Interim Report - Report No 364, June 2012

Case No 2890 (Ukraine) - Complaint date: 22-JUL-11 - Closed

Allegations: The complainant organization alleges that the recently adopted Tax Code violates Conventions Nos 87 and 98. It further alleges a case of interference in the establishment of trade union organizations, as well as cases of harassment of trade union leaders and the attempt by the State to seize the Federation of Trade Unions of Ukraine’s (FPU) property

1. 1019. The Federation of Trade Unions of Ukraine (FPU) submitted its complaint in communications dated 22 July and 18 August 2011. The International Trade Union Confederation (ITUC) associated itself with the complaint in a communication dated 1 August 2011.
2. 1020. The Government submitted its observations in communications dated 16 September and 3 October 2011.
3. 1021. Ukraine has ratified the Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87), and the Right to Organise and Collective Bargaining Convention, 1949 (No. 98).

A. The complainant’s allegations

1. 1022. In its communications dated 22 July and 18 August 2011, the FPU alleges that, cases of establishment of trade unions under employers’ control, interference by the government agencies and harassment of trade union leaders has become frequent in recent years. It alleges, in particular, that the recently adopted Tax Code of Ukraine contains a number of provisions allowing tax authorities to intervene in the statutory and financial activities of trade unions. In particular, section 20.1.6 of the Code stipulates that the State Fiscal Service is entitled to receive from all taxpayers, including non-profit organizations (trade unions) certificates and copies of documents relating to financial and economic activities.
2. 1023. According to the FPU, on the basis of this provision, the State Fiscal Service in Khmelnitsky and Donetsk regions brought an action against some primary trade union organizations seeking the annulment of their legal personality. According to the complainant, the reason behind this action is the failure of these organizations to file income tax returns and account reports.
3. 1024. The FPU indicates that article 157.14 of the Code gives the central body of the State Fiscal Service the power to decide whether to exclude non-profit organizations from the Registry of Non-Profit Organizations and Institutions and whether to impose taxes on their income in case of violation by such organizations of the tax code or any other legislation concerning non-profit organizations. According to the complainant, this means that in order to confirm the status of a non-profit organization, trade unions must allow the tax authorities to conduct inquiries into the expenditure of their funds.
4. 1025. The FPU further indicates that in order to implement paragraph 30.6 of the Code, the Cabinet of Ministers of Ukraine issued a decree dated 27 December 2010 “On approval of order of treatment of taxes and fees not paid by a business entity in the budget in connection with the receipt of tax benefits”. On the basis of this decree, the fiscal authorities require trade union organizations to file reports every three, six, nine and 12 months, in which the unions shall declare the amount of all funds received from trade union members, enterprises, institutions and organizations for cultural, sport and recreational activities, all other financial support, donations and passive income, as well as the value of property and services received by primary trade union organizations from an employer pursuant to a collective agreement, i.e. tax-exempt funds.
5. 1026. The FPU indicates that it had repeatedly appealed to the public authorities urging them to bring the Code into conformity with international standards and the law on trade unions. It has also drafted a proposed amendment to the Code which is currently pending in Parliament.
6. 1027. The FPU further alleges that the founding conference of the Trade Union of the Sea Transport Employees (United) took place on 15 April 2011. According to the complainant, the Deputy Chairperson of the National Sea and River Transport Agency of Ukraine had actively participated in the conference. Furthermore, upon his orders, three employees from each sea transport company were sent by their employers to participate in that conference, without any inquiry as to their wish to establish a union. According to the complainant, some of them being members of the FPU-affiliated organization refused to vote. Nevertheless, the trade union was established and is now in the process of being legalized by the Ministry of Justice. On 22 April 2011, the FPU urged the Office of the Prosecutor and the Ministry of Justice to redress the violation of Convention No. 98 but received no reply.
7. 1028. The complainant further alleges the following instances of interference in its activities by the authorities. On 11 May 2011, directors of educational institutions at all levels received an instruction from the Ministry of Education and Science to provide information on all trade union fees paid to structural organizations of the Trade Union of Workers of Education and Science of Ukraine. On 20 May 2011, the Nadvirnya District Regional Auditing Authority in Ivano-Frankivsk region requested the Chairperson of the trade union committee of the Nadvirnya technical college No. 11 to provide information on the receipt and use of trade union dues paid by students between 1 May 2009 and 31 April 2011.
8. 1029. Furthermore, on 23 May 2011, the FPU was instructed by the General Prosecutor’s Office not to examine questions of its statutory activities at the sitting of its presidium on 24 May 2011. On 27 May 2011, the Prosecutor’s Office requested the FPU to provide information on the discussion by its elected bodies of questions relating to the union property. On 2 and 3 June 2011, the Prosecutor’s Office also requested notarized copies of the FPU statutes, regulations of its standing commissions, list of members of the FPU’s presidium and council, the council’s and conference’s rules, minutes of meetings of standing commissions, presidium and council, including audiotapes, etc.
9. 1030. The FPU further alleges that its Chairperson, his deputies, as well as the Chairpersons of the FPU-affiliated unions are regularly called to the Prosecutor’s Office for interrogations that last over three hours. It also alleges that it has been receiving numerous requests from the authorities to provide information, documents and explanations regarding its activities, often on impossibly short notice or with regard to the events or activities which have yet not taken place.
10. 1031. According to the complainant, the Prosecutor’s Office has prohibited the elected FPU bodies from making any decision concerning the union property which rightfully belongs to the FPU as confirmed by numerous court decisions. In this respect, the FPU indicates that on 15 June 2011, the Khmelnitsky region Prosecutor’s Office sent a letter to the Chairperson of the Federation of Trade Unions of the Khmelnitsky region instructing him to inform the Office within two days about all trade union organizations existing in the region and all enterprises created by them since 2007, as well as to indicate whether any of its organizations have been investigated, and to inform about violations committed and the measures taken to eliminate such violations. On that same day, the Chairperson of the Federation of Trade Unions of Lugansk region received a letter from the Prosecutor’s Office of the Lugansk region requiring him to produce, not later than 12 p.m. on 17 June 2011, all information and documents concerning the FPU property.
11. 1032. On 16 June 2011, the Chairperson of the trade union committee of the “Dnepr AZOT” was requested by the Prosecutor’s Office of the Bagliysky region of Dneprodzerzhynsk city in the Dnepropetrovsk region to produce notarized copies of the trade union committee statutes, staff list, decisions adopted by trade union meetings held between 2010 and 2011. The union Chairperson was called to the Prosecutor’s Office to provide further explanations on 20 June 2011.
12. 1033. On 21 June 2011 the Chairperson of the Dnepropetrovsk regional trade union association was requested by the Prosecutor’s Offices of the Kirovskiy and Leninskiy districts of Dnepropetrovsk to produce a certificate detailing information regarding the implementation by the FPU of the legislative requirements with regard to its property between 2008 and 2011 and ensuring the right of citizens to health care and rest in the Kirovskiy district, as well as other documents confirming property rights and the right to use a plot of land.
13. 1034. The Prosecutor’s Office of Kamenets-Podolsk requested the Chairperson of the Khmelnitsky region Federation of Trade Unions to provide within one day information about the sanatoriums, hotels, tourist and sport centres, property complexes and buildings and premises belonging to the FPU, closed joint stock companies “Ukrproftour” and “Ukrprofzdravnitsa”. It also asked to provide all information on the alienation of the abovementioned property between 1994 and 10 June 2011. The Federation of Khmelnitsky region was also requested to indicate whether the FPU owned any land and property in the Khmelnitsky district.
14. 1035. In May and June 2011, the Chairperson of the Zakarpattia regional council and the Chairperson of the trade union council of the Ivano-Frankivsk region received multiple verbal requests from the officers of the Prosecutor’s Office to provide information on the decisions made by the presidium and the council of the FPU on 24 and 25 May 2011.
15. 1036. The Prosecutor’s Office of the Centralnogorodskoi and Dzerzhinsky districts of Krivoy Rog city, carried out a rush inspection of the activities of the municipal workers’ organizations in construction, health-care sectors, government agencies etc.
16. 1037. On 4 July 2011, the FPU Chairperson received a letter from the Kiev Prosecutor’s Office demanding him to urgently provide copies of all documents related to the acquisition, issuance, distribution of tour certificates to the health resorts between 2008 and 2011 among members of the Federation, trade union committees, and employees of undertakings, institutions and organizations established by the FPU.
17. 1038. According to the complainant, the authorities try to seize trade union property through courts. For example, the Prosecutor’s Offices of the Chernihiv, Cherkassy and Chernivtsi regions, Irpin and Nova Kakhovka cities requested the economic courts to invalidate state certificates of ownership of a number of real estate properties of closed joint stock companies “Ukrproftour” and “Ukrprofzdravnitsa” and to transfer the property to the State Property Fund of Ukraine. The following property was designated to be transferred: health resorts “Dubki”, “Zvezda”, “Ukraina”, “Health resort for children named after Shchors”, tourist health complex “Pridneprovsky”, boarding house “Bukovyna” and tourist hotel “Nova Kakhovka”.
18. 1039. The complainant further alleges harassment of trade union leaders. In this respect, it alleges that on 8 June 2011, following the illegal interference by the Prosecutor’s Office into the FPU internal affairs, the FPU carried out a picket of the General Prosecutor’s Office. During the picketing, the Chairperson of the Trade Union of Workers of Food and Food Processing Industry of the Kiev region, Ms Galina Karnatova, addressed the meeting and accused the authorities of violating the Law on Trade Unions. Following her speech, she was persecuted by the Office of the Prosecutor. On 20 June 2011, she was summoned to the Prosecutor’s Office to give explanations on the circumstances related to the investigation of the FPU activities. Later, she was requested to provide information on the structure of the regional trade union organization. Her organization was also requested to provide information on its internal activities and the list of its business entities, as well as those legal entities that have wage arrears and the measures undertaken by the Chairperson to guarantee the payment. The FPU alleges that Ms Karnatova is under psychological pressure as she is constantly summoned for interrogations. Following the expression by the Chairperson of the Trade Union of Workers of Energy and Electrical Industry of Kiev region, Ms Ludmila Maximenko, of her indignation about Ms Karnatova’s treatment, the Prosecutor’s Office begun an investigation of that union as well.
19. 1040. The complainant also alleges a large-scale campaign aimed at discrediting the FPU as a legitimate owner and manager of its property. The FPU filed petitions to the district court of Kiev to declare the disseminated information as false and detrimental to its business reputation and to trade unions in general. However, the court considered that it had no jurisdiction and the matter should be examined by the economic courts instead. The FPU considers that these cases are a civil matter and therefore appealed the court decision.
20. 1041. The complainant further alleges cases where interference in trade union affairs is conducted on the basis of judicial decisions and refers, in particular, to the June–July 2011 decisions of the Shevchenkivski District Court of Kiev which declared illegal the decision by the Statutory Commission of the FPU not to include one more candidate in the list of the candidates for the FPU Chairperson election. In addition, the judge obliged the FPU to take a decision on the inclusion of this candidate in the list of candidates. The judge did not take into account that this candidate did not meet statutory requirements for the position and was not a member of the FPU’s affiliate and the fact that the FPU had already elected its President.
21. 1042. The second decision of the court invalidated the decision of the 10th Kiev City Trade Union Conference of 17 December 2010 and reinstated, in the position of the Chairperson, the candidate who did not have the majority of votes. By that decision, the judge substituted the union statutory procedure by his own decision and thereby dismissed the duly elected Chairperson.

B. The Government’s reply

1. 1043. By its communications dated 16 September and 3 October 2011, the Government informs that the FPU allegations have been examined by the Prosecutor’s Office. The Government indicates that trade unions have rights and obligations. In accordance with section 36 of the Law on Trade Unions, trade unions are required to respect the Constitution and the legislation of the country.
2. 1044. The Government indicates that the Office of the Prosecutor has been currently carrying out inspections in order to verify the legality of the use of the State assets held by the FPU and entities established by it. These inspections have revealed a number of infringements of law. In order to defend the interests of the State and to hold those responsible for contravention accountable, a number of prosecutions have been instigated. The Government further indicates that the matters examined by the Prosecutor’s Office are currently pending before the courts.
3. 1045. The Government stresses that interference in the lawful activities of unions is not allowed and that in carrying out inspections, prosecutors are guided exclusively by the procedures established by the legislation aimed at prosecution of individuals who break the law. According to section 20 of the Act concerning the prosecution service, the Public Prosecutor has the right to access the documents and materials required for inspections, including commercial secrets or other confidential information. A public prosecutor is entitled by law to demand, in writing, the submission of any decisions, orders and instructions, to summon officials and private citizens and request them to give an oral or written deposition on matters relating to contraventions of laws. Under section 8 of the Act, lawful demands issued by a public prosecutor are binding on all bodies and must be complied with within the period specified by law or by the prosecutor.
4. 1046. The Government indicates that pursuant to article 67(1) of the Constitution of Ukraine, everyone is required to pay taxes as well as social charges as established by law. The Tax Code governs the relations that arise in connection with the levying of taxes and charges and includes an exhaustive list of taxes and charges levied in Ukraine, the procedures for administering them, persons liable to pay taxes and charges, the competence of the tax authorities and liability for contravention of the law. Pursuant to section 4.1 of the Code, the tax law is based on the principle of equality of all taxpayers, individuals and organizations. Under section 56(1) and (2) of the Code, decisions of the tax authority may be contested through administrative or judicial procedures.
5. 1047. The Government indicates that the situation described by the FPU results from the uncertain legal status of a part of the property in its possession. It explains that the main part of the property currently in the possession of the FPU was the property of all unions of the former USSR active in Ukraine. The Government points out that the legal status of that property is uncertain; in the light of the Supreme Council Order No. 3943-XII of 4 February 1994 concerning the property of all union public associations of the former USSR, the property in question is deemed to be the property of the State until such time as legislation defines the lawful owners. Therefore, in order to protect the interests of the State in respect of the property in the possession of the FPU and given attempts by trade unions to expropriate that property, a law imposing a moratorium on attempts to expropriate the property was introduced. The moratorium was in force until 1 January 2008. The Government emphasizes that the intention was not to deprive the FPU of its property which it has acquired at its own expense or by other lawful means, but rather concerns only the disputed property in the FPU’s possession. For that reason, all disputed issues relating to the property in question are under consideration by various judicial instances.
6. 1048. The Government concludes by stressing that the rights of trade unions, including their property rights, are protected by legislation. Interference by state authorities in the activities of trade unions is prohibited. According to section 12 of the Law on Trade Unions, trade unions and their federations operate independently of the state authorities, local administration, employers and other public associations and political parties. Pursuant to section 34 of the Law, trade unions and their federations may own resources and assets needed to carry out their activities. The state authorities and local administrations do not carry out financial oversight of assets owned by trade unions and their federations. Trade unions may be dispossessed of their property or denied the use of the assets entrusted to them only by a court and for reasons established by law. Pursuant to section 46 of the Law, officials and other persons who violate the terms of the law and by their actions obstruct trade unions’ activities bear disciplinary, administrative and criminal responsibility in accordance with the relevant laws.

C. The Committee’s conclusions

1. 1049. The Committee notes that the complainant alleges interference by the state authorities and employers in its internal affairs and activities.
2. 1050. The Committee notes that the FPU’s first set of allegations relates to the recently adopted Tax Code. According to the complainant, the Code contains a number of provisions allowing tax authorities to intervene in the activities of trade unions. The Committee notes that the complainant refers to the following sections which, in its opinion, open the way for the tax authorities to intervene in internal trade union affairs: section 20.1.6, which entitles fiscal authorities to obtain from all taxpayers, including trade unions, certificates and copies of documents relating to financial and economic activities; and section 157.14, which gives the central body of the State Fiscal Service the power to decide whether to exclude non-profit organizations from the Registry of Non-Profit Organizations and Institutions. According to the FPU, this means that in order to confirm the status of a non profit organization, trade unions must allow the tax authorities to conduct inquiries into the expenditure of their funds.
3. 1051. The Committee further notes the FPU’s allegations that on the basis of Decree No. 1233 of 27 December 2010 “On approval of order of treatment of taxes and fees not paid by a business entity in the budget in connection with the receipt of tax benefits”, the fiscal authorities require trade union organizations to file reports every three, six, nine and 12 months in which trade unions shall declare the amount of all funds received from trade union members, enterprises, institutions and organizations for cultural, sport and recreational activities, all other financial support, donations and passive income, as well as the value of property and services received by primary trade union organizations from an employer pursuant to a collective agreement, i.e. tax-exempt funds. The Committee understands, however, that this Decree is applicable to commercial undertakings (businesses) and to business activities of non-commercial organizations.
4. 1052. The Committee takes due note of the information provided by the Government that the Ukrainian legislation in force prohibits interference in trade union internal affairs and activities and establishes criminal and administrative liability in cases of violation. The Committee notes that according to the Government, the Tax Code governs the relations that arise in connection with the levying of taxes and charges and includes an exhaustive list of taxes and charges levied in Ukraine, the procedures for administering them, persons liable to pay taxes and charges, the competence of the tax authorities and liability for contravention of the law. Pursuant to section 4.1 of the Code, the tax law is based on the principle of equality of all taxpayers, individuals and organizations. Under section 56(1) and (2) of the Code, decisions of the tax authority may be contested through administrative or judicial procedures.
5. 1053. The Committee recalls that questions concerning general tax legislation fall outside its competence unless such legislation is used in practice to interfere in trade union activities. The Committee notes that the complainant’s allegations are of a general nature with an exception of the allegation that on the basis of the provisions of the Tax Code, the State Fiscal Service in the Khmelnitskiy and Donetsk regions brought an action against some primary trade union organizations seeking the annulment of their legal personality. The Committee notes, however, that according to the FPU itself, the reason behind this action is the failure of these organizations to file income tax returns and account reports.
6. 1054. With regard to the alleged attempts to seize the FPU property and numerous alleged investigations into its assets as well as assets of affiliates, as detailed in the complaint, the Committee notes the Government’s indication that the situation described by the FPU results from the uncertain legal status of part of the property in its possession. It explains that the main part of the property currently in the possession of the FPU was the property of all unions of the former USSR active in the Ukraine. The Government points out that in the light of the Supreme Council Order No. 3943-XII of 4 February 1994 concerning the property of all union public associations of the former USSR, the property in question is deemed to be the property of the State until such time as legislation defines the lawful owners. In order to protect the interests of the State in respect of the property in the possession of the FPU and given attempts by trade unions to expropriate that property, a law imposing a moratorium on the attempts to expropriate the property was introduced. The moratorium was in force until 1 January 2008. The Government emphasizes that the intention is not to deprive the FPU of its property which it has acquired at its own expense or by other lawful means, but rather concerns only the disputed property in the FPU’s possession. For that reason, all disputed issues relating to the property in question are under consideration by various judicial instances.
7. 1055. The Committee understands that the FPU performs not only functions of protection of social rights but also provides their members with some social service through its recreational institutions and sanatoriums. The Committee further understands that under the communist regime, the assets accumulated by the trade unions were very large because the functions exercised by trade unions went well beyond the traditional activities carried out by workers’ organizations in the defence of the interests of their members. It appears to the Committee that the complainant’s concerns are mostly about the rest houses, resorts and sanatoriums and other lucrative undertakings. The Committee understands from the Government’s reply that there is no intention to strip the FPU from all of its property, or the property that it had legally acquired or purchased, but rather to settle the issue of the disputed property of the former USSR trade unions which is currently in the FPU’s possession.
8. 1056. In examining this case, the Committee is fully aware of the great complexity of the matters raised. This complexity is due to several factors: the diversity and origin of the resources held by the former Ukrainian (USSR) trade unions (state subsidies and contributions from their members), the nature of the functions assigned to them, and the time that has elapsed since the formal disappearance of Ukrainian (USSR) trade unions and the issue of their property arose. The Committee understands that various normative acts maintained that the property of the former USSR unions active on the territory of Ukraine was the property of the State until such time as the legislation defines the legal owners. In order to protect the interests of the State in respect of such property, a law imposing a moratorium on attempts to expropriate and/or alienate it was introduced. The Committee understands that in the recent years, there have been attempts by the State to make an inventory of such property. In the opinion of the Committee, the State intervention alleged, in this case, in respect of the devolution of trade union assets, is not necessarily incompatible with the principles of freedom of association. While noting that cases relating to the issue of property are currently pending in courts, the Committee considers that this question is best solved by an agreement between the Government and the trade unions concerned. In these circumstances, the Committee invites the Government to engage in consultations with the trade union organizations concerned in order to settle the question of the assignment of property. It requests the Government to provide information on the evolution of the situation and, in particular, on any agreement, which may be reached in this respect.
9. 1057. The Committee also observes that at least the following alleged instances of interference by the authorities in the activities of the FPU and its affiliates do not appear to relate to the question of property: inquiry into trade union fees paid to the structural organizations of the Trade Union of Workers of Education and Science of Ukraine; inquiry into the receipt and the use of trade union dues paid by students to the trade union committee of the Nadvirnya technical college No. 11 in Ivano-Frankivsk; instruction given by the General Prosecutor’s Office on 23 May 2011 to the FPU not to examine certain issues at the sitting of its presidium on 24 May 2011; and request by the Prosecutor’s Office of the Bagliysky region of Dneprodzerzhynsk city in Dnepropetrovsk region addressed to the Chairperson of the trade union committee of the “Dnepr AZOT” to produce notarized copies of the trade union committee statutes, staff list and decisions adopted at trade union meetings between 2010 and 2011. The Committee requests the Government to provide its observations in this regard. The Committee further requests the Government to provide its observations on the two 2011 decisions of the Shevchenkivski District Court of Kiev (in the first decision, the court declared illegal the decision by the Statutory Commission of the FPU not to include one more candidate in the list of the candidates for the FPU Chairperson election and obliged the organization to take a decision on the inclusion of this candidate in the list of candidates; in the second decision, the court invalidated the decision of the 10th Kiev City Trade Union Conference of 17 December 2010 and reinstated, in the position of the Chairperson, the candidate who did not have the majority of votes), which, based on the information provided by the complainant, appear to interfere with the right of trade unions to elect their representative in full freedom.
10. 1058. The Committee notes the FPU’s allegation that the Trade Union of the Sea Transport Employees (United) was established upon the initiative and involvement of the Deputy Chairperson of the National Sea and River Transport Agency of Ukraine and employers of sea transport companies, whereas some of the employees requested to vote for the creation of that union were members of an FPU-affiliated union. The Committee regrets that no information has been provided by the Government in this regard. It recalls that the intervention by an employer to promote the establishment of a parallel trade union constitutes an act of interference by the employer in the functioning of a workers’ association, which is prohibited under Article 2 of Convention No. 98. The Committee requests the Government to institute an independent inquiry into this allegation and to provide information on its outcome.

The Committee’s recommendations

1. 1059. In the light of its foregoing interim conclusions, the Committee invites the Governing Body to approve the following recommendations:
   • (a) The Committee invites the Government to engage in consultations with the trade union organizations concerned in order to settle the question of the assignment of property. It requests the Government to provide information on the development of the situation and, in particular, on any agreement which may be reached in this respect.
   • (b) The Committee requests the Government to provide its observations on the remaining alleged instances of the interference in the FPU and its affiliates’ trade union affairs. It further requests the Government to provide its observations on the two 2011 decisions of the Shevchenkivski District Court of Kiev.
   • (c) The Committee requests the Government to institute an independent inquiry into the allegation of the establishment of the Trade Union of the Sea Transport Employees (United) by, or upon, the initiative of employers and to provide information on its outcome.