Important draft laws. Issue 18: changes in the work of territorial recruitment and social support centers, easing punishments for economic crimes, and Increase in excise taxes on alcohol and fuel

During this period, 42 draft laws were registered: eight from the president, seven from the government, and the remainder from people’s deputies. Among the proposals are changes to the operation of Territorial Recruitment and Social Support Centers (TRSSCs), including a proposal to transfer the authority to impose fines from them to the courts and to allow video recording of document checks for those eligible for military service. Another significant draft law proposes a method for settling debts among energy market participants and establishing economically justified tariffs for heating. The review also encompasses draft laws on increasing excise taxes, refunding clients of sanctioned financial institutions, providing housing for internally displaced persons (IDPs), and more.

Changes to the mobilization law

Bill No. 11261 proposes allowing citizens not subject to mobilization to undergo medical examinations by military medical commissions voluntarily. It also seeks to grant Ukrainians who decide to voluntarily join the Armed Forces the right to serve in a unit of their choice, provided they have confirmation from that unit.

Additionally, the draft’s authors propose granting citizens the right to take photos and videos during the document verification. 

According to the authors, the draft law would help attract more volunteers to join the Armed Forces of Ukraine. 

Proposal to remove TRSSCs’ fine imposing authority

Bill No. 11272 proposes transferring the authority to impose fines for violations of military registration rules (including damage or loss of military registration documents due to negligence) and mobilization legislation from the TRSSCs to the courts. According to the bill’s authors, this move would reduce the risk of TRSSCs abusing their authority to impose fines and determine their amounts. Entrusting the process to the courts ensures greater objectivity and competency. However, this change could delay case consideration and further burden the already overloaded courts.

Debt write-off and “free” tariffs for heating

Bill No. 11273 proposes resolving the debts of heating, water supply, and sewerage enterprises through mutual offsets. Additionally, it aims to enable district heating (TCE) companies and heat supply (HS) companies to establish economically justified heat tariffs.

Justification

The debt crisis in the energy sector, which periodically worsens, is caused by consumers’ tariffs being below market rates. When district heating enterprises’ revenues fall short of covering their expenses, they accumulate debts to their suppliers, including Naftogaz. Due to restrictions preventing TCE companies from adjusting tariffs, this accumulated debt periodically requires resolution through either debt write-offs, budget allocations, or mutual offsets among stakeholders (i.e., the state, TCE companies, Naftogaz, etc.).

According to “Ukrainian Energy,” as of the end of 2023, enterprises producing heat (TCE, thermal power plants, heat power stations, boiler houses), homeowners’ associations, housing offices, and managers of multi-apartment buildings collectively owed more than UAH 89 billion for gas. Specifically, the debt to Naftogaz of Ukraine (incurred before June 1, 2021, including penalties and fines) amounts to nearly UAH 31 billion, while the debt to Naftogaz Trading LLC (incurred after June 1, 2021) totals UAH 47.6 billion. The debt to the last resort supplier (LRS) also stands at UAH 10.6 billion.

Since the summer of 2022, a moratorium on increasing heat tariffs has been in effect in Ukraine during martial law and six months after its termination. 

Meanwhile, at the beginning of the 2023/2024 heating season, the state owed UAH 36 billion to heat supply companies (for utility services for state institutions). According to preliminary calculations, this debt could reach UAH 54 billion in 2024.

Debt settlement

The draft proposes to stop collecting the debt of heat supply and heat generating organizations for gas used as of October 1, 2023 (currently, debt incurred up to June 1, 2021, needs to be collected). The National Energy and Utilities Regulatory Commission (NEURC) must confirm the debt amounts as of October 1, 2023, which arose due to tariff differences. Subsequently, government subsidies or mutual offsets would be needed to settle the debts of (1) heat suppliers to energy suppliers, water utilities, and gas and electricity network operators; (2) water utilities to energy suppliers and network operators; (3) TCE enterprises and water utilities to the state budget. The Cabinet of Ministers would determine the order of debt repayment.

Regulation of heat energy tariffs

The draft law proposes the following changes:

1. Permit district heating companies to enter into heat supply contracts with owners of individual apartments or premises in multi-apartment buildings. Such agreements are only signed with homeowners’ associations or housing offices. The provision requiring network owners to grant all suppliers access to the networks on equal terms would remain unchanged.
2. Allow tariff revisions not only at the initiative of local self-government bodies but also upon request from business entities, although not more frequently than once per quarter, as is currently the case. It should be noted that local authorities’ approval of tariffs remains decisive in this matter.

Mitigation of punishments for economic crimes

Bill No. 11276 introduces amendments to Ukraine’s Criminal and Criminal Procedure Codes and the Law of Ukraine “On Forensic Examination.”

According to the Criminal Code, particularly serious crimes include:

• Crimes against property: theft, fraud, embezzlement, misappropriation or embezzlement of property, or taking possession of it through abuse of office, as well as the production and sale of counterfeit money and securities.
• Crimes against the economic order: smuggling (including the smuggling of cultural property, timber, and excisable goods) and the legalization (laundering) of property obtained through criminal means.

The draft law proposes reclassifying these crimes as serious offenses, reducing the maximum punishment from 12 to 10 years.

For your reference: Maximum punishment for crimes by severity according to the Criminal Code (In each specific case, the punishment is determined by the court):

Additionally, the bill proposes several measures to reduce the number of those who spend years in pre-trial detention on suspicion of economic crimes. These measures include mandatory forensic economic examinations to confirm material damage and limit the maximum bail amount to 10,000 times the subsistence minimum for non-disabled persons (approximately UAH 30 million; currently, there is no such limitation).

For offenses that incur liability solely for causing material damage (such as property crimes, violations within the economic sector, smuggling, issuing normative acts that decrease budget revenues or increase budget expenditures contrary to the law, tax evasion, and various other economic violations), detention would only be applied if the offender breaches other preventive measures (personal commitment, personal surety, bail, house arrest).

The draft law proposes extending the period for reviewing preventive measures from three to fourteen days and suspending this period during the appeal consideration of a complaint against the ruling. This extension would allow for more time to consider an appeal. In the event of exceeding the deadlines for reviewing complaints, the enforcement of the preventive measure ruling would be suspended.

The punishment for law enforcement officers and heads of penitentiary institutions for unlawful detention would be strengthened – from 3-5 to 5-7 years of imprisonment, and if such actions result in severe consequences or are committed for selfish motives – up to 7-10 years. The punishment for bringing knowingly innocent individuals to criminal liability is proposed to be increased from 5-10 to 7-10 years of imprisonment.

Thus, the bill aims to ensure that law enforcement officers adhere to criminal procedure rules and limit opportunities for abuse of power during pre-trial investigations.

Humanization of criminal liability for women

Bills No. 11230 and 11230-1 propose limiting the circumstances under which women can receive life imprisonment sentences. The first bill specifies that life imprisonment for women can only be imposed through the accumulation of sentences. The second draft law suggests refraining from applying this punishment to women committing a crime for the first time or to women who become pregnant while serving their sentence.

Currently, life imprisonment is not imposed on individuals who were under 18 or over 65 at the time of the crime, as well as on women who were pregnant either at the time of the crime or at the time of sentencing.

Additionally, both draft laws propose amendments to the fundamental legislative acts concerning the prohibition of discrimination in Ukraine (Laws “On Ensuring Equal Rights and Opportunities for Women and Men” and “On Principles of Prevention and Combating Discrimination in Ukraine“) stating that establishing different types and sizes of criminal punishments [for men and women], as well as their enforcement and serving procedures, is not considered discrimination.

Restoration of justice and punishment enforcement during wartime

Bill No. 11265 stipulates that individuals convicted but not yet served their sentences due to armed aggression or occupation may be released from further sentence execution if the statute of limitations for the conviction’s execution has expired. However, this provision does not extend to individuals sentenced to life imprisonment or those convicted of serious crimes against the state, peace, security of humanity, and international order.

The court would add to the served sentence the period during which the execution of the punishment was impossible due to armed aggression or occupation. 

The draft law also provides mechanisms for restoring criminal case materials lost due to Russian aggression and outlines specific procedures for conducting pre-trial investigations and court proceedings during wartime.

Adopting the bill would enable the dismissal of individuals unjustly impeded from serving their sentences, allowing for the resumption of criminal proceedings interrupted by war. Furthermore, it would enable challenging court decisions in criminal cases where evidence was destroyed or lost due to armed aggression against Ukraine.

An attempt to address the issue of housing for internally displaced persons (IDPs)

Bill No. 11281 proposes conducting a nationwide inventory and establishing a publicly accessible online database containing information about real estate properties of various ownership forms (state, communal, private) suitable for accommodating internally displaced persons (IDPs).

Special commissions would be established at local administrations to inspect housing and complete the database. These commissions would comprise representatives from regional administrations, the State Property Fund, the Ministry of Justice, and social protection centers.

Additionally, the project proposes leasing out the property of educational institutions that have remained unused as intended for one consecutive year to accommodate IDPs. For state and communal enterprises and public and charitable organizations providing accommodation for IDPs, the government would establish preferential lease terms for state and communal property.

Increase in excise duties on alcohol and fuel

Bill No. 11256 proposes increasing excise duties as follows:

1. On wines and other alcoholic beverages with a strength of 1.2% – 22%, from UAH 8.42 to 12.23 per liter, aligning with the current excise rate for sparkling and carbonated wines and fermented beverages.
2. The increase would be from EUR 213 to 359 for gasoline, EUR 139 to 330 for diesel fuel, and EUR 52 to 277 for automobile gas per 1000 liters. It would occur gradually from July 1, 2024, to January 1, 2028.

The increase in excise duties on fuel may result in price hikes, potentially dampening consumer demand. However, it would bolster budget revenues. Furthermore, raising excise duties on alcohol, thereby increasing the cost of alcoholic beverages and curbing consumption, could foster improved health outcomes among Ukrainians.

Refunding clients of sanctioned financial institutions

Bill No. 11263 proposes to regulate the return of funds and other assets to clients of sanctioned professional participants in the capital markets who are not prohibited from returning funds to their clients. Currently, this includes the company “Freedom Finance.”

For your reference: 

The rationale for developing and adopting Bill 11263 stems from October 2022, when the National Security and Defense Council imposed sanctions against LLC “Freedom Finance Ukraine,” a broker and depository institution operating in capital markets. These sanctions resulted in freezing assets belonging to investors who had purchased domestic government bonds through this broker. With over UAH 500 million worth of assets blocked by the sanctions, clients lost access to securities, payments, and funds in their accounts. More than 2,000 investors became hostages to this situation, prompting some to file lawsuits against the state.

The project envisages that the executive directorate of the Deposit Guarantee Fund should appoint a temporary manager for the sanctioned company. The manager’s duties include suspending the company’s activities in capital markets, conducting an inventory of its assets and liabilities, determining the amount of debt to clients, and identifying clients who need their funds and securities returned.

Additionally, the manager must provide information about clients to the Security Service of Ukraine, the Main Intelligence Directorate of the Ministry of Defense, the Foreign Intelligence Service, and the Ministry of Justice of Ukraine for verification regarding circumstances that may hinder asset return (such as citizenship of the aggressor country or being under sanctions).

If no obstacles are found for refunding, funds, securities, and other financial instruments are returned to the clients. Suppose the amount of funds in the sanctioned company’s account is less than that owed to clients for securities. In that case, all available funds are returned to clients proportionally based on their share in the total volume of obligations.

The new rules in foreign economic activity

The government has developed three draft laws to protect Ukrainian companies from unfair competition from imports within the framework of the WTO. The relevant laws were adopted in Ukraine in 1998; however, significant changes have occurred in WTO rules since then. As part of Ukraine’s European integration, it needs to harmonize its legislation with EU rules. Therefore, these three drafts define procedures for conducting antidumping investigations based on the current version of WTO rules and EU directives. They specify who would conduct these investigations (government commission or Ministry of Economy), investigation timelines, methods for calculating damages from dumping, and other relevant details.

Bill No. 11267 pertains to dumping itself, which occurs when a foreign manufacturer supplies goods to Ukraine below cost, prompting the Ukrainian government to impose antidumping duties on these products. Bill No. 11268 addresses subsidized imports, wherein a foreign manufacturer receives a subsidy from its government, prompting the Ukrainian government to impose higher duties on its products. Bill No. 11269 focuses on safeguard measures implemented when increasing imports from a particular country causes significant damage to Ukrainian producers and threatens to push them out of the market.