Four Pillars of Recovery: How to Prevent Corruption from “Devouring” Reconstruction?

In the past year, we have heard the word “reconstruction” so often that it seems to have become a constant part of our lives.

No one doubts the need to rebuild. There is even a certain consensus between the authorities, Ukrainian society, and international partners on this issue — we all want to rebuild better than it was. But what last year at the Lugano Recovery Conference seemed to be a future, distant project, for which much preparatory work would still need to be done, is now perceived as something urgent and unequivocal. However, the unequivocal nature of reconstruction has some risks.

According to the study of expectations from the upcoming reconstruction, presented by TI Ukraine last week, 73% of Ukrainians and 80% of business representatives are most concerned about the resumption of corruption schemes in the reconstruction process. Another 63% of citizens and 73% of entrepreneurs fear the possible lack of control over this process and, as a result, embezzlement of public funds. The fear of the resumption of hostilities only comes third with business (45%) and the population (55%).

That is, the issues of corruption and reconstruction are closely related, even intertwined.  Without solving the former, Ukrainians do not see opportunities for effective implementation of the latter.

That is why for this year’s Recovery Conference, which was held in London this week, Transparency International Ukraine prepared an analysis and recommendations on enhancing anti-corruption measures to safeguard transparent recovery of the country, together with the colleagues from the Basel Institute on Governance. It was these statements that were promoted in communication during the Conference.

This is a policy paper that approaches the problem comprehensively. I would like to talk briefly about the four main pillars, which can ensure a truly transparent and effective reconstruction. Allow me to explain why, in our opinion, there is no other way to truly achieve the desired result in our country.

Pillar 1. Strengthening anti-corruption bodies

We are talking about the independence and capacity of anti-corruption institutions, not from the moment of founding each of them, but with some, such as the High Anti-Corruption Court, even before the launch. The time has shown that all these conversations were and are not in vain.

According to the Corruption Perceptions Index, which is prepared annually by the global Transparency International movement, Ukraine has improved its score by 8 points over 10 years. This, by the way, is one of the best increases among the 180 countries that are currently analyzed in this study.

Of course, the work of the anti-corruption ecosystem plays a critical role in this indicator, especially if we consider that this work did not stop even after the full-scale invasion of russia into Ukraine. In the most difficult times, anti-corruption bodies have shown their capacity. The latest high-profile cases, such as the case of ex-head of the Supreme Court Vsevolod Kniaziev and the bribe of UAH 2.7 mln, or the investigation against the ex-deputy Minister of Community and Territorial Development Vasyl Lozynskyi, show that even now, despite the constant shelling, the activities of the NABU, the SAPO, and the HACC do not stop.

That is, we can already say that in the fight against corruption, we have a well-formed foundation and erected walls for a hypothetical anti-corruption fortress, but its internal architecture still requires considerable effort. Although the full-scale war did not affect the ability of anti-corruption bodies, it did leave its imprint. Many of the previous issues are still unresolved.

That is why in our recommendations, we remind of important challenges that currently require significant attention. Among them are:

• enhancing the institutional autonomy of the Specialized Anti-Corruption Prosecutor’s Office (SAPO) and expanding the authority of its leadership;
• resolving the problem of the NABU’s access to high-quality and impartial forensic examinations, as well as providing the Bureau with effective capabilities for autonomous wiretapping;
• increasing the number of personnel in anti-corruption agencies to effectively address the challenges posed by wartime reconstruction.

Separately, in our recommendations, we mentioned the restoration of mandatory declarations for officials and improving the work of the Asset Recovery and Management Agency (ARMA). This is why:

In the time after the full-scale invasion, when officials were permitted not to submit electronic declarations, there were many grounds for corruption. Lack of accountability encourages dishonest officials to act, and the extreme conditions of war provide many opportunities to organize dubious schemes. In general, what seemed appropriate in February 2022, today is not.

Our European partners also understand this problem. As European Pravda journalists reported in their article, the European Commission also considered it crucial for Ukraine to restore the mandatory declaration of officials. “Without this step, it seems that counting the criterion as fulfilled is unrealistic,” the article notes, and it is difficult to disagree with this.

Mandatory electronic declaration of officials is one of the easiest to implement and the most effective tool for preventing corruption, detecting cases of illicit enrichment or conflicts of interest. Therefore, without the restoration of mandatory declarations, integrity in reconstruction is impossible.

If we talk about the ARMA, the importance of this body during the war is difficult to overestimate. It is here that all the seized assets are transferred, and it is this institution that is engaged in the recovery of the property of traitors, including the assets to be seized.

However, the planning process is still not established before such assets are seized, the procedure for determining managers is not regulated, and the sale of assets remains opaque. The newly created asset register is not public, which reduces the accountability of the ARMA.

All this is in the absence of a full-fledged head of the institution. It has been three years of trying to select the head, and only now, is there hope that this will happen.

So, as we can see, there is still a lot of work in this area, while time is short. And this creates a separate risk for the reconstruction, which we are already waiting for.

Pillar 2. Judicial reform and reform of the Constitutional Court

Another topic that we have been talking about for years, and which is becoming more acute against the backdrop of the future reconstruction, is the situation with the Ukrainian courts. The fact is that without fair courts, international investors will not come to Ukraine because no one can guarantee them the safety of their investments. Ukrainian entrepreneurs have also been waiting for a fair trial for a long time, which will be able to guarantee them opportunities for work and save them from possible restrictions on their rights.

Although there are still many problems in this area, over the past six months, we have witnessed a noticeable shift. However, it is not yet clear to what extent Ukraine will be able to continue moving forward in this direction.

Finally, the High Council of Justice (HCJ) started operating, which is responsible for appointing and transferring judges. In June 2023, the HCJ approved 16 candidates who became members of the HQCJ. Although there was not a single representative of relevant non-governmental organizations among them, there were concerns about the integrity of only two candidates.

Another shift is the dissolution of the District Administrative Court of Kyiv. However, this crucial measure unearthed new challenges. Thus, currently, the consideration of cases that were in the proceedings of this court has actually been stopped. The court, which was supposed to consider these cases during the transition period, stopped the process of transferring materials altogether due to an excessive workload.

The issue of the selection of judges to the Constitutional Court of Ukraine remains open. Here we see a kind of clinch.

In December 2022, the President signed the Law on Candidates for the Position of Judge of the Constitutional Court of Ukraine on a Competitive Basis, but this document received a negative opinion from the Venice Commission, n particular, in the matter of the Advisory Group of Experts, which would check the candidates for positions. Ukraine was recommended to include the seventh, international, member in its composition who would have a decisive vote. The adopted draft law, however, provides for only six members of the Advisory Group: three Ukrainian and three international ones.

The Venice Commission also insisted that the Advisory Group’s decisions should be binding so that a candidate who received a negative result during the verification process could not become a judge of the CCU. However, there are currently no changes to the law.

Moreover, on June 10, 2023, the Venice Commission published another opinion on another draft law on the competitive selection of candidates for the post of CCU judge. Although this draft law does not consider the preliminary recommendation of the Venice Commission, experts have noticed significant progress. Therefore, in general, the Venice Commission positively assessed this draft law. Despite this positive assessment, we consider it imperative to fully implement the recommendations of the Venice Commission as soon as possible.

Pillar 3. Asset recovery as en effective tool of post-war reconstruction 

Over the 30 years of independence, Ukraine has come into possession of a lot of property that is somehow connected with russia or pro-russian local officials. It is obvious that under conditions of open aggression, such a situation was simply unacceptable.

That is why after the full-scale invasion of russia began, Ukraine adopted two mechanisms for the confiscation of assets by the state. These mechanisms are already working!

As of June 2023, 21 cases of confiscation of assets, in particular regarding the assets of Oleg Deripaska, Mikhail Shelkov, and Vladimir Yevtushenkov, were transferred to the HACC under the sanctions legislation. This is a really important step.

However, time and practice have shown that the existing mechanisms of confiscation need to be improved. In particular, it is necessary to increase the terms of consideration of the case by the first and appellate instances and the term for contesting the decision.

Moreover, unfortunately, the country has not yet adopted an Asset Recovery Strategy and an Action Plan considering the risks and priorities of wartime. These documents would establish the transfer of assets confiscated abroad, and in general, would facilitate the interaction of Ukrainian and international institutions in the recovery and confiscation of pro-russian property.

So far in our country, the circumvention of sanctions has not been criminalized. If this is corrected, it will be possible to confiscate the assets of persons who were sanctioned and who will try to circumvent the imposed restrictions.

Pillar 4. Transparency of procurement as a cornerstone of reconstruction

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We are convinced that the consideration of all the issues described above will not only significantly facilitate the future reconstruction, but will also increase the level of trust in our state both on the part of international partners and our citizens. The enemy, for their part, constantly mentions the significant nature of corruption in Ukraine at the international level.

Post-war recovery can give us a unique chance to rebuild and improve in all areas, including in the fight against corruption.

This publication was made possible by the support of the American people through the United States Agency for International Development (USAID) within the SACCI Project. The content of this publication is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of USAID or the United States Government.