Anti-Corruption Steps Ukraine Must Take in 2025

On October 30, 2024, the long-awaited EU Enlargement Report on Ukraine as a candidate country for 2024 was published on the website of the European Commission. This year, the document has 103 pages with annexes; its structure and format were also updated compared to last year’s 150-page report for 2023, which we previously analyzed.

In the document, European partners stated that after the first intergovernmental conference in June 2024, the screening of Ukrainian legislation for compliance with EU legal norms was progressing unhindered. If Ukraine fulfills the integration conditions, the European Commission expects the negotiations on our accession to the EU to begin as early as 2025. The sections from the Fundamentals cluster will be then opened for Ukraine.

In the introduction to the report, the EC notes that, despite the continued aggressive war of Russia, Ukraine has demonstrated remarkable resilience and commitment to its European path and has generally implemented its anti-corruption recommendations from the previous report.

Like last year, the European Commission believes that Ukraine has made some progress in preventing and combating corruption, in particular through strengthened anti-corruption institutions and the gradual build-up of a track record in investigating, prosecuting, and adjudicating high-level corruption cases.

Ukraine has strengthened the independence and institutional capacity of the Specialized Anti-Corruption Prosecutor’s Office (SAPO), the National Anti-Corruption Bureau of Ukraine (NABU), and the National Agency on Corruption Prevention (NACP). According to the EC, this was done, in particular, due to an increase in the number of personnel; however, the NACP limit of 408 people remained unchanged. Such actions helped specialized anti-corruption bodies to become more effective and achieve a noticeable level of law enforcement in corruption cases at the highest level. One of the key conclusions of the European Commission was that targeted risk assessments and special measures are necessary to combat corruption in the most vulnerable sectors.

In this analysis, Transparency International Ukraine experts consider other events and progress in the fight against corruption that were noticed by our partners in Brussels, as well as freshly provided recommendations for the next year.

Corruption prevention and the NACP mandate: e-declaration, lobbying, whistleblowers, anti-corruption policy, state financing of political parties, etc.

The European Commission reported that the NACP has achieved good results and demonstrated independence from political and vested interests.

The report informs that after resuming e-declaration, the NACP reformed its approach to verifications of asset declarations with a new focus on risk-based assessments. However, the EC notes the need for further streamlining of internal procedures. The Commission also points out that the NACP should raise the number of cases of unexplained wealth detected through its own analysis, as successful cases originate from external notifications. Certain registers and databases, to which the NACP has access, are outdated and require significant updates. The Verkhovna Rada should broaden penalties for unexplained wealth and considerably reduce the currently applicable thresholds to make the sanctions regime relevant and effective.

The report notes that Ukraine has established the first framework for regulating lobbying. The EC believes that the enacted law is in line with international standards and best practices, defining lobbying comprehensively, excluding non-commercial CSOs from the definition, and the range of penalties is coherent and acceptable overall.

With respect to whistleblowers, the European Commission mentions the launch of the unified whistleblower reporting portal in September 2023; however, less than 10% of relevant entities are connected to the portal. Despite the increase in the number of reports, only 15 cases were submitted to the court by the NACP, and the HACC issued two decisions granting monetary awards in the total amount of EUR 325,000.

European partners note the high quality of the Anti-Corruption Strategy and the State Anti-Corruption Program (SAP) applicable until 2025, but point to delays in their implementation due to lack of staff and budgetary resources. According to the EC, given such delays, adjustments need to be introduced to the Anti-Corruption Strategy and the SAP. It seems to us that this is not only about the enforcers of anti-corruption measures, but also about the employees of the relevant department in the NACP. Their number is obviously too low for the assigned tasks. The specialists are overloaded, and the financing of this staff should be higher and such that would ensure its expansion. Separately, the EC report notes that the NACP launched an IT system for monitoring implementation of the SAP.

The report also refers to the resumption of the requirement for political parties to submit reports to the NACP. Among other things, the Commission mentions measures that concern money laundering, politically exposed persons (PEP), judicial reform and reform of the Constitutional Court of Ukraine, privatization and corporate governance reforms, etc.

Our next steps

The European Commission’s statements on improving the NACP’s by-laws on financial control echo the recommendations from our Shadow Report. It mentioned shortcomings of the lifestyle monitoring mechanism adopted by the Agency, the full verification of declarations (including automated full verification), the irrelevance of some “quick” declaration checks, the closed nature of the rules of logical and arithmetic control (LAC), as well as the procedures for checking the declarations of employees of certain categories.

We also called on the body to focus on finding and detecting signs of unlawful enrichment and unjustified assets, and not on small-scale discrepancies between the declaration and flawed state registers, as is mainly the case now. We support the EC’s recommendation on reducing the thresholds for the declaration of assets by officials and the application of criminal liability for false declaration and unlawful enrichment.

The European Commission also recommends extending the personal scope of the asset declaration obligation to staff of private offices of high-level political officials, including their advisors and assistants. In the section of the Shadow Report devoted to lobbying, we supported the expansion in the range of entities of anti-corruption legislation, including the obligation to declare.

The European Commission once again noted that the legal framework on whistleblower protection remains to be aligned with the EU acquis. In the Shadow Report, we detailed the discrepancies in terms of the relevant EU Directive, especially regarding the introduction of a “broad definition” of a whistleblower, as well as the need to introduce the new European directive on protection against strategic lawsuit against public participation (SLAPP) into Ukrainian legislation.

The Commission recommends that Ukraine makes an early start on the implementation effectiveness assessment for the current 2021-2025 State Anti-Corruption Strategy and conducts an inclusive preparatory process for a subsequent strategy and implementation program. Apparently, this statement is mentioned in the report in accordance with the Ukraine Facility Plan. One of its conditions is the adoption of new national anti-corruption policy documents by the end of the second quarter of 2026. But this counterpoints our recommendation from the Shadow Report, where we stressed the need to amend the legislation now so that the NACP could begin such an implementation effectiveness assessment of the Anti-Corruption Strategy together with the development of a new one only after the expiration of the current documents.

Another recommendation of the EC is to significantly improve the implementation of the SAP to an acceptable level. In our opinion, a clearer and more ambitious step would be to include in the report a specific indicator of the measures implemented, for example, at least, at the level of 80-90%, given that the next year is the last year of the SAP’s validity.

The report also refers to the need for a comprehensive update of legislation on political parties, including procedures for prosecuting violations of funding rules. The Shadow Report also drew attention to the need for a new law that would include balanced and proportionate sanctions that apply for violations.

What was not mentioned by the European Commission?

Transparency International Ukraine published a rather critical assessment of the first five months of the new NACP leadership, where we, among other things, mentioned dubious personnel appointments to the senior management of the body. This matter and the results of monitoring the lifestyle of all officials, which are closed to the public, do not allow us to agree yet that the Agency has shown good results and independence from private interests.

Perhaps such a positive assessment of the NACP was influenced by the changes that had taken place earlier this year. Spring saw a successful exclusion of unlawful functions in the field of sanctions policy from the scope of the NACP mandate. In summer, we witnessed the long-awaited harmonization of the functions of internal control and prevention of corruption in the NACP with the legislation. We spoke positively about all this at the start of the upgraded Agency’s operation.

In the Shadow Report, we paid more attention to the potential of improving the first legal framework for regulating lobbying through a number of specific steps that would allow for a fully effective system of sanctions for violations in this area. Unfortunately, the European Commission does not mention this in the report.

Neither does the European Commission mention the shortcomings of the Unified Whistleblower Reporting Portal described by us. These include requiring the whistleblower to provide a legal qualification of the possible offense at the reporting stage, the whistleblower’s manager’s ability to see the archive of such reports, the absence of a TOR version of the portal, and other inconsistencies with the best standards of anonymity and confidentiality. We will wait for the promised update of the portal by the NACP so that these and other gaps become irrelevant.

Recent amendments to the SAP, along with positive changes, have led to the removal of certain progressive provisions, such as the creation of a system of psychological assistance to whistleblowers or the proper interoperability of state registers. But we still are of the opinion that the existing anti-corruption strategic documents are generally of high quality, since the bulk of the measures in them remained, and the shortcomings in the implementation of substantive SAP measures were widely described in the Shadow Report. The European Commission only mentions the imposition of sanctions for systematic non-compliance with these measures, which, in our opinion, is not enough. We believe that to increase the level of measure implementation, the Verkhovna Rada needs not only to grant the NACP the authority to issue mandatory precepts with administrative liability for non-compliance, but also to establish proper coordination, ensuring a full level of political representation, and introduce appropriate mechanisms for assessing the enforcers of such measures.

The report of the European Commission did not mention the challenges of the Politdata electronic reporting system of political parties, anti-corruption examinations and programs of public authorities, monitoring of conflicts of interest, the subsequent external assessment of the NACP effectiveness, as well as deoligarchization. We described all these problems in our Shadow Report and provided recommendations to solve them.

Anti-corruption segment of criminal justice

The European Commission indicated that the anti-corruption indicators in Ukraine have improved further over the year. Anti-corruption institutions are making efforts to create a serious list of investigations and court decisions in corruption cases at the highest level, and the total number of indictments and court decisions during the reporting period reached the highest level for the entire existence of key anti-corruption institutions.

Partners also note that the NABU and the SAPO have maintained their operational effectiveness and remain important institutional pillars in the anti-corruption infrastructure. Their institutional capacity was further strengthened and, following the adoption of legislative amendments in December 2023, the NABU and the SAPO have gradually started to increase their human resources. In March, the SAPO became a separate legal entity, which formalized its institutional independence from the Office of the Prosecutor General.

The HCJ and the HQCJ launched a competition to recruit 25 new judges to the HACC, which would bring the total number of judges to 63.

The report also notes a legislative framework in Ukraine in the field of combating corruption and the fact that during the reporting period, it was even more aligned with international standards. In particular, legislation was adopted and implemented that strengthened the SAPO and the NABU.

Our next steps

The NABU and the SAPO should continue to improve their case prioritization policies and work on more high-profile investigations. In addition, the value of seized and confiscated assets within NABU proceedings is still low. This fact requires analysis and new strategic approaches. Such conclusions are in line with our recommendations related to the quality assessment of the NABU Development Strategy implementation and the formation of the SAPO development strategy, which has not been worked out so far. It is also important to develop the practice of assessing detectives not only by quantitative but also by qualitative indicators, as well as to introduce a system for assessing the activities of prosecutors.

As for the European Commission’s attention to the confiscation of criminal assets, it should be noted that Ukraine needs to improve measures for the confiscation of corruption assets. In the study of property confiscations, we recommended, for example, bringing the property confiscation procedure in line with generally accepted international standards. To do this, it is necessary to provide for “expanded” confiscation of property in the Criminal Code of Ukraine, initiate the conclusion of new and improvement of existing bilateral agreements on legal assistance in criminal cases in terms of confiscation of assets obtained by criminal means. There are also no public statistics on the website of the State Executive Service on the enforcement of court sentences in terms of confiscation of property and special forfeiture. Therefore, this body should publish it and analyze the results obtained to improve the operation of the competent authorities.

The European Commission emphasized that the institutional framework for combating corruption in Ukraine is mainly established but needs further improvement in terms of both preventive measures and law enforcement.

In this matter, our recommendations fully coincide with those provided by the European Commission. The NABU still lacks appropriate access to timely and independent forensic services and autonomous wiretapping capabilities in its high-level corruption investigations. We also recommended improving the organizational structure of the NABU and interaction between units. To this end, the body should review the internal distribution of personnel, the roles, and location of individual structural units, as well as the arrangement of work. Before that, the European Commission recommended considering the possibility of expanding the regional presence and capabilities of the NABU.

Our opinion also coincides with the recommendation that the powers of the SAPO head still need to be expanded. We indicated that the following should be added to his legal status:

• the ability to initiate criminal proceedings and coordinate investigative actions against MPs;
• apply for extradition to the competent authority of a foreign state;
• consider and resolve the issue of establishing joint investigative groups at the request of an investigative body of pre-trial investigation of Ukraine, a prosecutor of Ukraine, and competent authorities of foreign states.

The European Commission also mentioned the dismissal of NABU First Deputy Director Gizo Uglava. After an internal investigation and disciplinary proceedings, the NABU Director dismissed his first deputy in September due to unlawful actions towards the whistleblower who reported an alleged leak. It is important that the NABU address the underlying internal structural issues to effectively prevent information leakage and ensure the effectiveness of its Internal Control Department.

We also drew attention to this matter; however, it should be noted that disciplinary liability must be clear to the general public to avoid manipulations and ambiguous interpretations. Therefore, we additionally recommended that the NABU strengthen public communication on the results of internal investigations for violations established by HACC judges, as well as the overall effectiveness of the internal control system.

The European Commission recommended taking appropriate measures to implement the results and recommendations of the upcoming external independent audit of the NABU. Currently, we are still awaiting the published audit criteria and methodology.

The European Commission noted that the deployment of the NABU-SAPO electronic case management system is progressing slowly. According to European partners, it is necessary to remove the current legal and technical obstacles, in particular those that prevent attorneys from connecting to the system, to ensure its immediate full deployment and full operational use. This echoes our recommendation that for the full operation of the eCase system, it is necessary to develop a technical capability and a regulatory framework to engage other participants in electronic criminal proceedings.

The European Commission also mentioned the competition for the positions in the HACC; its recommendation that the current mandate of the PCIE be extended to ensure quality selection of new judges is quite consistent with ours. The authorities have already implemented this recommendation, so we expect a quick and efficient selection. The problem of the HACC premises for a larger number of employees also remains relevant; therefore, it requires the immediate attention of public authorities.

In the context of the recruitment of HACC judges, it is also necessary to pay attention to the problems of transparency and quality of competitive selection. Currently, the HQCJ does not have an up-to-date published methodology for the qualification assessment of competition participants with a clear weight (value) of each indicator by which the candidate is assessed, and this may reduce the objectivity of the selection results. In addition, the previous experience of the competitive selection of HACC judges highlighted the issue of transparency because the regulatory framework of the HQCJ does not oblige the commission to publish a list of information important for public control, in particular, the practical tasks performed, the methodology for their assessment, as well as the decisions made by the PCIE and the HQCJ during special joint meetings. Transparency of the competition is a guarantee of trust in the elected judges, which is especially important in conditions when the HACC considers cases of high-profile corruption.

Separately, we draw attention to the recommendation of the European Commission on changes to the statute of limitations to ensure more effective prosecution for corruption offenses. Based on the results of the TI Ukraine study, we have come up with the best way to introduce such changes: to expand the grounds for suspending the statute of limitations, to enhance criminal liability for certain corruption criminal offenses and those that impede the investigation, as well as to shift the moment of expiration of the statute of limitations to the time of delivering the verdict, and not its entry into force. This will improve the situation with this category of criminal offenses and maintain a balanced criminal law system.

The European Commission recommended amending the legislation to improve the tool for concluding plea agreements. Despite the draft law No.12039 adopted as a whole, in our opinion, when reforming the tool of agreements, it is necessary to:

• additionally determine the mandatory application of special forfeiture when concluding agreements in corruption cases if there are grounds for this, as well as improve the provision on confiscation of property;
• specify that agreements may be concluded in those criminal proceedings where damage is not involved;
• authorize the court to demand the collected materials of the pre-trial investigation or to oblige the prosecutor to send such materials to the court, together with the indictment and the agreement.

The EC also recommends amending the Criminal Procedure Code to prevent procedural abuses in criminal proceedings. Our results of monitoring HACC cases confirm the relevance of this recommendation.

Separately, the European Commission pointed out that Ukraine should continue to align its actions with the norms of the OECD Anti-Bribery Convention and the recommendations of the OECD Council, including corporate liability reform. However, the draft law No.11443 adopted in the first reading significantly narrows the grounds for applying measures against legal entities and runs the risk of remaining purely a provision on paper and will not be used to fight corruption in practice.

The EC also mentions changes in the legislation that allow certain criminal cases to be considered by a single HACC judge depending on the severity of the penalty to significantly increase efficiency. The European Commission also paid attention to the fact that when adopting such amendments to the legislation, exceptions were introduced for certain high-ranking officials (including MPs) who can opt for their criminal cases in any court to be heard collegially regardless of the severity of the penalty.

Even before the adoption of these amendments to the legislation, we stated that they would not apply to high-ranking officials involved in criminal cases, and noted that the adoption of such provisions would complicate the consideration of cases by local general courts. We also stressed that updating the legislation with a list of exceptions for senior officials contradicts our obligations to partners. We support the recommendations from the EC report to revise these provisions of the law, considering its proportionality and impact on judicial efficiency.

The section on justice also mentions that for effective investigations, the mandatory closure of criminal cases due to the expiration of the time-limit of the pre-trial investigation and the duration of the time-limit should be reviewed. According to TI Ukraine, the court should have the right, not the obligation, to close criminal proceedings if the indictment was sent outside the period of pre-trial investigation. This will allow for bringing the prosecution to discipline and protecting expectations within reasonable time-limits of prosecution, but at the same time it will not invalidate several years of work of the pre-trial investigation body because of delays and non-appearances.

This section of the EC report also mentions the need to improve the system for selecting management-level prosecutors, in particular to enhance transparency and ensure credible integrity, professionalism, and leadership checks. The selection and dismissal procedures for the Prosecutor General should be made more transparent, objective and meritocratic, and less prone to politicization.

Back at the stage of developing the current Anti-Corruption Strategy, we supported the introduction of an open, transparent, and objective competitive selection for the position of Prosecutor General. In our opinion, the selection should be conducted by an independent commission with the engagement of international partners, with due attention to the professionalism and integrity of the candidates. Unfortunately, this provision was not included in the strategy at that time, unlike another positive norm—the definition of an exhaustive list of grounds for dismissal and termination of the powers of prosecutors, including the Prosecutor General, to prevent their unmotivated (including political) use. Currently, the Prosecutor General’s Office continues to develop the relevant draft law. 

What was not mentioned by the European Commission?

The EC report doesn’t mention certain issues with the enforcement of HACC sentences. For example, the issue of early release of convicted persons is decided by the local court at the place of the sentence served. The reason for this may be great attention to the stages of pre-trial investigation, the hearing of corruption cases, and insignificant communication about the results of the enforcement of such decisions, although they are the main goal of the whole process.

We also paid serious attention in the Shadow Report to the fact that the Security Service of Ukraine (SSU), the State Bureau of Investigation (SBI), the National Police of Ukraine (NPU), the Bureau of Economic Security (BES), and the prosecutor’s offices must strictly comply with the requirements of procedural legislation on the jurisdiction of NABU cases and, to this end, effectively interact with each other. For example, when the SSU, in the course of investigating a case under its specialization, detects the facts of corruption and corruption-related criminal offenses committed by a suspect under the jurisdiction of the NABU, the quick and prompt transfer of the relevant case materials to the Bureau’s specialists should be ensured. However, the European Commission did not mention this in the report.

We also recommended working on the issue of establishing disciplinary liability for the heads of pre-trial investigation bodies (i.e., investigative units) for the fact that their units investigate cases in violation of the exclusive jurisdiction of the NABU, as well as prosecutors who failed to determine the jurisdiction of criminal proceedings correctly.

The European Commission may not have emphasized this because the Action Plan for the Implementation of the Overarching Strategic Plan on Law Enforcement Reform indicated a clear delineation of jurisdiction in one of the points. In Brussels, one of the tasks for the next year was to achieve tangible progress in the implementation of this action plan.

In this context, it is important that the European Commission recommended the introduction of transparent and merit-based recruitment and selection procedures for managerial positions in central and regional offices of the National Police and the SBI, with the involvement of independent experts, and strong disciplinary and anti-corruption frameworks tailored to the local context, addressing actual corruption risks.

Comprehensive reform of the Asset Recovery and Management Agency 

In Chapter 24, the European Commission mentioned that Ukraine should also continue the comprehensive reform of the ARMA in accordance with EU law.

We at TI Ukraine have been tracking the operation of the ARMA since its launch and can note that this mention of the European Commission, albeit short, is crucial. The Ukraine Facility Plan refers to the need to carry out a comprehensive reform of the ARMA based on a technical analysis of the Agency’s activities, which would also include a system of transparent selection of its head. Particular attention in the plan is paid to the independent system of external evaluation of ARMA activities, as well as to the improvement of mechanisms for managing and selling confiscated assets.

The ARMA was modeled after asset recovery offices that functioned in EU member states. It should have been a compact, highly qualified body with broad powers, serious guarantees of independence, and a sufficient level of control on the part of specialists and the public. And its main functionality was to be precisely in the detection, search, and management of criminal assets, but so far, there are problems in each of these areas.

Our next steps

Over the years of the ARMA’s activity, we haven’t noticed any significant results of its functioning, and the reasons for this lay both in the very operation of the Agency and in the shortcomings of the legislation. Therefore, we hope that the comprehensive reform of the ARMA will allow for a full realization of the potential of this body.

In our opinion, it is necessary to:

• change the rules for the selection of the Agency head by reducing the number of commission members, lower the politicization of the process, and supplement the competition with clear rules for assessing candidates;
• increase transparency of activities, especially in the management of seized assets. Currently, these processes are too complicated both for the owners of the seized property and for potential managers, as the ARMA often delays tenders;
• change the rules of external independent assessment of the Agency’s work, in particular, reduce the number of commission members to three, and the Cabinet of Ministers shall appoint them based on proposals of international partners;
• introduce full-fledged planning before seizure;
• prioritize the seizure of assets by criminal courts over other interim relief measures within other jurisdictions;
• unblock the possibility to manage corporate rights.

External audit

As in the previous report, the European Commission noted the limited influence of the Accounting Chamber as the only external audit body in the field of financial control. One of the reasons for this assessment was the shortcomings of the regulatory framework, which at the time of the report was inconsistent with international standards for supreme audit institutions.

However, the report also noted some positive changes in the activities of the Accounting Chamber. The body approved the INTOSAI Framework of Professional Pronouncements (IFPP) as the basis of the organizational and methodological framework for audits and approved the methodologies for compliance audits and performance (effectiveness) audits. The methodologies of all types of audits conducted by the Accounting Chamber have been brought into line with international standards, and the body has already begun to implement them in practice. In addition, partial progress has been made in monitoring the implementation of the Accounting Chamber’s recommendations.

Our next steps

The recommendations of the European Commission for Ukraine in the field of external audit have not changed significantly compared to the previous report. The key is to enhance the political, administrative, and financial independence of the Accounting Chamber and expand its mandate to include control over all public finances.

As before, European partners draw attention to the need to establish more effective cooperation between the Accounting Chamber and the parliament to enhance control over the receipt and use of national budget funds.

In addition, according to European experts, it is important to ensure the delineation of mandates between the two control bodies—the Accounting Chamber and the State Audit Service.

In order for the audits of the Accounting Chamber to stimulate and strengthen reforms, the body should plan its activities based on risk and impact assessment. It should be noted that the Chamber carries out audits in 12 areas, including defense and security, economic and law enforcement, infrastructure, education, and health care.

Most of the recommendations of the European Commission are consistent with the proposals of TI Ukraine to enhance the capacity of the body, in particular to establish guarantees of its political and financial independence in the law, improve the approach to audit planning, and delineate its mandate from that of the State Audit Service.

What was not mentioned by the European Commission?

In general, the report mentions the steps necessary for a quality reform of the Accounting Chamber. However, some recommendations provided by the EC were considered at the time of publication of this report because on the day of its publication, the Verkhovna Rada adopted draft law No.10044-d, designed to improve the operation of the Accounting Chamber. This document considers several recommendations of our European partners:

• expands the authority of the body to audit local budgets, state-owned enterprises, extra-budgetary foundations, consolidated financial statements of public sector entities;
• introduces an updated procedure for the competitive selection of members of the Accounting Chamber with the prevailing right of international experts to vote;
• eliminates the possibility of direct political influence on the Accounting Chamber through unscheduled audits initiated by other bodies;
• enshrines a risk-oriented approach to audit planning in law;
• enhances the administrative independence of the Accounting Chamber by simplifying the procedure for determining the maximum number of employees and removing officials from the scope of the Law on Civil Service;
• enhances the financial independence of the body by enshrining the salaries and bonuses of officials at the level of the law and establishing a special procedure for considering the budget requests of the Accounting Chamber;
• consolidates the requirements for mandatory consideration of certain decisions of the Accounting Chamber by parliamentary committees based on the results of audits and information on improper implementation or non-implementation of recommendations provided by it.

However, certain risks related to ensuring the political independence of the Accounting Chamber and the overlapping of its functions with those of the State Audit Service were not eliminated in the new law. Their correction in the future will not only help to fully implement the recommendations of the European Commission, but also significantly strengthen the institution and consolidate the distribution of responsibilities of public authorities in the field of financial control.

Public procurement

The European Commission notes certain progress of Ukraine in the field of public procurement. It includes the development of a new draft law on procurement, the adoption of the Strategy for Reforming the Public Procurement System for 2024-2026, as well as the reduction of exceptions to procurement legislation necessary under martial law.

However, the legislative framework in this area has remained largely unchanged and thus only partially aligned with the EU Directives. Lack of human and financial resources affects the institutional capacity of procuring entities to manage public procurement. However, despite the war, Ukraine managed to maintain procurement procedures, including the use of the Prozorro system.

Considering certain aspects of procurement, the European Commission notes that the legislation retains temporary requirements for the localization of goods, and procuring entities encounter difficulties in their application. The EC also notes that the evaluation of the tender bid in Ukrainian procurement excessively depends on price as the only criterion, which indicates a significant imbalance in the priority of price over quality. In addition, mandatory energy efficiency criteria have not yet been introduced, which is important given the scope of the country’s reconstruction needs.

The report notes progress in defense procurement: first of all, the creation by the Ministry of Defense of two centralized procurement bodies for non-military and military procurement and their launch. In early 2024, a large-scale training program on procurement in the defense sector was launched.

Assessing the control over procurement, the European Commission notes that the State Audit Service continues to monitor legal compliance of contract award and implementation. However, the coverage of monitoring and ex post internal audit of public procurement remains modest, and the risk assessment within procuring entities is weak. Ukraine has a legal and institutional framework for integrity and conflict of interest management, but there is no sectoral anti-corruption strategy based on risk assessment.

The legislation on the right to legal remedy is partially aligned with the EU acquis. The European Commission noted an increase in the number of complaints to the Antimonopoly Committee of Ukraine given the recruitment of only 4 out of maximum 10 public procurement commissioners in 2023.

Our next steps

The European Commission notes that its last year’s recommendations have only been partially implemented and remain valid. Next year, Ukraine should take the following steps.

• Adopt laws on public procurement and concessions and public-private partnerships (PPPs) that are in line with the EU acquis and harmonize the definitions of defense procurement with EU directives.
• Reinforce the new Public Procurement Reform Strategy for 2024-2026 with a clear and structured approach to its implementation.
• Provide procuring entities with comprehensive explanations that localization requirements do not apply to contracts that are subject to Ukraine’s international obligations, in particular the Association Agreement, to comply with the principles of non-discrimination and equal treatment.
• Assess the relevance of the current exemptions to public procurement legislation caused by the full-scale war and minimize them. Exemptions related to innovative medicines procured via managed entry agreements need to be reviewed.
• Develop a roadmap to enhance control over public procurement by the State Audit Service in accordance with the Ukraine Facility Plan. The need to enhance state supervision over the practice of public procurement is also indicated by the EC in the context of regional policy, in particular during the planning, distribution of finances, and the direct implementation of reconstruction.
• Continue professionalization of procuring entities: implement professional standards, professionalization strategy, and training policy based on needs assessment.
• Select more commissioners who consider complaints in public procurement to the commissions of the Antimonopoly Committee and strengthen the internal administrative capacity of the body to support its activities.

What was not mentioned by the European Commission?

When assessing the progress in procurement, the European Commission does not indicate some issues and growth areas, perhaps because not all of them directly relate to the implementation of the requirements of the EU Directives, in particular:

• improvement of the work of centralized procurement organizations;
• the need to reconsider some temporary approaches introduced during martial law (such as abandoning the negotiation procedure);
• gaps in the regulation of determining the expected cost of the procurement item;
• lack of transparency at the stage of procurement contract implementation;
• increase in the efficiency of procurement monitoring by the State Audit Service, in particular through change of approaches;
• low level of competition in public procurement.

The European Commission does not mention the development of the Prozorro Market electronic catalog and the need for its further optimization, as well as the development of the Prozorro system and the need to synchronize it with other information systems and registers. Among the positive steps introduced but not mentioned by the EC are increased transparency and competition in defense procurement, an increase in the scope of reporting on direct procurement for above-threshold amounts and the possibility of their monitoring.

Conclusions

A significant number of the European Commission’s points and recommendations echo what we have repeatedly noted in the Shadow Report, other studies, and legal analyses.

At the same time, TI Ukraine proposed additional steps not mentioned by the European Commission in its report. Despite the lack of these recommendations, they largely coincide with other requirements for Ukraine’s European integration and can enhance the capacity and efficiency of the anti-corruption ecosystem. Therefore, Ukraine has a voluminous task of implementing all these recommendations.

Among the many areas that the EC drew attention to in the report, we would like to note three systemic reforms that need priority attention in the near future:

• enhancing the capacity of the Accounting Chamber;
• bringing procurement rules in line with European ones;
• comprehensive reform of the ARMA.

It is these areas that require significant changes and their effective implementation. Moreover, all of them are included in the first negotiation cluster “Fundamentals of the EU Accession Process,” in which the negotiation chapters will be opened first and will remain open until the very end of the negotiations.

We at TI Ukraine hope for further progress of Ukraine in European integration, a significant part of which is the fight against corruption, to fulfill the forecast of the EU Commissioner for Enlargement on Ukraine’s possible accession to the Union by 2029, subject to the completion of reforms and the fulfillment of the criteria.