Effective Corruption Prevention: Legal Analysis of Draft Law (Updated)

On 29 August, President Volodymyr Zelenskyy submitted urgent draft law No. 1029 on amendments to certain legislative acts of Ukraine concerning ensuring the effectiveness of institutional mechanism for corruption prevention.

Update (9 September 2019). According to the decision of the Verkhovna Rada Committee on Anti-Corruption Policy, it is recommended to adopt draft law No. 1029 as the basis with regard to certain changes.

One of them is immediate dismissal of NACP members after the Law comes into effect and appointment of a temporary acting Head of the NACP for the duration of the 60-day competition for this position by the Cabinet of Ministers. This procedure is worrying in the context of it possibly being appealed in court, including the Constitutional Court. This may be a threat to election of the new Head of the NACP in the competition. Independence of the NACP itself is also questionable, given it is also tasked with verification of Government officials.

We welcome strengthening of the international experts’ role. The Committee suggests formalizing mandatory three votes of international members to approve the Head of the NACP. This further extends the idea proposed by TI Ukraine concerning two mandatory votes of international members. However, taking into account the appointment of the temporary acting head of the NACP by the Cabinet of Ministers, the 6-member Commission may fail to get the fourth vote from the Government delegate. Thus, the competition will continue for over 60 days, which would weaken it.

The last idea of the Committee is retroactive 5-year suspension of public funding of political parties that overcame the 2% threshold at the recent elections that have already taken place and been recognized as valid.

What will change if the draft law is passed in the current version?

The NACP will cease to be a collegiate agency. It will have the head who will be personally responsible for the agency’s results. They will be appointed by the Cabinet of Ministers under a new procedure for a four-year term of office without the right to be reelected. 

The NACP will receive automatic access to the Unified State Register, the property register, other registers; it will have the right to request explanations from civil society organizations, citizens, economic entities, which is the missing link in verification of e-declarations as it is now.

The NACP will create a special e-declarations procedure for the SBU and the External Intelligence Service (Art. 52-1 of the Law on Corruption Prevention). This special procedure will not apply to positions openly appointed or dismissed by the President.

The limitation period concerning administrative sanctions for corruption will increase from three months to two years.

Once in two years, three individuals delegated by international organizations and approved by the Cabinet of Ministers will perform external audit of the NACP. The conclusion that the head of the NACP works ineffectively will serve as a reason to terminate their term of office ahead of schedule.

Our recommendations

• Establish the maximum number of NACP staff members.

• All subjects of declarations should report changes in their financial status. These data must be published in the register of e-declarations. The draft law does not include this.

• The next step to ensure effectiveness of corruption prevention: changes to the Procedure for Verification of E-Declarations and increasing independence of NACP staff members who verify them.

• Coordinate amendments in this draft law with other draft laws, such as the one on the protection of whistleblowers.

What is happening?

On 29 August 2019, the President filed urgent draft law No. 1029 on amendments to certain legislative acts of Ukraine concerning ensuring the effectiveness of institutional mechanism for corruption prevention.

What is the current situation?

Civil society activists have compiled a “black list” of failures of the National Agency for Corruption Prevention that illustrate the problems with NACP’s independence. The Agency maintained its collegiate model. Some NACP members had no experience with corruption counteraction and management on the national level. Full-fledged verification of e-declarations with access to all the necessary registers did not start working. There have been issues with the verification procedure and the subjects of declaration, too.

What is suggested? Commentary.

TI Ukraine and its partners have been reiterating the need for a draft law which would reboot the NACP since 2017, as well as on the fact that the current selection board should be replaced. The new head of the NACP, accountable for all the Agency’s focus areas, should also be selected by experts nominated by international organizations with clear selection criteria and transparent procedures.

The draft law stipulates this in the form of appointment of the Head of the NACP by the Cabinet of Ministers for a four-year term of office. A new selection board is created from six people selected by the Cabinet of Ministers (including three nominated by international organizations). Four votes are enough to make a decision, but it would be advisable to specify that at least two of these votes should be from representatives of international organizations. The Head can also appoint three deputies, the chief of staff and their deputies, as well at no more than six heads of territorial subdivisions of the NACP. The maximum number of staff members is not limited.

At the same time, the draft law contains many fundamental things which allow to improve the anti-corruption infrastructure:

• Automatic access of the NACP to the Unified State Register, the property register, other registers; its right to request explanations from civil society organizations, citizens, economic entities while verifying e-declarations.
• The NACP will be granted access to registration files, custodian accounting and notary privilege, which will come in handy while verifying e-declarations in the part pertaining to securities and inheritance.
• The NABU will have direct access to the register of e-declarations, taken away by the NACP back in the day.
• Now, e-declarations of prospective MPs at off-schedule elections, individuals from the executive support service, including assistant judges and the Presidential Office, will be available.
• The NACP will create a special procedure of e-declarations for the SBU and the External Intelligence Service (Art. 52-1 of the Law on Corruption Prevention). This special procedure will not apply to positions openly appointed and dismissed by the President. However, there is a risk that acts of such appointment or dismissal will be labeled secret for non-management positions, which will bring them beyond the general declaration obligation again.
• The limitation period concerning administrative sanctions for corruption will increase from three months to two years.
• The Ministry of Justice loses the veto right concerning registration of NACP acts.
• Once in two years, three individuals delegated by international organizations and approved by the Cabinet of Ministers will perform external audit of the NACP. The conclusion that the head of the NACP works ineffectively will serve as a reason to terminate their term of office ahead of schedule.
• Internal oversight and corruption prevention departments in the NACP are formalized, as are anti-corruption subdivisions in public authorities.
• Public Council under the NACP will be formed through open online vote, and its authority is extended, among other things, to participation in disciplinary commissions and selection boards.
• The list of close relatives now includes nephews and nieces, cousins, etc.
• Earlier, annual declarations were filed with information as of December 31. After the draft law is passed, individuals will have to declare an asset if its ownership or use by the subject of the declaration or a close relative continued for over half of the reporting period. The same applies to the definition of a family member.

Other changes:

• The law now contains the definition of a “legal entity of public law,” which, on the one hand, serves as an additional safeguard for “manual” transfer of an individual to the sphere of private law and avoidance of relevant anti-corruption restrictions. On the other hand, it should be specified that this notion is used for the purposes of the Law on Corruption Prevention.
• Restriction of the maximum amount of monthly bonuses to the NACP management — not more than 50% of the regular monthly wage.
• Cutting the annual funding of political parties by half and increasing the applicability barrier from 2% to 5%, which can block further development of the political landscape by restricting funding only to the parties represented in the parliament.
• All members of public councils and non-resident foreigners participating in selection boards and supervisory boards will not be obliged to file declarations.
• Independent members of supervisory boards will be relieved from regulating the conflict of interest concerning corporate rights, as are temporary members of local councils. There is a risk of those members falsely claiming they are independent.
• Significant changes in the financial status will include those changes for a family member, too. This is disproportionate. The subject of declaration is not obliged to track changes in the life of their family members and be responsible for them. It is one thing to do this once a year when the declaration is filed, and a different thing to do it regularly. By the way, significant changes mean expenses for the amount over 50 minimum costs of living. But low-level public officials will not have to report changes in the financial status, and these changes will not be published in the e-declarations register. This may impede rapid public oversight.
• 45 days after the law coming into effect, NACP members, the NACP chief of staff and his deputies, members of the Public Council under the NACP will be removed from office ahead of schedule.

    Important! This draft law is in conflict with amendments in other draft laws to the same articles. For instance, amendments to Art. 172 of the Criminal Code are better in draft law No. 1010 concerning corruption whistleblowers, as opposed to this draft law No. 1029. Conversely, amendments pertaining to explanations provided to the NACP are broader in this draft law than in No. 1010. The unconstitutional provisions on declarations of anti-corruption activists are also eliminated.

Legal analysis prepared by legal advisor of TI Ukraine Oleksandr Kalitenko