James Miller

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An investment climate where "defamation" is shielded by the law - or – What do you know about 'value judgment'?

From time to time, the business community hears different stories about endeavors of entrepreneurs who seek higher ROI and other great opportunities overseas in emerging markets. This is another important case for the honorable business community to be aware of, as shady things can happen out there.

Ukraine is one of such emerging economies. It became very attractive to many American and European companies after the fall of the Pro-Russian government in 2014. Since then, the people of Ukraine have been awarded with the right to travel without visa to European countries and many things have begun to change for the better. And while this news may sound great for the international business community, mudslinging against businesses in Ukraine is not uncommon. More often than not, companies fall victim to competitors or extortionists, and defamation is used as part of attack campaigns against businesses and people.

But it is not only locals that fall victim to such attacks, even a transnational company with a global brand name can technically suffer agonizing loses.

Private lawyer Mr. Rostyslav Kravets recalls a notorious case involving major sunflower oil producer Delta Wilmar, a subsidiary of international corporation, Wilmar International LTD Singapore, with a total capitalization of over $43 billion and more then 90,000 employees. Mr Kravets says, "As soon as it announced implementation of a new investment project in Ukraine in 2016, a charitable organization titled International Anticorruption Court Foundation started flooding Ukrainian and international organizations with emails containing absurd charges against the company." Delta Wilmar, for example was accused of ties with Donbas separatists. Heads of all law enforcement agencies received the emails as well as customs and excise services of the Republic of Indonesia and representatives of the international business community in the Republic of Malaysia and Singapore

Delta Wilmar addressed the Prosecutor General's Office and the Security Service of Ukraine, and filed a lawsuit on protection of business reputation to the Economic Court of Kyiv. What followed were formal replies, a lack of response by law enforcement agencies, and the bizarre position taken by judges who did not see the attack as reprehensible. As a result, the company owners made their conclusions about the "investment climate' in the country, announcing they were discontinuing the project, which aimed to construct a new oil extraction plant and totalled $150 million in investments.

"Ukraine's criminal, administrative, and civil legislation does not include the term "defamation'," says Rostyslav Kravets, a prominent attorney.

Lawyers argue that lawsuits on protection of honor and dignity are complex because of a number of features. First, they last too long due to courts trying too many cases. The period between filing a lawsuit and the start of the process might take more than a month. Pushing the case through all appellate agencies can take several years. Second, the process should involve all third parties, including the mass media, which published statements by the offender. The refutation will have to be published in some media, after all. By the time a court comes up with decision, the person's reputation is destroyed.

In theory, it might not seem that difficult to prove that you have been defamed. According to the article 277 of the Civil Code of Ukraine and article 10 of the Civil Procedure Code of Ukraine obligates the defendant to prove that published information is reliable. In other words, it is the offender who must prove the authenticity of his statements.

In most cases, defendants will say in court that they didn't state anything specific, just a "value judgment.'

However, there is a loophole in the law that enables the defendant to escape liability. Parts 1 and 2 of article 30 of the Law of Ukraine "On Information' provide that no one can be held accountable for making value judgments. Value judgments are not subject to refutation or verification since the right to express judgments, assessments, and opinions is enshrined in the Convention for the Protection of Human Rights and Fundamental Freedoms, which under article 9 of the Constitution of Ukraine, is part of the Ukrainian legislation. In most cases, defendants would say in court that they didn't state anything specific, just a "value judgment.' For instance, the National Bank of Ukraine had a lengthy litigation with MP Mykhailo Holovko who claimed that the collapse of Khreshchatyk Bank was "planned action by the NBU head." NBU failed because the politician said he was just offering his opinion regarding the situation.

Lawyers say that "value judgment' notion is often misused. A value judgment is a statement with no fact.

If an MP believes NBU is failing to do its job, it's his personal opinion that he is entitled to. But if a politician claims someone stole a billion, it's a statement that needs to be proven with facts, documents, and officials' statements.

"Only a specialized examination can define whether it's defamation or a personal opinion; skilled linguists and psychologists who might determine whether a person expressed his or her opinion, or it's a statement," Rostyslav Kravets said.

MP Serhii Leshchenko was held liable for defamation of the Ministry of Interior Affairs and its head, Arsen Avakov. The case lasted two years. It started with an interview that Leshchenko gave Deutsche Welle, which was published on November 18, 2015. In the interview, the MP said he "felt' like he was being illegally shadowed by the Ministry and his cell phones wiretapped.

It was not until October 2017 that the Pechersk court of Kyiv found Leshchenko guilty of circulation of false information and dismissed the appeal. However, the lengthy litigation ended up with almost no fines. The court ordered Leshchenko to pay 551 hryvnia (about $20) in court fees to the benefit of Avakov and 1,100 hryvnia to the benefit of the Ministry, as well as publish a disapproval.

"Today, we have very few positive court rulings obliging the parties in these cases to pay financial consideration," says attorney Denys Buhai, former president of Ukraine's Lawyers Association.

Buhai says Ukrainian legislation and litigation practice are quite loyal to persons who publish false information.

"The rulings are 50/50: in half of the cases, the courts use the freedom of speech principle and value judgment notion to dismiss a complaint; in the other half, they oblige to disprove information but never award significant amounts of damage compensation," Buhai says.

Currently, a court is considering a lawsuit by investment company ICU against Law and Society Institute, which is directed by Yurii Karmazin. The situation resembles that of Delta Wilmar — in both cases, non-profit organizations sent out emails with accusations to Ukrainian and foreign agencies, utilizing a similar methodology. It started when Mr. Karmazin and his colleagues held a press conference to demonstrate "multi-million lobbying contracts' between certain non-resident companies from ICU owners and one of Donald Trump's fundraisers, Elliott Brody. ICU promptly provided a refutation and said this was a fake. However, the Institute emailed the "contracts' to Ukrainian and international law enforcement agencies, obviously threatening to expose each and every one involved in this story.

ICU lawyers filed a lawsuit and claim to the prosecutor's office that Karmazin sent deliberately false reports to law enforcers. "They didn't just spread false, defamatory information against the company. They spread it deliberately by sending allegations of crime to law enforcement agencies. It is known that Karmazin and his colleagues Shyshkin and Dombrovskyi are lawyers with significant experience. They understand what it means to send a crime report and accusations of involvement in grave crimes against the foundations of Ukraine's national security. In addition, they backed the false documents with their own legal conclusion," ICU said.

The scheme was as follows: Yurii Karmazin received the papers from someone that is "not Ukrainian,' a highly respected foreign person. He hadn't disclosed the name and organization and he hadn't checked the authenticity of the documents despite being a lawyer. All of this seems like the perfect "value judgment' scenario. According to Karmazin, the examination is expensive, and "it is not [his] business to appoint expert examination of the authenticity of signatures and texts. "My knowledge of English does not allow me to conduct linguistic and other examination. I am only able to communicate on social and political topics. I do not produce them. I provided the text I had," he said. The problem with such a scenario is that no one knows who will be the next company on the list of these unethical politicians. It is really easy to sabotage an entire organization and leave the court with a maximum $30 fine. A multimillion-dollar corporation can be destroyed in months, and their assets will be torn apart.

In developed countries, when a company falls victim to mudslinging, the legal process would take only a few months. For example, in June 2017, German TV channel MDR posted a story featuring the factory of Ukrainian holding, Myronivskyi Khliboproduct. It said the plant, which had been constructed on a loan from the European Investment Bank, polluted the environment. Myronivskyi was quick to react to the accusations by contacting the channel with a claim and demanding they remove the story. MDR ignored their request. Representatives of the company in Germany filed a lawsuit against MDR in the Hamburg Civil Court. In September, the court ordered that the channel remove the disclosed information, stop broadcasting the story on air and on its website, and to refute false information regarding Myronivskyi. The decision has since been implemented.

"Once the international business community knows there al meaning of "value judgment' in Ukraine, I can relax," says Rostyslav Kravets. However, if any one gets into trouble, his doors are open… AsinUkraine, scammers can get away with corporate murder. And this could be anyone. A good entrepreneur has to becareful with what they are doing or they could fall into a well- orchestrated ponzi scheme carried out by a powerful, well-connected fraudster.