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Will Ukraine’s new whistleblower law punish innocent corporations?

In October 2019, the Parliament of Ukraine introduced amendments to the existing Anti-Corruption Law. These amendments — known as the “Whistleblowers Law” — brought fundamental protections for those who report on corruption in Ukraine. The new provisions have also kicked off a debate about whether enhanced whistleblower protections will lead to unintended and unfair consequences for businesses in Ukraine.

The Whistleblowers Law applies to state bodies, local self-governmental bodies, state-owned companies, and other representatives of the public sector. It also applies to larger businesses, namely to companies participating in public procurements valued at more than UAH 20 million (about $830,000).

The Whistleblowers Law requires those organizations to promote a culture of corruption reporting — by providing employees with a way to report corruption, and setting out internal procedures for receiving, considering and verifying whistleblowers’ reports and properly responding to them.

The new law puts the National Agency on Prevention Corruption (NAPC) in charge of inspecting the organizations’ compliance with the new whistleblower requirements. The NAPC was not previously  tasked with enforcement authority. Originally the agency was created to prevent corruption, not impose penalties associated with it.

Beyond that, the Whistleblowers Law does not define clear grounds for inspections by the NAPC, or set out any protections against the NAPC’s potential abuse of its powers. As soon as there is enough anonymous information about possible violations of a whistleblower’s rights, the NAPC can show up at an organization for a compliance inspection.

During on-site compliance inspections, NAPC representatives are granted:

Free access to the enterprise with an official ID only

Access to documents and other materials necessary for the inspection

The right to request confidential materials, and

The right to require written explanations from an unlimited number of persons.

In addition, the Whistleblowers Law granted the NAPC powers to represent whistleblowers in court — to file lawsuits on behalf of the whistleblowers and to engage in the court proceedings at any stage.

Under the new law, whistleblowers are now guaranteed significant labor-law protections starting from the moment when they report alleged corruption. Employees who make such reports can’t be fired, even if the report was filed in bad faith (e.g., as an act of revenge). Consequently, the burden will be on employers to prove a deliberately false corruption report. In practice it will be very difficult to demonstrate someone’s intention to file a deliberately abusive or fraudulent whistleblowing complaint, particularly if the whistleblower is represented in court by the NAPC.

These are some of the concerns Ukrainian businesses have about the new Whistleblowers Law. The businesses are already sensitive to “muscle building” scenarios by government bodies; Ukraine’s recent history has many examples of businesses feeling illegal pressure from existing law enforcement agencies. Although it is still too early for pessimistic conclusions, the move to enhance the NAPC’s powers brings to mind the warning: “Hope for the best and prepare for the worst.”

At the same time, the Whistleblowers Law is a meaningful step forward for whistleblower protections in Ukraine, and hopefully it will be used only with the aim of ensuring effective compliance. However, the wide-ranging powers of the NAPC in conjunction with the possibility of fraudulent whistleblowing create new risks for large businesses that shouldn’t be ignored.

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Olga Vorozhbyt, pictured above left, is a partner at DLA Piper Ukraine and head of the litigation and regulatory practice. She focuses her practice on litigation, international arbitration, corporate crime, compliance and global investigations.

Artem Krykun-Trush, above right, is an associate at DLA Piper Ukraine. He’s a former detective of the National Anti-Corruption Bureau of Ukraine.

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