Kharkiv RJRC discussed ways to improve anti-corruption compliance in Ukraine

On April 29, 2021, Kharkiv Regional Justice Reform Council of the EU Project “Pravo-Justice” held a discussion on the “Anti-corruption Compliance”. The legal community of the region had the opportunity to discuss existing problems in preventing corruption in the activities of state and municipal enterprises and local authorities with the representatives of the NABU and the NAPC Public Council while coming up with some joint solutions.

The discussion was moderated by Roman Chumak, Kharkiv RJRC Coordinator, Managing Partner of Ares Law Firm.

"Fight against corruption is extremely important for Ukraine. Anti-corruption legislation adopted in recent years has significantly strengthened and changed the standards of doing business in Ukraine. Deviation from these legal and ethical requirements can therefore lead to some serious consequences, including criminal liability. That is why successful application of anti-corruption compliance is extremely important in the activities of both businesses and state-owned enterprises," said Oksana Tsymbrivska, Key National Expert of the EU Project Pravo-Justice and RJRCs National Coordinator.

According to Vitalii Tkachenko, anti-corruption compliance consultant and author of the research on anti-corruption in the security and defense, energy, and transport sectors, there is public misconception of corruption in public authorities, local governments, law enforcement bodies, and regulatory authorities as the most dangerous type of corruption. In reality, the biggest threat to the state and the society is primarily the corrupt practices of state and municipal enterprises. As this is what causes significant financial damage, affects reputation of a company and the state as a whole, and hinders foreign investment inflow.

In order to prevent these corrupt practices, the Law of Ukraine “On Prevention of Corruption” introduced in 2014 two interrelated institutions: the institution of the anti-corruption program and the institution of authorized units or persons who are responsible for the implementation of the said anti-corruption program. However, today the effectiveness of such commissioners remains extremely low, and their activities are limited to anti-corruption programs drafting and risk assessment.

“As of today, the statutory regulation of either legal status and responsibilities or procedure for appointing a commissioner does not meet the needs which would allow for the effective functioning of the instrument of commissioners. In this connection, immediate legislative changes ought to be introduced,” Vitalii Tkachenko said.

The key factors that hinder the activities of authorized legal entities, according to Vitalii Tkachenko, include the following:

• Formalistic approach of the management to such positions and lack of appropriate conditions for the exercise of their functions and powers.
• Low awareness of the staff of enterprises about the concepts of “anti-corruption activities” and “anti-corruption commissioner”.
• Problem of legislative regulation of the procedure for appointing commissioners. They are currently appointed by the management which is interested in having a controlled person in this position. Dependence on management also significantly limits the activities of commissioners.
• Lack of legal stipulation of qualification requirements for commissioners, which creates complete discretion in the appointment of the commissioner.
• Need in detailed statutory regulation of the powers of the commissioners. Such powers are currently regulated by the NAPC orders, while they should be regulated by law
• Unresolved issues of work and protection of whistleblowers.
• Poor professionalism of the commissioners etc.

For his part, Yevhen Riyako, lawyer, managing partner of RIYAKO & PARTNERS, and representative of Kharkiv RJRC, spoke in more detail about the activities of anti-corruption commissioners in public procurement processes. In particular, he listed the following problematic issues:

• Insufficient check to detect affiliates among tenderers, or verify whether they had actually delivered services in full under similar contracts in the past.
• Unethical behavior of tenderers and buyers. For example, there are more than few cases where after a lawfully completed tender at the stage of signing a contract, the winner would be forced to offer illicit benefit.
• Commissioner not being empowered to monitor the lifestyle of top employees of enterprises who may allow corrupt practices.

Yevhen Riyako also stressed the need to increase motivation of the commissioners. On one hand, through the establishment of disciplinary and financial responsibility of the senior manager for non-compliance with the requirements or requests of the commissioner, which does not exist today. On the other hand – through the responsibility of the commissioner.

“Only a person who accepts such conditions and is ready to do everything to ensure that what they do to detect corruption is not overshadowed in any way,” Yevhen Riako said.

Ksenia Hoduieva, senior detective of the NABU Internal Control Department, who was present at the event, spoke about the activities of the bureau under the ISO 37001 standard on combating corruption.

“The standard covers the full cycle: from prevention, ie not allowing violations, to prosecution. In addition, the standard covers the procedures of internal interaction among the NABU units,” said Ksenia Hoduieva.

According to her, the NABU does not have commissioners to combat corruption, as in other public bodies. These functions are performed by the Internal Control Department. At the same time, the Commission for Corruption Risk Assessment and Internal Control, which is composed of the heads of all independent divisions, is a key player in the implementation of the standard. Its scope of powers includes responding to any allegations of violation of the standard by the NABU employees or other stakeholders.

For his part, Pavlo Ivanin, Doctor of Law, Member of the Public Council at the NAPC, Deputy Chairman of the Board of the NGO “Network of Anti-Corruption Centers”, shared the results of the study of performance of anti-corruption commissioners in public and local executive bodies conducted by the NAPC in 2020. He reported the following:

• As of the end of 2020, 13% of central executive bodies ignored the need to establish an authorized unit or to appoint an authorized person.
• 7% of state bodies do not comply with the rule on subordination of the commissioner to the head of the body.
• 16% of anti-corruption commissioner positions in public and local authorities remain vacant.
• 44% of commissioners do not take any anti-corruption measures in their respective authorities.
• Only 80% of surveyed bodies take measures to inform employees about corruption.
• Only 16% of surveyed bodies have mechanisms in place to encourage whistleblowers.

“We need to focus on increasing the independence and efficiency of the anti-corruption commissioner, first, and then on increasing the responsibility of the commissioner for the way they perform their duties. I have to state that currently the work of the commissioner is reduced to submitting formal reports to the NAPC and failure to do actual work at the enterprise,” Pavlo Ivanin said.

Following the discussion, the participants came up with the some recommendations which are intended to improve the efficiency of anti-corruption commissioners:

• Develop training programs and reach out heads and staff of enterprises to give better understanding that compliance with anti-corruption standards helps reduce losses and avoid further problems with law enforcement bodies.
• Through legislative changes, introduce competitive selection of commissioners for a certain period with the involvement of NAPC representatives as supervisors.
• Enshrine in law qualification requirements to commissioners, namely education and experience in anti-corruption or law enforcement. And also make it impossible for those who have committed acts of corruption in the past to be appointed as anti-corruption commissioners.
• Enshrine in law a detailed description of functions of a commissioner, especially regarding access to information and conducting official inspections and internal investigations.
• Introduce reporting on the implementation of the anti-corruption program at an enterprise with an indication of whether any corrupt actions have taken place.

Background:

Regional Justice Reform Councils (RJRCs) have been established with support of the EU Project Pravo-Justice and function in Chernivtsi, Dnipro, Kharkiv, Lviv, Odesa regions and Donbas. To date, Councils members have been actively participating in drafting a bill on mediation, amendments to the Bankruptcy Code, proposals to improve legislation on enforcement proceedings, introducing e-court and discussing the concept of transitional justice.

RJRCs act as permanent working groups to promote bottom-up reforms: bringing region-specific challenges and potential solutions thereof to the level of central government.