument Convention judiciaire d’intérêt public (CJIP), where the state quickly returns funds and business avoids the status of a convicted person.

What do lawyers say?

According to Yevgeniy Riyako, pre-trial settlement is the second logical step in the development of the ESBU after the declared zero tolerance to corruption. «The first step is anti-corruption. The second is adequacy in approaches to the main task: the economic stability of the country. The lawyer draws attention to the fact that the current criminal model is slow, expensive and not always effective in terms of budget revenues. Businesses have been suing the tax authorities for years, often winning cases due to procedural errors, and the state does not receive any money. The key advantage of the new model is rationality: it is better to quickly return money to the budget than to investigate for years without a final result

Procedural node: where are the prosecutor and the court?

At the same time, Riyako emphasises that in criminal proceedings, it cannot be “everything is decided among themselves”

Today there is an institution of agreements with the prosecutor, which:

• are concluded with the participation of the parties,

• are approved by the court,

• go through several levels of control.

How this model will be adapted to the proposal of the Economic Security Bureau of Ukraine is unclear. In particular, who will approve the agreement, whether the court will participate in these processes and what role the prosecutor will play. «There should be a third-party controlling entity - the prosecutor, the court or both. The decision cannot depend only on the ESBU employees," - the lawyer believes. In his opinion, without this, the risk of abuse increases automatically.

Why doesn't this reform work without business?

Eugene Riyako, who represents a number of business associations, emphasises that any reform “for business” without business is stillborn. “Before submitting any draft law for registration, you first need to listen to the opinion of business and lawyers who serve it, so that it is a consolidated joint draft law, and then there are no obstacles, no discussions, ”, - says the lawyer. He emphasises that business actively supports such discussions, no matter who organises them, adding that communication with the ESBU is established.

Tax or ESBU: who should calculate taxes?

A separate problem of the approach proposed by the ESBU is the separation of functions. After all, the only body that can correctly calculate taxes and fines is the tax service. However, its tools are limited to administrative decisions, which businesses are massively challenging in courts and doing so quite successfully. According to the lawyer, criminal cases are much more frightening than tax notices. That's why businesses are more likely to pay to resolve the issue. «At this stage of the country's development, the role of the ESBU as a tool of tax discipline seems logical. But in the future, we can and should move away from it by strengthening the capacity of the tax authorities," Riyako believes. 

The main stop factor: the responsibility of officials

The key scepticism of the lawyer concerns the practical implementation of pre-trial settlement of economic offences. After all, any decision of a tax officer or official who has “forgiven” part of the tax liabilities or signed a compromise automatically creates the risk of a criminal case against him or her. «No adequate official will sign such compromises if it threatens with accusations of abuse of power or corruption," the lawyer summarises, noting that without a clear legislative framework the mechanism simply will not work.

What do MPs say?  

We would like to remind you that earlier the State Tax Service and the Business Ombudsman Council planned to introduce tax mediation in tax disputes. The first practical stage was to be a pilot project in the Central Interregional Department of the State Tax Service for work with large taxpayers.

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