Legislative changes taking place in the field of bank secrecy raises concerns regarding the state of separation of powers in Armenia. ‘My Step’ ruling party controls the Parliament majority and with Prime Minister Pashinyan’s ongoing anti-corruption campaign the government, with the aid of favorable new regulation, expands its investigative authorities which create wider possibility for abuse of power and infringement of individuals’ right to privacy. The judiciary remains a fragile institution, incapable of performing proper checks on government powers

To better understand the robustness of the state of checks and balances in a country, international organizations measure it as a component of ‘Rule of Law’. The World Justice Project, for example, considers 9 factors in its Global Rule of Law Index, the first being ‘Constraints on Government Powers’. This factor evaluates to what extent those who govern are bound by law. One important focus of checks and balances is the judiciary, which holds the legislature and the executive accountable against the law and the Constitution. For example, Point 74 of the Rule of Law Checklist, adopted by the Venice Commission stipulates: 

“The judiciary should be independent. Independence means that the judiciary is free from external pressure, and is not subject to political influence or manipulation, in particular by the executive branch. This requirement is an integral part of the fundamental democratic principle of the separation of powers. Judges should not be subject to political influence or manipulation.”

Armenia is a representative parliamentary democratic republic. Article 4 of the RA Constitution stipulates a tripartite system: Executive Branch - head of state (President), head of government (Prime Minister) and cabinet (council of ministers), Legislative Branch - National Assembly (Parliament) with 105 seats, Judicial Branch - Highest courts: Court of Cassation (responsible for interpreting relevant law, not facts of a case) and Constitutional Court (determines if laws that are challenged are unconstitutional) and subordinate courts.

According to Freedom House Reports between 2017-2020, Armenia has sustained the lowest score applicable to the section on independent judiciary (i.e. 1 out of 4). Prior to Velvet Revolution, indicators such as judges feeling pressured to cooperate with prosecutors, low acquittal rates, bribery and the leveraging of political influence positioned the judiciary in a vulnerable state. Although the new government has been somewhat successful in reducing corruption, the issue of an independent and impartial judiciary, in the context of proposed reforms, remains a predicament.

In April, the State Revenue Committee (SRC) proposed amendments to the Law on Bank Secrecy, which would have allowed the tax authorities to obtain and use customer banking information without a court order. The SRC emphasized that it will use this information exclusively for tax purposes. To this end, the new amendment suggested provision of information about its customers by the bank to the tax authorities on the basis of legally well-founded decision. It should be noted that according to the current Law on Banking Secrecy, the bank provides information about its customers to the relevant authorities only based on a court decision. After disclosure of sensitive information to relative government body, said body has an obligation not to divulge the information to any third party. Referring to this regulation, the SRC claimed that the tax authority will maintain the confidentiality of the obtained information and it will be used within the limits of tax supervision.

Main criticism on the initiative came from Bright Armenia representative Edmon Marukyan, who argued that the institution of banking secrecy will receive a fatal blow. However, aside from the importance of bank secrecy, such initiative would have granted the SRC unfettered access to information on citizens without any judicial overview. Although the initiative was withdrawn by the SRC, it is one of the examples of the new government’s effort to bypass the court system, under the guise of an anti-corruption premise.

Another attempt to broaden executive’s authority to investigate corruption charges with less supervision, came with amendments to series of laws, that would allow the Corruption Prevention Commission (CRC) to access bank secrets with greater ease. CRC aids the Ethics Commission in discovering government officials’ misconduct.

The proposed amendments stipulate that within the constraints of an initiated criminal case and by the justified decision of the court, investigators are allowed to have access to confidential information of a financial nature including bank secret regarding individuals not considered ‘suspect’ or ‘accused’. The scope of this new regulation concerns several areas of Criminal Code, most notably crimes including abuse of official authority, bribery and refusal to make declaration on high ranking officials’ property, income and affiliates to the CRC.

The formulation of the amendment can be considered problematic because by striping the individual of an official designation, they lose the legal guarantees enshrined in the Criminal Code for a suspect or an accused. The text of the amendment may be considered a violation of European Court on Human Rights’ understanding of ‘autonomous concepts’, meaning the mere fact that the law refuses to bestow status to the individuals under investigation, does not automatically annul their right to protections established by the criminal law. Furthermore, the amendments do not clearly limit the scope of individuals that can be subject to such investigation, and given the current situation of judicial impartiality and cooperation of judges with prosecutors, it seems that the government can access confidential information without a substantive supervisory tool in effect.

The amendments were adopted by the National Assembly on the 22nd of January, however, the President did not sign them and referred the matter to the Constitutional Court for review. On the 18th of June, the Constitutional Court found that the suggested amendments do not correspond with the constitution. They contradict constitutional provisions on effective judicial protection, and principles of proportionality and legal certainty.

On 11th May, the President signed into law the Law on Levying the Property of Illegal Origin, an initiative by the Ministry of Justice to fortify the legal arsenal to combat corruption. A novel, legal institution, the statute complements the existing regulations in the field of illegal asset recovery. Under Article 103.1 (i.e. confiscation) of the Criminal Code, forfeiture of property takes place when such property directly or indirectly was used or obtained exclusively as a result of a crime. This mechanism does not contain regulations on the prevention of the circulation of criminal assets, nor the restoration of assets of illegal origin.

The statute operates based on the presumption that the property is of criminal origin. The presumption is formed considering objective circumstances such as incompatibility of a person's income and possessed property or being convicted of a crime that would lead the court to conclude that the convict's property was acquired as a result of similar illegal actions. Consequently, the statute provides for the possibility of satisfying the claim, if the plaintiff (i.e. the Prosecutor General’s Office) proves that the property belonging to the defendant cannot be justified according to the available information on defendant’s lawful income.

Necessary grounds for the initiation of the investigation are prosecution under certain articles of the Criminal Code or in some cases impossibility of such prosecution. The list of selected articles enumerates crimes that contain obtaining property through criminal sources as the main motive. Examples include corruption-related crimes, terrorism, drug and human trafficking.

With the adoption of the statute an amendment to the Law on Bank Secrecy has been made, which prevents informing the person regarding the investigation.

The statute specifies several limits to its application. The property is subject to forfeiture only when the disparity between the income and the value of the property is significant and the market value of the property exceeds the limit prescribed by the statute (fifty million Armenian drams equivalent to approximately hundred thousand euros). The statute functions retroactively, however, because as a civil proceeding, general statute of limitation is applied to the claims. Which means that the Prosecutor General’s Office can bring a claim of compensation of damages within three years from the moment it knew or could have known about the offense. The Prosecutor General’s Office must cumulatively prove existence of the defendant’s illegal conduct, damages to the state, the causal link between the two and the defendant’s guilt. The onus of proof of the initial three conditions falls on the Prosecutor General’s Office.

With this statute, the Prosecutor General’s Office is subject to lower burden of proof, from beyond reasonable doubt to balance of probabilities: a standard that is satisfied if there is a greater than fifty percent chance that the proposition is true. Given that first instance courts examine both civil and criminal cases and same judges preside over cases brought by the Prosecutor General’s Office, the concern of judicial impartiality persists.

The President’s Office made precautionary declaration related to the application of the statute, stating that the investigative data-collection should be in accordance with the legal principles of necessity, proportionality and effectiveness. There is an expectation of transparency and provision of reporting on confiscated assets. The President considers it necessary to refer back to the legal perceptions and possible interpretations of the statute in the future.

Implementation of the legislative changes in practice will determine actual problems associated with protection of individuals’ right to privacy. From the perspective of separation of powers, the current framework of laws and judicial supervision does not look promising. For the new government to be truly successful in revolutionizing Armenia, it must maintain the delicate balance of judicial reform: bring meaningful changes to the court system, without compromising its independence and impartiality.

About author: Ejmin Shahbazian practices corporate law at an investment company in Yerevan, Armenia and is a contributing writer and editor on issues of law and politics. Born in Iran of Armenian ethnicity, he completed a bachelor’s degree in law at the French University of Armenia, followed by a master’s degree in law at the American University of Armenia. Being fluent in Armenian, Farsi, French and English, he enjoys exploring questions as expressed across a variety of cultural frameworks.