Pros and Cons of New Draft Law on Restoration of E-Declaration of Officials

On July 27, the Verkhovna Rada of Ukraine supported a new draft law No.9534 in the first reading and as a basis, which determined the procedure for submitting declarations of persons authorized to perform the functions of the state or local self-government under martial law. This document is aimed at restoring mandatory electronic declaration.

Brief conclusions from the draft law

• Although this draft law needs to be finalized before the second reading, it is better than its predecessor, 8071. However, the latter failed to reach the first reading in the parliament.
• Draft law 9534 restores the obligation of officials to submit declarations under martial law; dismissal is provided for failure to submit declarations.
• The NACP will be able to resume the verification of such declarations. Special checks with dismissal for failure to pass are also to be resumed.
• The register of declarations is reopened for public access, but some information from the declarations will not be made public.
• There are risks of abuse of the new provision on the market value of property in possession or use — this can lead to non-declaration of such property and evasion of criminal liability.

Key recommendations

• To exclude the proposed new condition regarding the market value of objects of ownership or use from the draft law.
• To reject the requirement of owning and using the asset for 183 calendar days for it to be declared, instead, to return to the current approach of half of the reporting period.
• To exclude the provision on concealing the full names of other persons, except for the declarant, from the public declaration.
• Not to limit the mandate of the NACP to providing clarifications only in the field of conflicts of interest and gifts.
• To develop and adopt a draft law on the Unified Register of Bank Accounts.

Read the legal analysis of the new draft law to find out more about all these nuances.

What happened?

On July 27, by 299 votes, the Parliament adopted the draft law No.9534 on the restoration of e-declaration in the first reading. The Committee on Anti-Corruption Policy was determined as the main committee, headed by Anastasiia Radina — one of the initiators of the draft law, together with Davyd Arakhamia and other MPs. Earlier on the same day, the draft law had been presented at a meeting of the Committee, which recommended its adoption as a basis.

The text of the draft law was registered in the Parliament and was made public the day before, on July 26.

What is happening with e-declaration now?

After the introduction of martial law in Ukraine, the submission of property declarations became optional, and a number of NACP functions were suspended. In particular, one of the main powers of the National Agency was put on hold — a full verification of declarations.

In addition, for security reasons, the Agency restricted access to the public part of the Register of Declarations; accordingly, all data from declarations already submitted for previous years were also inaccessible to the media and the public.

What does the new draft law No. 9534 propose?

1. The draft law proposes to restore the obligation to submit declarations within 90 days from the date of its entry into force. There are exceptions for servicemen and declarants who are in the territories affected by the military aggression of russia.

For example, for such a category of declarants, the reporting period (90 days) may be calculated from the date determined as the end of hostilities for the relevant territories or from the date determined as the end of temporary occupation for the temporarily occupied territories in which the person is located. This is a positive step, as the filing of declarations is currently purely voluntary.

2. The second important change is the resumption of all verifications that were conducted by the NACP before the full-scale invasion of Ukraine by russia, as well as the resumption of special checks. Exceptional circumstances related to military aggression are also provided for, due to which special checks can be conducted later.

This is also a positive step, since no background checks are currently carried out, and the NACP cannot check electronic declarations as part of the full verification mechanism. New grounds for dismissal of an official within 3 working days for failure to submit a declaration or pass a special check are also proposed, which can be assessed positively.

3. The draft law proposes to restore the obligation for declarants to submit a notice of significant changes in property status, but within 20, and not 10, days from the date of receipt of income, acquisition of property, or expenditure. But now, it will not be necessary to report such changes if they are related to the receipt of income in the form of wages (monetary support) or remuneration received at the expense of the state or local budget at the main place of work (service).

We do not see risks in such exceptions, since information about the specified type of income will be reflected in the declaration.

4. It is also important that in addition to the resumption of declarations and checks, it is proposed to reopen the Register of Declarations to a certain extent.

This is an exceptionally positive step from the perspective of public control because we are in for competitions for important positions, such as the NACP Head, or new judges.

The information that was marked as confidential in the declaration and had not been made public until February 24, 2022 (tax identification numbers, dates of birth, passport series and number, street names, house numbers, etc.), will now include the settlement of the object of the declaration or place of residence (the obligation to indicate the oblast remains, which is justified), as well as all the names of other persons specified in the declaration. The latter is a negative step that reduces opportunities for public control, conducting journalistic investigations, etc.

In our opinion, the public interest here prevails over the potential risks associated with the publication of this information. In addition, for the most part, data on such persons already appeared in previous declarations submitted before the outbreak of the full-scale war.

5. In the declarations, officials will be able not to indicate the IBAN number and type of bank account.

This is a provision that can facilitate the filling out of declarations. However, to balance this step, the Parliament will need to further consider and adopt a separate law on the creation of a Unified Register of Bank Accounts, in accordance with best practices and international standards, enshrined, in particular, through the EU Directives.

6. The draft law provides for the NACP to grant declarants the access to information about them and their family members contained in public electronic registers using the software of the Unified State Register of Declarations. This will make it easier to fill out the declarations.

What needs to be finalized

1. Due to the proposed amendments to Art. 46 of the Law “On Prevention of Corruption,” a large gap arises in the issue of non-declaration of objects of possession or use by the declarant or members of their family and evasion of declarants from criminal liability.

The amendments propose to declare the asset not only in relation to the time of its use, but depending on its market value, which should be higher than 50 subsistence minimums for able-bodied persons (as of January 1, 2023, this is UAH 134,200). This will place an additional obligation on bona fide declarants to assess the market value of the property, although for the purpose of declaring, there is no obligation to officially conduct a monetary valuation and determine the value, if it was not previously determined in the legal documents or should have been known to the declarant.

Such a change will also create space for potential abuse — the conclusion of lease agreements at a reduced price, manipulation with expert monetary valuation, etc. In the case of using the object free of charge, there may be no such written agreement at all. In general, it will be difficult to prove in court the direct intent of violators who resorted to such abuses and therefore did not declare property. Moreover, this disproportionate and burdensome provision can harm the proper declaration of beneficial ownership.

2. Regarding the time of use of such an asset, the declaration regime will be weakened due to the establishment of a threshold of 183 calendar days to declare objects of ownership or use, while the declaration may cover a reporting period of less than a year.

Previously, a specific number of days for declaration was not provided, a half of the reporting period was considered (if the declaration is annual, then half a year). Therefore, we propose to preserve the current version of the Law in this case. Regarding the other current condition for declaring such objects as of the last day of the reporting period, which is replaced by two months preceding the end of the reporting period, there are no reservations on our part.

3. The NACP will lose the authority to issue clarifications on state funding of political parties, whistleblowers, and declarations. The Agency’s powers will only cover the clarifications relating to gifts and conflicts of interest, and other areas will need to be explained through “recommendations,” which may create different practices for declarants to submit information.
4. The draft law specifies too broad exceptions for family members of declarants serving in the army and persons who are in the territories affected by Russian aggression.

For example, it provides that declarants whose family members perform tasks in the interests of national security or are in the territories affected by the military aggression of russia against Ukraine have the right to submit a declaration within 90 days from the date of cessation of martial law, hostilities, etc. In this case, a more proportionate step would be to apply the obligation to submit the declaration anyway, with all known information that does not concern such persons.

5. In the Final Provisions, the draft law proposes to oblige declarants to submit declarations that were not submitted in 2022–2023.

We believe that not only this period should be covered, since it is not yet possible to predict for sure when the draft law will be adopted as a whole, signed by the President, and come into force. We propose binding not to specific periods in this part, but to the declarations, which have not been previously submitted.

Conclusion

Transparency International Ukraine supports the decision of the Verkhovna Rada to adopt draft law No.9354 in the first reading as a basis.

However, it undoubtedly needs to be finalized before the second reading in terms of the shortcomings indicated above. It is necessary to restore the declaration in a form that will consider both the temporary features of the martial law and the public interest in the integrity of officials because the latter did not disappear with the outbreak of the full-scale war.

Authors: Oleksandr Kalitenko and Nataliia Sichevliuk, Legal Advisors at Transparency International Ukraine