Although the Legal Commission of the Saeima decided on Tuesday to review the amendments in three readings, and not as a matter of urgency, Bite pointed out that the LDDK is against amendments made as a matter of urgency, which have not been discussed with the business environment.
At the same time, Bite said that he does not doubt the need to regulate or organize this process, however, “people who have been working in the business environment for many years have fresh memories of the system with insolvency administrators and company raiding cases, for example, in the early 2000s”.
Bite pointed out that LDDK superficially sees potential threats in this regulation.
He pointed out that currently there are no clearly defined rules for how an external manager takes over control of a company, nor is it defined how the rights of the legal or existing owner are respected.
In a situation where it is quite easy to initiate criminal proceedings or criminal cases against individuals, an unspoken, unclear and uncoordinated system poses a threat to future models of raiding, Bite emphasized.
Also, Bite said that such urgent amendments usually call for caution and raise the question of why it is necessary, when everything can be discussed and agreed upon with businessmen, thus eliminating all doubts and concerns.
Bite emphasized that he wants to understand the nuances of the amendment’s operation, because he does not want to experience a situation in which companies are built for decades, and there is a risk that “someone can come and file a fictitious case and take over the management of the company”.
“No one in this world is safe from criminal proceedings, so to prevent the risk of amendments being used to take over a company and destroy it or hand it over to others, there needs to be a very clear system that we understand,” Bite said.
LETA already reported that the Saeima’s Legal Commission decided on Tuesday to review the amendments to the law proposed by the Ministry of Justice (MoJ), which provide for a manager authorized by the government to entrust the management of capital shares of companies arrested in criminal proceedings, in three readings, and not as a matter of urgency.
Andrejs Yudins (JV), head of the Legal Commission of the Saeima, stated during the session that the amendments prepared by the Ministry of Justice to the Law on Criminal Procedure and the amendments to the Law on the Enforcement of Confiscation of Criminally Obtained Property should not be considered as a matter of urgency, as certain objections have been received against them, for example from the Latvian Council of Sworn Lawyers (LZAP).
It was also reported that, since the Ministry of Justice was unable to reach an agreement at the inter-institutional level for a long time, the amendments to the Law on Criminal Procedure have reached the Legal Commission of the Saeima, which has been asked to advance them as a matter of urgency.
However, the procedures for managing the seized capital shares and what the manager’s responsibility would be, including in cases where the managed companies lose value, have not yet been developed. It is also not clear whether and how Public Assets Manager SIA “Possessor” supervised by the Ministry of Economy (ME) could change the officials of the companies transferred to its management.
Work on the amendments began at the beginning of 2022, when the government considered in a closed session the report on the management and evaluation of the property seized in the case of former Ventspils mayor Aivars Lembergs (“For Latvia and Ventspils”). At that time, the police had started criminal proceedings for the conduct of Rudolf Meroni in managing Lemberg’s property.
However, over several years, TM has not succeeded in achieving inter-institutional agreement on the developed regulatory act, so that it could be examined in the Cabinet of Ministers and forwarded to the Saeima in the usual order. Therefore, TM has called on Saeima Legal Commissions to advance the amendments as their proposal, and to do so as a matter of urgency.
TM explains that the amendments are necessary to eliminate gaps in the laws related to the seizure of capital (shares) or shares. Currently, the law allows the initiator of the process, imposing a seizure on capital shares, to demand that the company or cooperative transfer all funds to the specified account. It also prohibits the alienation or encumbrance of the seized equity.
However, in the absence of a way to manage the seized capital shares, which can lead to a decrease or loss of their value, explains TM. In the future, this may make it difficult to recover procedural costs and compensation for damage, return of criminally obtained property to the owner, confiscation of criminally obtained property, and confiscation of property as an additional penalty.
Therefore, it is proposed to introduce a new article in the Criminal Procedure Law, which will determine that the seized capital shares (shares) or shares will be transferred to management in order to monitor them and preserve their value.
The new article provides that the initiator of the process, by imposing a seizure on capital shares, can transfer them to the manager appointed by the Cabinet of Ministers for management. In the pre-trial process, this decision would be approved by the investigating judge.
It is intended to establish that the manager of the seized capital shares must inform the initiator of the process about the risk that the shares could lose their value. On the other hand, the initiator of the process, upon receiving such information, could, with the consent of the owner or legal possessor of the seized capital shares, make a decision on the sale of capital shares in accordance with the procedures established by the Cabinet of Ministers.
The Cabinet of Ministers will also have to determine the procedure for managing seized capital shares and the procedure for calculating and covering management expenses, as well as the extent of the manager’s responsibility.
The amendments are also intended to determine the cases when capital shares are not transferred to management, in order to avoid situations where management costs would exceed the value of seized capital shares.
It is proposed to establish that capital shares are not transferred for management if the company was created or used for criminal purposes and does not carry out real economic activity. This point would apply where the company is set up, for example, to launder the proceeds of crime. The criteria are cumulative, that is, the company must be both related to criminal activity and not perform real economic activity.
LZAP opposes the amendments submitted to the Saeima in their current version, as they contain significant flaws that, in the course of applying the proposed norms, could lead to an unjustified violation of the fundamental rights of the persons involved in criminal proceedings, according to the council’s letter to the TM and the Saeima’s Legal Commission. Likewise, the council has doubts about the conformity of the wordings of the proposed norms with the right to property enshrined in Article 105 of the Constitution.