October 9, 2015, Vol. 2, Issue 3

Obstruction Of Justice The case for fi ring Prosecutor General Special coverage pages 4-15

Editors’ Note Contents

This seventh issue of the Legal Quarterly is devoted to three themes – or three Ps: prosecu- 4 Interview: tors, privatization, procurement. These are key areas for ’s future. Lawmaker Yegor Sobolev explains why he is leading drive In the fi rst one, prosecutors, all is not well. More than 110 lawmakers led by Yegor Sobolev to dump Shokin are calling on President to fi re Prosecutor General Viktor Shokin. Not only has Shokin failed to prosecute high-level crime in Ukraine, but critics call him the chief ob- 7 Selective justice, lack of due structionist to justice and accuse him of tolerating corruption within his ranks. “They want process still alive in Ukraine to spearhead corruption, not fi ght it,” Sobolev said of Shokin’s team. The top prosecutor has Opinion: never agreed to be interviewed by the Post. 10 US ambassador says prosecutors As for the second one, privatization, this refers to the 3,000 state-owned enterprises that sabotaging fi ght against continue to bleed money – more than $5 billion alone last year – through mismanagement and corruption. But large-scale privatization is not likely to happen soon, at least until a new law on privatization is passed by parliament. The aim is to have public, transparent, compet- 12 Interview: itive tenders – not just televised ones. The law, reformers say, needs to prevent current state Shabunin says Poroshenko directors from looting companies that are sold and ensure both state and investor rights. blocks judicial reforms

As for the third one, procurement, much more progress has been coming in terms of e-pro- 14 Ukraine struggles to end to curement aimed at competitive and transparent state purchases of goods and services. If prosecutorial tyranny successful, it could eliminate a big black hole of corruption into which more than $2.3 billion Directory of Legal Services in taxpayer money is lost through overpricing and needless intermediaries. 16

The three Ps – prosecutors, privatization, procurement – show the battle for Ukraine’s future 20 Interview: rages on, with the nation's 43 million people having huge stakes in the outcome of all three Infrastructure Minister Andriy contests. Pyvovarsky sets year-end goals

23 State enterprises drain $5 billion in 2014 from Ukrainian taxpayers Brian Euan Mariana Bonner MacDonald Antonovych 26 Interview: Kyiv Post Kyiv Post Deputy Economy Minister Max Chief Editor Editor Legal Affairs Nefyodov wants to end $2.3 Reporter billion yearly in corrupt state All of our contacts are available online at http://www.kyivpost.com/contacts/ purchases

30 Time running out to sell Ukrspyrt ethanol-producing monopoly

33 Interview: Toms proposes legal ombudsman October 9, 2015, Vol. 2, Issue 3 Спеціалізоване видання «Kyiv Post Legal Quarterly» as fi x to Ukraine’s corrupt видається ТОВ «Паблік-Медіа». © Kyiv Post, 2015 Наклад — 7 000 прим. judicial system Розповсюджується безкоштовно. The material published in the Kyiv Post Legal Quarterly may Матерiали, надрукованi у виданні «Kyiv Post Legal not be reproduced without the written consent of the publish- Quarterly» є власнiстю видавництва, захищенi er. All material in the Kyiv Post Legal Quarterly is protected by мiжнародним та українським законодавством i Ukrainian and international laws. не можуть бути вiдтворенi у будь-якiй формi без письмового дозволу Видавця. Думки, висловленi у The views expressed in the Kyiv Post Legal Quarterly are not дописах можуть не завжди співпадати з поглядами видавця, який не бере на себе вiдповiдальнiсть за necessarily the views of the publisher nor does the publisher наслiдки публiкацiй. carry any responsibility for those views. Засновник — ТОВ «Паблік-Медіа» Головний редактор — Брайан Боннер Publisher: Mohammad Zahoor Відповідальна за випуск — Наталія Бугайова Chief Executive Offi cer: Nataliya Bugayova Адреса видавця та засновника співпадають: Chief Editor: Brian Bonner Україна, м. Київ, 01004, вул. Пушкінська, 31А, 6й пов. Реєстрацiйне свiдоцтво — Sales Director: Alyona Nevmerzhytska Кв № 20588-10388Р від 18.03.2014 Sales Managers: Elena Symonenko, Yulia Kovalenko Надруковано — ТОВ «Новий друк», Designers: Vladyslav Zakharenko, Jurij Ternicki 02660, Київ, вулиця Магнітогорська, 1, Project Team: Johannes Wamberg Andersen, Mariana тел.: +38 044 537 24 00 Antonovych, Olena Goncharova, Olena Gordiienko, Bozhena Замовлення № 15-2403 Sheremeta, Oleg Sukhov, Ilya Timtchenko З приводу розміщення реклами звертайтесь: (Cover photo) What’s behind drive to fi re Photo Editor: Pavlo Podufalov +380 44 591-77-88 Відповідальність за зміст реклами Prosecutor General Viktor Shokin? See Photographers: Volodymyr Petrov, Anastasia Vlasova несе рекламодавець. stories on pages 4-15. (Volodymyr Petrov)

[KYIV POST LEGAL QUARTERLY] #03/2015 3 Sobolev’s case for fi ring Shokin steadily gains momentum

Yegor Sobolev, the lawmaker leading the charge to fi re the prosecutor general, says that President Petro Poroshenko is resisting because “loyalty is more important for Poroshenko than real eradication of corruption.”

By Oleg Sukhov July, Prosecutor General Viktor believes that Shokin is stalling all high-pro- [email protected] Shokin announced with great fan- fi le investigations and covering up corrupt Infare that a court had authorized prosecutors. the trial in absentia for disgraced ex-Presi- The only way out is to replace Shokin, a loy- dent . alist of President Petro Poroshenko, with a But, almost two years after the truly independent prosecutor able to deliver Revolution began, not a single indictment in impartial justice, Sobolev says. corruption cases against the former president Andriy Demartino, a spokesman for the or his allies has been sent to court. Prosecutor General’s Offi ce, declined to Yegor Sobolev, a lawmaker from the comment. Samopomich party and chairman of the Ineffi ciency and sabotage at the Prosecutor ’s anti-corruption committee, General’s Offi ce has gotten out of hand to such

4 #03/2015 [KYIV POST LEGAL QUARTERLY] ADVERTISEMENT an extent that even diplomats are using tough language. Geoffrey R. Pyatt, the U.S. ambassador Hanna Shtepa to Ukraine, said on Sept. 24 that “corrupt actors” under Shokin “are making things Senior Associate, Baker & McKenzie worse by openly and aggressively under- mining reform.” New Markets for Ukrainian Goods and Services This damning indictment of Shokin’s performance since he was appointed in Given that the Ministry of Economic Development and Trade of Ukraine announced February has given a boost to efforts by that all formal requirements required for Ukraine to join the WTO Government Procurement Agreement (the “GPA”) are expected to be completed by the end of this Sobolev and civil society to fi re him. year, there are good chances that Ukrainian goods and services will have access to Sobolev has so far collected 114 signa- the public procurement markets of the major world economies (including the USA, tures in parliament for dismissing Shokin, EU, Japan, China and Canada) and enjoy the guarantees provided by the GPA as ear- still well short of the 150 signatures need- ly as the beginning of 2016. ed to put the issue on the agenda. What would be available for Ukraine He said in an interview with the Kyiv The total public procurement market covered by the GPA is about 1.7 trillion US dol- Post that not a single signature has been lars. However, the scope of the public procurement market to be opened for Ukrainian collected since the Sept. 17 arrest of goods and services in each particular country under the GPA is not yet publicly avail- Radical Party lawmaker Ihor Mosiychuk able and would differ depending on the country. In particular, each country participating in the GPA would specify the procuring authorities/ entities, types of goods/services for on suspicion of bribery. Critics see the ar- procurement to which Ukrainian goods and services would have access under the GPA. rest as political revenge by Shokin for What should be done Mosiychuk’s support for his fi ring. “After Ihor’s arrest everyone started In order for Ukrainian companies to benefit from the opportunities provided by the GPA, significant preparatory work should be done well ahead of any actual participa- thinking ‘what if this happens to me to- tion in the procurement procedures. In particular, companies wishing to participate morrow’?” Sobolev said. “One of Shokin’s should undertake the following steps: goals is to show to lawmakers what conse- 1. Ensure compliance of goods/services with local requirements quences could happen to those who sub- mit signatures for his dismissal.” To be eligible for foreign public procurement, goods and services should comply with the legal requirements applicable to such types of goods and services in the country He attributed the slow pace of the drive where the procuring entity is located. Depending on the national legal regime of the to oust Shokin to a lack of principled country of procurement and the type of goods procured, certification of the goods/ lawmakers. services might be required. In practice, this may take a significant time as well as re- Many lawmakers are reluctant to back quire the allocation of substantial administrative and sometimes financial resources. Even if certification of the goods or services is not generally required, it might be re- the sacking of Shokin because they are quested under the tender requirements by a particular procurement entity. Therefore, part of the system that covers up corrup- both the national legislation and the usual tender requirements for goods and servic- tion, Sobolev said. es requested by the procurement entities should be studied in advance of the actual participation in public procurement procedures in any particular country. The president refuses to fi re Shokin because “loyalty is more important for 2. Understanding national public procurement procedures Poroshenko than real eradication of cor- The GPA does not set a unified procedure for international procurement but only es- ruption,” Sobolev says. tablishes the main principles to be followed by its participants. As a result, national pro- Shokin was a protégé of Poroshenko as curement laws and procedures apply to the public procurement falling under the GPA. Deputy prosecutors Formal compliance with all requirements applicable under the national procurement Davit Sakvarelidze early as 2005, when he was a deputy pros- laws and procedures is essential to ensure that the tender proposals of Ukrainian com- (C) and Vitaliy Kasko ecutor general, according to Sobolev. At panies are not declared ineligible or disqualified on formal grounds, and that Ukrainian (R) listen to chair- that time Shokin told Sobolev, then a jour- companies could use the procedures for challenging the tender results both under the man of the parlia- national law and under the GPA. Given that, as a rule, the time allocated for submitting nalist, that Serhiy Kivalov and other mem- mentary committee bids is very short, it is essential for companies wishing to participate in foreign bids to for preventing and bers of the Central Election Commission involve legal counsels knowledgeable on the local procedures and requirements towel fi ghting corruption accused of vote rigging in favor of in advance of the actual preparation of the tender proposals. Yegor Sobolev at the Verkhovna Rada’s Yanukovych in the 2004 presidential elec- 3. Presence in the country of procurement anti-corruption tion would be soon convicted. Given that public procurement in most countries is still not centralized and still very committee on “These cases didn’t lead to convictions,” July 15. formalistic, having a physical/ legal presence can significantly facilitate a successful (Volodymyr Petrov) Sobolev said. “This is the main reason why participation in tender procedures abroad. This could be achieved by opening a repre- we voted against his appointment as pros- sentative office or a subsidiary in the country of interest, or engaging agents or coun- ecutor general. Unfortunately his work sels that could facilitate communication with the foreign procurement authorities.

proved that we were right.” Renaissance Business Center, Shokin’s choice of four people for the 24 Bulvarno-Kudriavska (Vorovskoho) St., commission to select the chief anti-corrup- Kyiv 01054, Ukraine; +380 44 590 0101, +380 44 590 0110 tion prosecutor also proves that he is not www.bakermckenzie.com

[KYIV POST LEGAL QUARTERLY] #03/2015 5 interested in fi ghting corruption, Sobolev said. “Not a single one of these investigations has been com- One of them, First Deputy Prosecutor General Yury pleted,” he said. “Starting with Yanukovych’s gang and Sevruk, has been accused of sabotaging reform at the ending with incumbent top offi cials, all investigations are Prosecutor General’s Offi ce. Another member - Yury being sabotaged.” Hryshchenko, head of the offi ce’s main investigative de- Investigating corruption in its own ranks has also mostly partment - has been lambasted because he was the boss remained a taboo for the Prosecutor General’s Offi ce. of prosecutor Volodymyr Shapakin, who was arrested in a Corruption accusations against ex-deputy prosecutor bribery case in July. generals Anatoly Danylenko and Volodymyr Huzyr have “Shokin appointed people who are linked to corruption not been investigated. to choose an anti-corruption prosecutor,” Sobolev said. Shokin has also been accused of trying to protect two The three commission members delegated by the top prosecutors accused of bribery, Oleksandr Korniyets Petro Poroshenko Bloc – Volodymyr Horbach, Kateryna and Volodymyr Shapakin, by starting criminal cases against Levchenko and Yevhen Nishchuk - also raise doubts. Deputy Prosecutor General Davit Sakvarelidze and his in- “These three people don’t have effi cient experience in vestigators who arrested them in July. fi ghting corruption,” Sobolev said. “They didn’t show in Some claim that Shokin had nothing to do with the mat- the past that they can and are ready to stop it, but they still ter but Sobolev believes the prosecutor general was in have a chance to show it now.” charge of sabotaging the Korniyets-Shapakin case. Earlier this month Poroshenko claimed that the The Prosecutor General’s Offi ce is very hierarchical, and had no complaints against the commis- nothing important can happen without the prosecutor sion’s composition, citing negotiations between Shokin general’s permission, Sobolev argued. NEWS ITEM: In a and Jan Tombinski, EU ambassador to Ukraine. Activists , a lawmaker from the Petro Poroshenko nation swimming in accused Shokin of lying and deceiving the president af- Bloc, wrote in July that Shokin had taken part in the at- corruption, Prosecu- ter Tombinski issued a statement saying that civil society’s tempts to protect Korniyets and Shapakin and that they tor General Viktor Shokin is perform- concerns about the commission were valid. were his protégés. ing dismally, failing Another complaint against Shokin is that not a single “The cases haven’t been sent to court yet,” Sobolev said. to prosecute anyone corruption case against Yanukovych and his allies has been “This is another signal that they want to spearhead corrup- for major fi nancial crimes or high-pro- sent to court. tion, not to fi ght it.” fi le murders. “Not a Serhiy Horbatiuk, head of the prosecutorial department Serhiy Parashin, an ex-chief of the Chornobyl Nuclear single one of these in charge of trials in absentia, told the Kyiv Post that the Power Plant, told the Kyiv Post about a recent criminal investigations has been completed,” Yanukovych case would be sent to court after makes case against the plant that he argues aimed to discredit its said lawmaker Yegor a decision on extraditing ex-Finance Minister leadership. Sobolev. “Starting Yury Kolobov, a suspect in the same embezzle- He described the General Prosecutor’s with (ex-President Viktor) Yanukovych’s ment case, to Ukraine. Offi ce as a “tool for discrediting people gang and ending Sobolev said that his anti-corrup- I caught a small and an instrument of self-enrichment, with incumbent top tion committee had collected evidence one - these are the not a law enforcement agency.” offi cials, all inves- tigations are being on 200 cases of top offi cials’ cor- only fish I can catch! “I hear things that can only hap- sabotaged.” ruption in the period be- pen in a mafi a gang,” he told the Kyiv fore and after the Post. revolution. Money is paid for opening and closing criminal cases, Parashin said. “Do you think they don‘t bring it to the very top?” he added. To make sure that the General Prosecutor’s Offi ce is truly reformed and its head is indepen- dent, lawmakers including Sobolev drafted a bill last winter to choose an independent gener- al prosecutor through a transparent competitive hiring process. However, Verkhovna Rada Speaker Volodymyr Groysman has so far failed to submit the bill for voting, he said. “Either society will make the incumbent pres- ident and parliament support this, or we will need a more principled president and parlia- ment,” Sobolev added. Kyiv Post staff writer Oleg Sukhov can be reached at [email protected]

6 #03/2015 [KYIV POST LEGAL QUARTERLY] Lawmaker’s arrest exposes Ukraine’s lack of due process, selective justice

By Oleg Sukhov [email protected]

he arrest of member of parliament Ihor Mosiychuk in the Verkhovna Rada on Sept. 17 made for great theater – and terri- Tble justice. But it is only the latest high-profi le example of Ukraine's long and in- glorious history of selective justice. Then-Verkhovna Rada members Petro Poroshenko (L), Arseniy Mosiychuk, an opposition member of parliament, was arrested on Yatsenyuk and Mykola Martynenko (R) on Jan. 29, 2014. Lawmak- suspicion of accepting bribes and is jailed in a pre-trial detention center. ers say Ukraine is obstructing a Swiss investigation into suspected multimillion-dollar bribery by Martynenko, a close ally of Yatse- Prosecutor General Viktor Shokin personally turned up in parliament to nyuk, Ukraine’s prime minister. Martynenko denies the allegations. present video evidence against Mosiychuk, a member of 's (UNIAN) opposition Radical Party. Mosiychuk's supporters portrayed the arrest as politically motivated revenge by Shokin and President Petro Poroshenko. It took place after the party, which had been collecting signatures for Shokin’s dismiss- al, left the government coalition and formally joined the opposition on Sept. 1. Responding to the accusations of selective justice, Shokin said on Sept. 21 that he had no “blacklist” of disloyal lawmakers to be arrest- ed. He said that, to avoid such accusations, he would not seek to pros- ecute any member of parliament again until immunity is lifted for all lawmakers. Meanwhile, associates of ex-President Viktor Yanukovych and allies of those currently in power are not being prosecuted for crimes, includ- ing alleged cases of embezzlement totaling billions of dollars and al- leged murder of EuroMaidan Revolution demonstrators. The uprising that sent Yanukovych fl eeing on Feb. 22, 2014 was sup- posed to end selective justice and bring rule of law to Ukraine. It has done nothing of the kind, with Mosiychuk's arrest violating numerous rules of criminal procedure. The Mosiychuk case is a worrying indicator that the present govern- ment is sticking to old, bad habits of using justice as a political weapon, Daniel Bilak, managing partner at the Kyiv offi ce of British law fi rm CMS Cameron McKenna, told the Kyiv Post. “It was great theater but it certainly didn’t look like much justice,” Bilak said, speaking about Mosiychuk’s arrest. “This will send a signal to everybody that it’s open season on political opponents.” He argued that such violations of due process could reverse Ukraine’s movement towards rule of law. “That’s a very slippery slope, because if you can get away with it once,

[KYIV POST LEGAL QUARTERLY] #03/2015 7 you can do it again,” Bilak said. “Nobody is safe, and we’ll surveillance of Mosiychuk because this is only possible af- be back to the Yanukovych years.” ter parliament authorizes a criminal investigation against a Irina Paliashvili, chair of the U.S.-Ukraine Business lawmaker, critics say. Council’s legal committee, agreed with Bilak, describing Moreover, the video recording had not been indepen- Mosiychuk’s arrest as an “in your face” violation of proce- dently verifi ed and recognized by a court as proper evi- dural norms, and a “circus.” dence, Bilak said. “Mosiychuk’s arrest is a throwback to our old traditions “From what I have seen, a judge would be within the law of selective justice,” she told the Kyiv Post. to release him on the basis that procedural norms and the The video Shokin presented in the Rada appears to show laws were not followed,” Bilak said. “What’s the point of Mosiychuk specifying the size of bribes for lobbying for having immunity if it can be taken away at the whim of the businesses’ interests, and then receiving cash. Mosiychuk speaker, president or prosecutor general?” denies the accusations, saying the video was manipulated. He argued that “due process is as fundamental an as- The procedural violations were so obvious that they pect of doing justice as having somebody going to prison were even admitted by Verkhovna Rada Speaker Volodymyr for their crimes.” Groysman, who said they were necessary to speed up the “You cannot have one set of rules for some people and investigation. another set of rules for others,” Bilak said. “This puts the One of the violations is that the issue of stripping entire administration of justice into disrepute.” Mosiychuk of immunity from prosecution was not consid- And it’s not just politicians who are targeted now: ered by the Verkhovna Rada’s rules committee. Yevhen Zakharov, head of Ukraine’s Helsinki Human Another violation is that Mosiychuk was not given the Rights Union, said that similar cases of selective justice fl oor to answer the accusations. have happened during numerous investigations against “Equality before the law and the right to be heard are nationalists and fi ghters of volunteer units, who crit- fundamental principles of justice,” Bilak said. “Both of ics say are seen by the authorities as a challenge to their them seem to have been somewhat breached, based on power. what I’ve seen and heard.” Critics argue that the political nature of Shokin’s actions Law enforcement employees also had no right to conduct is clear from the contrast in the way Mosiychuk and Serhiy

Ihor Mosiychuk, a Verkhovna Rada member, at a hearing at Kyiv’s Pechersk District Court on Sept. 18. (UNIAN)

8 #03/2015 [KYIV POST LEGAL QUARTERLY] criminal cases against them, Yury Boiko, Yevhen Bakulin, Serhiy Lyovochkin, Serhiy Kivalov, Mikhailo Dobkin and many other Yanukovych allies are not currently suspects in any criminal cases. “Where there is big money, there is no morality,” Kaleniuk said. “There are no enemies there, only partners. There could be a political agreement at the top level not to touch Party of Regions people, allow them to fl ee and let them hide the stolen stuff.” Yanukovych associates could also have some compromising informa- tion on the current government, and cases are being sabotaged to keep them silent, Kaleniuk said. Just like the previous government’s corruption, accusations against allies of the incumbent authorities are mostly ignored by prosecutors. The Prosecutor General’s Offi ce has done nothing to investigate a procurement scheme said to involve Russian businessman Konstantin Grigorishin, a partner of Poroshenko, or graft allegations against State Fiscal Service head Roman Nasirov, an ex-lawmaker from the Petro Poroshenko Bloc. Nor are prosecutors probing a money-laundering scheme allegedly linked to Poroshenko’s chief of staff Borys Lozhkin that is being investigated in Austria. Ukrainian prosecutors have also failed to express any interest in a Swiss bribery investigation against Mykola Martynenko, a lawmaker from Prime Minister Arseniy Yatsenyuk’s People’s Front party. “It would be logical if the prosecutor general sought to strip of immu- nity some bigger fi sh like Mr. Martynenko, as opposed to Mosiychuk, the sacrifi cial lamb,” Kaleniuk said. Kyiv Post staff writer Oleg Sukhov can be reached at reaganx84@gmail. com

Lawmaker Serhiy Klyuyev at a session of the Verkhovna Rada on June 3. (UNIAN)

Klyuyev, an ex-member of Yanukovych’s Party of Regions, were treated when they were stripped of parliamentary immunity. While Mosiychuk is accused of getting a Hr 100,000 bribe, Klyuyev is suspected of embez- zling billions of hryvnias. Darina Kaleniuk, executive director of the Anti-Corruption Action Center, told the Kyiv Post that the General’s Prosecutor's Offi ce had ig- nored the most substantial evidence against Klyuyev when it asked par- liament in June to strip him of immunity. Given the weakness of the case it presented, it did not even request his arrest initially and did so only after he had fl ed Ukraine. The General Prosecutor's Offi ce justifi ed its inability to arrest him by saying it could not conduct surveillance without parliament’s approv- al and referring to other procedural formalities – something that critics say it openly violated in the Mosiychuk case. Many other Yanukovych allies have also escaped justice one way or another. The General Prosecutor’s Offi ce is investigating many of those who fl ed Ukraine after the EuroMaidan Revolution, but the cases are moving at a snail’s pace. Not a single corruption case against top Yanukovych- era offi cials has been sent to court almost two years after the revolu- tion began. Despite vast journalistic investigations and, in some cases, past

[KYIV POST LEGAL QUARTERLY] #03/2015 9 Failure to fi ght corruption threatens everything that government is doing 'Corrupt actors' sabotage prosecution of legitimate criminal cases, U.S. Ambassador to Ukraine Geoffrey R. Pyatt writes. The case of ex-Ecology Minister is an example that cost $23 million.

here is one glaring problem that threatens all of the We have learned that there have been times that the PGO not good work that regional leaders here in Odesa, in only did not support investigations into corruption, but rather TKharkiv, in , and elsewhere are doing to improve undermined prosecutors working on legitimate corruption cases. the business climate and build a new model of government For example, in the case of former Ecology Minister that serves the people. That problem threatens everything Mykola Zlochevsky, the U.K. authorities had seized $23 mil- that the Rada, the Cabinet, the National Reform Council, and lion in illicit assets that belonged to the Ukrainian people. By Geoffrey R. Pyatt others are doing to push political and economic reforms for- Offi cials at the PGO’s offi ce were asked by the U.K to send ward and make life better for Ukrainians, and it fl ies in the documents supporting the seizure. face of what the Revolution of Dignity is trying to achieve. Instead they sent letters to Zlochevsky’s attorneys attest- That obstacle is the failure of the institution of the ing that there was no case against him. As a result the money Prosecutor General of Ukraine to successfully fi ght inter- was freed by the U.K. court and shortly thereafter the money nal corruption. Rather than supporting Ukraine’s reforms was moved to Cyprus. and working to root out corruption, corrupt actors within The misconduct by the PGO offi cials who wrote those let- the Prosecutor General’s Offi ce are making things worse by ters should be investigated, and those responsible for sub- openly and aggressively undermining reform. verting the case by authorizing those letters should – at a In defi ance of Ukraine’s leaders, these bad actors regular- minimum – be summarily terminated. ly hinder efforts to investigate and prosecute corrupt offi cials Even as we support the work of the new Anti-Corruption within the Prosecutor General’s Offi ce. They intimidate and Commission, and the recruitment of new prosecutors, we obstruct the efforts of those working honestly on reform ini- have urged Prosecutor General Viktor Shokin to empower his tiatives within that same offi ce. deputies Sakvarelidze and Kasko to implement reforms and The stands behind those who challenge bring to justice those who have violated the law, regardless these bad actors. of rank or status. We are prepared to partner with reformers We applaud the work of the newly established Inspector within the PGO in the fi ght for anticorruption. General’s Offi ce in the prosecutor's offi ce led by Davit That’s why, on Aug. 10, the U.S. signed a Joint Action Plan Sakvarelidze and Vitaliy Kasko. Their investigations into cor- with Deputy Prosecutor General Sakvarelidze to provide $2 ruption within the PGO have delivered important arrests and million in U.S. assistance to support reform, anticorruption, have sent the signal that those who abuse their offi cial posi- and capacity building at the PGO. Ex- Ecology Minister Mykola tions as prosecutors will be investigated and prosecuted. It is critical that these reforms be undertaken in an open Zlochevsky at the I encourage all of you to speak up in support of these brave and transparent manner – consistent with the Procuracy Cabinet of Minis- investigators and prosecutors. Give them the resources and Reform Law, international standards, and in coordination ters on March 14, 2012. (Ukrafoto) support to successfully prosecute these and future cases. with national and international stakeholders – so that the Ukrainian people can have full faith and confi dence in their laws and in those who have sworn to enforce them. There are other cases as well, like those involving Former Deputy Chief Prosecutor Volodymyr Shapakin and Former Prosecutor Korniyets that clearly demonstrate that it is criti- cal to cease intimidation and investigations of investigators, prosecutors and witnesses. We want to work with Prosecutor General Shokin so the PGO is leading the fi ght against corruption. We want the Ukrainian people to have confi dence in the Prosecutor General’s Offi ce, and see that the PGO, like the new patrol police, has been reinvented as an institution to serve the cit- izens of Ukraine. Geoffrey R. Pyatt is America's eighth ambassador to Ukraine. The remarks are edited from a speech Pyatt made at the Odesa Financial Forum on Sept. 24.

10 #03/2015 [KYIV POST LEGAL QUARTERLY] ADVERTISEMENT

Graham Conlon Tetyana Dovgan Daniel Bilak Partner, Co-Head of International Senior Associate, Private Equity and Head Managing Partner Corporate/M&A of Corporate/M&A

Ensuring success of Ukraine’s privatisation programme

Ukrainian Government has launched the larg- this type of risk allocation, including in the con- transactions of this nature. Which law will ulti- est privatisation programme held in the last 20 text of privatisations. mately govern the transaction documents will years in the course of which over 300 state- be, in our experience, a fundamental issue that owned enterprises representing various sectors Future regulatory change will be heavily negotiated. There are, however, of economy are to be privatised in 2015-2016 potential ‘middle ground’ solutions which are (“Privatisation Programme”). Whether or not the In heavily regulated markets such as energy or possible to ensure that both the seller and the Privatisation Programme will be successful will TMT, investors will expect the Government to buyer are happy. depend on a number of factors. Below is brief give assurances that the Government will not summary of some of the issues that will need to amend the regulatory framework for a certain Asset deal be considered, based on our past experience of period of time, or otherwise do anything making participating in successful privatisations in oth- the investor’s investment less profitable. This is Despite assurances given to the investors, they er jurisdictions. a common request in the context of privatisa- may remain nervous on the basis that the com- tions, and the Government will need to give as- panies being privatised will come not just with Guarantees to potential investors surances to the buyer that its investment will be the assets that are of interest to the investors, safe, but in a manner that will be acceptable to but also with potentially unknown liabilities. In The classic and internationally-recognised way the Government too. other countries, a method to circumvent these to ensure that the buyer is comfortable with risks is to allow the buyer to purchase the as- the company that he is buying is for a seller Post sale obligations sets from the company — rather than purchase to provide ‘representations and warranties’ — the company (which comes with potential li- essentially a suite of statements confirming The Government will naturally want investors to abilities) itself. In Ukraine however there are that certain facts are true (for example, ‘the commit to certain post sale obligations, such as, obstacles, including those in a form of VAT Government owns the shares which it is selling for example, an obligation to invest in the com- payments (otherwise not required if the buy- to the buyer’). Despite this concept being large- pany and/or retain a certain number of employ- er purchased the company itself). To the extent ly unknown under Ukrainian law and in civil law ees post sale. In the EU, both the Government that the Government desires to dis-apply the countries generally, the Government will need and the buyer would need to bear in mind appli- VAT charge in the privatisation context, this will to be prepared to give such assurances never- cable state aid rules. It must therefore be clear in our view make the privatisation programme theless to attract high profile buyers and a seri- and demonstrable that the Government is act- significantly more attractive to international in- ous price. With proper advice, the Government ing as an independent commercial compa- vestors, and will go a long way to maximise the may mitigate the risk of being sued by the buyer ny (the ‘Private Investor Vendor Test’) and that purchase price that will be offered by poten- for breach of such representations and warran- the privatisation process was open and non-dis- tial buyers. ties in a manner acceptable to it which would criminatory with the company being sold to the The existing regulatory framework in Ukraine still attract serious investors. For example, the highest bidder. does not offer off the shelf solutions with re- Government may use ‘warranty & indemnity’ spect to the above issues. Nevertheless, with insurance, an insurance product (typically un- Governing law for transaction documents effort on both sides and further reform of the derwritten in ), whereby its liability is lim- privatisation legislation some middle ground ited — sometimes to as low as €1 — and a claim Investors will likely push for the governing law can be found to address these issues in a man- by the buyer would be brought to the insurance of the privatisation sale and purchase agree- ner which would be attractive to foreign inves- underwriter instead of the Government. In re- ment to be that of an independent country, tors and at the same time would not expose cent years there has been a growing interest in and English law would be a typical choice in the Government to unnecessary risk.

38 Volodymyrska St., 6th floor, Kyiv 01030, Ukraine; www.cmslegal.com, www.cms-cmck.com, www.cms-lawnow.com; KyivOffi[email protected], +38 044 391 3377

[KYIV POST LEGAL QUARTERLY] #03/2015 11 Vitaliy Shabunin of the Anti-Corruption Action Center (C) protests corruption in the health-care sector on June 18. (UNIAN) Shabunin: Poroshenko blocks judicial reforms

By Johannes Wamberg ou can’t have your chocolate and eat it too, to prosecutors remain instruments of a highly politicized – Andersen [email protected] mangle an old proverb. But that’s exactly what and politically subservient – criminal justice system. YPresident Petro Poroshenko wants, say anti-cor- This provides a damning indictment of the performance ruption activists who accuse him of obstructing justice of Poroshenko, the fi rst post-EuroMaidan Revolution and resisting change. president. The public hungers for convictions and jail terms Keeping control of prosecutors, the Security Service of for those who committed major crimes against the Ukraine and the courts is a key feature of Poroshenko’s rule state, especially under overthrown President Viktor since his election in May 2014, said Vitaliy Shabunin, head Yanukovych. of the board of directors of the Anti-Corruption Action Yet there have been no convictions. High-ranking of- Center. The nongovernmental group exposes corruption fi cials suspected of corruption are walking free as and lobbies for anti-corruption legislation.

12 #03/2015 [KYIV POST LEGAL QUARTERLY] “It is a pattern of behavior," Shabunin said. “Poroshenko saying that the problem of ”ordering court rulings by wants to retain control over prosecution.” phone has become even worse.” Such control effectively leaves the president in charge of Anti-corruption activists were earlier willing to give the who among the power elite gets investigated and who is let president the benefi t of the doubt. But no longer. “I had off the hook. hoped he’d kept those instruments from the old regime in By foot-dragging in creating a genuinely independent order to pursue swift reform,” Shabunin said. prosecutorial service, however, Poroshenko risks a fall from What are Poroshenko's motivations? Possibly fear, grace similar to that of ex-President Viktor Yushchenko. Shabunin said. After Yushchenko failed to live up to the expectations of “He couldn’t have been a big businessman and serving the 2004 Orange Revolution that put him in power, he got as minister of economy under Yanukovych without partic- only 5 percent of votes when he stood for re-election in 2010. A Poroshenko spokesperson wasn’t immediately avail- ‘It is a pattern of behavior. Poroshenko wants able, but Poroshenko has repeatedly insisted that he will to retain control over prosecution.’ bring the justice system and public administration in line with European Union and Council of Europe standards. Vitaliy Shabunin, Oleksiy Mushak, a Bloc of Poroshenko lawmaker, agreed head of the board of directors that “society increasingly demands justice, so the authori- of the Anti-Corruption Action Center. ties will have to deliver soon, including against Yanukovych era offi cials.” Shabunin said Poroshenko's desire for a loyal prosecu- ipating in corrupt deals,” Shabunin told the Kyiv Post. He tor general also depends on rank-and-fi le prosecutors who believes that Poroshenko is driven by fear that past mis- obey orders from the top. This is why Deputy Prosecutor deeds might be exposed, an explanation for why no top General Davit Sakvarelidze, who is trying to hire new and offi cials from the administration of ex-President Viktor independent prosecutors, is so threatening to the status Yanukovych have been prosecuted, with many fl eeing the quo. country and, in some cases, keeping their assets. Shokin and the presidential administration are insert- They might know a lot about Poroshenko, who was a co- ing their representatives on commissions to hire new pros- founder of the Party of Regions and an economy minister ecutors. "If the newly hired people have worked in the under Yanukovych. Shabunin is also worried about possible prosecution service before, then we’re in deep trouble,” presidential misdeeds today. Shabunin said. While painting a bleak picture, Shabunin still believes But the problems in the judicial system are more wide- that “the situation is much better compared with that un- spread than just prosecutors. der Yanukovych” because the authorities are more vulner- Shabunin said that the president can still order verdicts able and more sensitive to criticism, both domestic and from judges just as his predecessors did. When verdicts foreign. “It’s easier for us to have an impact,” he said. aren't ordered from above, Shabunin claimed, they can Kyiv Post writer Johannes Wamberg Andersen can be still be bought. Lawyer Igor Fomin agreed with Shabunin, reached at [email protected]

[KYIV POST LEGAL QUARTERLY] #03/2015 13 Protesters burn hats on the effi gies of Prosecutor General Viktor Shokin and his deputies Volodymyr Huzyr and Yury Stolyarchuk at a rally in front of the Ukraine struggles Prosecutor General’s Offi ce on July 24. The action is a reference to the Slavic proverb “a thief wears a burning hat,” which means that a criminal's behavior to put an end to gives him away. (Volodymyr Petrov) prosecutorial tyranny

By Mariana Antonovych t’s very diffi cult to regain lost trust. That’s all and others are closed without criminal [email protected] the problem facing Ukrainian prosecu- charges. Itors. They're not making it any easier by One big proposed change is to gradual- failing to prosecute anybody for major crimes ly strip prosecutors of their investigative against Ukraine, ranging from large-scale em- powers and instead invest them in a State bezzlement to murder. Investigative Bureau, which will probe crimes For years, prosecutors have been weapons committed by high-ranking offi cials, judg- of political persecution while simultaneously es and prosecutors, according to Oleksandr covering up or stalling criminal investigations Banchuk from Center for Political and Legal of the high and mighty. Reforms. It's easy to see why Ukraine's army of In parallel, the newly created National Anti- 18,000 prosecutors are both despised and Corruption Bureau will be responsible for feared. For one reason, they obtain convic- high-profi le graft cases. tions against 99 percent of the defendants The State Investigative Bureau also could, they take to court – courts in which judges, in theory, help Ukraine fulfi ll a ruling made in not juries, render verdicts. For another rea- 2012 by the European Court of Human Rights son, prosecutors are not accountable to the that obliged the country to create a mechanism public, giving almost no information about for investigating complaints against the justice cases under active investigation or explain- system, Tetyana Mazur, director of Amnesty ing why some cases are not investigated at International Ukraine told the Kyiv Post.

14 #03/2015 [KYIV POST LEGAL QUARTERLY] “But we want to see (such an organ) being not just something new, inspectors, prosecutors were not only able to impose fi nes, but could but also effective,” which means it must have all of the necessary re- also open criminal proceedings against the management of companies, sources at its disposal, from new investigators with decent salaries, to Banchuk added. suffi ciently broad powers, she said. These measures would help produce positive reforms, but Amnesty The new investigative bureau is expected to have full autonomy from International’s Mazur worries that too many of the changes are being the prosecution service and the Interior Ministry, Olena Sotnyk, a law- made in isolation. maker with the Samopomich party and one of the authors of the bill on “You get the impression that the authorities don’t see a big picture of State Investigative Bureau, said. the criminal justice system at the end of this process,” Mazur said. However, there’s no agreement yet on who will appoint the head of this powerful, new, professional investigative body. Pro-presidential party leader Yury Lutsenko “believes that the presi- ‘You get the impression that the dent should appoint the head,” Sotnyk said. But given that president al- ready appoints the heads of the prosecution and state security service, authorities don’t see a big picture of this could lead to too much presidential power, she said. the criminal justice system at the end In the meantime, Deputy Prosecutor General Davit Sakvarelidze is of the process.’ working to get rid of corrupt and unprofessional prosecutors and hire Tetyana Mazur, better ones. Since Sept. 5, prosecutors at local prosecutor offi ces have been un- director of Amnesty International dergoing two types of testing: an open competitive selection process Ukraine for appointments to managerial posts, and re-attestation for regular prosecutors. As a result of the competitive process, the present 2,250 managerial “There’s no effective communication, no working group responsible positions are to be shrunk to just 700. for detailed discussion of this issue… All of these measures are being When the testing is over, a commission consisting of three candi- taken episodically, which creates a risk that these changes won’t work dates appointed by parliament and four by the Prosecutor General’s together like cogs in one mechanism.” Offi ce will chose the three best-qualifi ed candidates for each manageri- Kyiv Post’s legal affairs reporter Mariana Antonovych can be reached at al post, while Ukraine’s Prosecutor General Viktor Shokin will make the [email protected]. fi nal decisions. Not surprisingly, Shokin has already fi lled his commission quota with prosecutors, rather than lawyers or human rights activists, Sergiy Grebenyuk from Egorov Puginsky Afanasiev & Partners law fi rm told the Kyiv Post. Outside candidates will be allowed to compete for these posts only if some prosecutors fl unk the retesting process. But whether this hap- pens or not “will become clear no earlier than Dec. 15, when the testing is fi nished,” Banchuk added. Another problem is that the retesting process lacks transparency, said Sotnyk. While the results are made public, there are no names, only candidate numbers, which makes it impossible for the public to track the process independently, lawmaker added. Ukraine’s Constitutional Commission has also prepared a series of amendments that affect the judiciary system, including the prosecuto- rial system. These amendments would strip the prosecution of many of its current powers, leaving it with essentially one function: supervising pre-trial proceedings and pursuing prosecutions in the courts on behalf of the state, according to Grebenyuk. One of the prosecutorial powers to be removed from the Constitution would be the ability to make prosecutorial inspections, which gave Litigation | Insolvency & Restructuring prosecutors the right to carry out searches and investigations into the Privatization | Banking and finance management of companies, no matter their form of ownership. Government Relations | Investment These overriding powers encouraged corruption to fl ourish in the prosecutorial system and led to the duplication of powers of the prose- cution and other supervising authorities, Banchuk said. Law Firm “Ario Capital Group” “Obviously, the prosecutors were not able to ensure and guarantee ǜǾ+06/+,$,1ǽǾ,ƛ& "ǗǾ6&3ǕǖǕǕǖǾ(/&+"Ǿ1")ǿʭǘǝǕțǙǙȜǚǘǜȒǗǗȒǞǕ law and order in each sphere,” Banchuk said. “That is why inspections 444ǽ $/,2-ǽ ,*ǽ2Ǿ $ȯ $/,2-ǽ ,*ǽ2 were selective.” This also promoted extortion, because unlike other

[KYIV POST LEGAL QUARTERLY] #03/2015 15 ADVERTISEMENT LEGAL SERVICES Listing is arranged in alphabetical order

Phone number Top executives HQ Est. Main Specialization, services Major clients Languages

Aleksandr Peremezhko & Partners 86D Kazymyra Malevycha (Bozhenko) St., 3rd fl oor, offi ce 3.1, Kyiv 03680, Ukraine; offi [email protected], www.opp.com.ua

Litigation & Arbitration; Tax and Customs; Corporate VIETTEL Global Investment JSC, Sharp Electronics English, German, Kyiv, and M&A; Competition and Anti-monopoly; Media and Ukraine, Lego Ukraine, B&H, UFD, LeDoyen Studio, +38 044 371 4007 Aleksandr Peremezhko 2010 Polish, Russian, Ukraine Communication; Intellectual Property; White Collar Euro ns Food & Agro Testing Sweden AB, Ciklum Ukrainian Defense Ukraine, AstraZeneca

Ante Law Firm Europe Business Centre, 5th fl oor, 103 Stolychne Highway, Kyiv 03131, Ukraine; offi [email protected], www.antelaw.com.ua

Litigation; Corporate; White collar; Transport & Andriy Guck, Kyiv, Emirates, Lufthansa, Austrian, British Airways, English, Turkish, +38 044 277 2300 Infrastructure; Aviation; Energy & Natural resources; Kateryna Ishchenko Ukraine Atlasglobal, Zdravo Russian, Ukrainian Employment; IP; Tax & Customs

Ario Capital Group 7 Panasa Myrnoho St., Kyiv 01011, Ukraine; [email protected], www.acgroup.com.ua

Mercantile exchange “Electronic Auction of Ukraine”, Kyiv, Insolvency/Restructuring; Litigation; Banking & Finance; First Ukrainian International Bank, Finance and Credit English, Russian, +38 044 537 2290 Julian Khorunzhii 2010 Ukraine Government Relations Bank, State Finance Institution for Innovations, Finance Ukrainian company “Kyivschyna-Kapital”

Arzinger Eurasia Business Centre, 75 Zhylyanska St., 5th Floor, Kyiv 01032, Ukraine; [email protected], www.arzinger.ua

English, Litigation; Antitrust/Competition; Corporate/M&A; Astelit, Bayer AG, Bunge, Citibank, GlaxoSmithKline, Kyiv, German, French, +38 044 390 5533 Timur Bondaryev 2002 Real estate; IP; Arbitration; Tax; Banking & Finance; Henkel, Lafarge, Porsche, SHARP, SCM, UNIQA AG, Ukraine Ukrainian, Bankruptcy; White Collar Defense Ukrtelecom Russian

International Law Group “AstapovLawyers” Sophia Business Centre, 6 Rylskiy Ln. Kyiv 01601, Ukraine; [email protected], www.astapovlawyers.com

Litigation & Arbitration; Corporate & M&A; Antitrust & Andrey Astapov, Kyiv, English, Russian, +38 044 490 7001 2002 Competition; Tax & Restucturing; IP WND Oleh Malsky Ukraine Ukrainian

Asters Leonardo Business Center, 19-21 Bohdana Khmelnytskoho St., 14th fl oor, Kyiv 01030, Ukraine; [email protected], www.asterslaw.com

Oleksiy Didkovskiy, L’Oreal, Coca Cola, Nissan Motor Ukraine, S.C. English, Russian, +38 044 230 6000 1995 Full-Service Law Firm Armen Khachaturyan Johnson, EBRD, IFC Ukrainian

Avellum Partners Leonardo Business Center, 19-21 B. Khmelnytskoho St., 11th fl oor, Kyiv 01030, Ukraine; [email protected], www.avellum.com

Capital Markets; Corporate / M&A; Competition; MHP, Novartis, Lafarge, Ferrexpo, ING Bank, EBRD, Mykola Stetsenko, Kyiv, Disputes; Employment; Energy and Infrastructure; FUIB, UBS, Kernel, DTEK, Nadezhda Group, AVK, PPF, English, Russian, +38 044 220 0335 Glib Bondar, 2009 Ukraine Finance; Projects; Real Estate; Restructuring and UDP, Odeko, Ministry of Finance of Ukraine, Mriya Agro Ukrainian Dmytro Marchukov Insolvency; Tax Holding

16 #03/2015 [KYIV POST LEGAL QUARTERLY] ADVERTISEMENT

Phone number Top executives HQ Est. Main Specialization, services Major clients Languages

Baker & McKenzie Renaissance Business Center, 24 Bulvarno-Kudriavska (Vorovskoho) St., Kyiv 01054, Ukraine; [email protected], www.bakermckenzie.com

Antitrust & Competition; Banking & Finance; Corporate; +380 44 590 0101 Arcelor Mittal, EastOne Group, Horizon Capital, Serhiy Chorny, M&A; Securities; Dispute Resolution; Employment; IP; English, Russian, +380 44 590 0110 1992 ING Bank Ukraine, Metinvest BV, RaiffeisenBank, Serhiy Piontkovsky International Trade; Real Estate and Construction; Tax Ukrainian MasterCard, UkrSibbank BNP Paribas Group and Customs

B.C. Toms & Co 18/1 Prorizna St., Suite 1, Kyiv 01001, Ukraine; [email protected], www.bctoms.net

English, French, +38 044 490 6000 Kyiv, Agricultural Investments; Oil, Gas and Electricity; M&A; Bate C. Toms 1991 WND Russian, Ukrainian, +38 044 278 1000 Ukraine Banking; Finance and Capital Markets Polish

СMS Cameron McKenna LLC 38 Volodymyrska St., 6th floor, Kyiv 01030, Ukraine; KyivOffi[email protected], www.cmslegal.com, www.cms-cmck.com, www.cms-lawnow.com

Energy; Infrastructure; Corporate and M&A; Banking English, French, London, +38 044 391 3377 Daniel Bilak 2007 and Finance; Commercial; Tax&Customs; Competition; WND Ukrainian, UK Dispute Resolution; Compliance; Employment; Property Russian

Dentons (LLC Dentons Europe) 49A Volodymyrska St., Kyiv 01034, Ukraine; [email protected], www.dentons.com

Banking and nance; Corporate/M&A; Dispute Multinational corporations, commercial and investment +38 044 494 4774 Global English, Russian, Oleg Batyuk 1992 resolution; Investments; IP&T; Real estate and banks, energy companies, developers, hotel chains, +38 044 494 1991 law rm Ukrainian Construction; Restructuring; Tax investment funds, international organisations

DLA Piper Ukraine LLC 77A Velyka Vasylkivska St., Kyiv 03150, Ukraine; [email protected], www.dlapiper.com

Multinational corporations, commercial Corporate and M&A; Antitrust/ Competition and London, and investment banks, energy companies, English, Russian, +38 044 490 9575 Karpenko Margarita 2005 Regulatory; Finance & Projects; Real Estate; IP and UK developers, hotel chains, investment funds, Ukrainian Technology; Tax international organisations

EBS 13A Universytetska St., Kyiv 03110, Ukraine; [email protected], www.ebskiev.com

Legal Services; Management Consulting; Accounting 3M, Wizz Air, EBA, Dragon Capital, ABB, ACC, Alcon, English, German, Kyiv, +38 044 249 7905 Helen Volska 1998 and Financial Management ; Tax and Audit; Castrol, Florage, Michelin, Yves Rocher, Winner French, Russian, Ukraine IFRS Reporting; IT and HR Consulting; Transfer Pricing Automotive Ukrainian

Egorov Puginsky Afanasiev and Partners Ukraine 38 Volodymyrska St., Kyiv 01030, Ukraine; kyiv_offi[email protected], www.epap.ua

Serhii Sviriba, Banking & Finance, Capital Markets; Bankruptcy; BASF, Citi Bank, Credit Suisse, DCH, Erste Bank, IBRC, Gleb Bialyi, Competition; Criminal Law; Domestic Litigation; English, German, IDS, Intesa Sanpaolo, Johnson Controls, J.P. Morgan, Oksana Ilchenko, Kyiv, Employment; Family Law; IP / TMT; International French, Polish, +38 044 492 8282 1997 Morgan Stanley, Regal Petroleum, Samsung, Unilever, Markiyan Kliuchkovskyi, Ukraine Arbitration & Cross-Border Litigation; International Trade Spanish, Russian, Sodrugestvo Group, UEFA, Avito Holding, Kemira Oyj, Roman Stepanenko, & Customs; M&A and Corporate; Pharmaceuticals & Ukrainian Teva Ilona Zekely Healthcare; Real Estate; Sports Law; Tax

ENGARDE 4G Andrushchenko St., Kyiv 01135, Ukraine; www.engarde-attorneys.com

English, German, Kyiv, Commercial dispute resolution (incl. international UniCredit Bank, Smart Holding, Scania Group, Fuji Film, French, Spanish, +38 044 498 7380 Irina Nazarova 2009 Ukraine arbitration); Corporate law (incl. mergers & acquisitions) Bionade AG, Hazera Ukraine Czech, Russian, Ukrainian

ePravo 28/9 Pushkinska St., 2nd floor, office 24, Kyiv 01001, Ukraine; [email protected], www.epravo.ua

Russian, Kyiv, Litigation and Arbitration; Corporate and M&A; +38 044 235 0444 V. Vlasiuk 2012 Allta, Astrat, Askertrade, Studway, Orion.Group Spanish, Ukraine Intellectual Property; E-Commerce Ukrainian

[KYIV POST LEGAL QUARTERLY] #03/2015 17 ADVERTISEMENT

Phone number Top executives HQ Est. Main Specialization, services Major clients Languages

FCLEX Law Firm 14D Bekhterivsky Lane, Kyiv 04053, Ukraine; [email protected], www.fclex.com

Ferrexpo AG, Concorde Capital, Azovmash, NEST Banking and Finance; Competition; Corporate and Kyiv, Corp., ACME Color, Finance&Credit Bank; Terra Bank; English, Russian, +38 044 238 6420 Viktor Barsuk 2002 M&A; Dispute resolution; Intellectual property; Labor; Ukraine NorYards AS; Arterium Corp.; AutoKraz; IC “Omega”; Ukrainian Real Estate; Bankruptcy; Tax; White Collar Crimes SOTA Cinema Group and others

Golovan & Partners Law Firm 33B Bulvarno-Kudriavska (Vorovskoho) St., Kyiv 01054, Ukraine; [email protected], www.golovan.ua

Complex Business Protection; & ATO Zone Issues; Kyiv, English, Russian, +38 044 486 0047 Igor Golovan 1996 White Collar Crimes; Litigation & International Arbitration; Privileged Ukraine Ukrainian Investment Disputes; Copyright & Related Rights

Gramatskiy & Partners 16 Mykhailivska St., Floor 2-3, Kyiv 01001, Ukraine; offi[email protected], www.gramatskiy.com

City Capital Group, Seven Hills, Danfoss, TM De-vi, Business-Advocacy; Foreign Investments; Foreign English, Italian, PlayTech, ClickMeIn, Keystone Trading Technologies, Kyiv, Trade; Business Protection; Real Estate&Construction; Greek, Polish, +38 044 581 1551 Ernest Gramatskiy 1998 Skywind Tech UA, ULMA Ukraine, Celentano, Banka, Ukraine Agribusiness; IT; Litigation; Taxation; Business Russian, Jeltok, Promkabel, Larsen, Graal, TOMAK, All-Ukrainian Restructuring; Due Diligence; Debts&Bankruptcy Ukrainian Advertising Coalition

Koval & Partners, Patent & Law Company 23 M. Raskovoy St., apt. 602, Kyiv 02660, Ukraine, [email protected], www.koval-partners.com

Legal protection of trademarks; industrial designs; inventions and utility models; copyrights; computer TERMIX, Y!, BWIN, ForexClub, Coral travel, Koval Maxim, Kyiv, English, Russian, +38 044 228 2552 2003 programs and databases; Internet solutions; domain ABERCROMBIE, FrauSchmidt special, SCM, VELYKA Koval Natalia Ukraine Ukrainian names; International protection of intellectual property KYSHENIA rights; Legal services

Kushnir, Yakymyak & Partners 19B Instytutska St., Suite 40, Kyiv 01021, Ukraine; [email protected], www.kypartners.com

Kyiv, Banking & Finance; Corporate; Energy; Investments; IT; Multinational corporations, Ukrainian companies, English, Polish, +38 044 253 5939 Yuri Kushnir 2003 Ukraine Labour; Litigation; Real Estate; Tax; Trade Law foreign embassies Russian, Ukrainian

Lavrynovych & Partners 41 Saksahanskoho St., Kyiv 01033, Ukraine; offi[email protected], www.lp.ua

Banking & Finance; Tax; Corporate and M&A; Canon, MoneyGram, Danone, Dragon Capital, Hyundai, Kyiv, English, Italian, +38 044 494 2727 Maksym Lavrynovych 2004 Competition/Antitrust; Infrastructure; IP; Dispute Louis Dreyfus Commodities, MUK, Nova Healthcare, Ukraine Russian, Ukrainian Resolution; Public Private Partnership; Agribusiness Peri Ukraine, UCAB, Winner Automotive

LCF Law Group 47 Volodymyrska St., office 3, Kyiv 01001, Ukraine; [email protected], www.lcfgroup.com.ua

Alfa-Bank, Universalbank, Commerzbank, Bank Kontrakt, Ukrenergy Coal Ltd, Capital Times, Arab Energy Alliance, English, German, Anna Ogrenchuk, Kyiv, Comodo Company LLC, Humana People to People Baltic, +38 044 455 8887 2009 Legal services: Litigation, Corporate, Finance Russian, Artem Stoianov Ukraine State Enterprise “Plant 410 CA”, UkrSibinvest, QBE Ukraine, Neos Bank (group of companies "Poverchnost"), Allianz Ukrainian Ukraine, Vikoil Ltd, AVK Confectionery Company

Lexwell & Partners Sophia Business Center, 6 Rylsky Lane, 5th floor, Kyiv 01001, Ukraine; [email protected], www.lexwell.com.ua

AET, Bridgestone, CRH, Dniprospetsstal, DuPont, East Corporate Law; M&A; Competition Law; Litigation; Metals, Evraz, Honda Trading, ING, Marubeni, Millhouse, Kyiv, English, Russian, +38 044 228 6080 Andriy Kolupaev 2005 Dispute Resolution; International Arbitration; Real Estate Mykolaivcement, Naftogaz of Ukraine, Odesaoblenergo, Ukraine Ukrainian & Construction; Tax; Labour Law Pzer, Podilsky Cement, Schenker, Sojitz, Stirol, Subaru, Sumitomo, Toyota, Ukrproduct, VS Energy

18 #03/2015 [KYIV POST LEGAL QUARTERLY] ADVERTISEMENT

Phone number Top executives HQ Est. Main Specialization, services Major clients Languages

NOBLES 7/11 Khreschatyk St., Kyiv 01001, Ukraine; [email protected], www.nobles-law.com

AMD, Avon, BSH, Claas, Credit Suisse, Deutsche Alexander Weigelt, Corporate; M&A; Commercial; Antitrust; Employment; Kyiv, Telekom, EBRD, Fujitsu, Groupon, Lufthansa, English, German, +38 044 495 3080 Volodymyr Yakubovskyy, 2007 Insolvency & Restructuring; Banking & Finance; Energy; Ukraine Mothercare, Navico, Otto, Rocket Internet, RBS, Ukrainian,Russian Tatiana Iurkovska Real Estate; Intellectual Property; Litigation Swatch, Teradata, Viacom

Poberezhnyuk & Partners Law Group BC Residence, 7A Dovnar-Zapolskoho St., Kyiv 04116, Ukraine; offi [email protected], www.p-partners.com

KFSW “Stolichniy”, Watsons, Incom, AVON, Litigation; Representation in the ECHR (Strasbourg); +38 044 351 1727 Kyiv, Construction machinery, VTB Bank, Oschadbank, English, German, Larysa Poberezhnyuk 2008 Tax; Corporate; Intellectual; Banking; Competition; +38 044 351 1738 Ukraine PromSvyazBank, Ukrgazbank, Eurogazbank, Eurobank, Russian, Ukrainian Real estate; White Collar Crime; Civil; Labour; Family Tubex Commodities AG, Odessagaz, Provesin, Holtec

Strateg Law Firm 18A Kikvidze St., Kyiv 01103, Ukraine; [email protected], www.strateg-llc.com

Commercial Law; Administrative Law; Labor Law; Family Kyiv, Law; Inheritance Law; Tax and Legal advice; Customer Multinational corporations, Ukrainian corporations, English, Russian, +38 044 227 9391 Oleg Nalyvayko 2009 Ukraine legal support; Representation in courts; Registration Comercial banks Ukrainian and servicing of offshores; Bankruptcy

Skliarenko, Sydorenko and Partners, Attorneys At Law 31 Tarasa Shavchenko Blvd., 3rd fl oor, offi ce 8, Kyiv 01032, Ukraine; [email protected], www.s-partners.org

Litigation; Criminal Law and Procedure; Commercial Oleksandr Skliarenko, Kyiv, Law; Corporate Law, Tax Litigation; Corporate Grawe Ukraine, IDS Group Ukraine, OTP Bank, Kvazar, English, Russian, +38 044 235 8575 2011 Andrii Sydorenko Ukraine Disputes; Insolvency and Bankruptcy; Mediation; Mamamusic Ukrainian Civil Law; Labor Law

Squire Patton Boggs-Salkom International Association 12 Khreschatyk St., Kyiv 01001, Ukraine; www.squirepattonboggs.com, www.salkom.ua

Anti-Corruption (FCPA/UK Bribery Act); Antitrust and Acron, ContourGlobal, Group DF, Lufthansa Ukraine, Competition; Banking and Finance; Commercial +38 044 591 3100 Peter Teluk, Kyiv, MTS Ukraine, Orithil, Ukrainian Construction Company, English, Russian, 1992 Contracts; Corporate; Dispute Resolution; Intellectual +38 044 591 3140 Evgeniy Kubko Ukraine UniCredit Bank, United Capital Partners, Velti, Winner Ukrainian Property; Labor and Employment; Litigation; M&A; PE; Imports Ukraine Real Estate; Tax and Customs

Syutkin and Partners 10 Redutna St., offi ce 2, Kyiv 01015, Ukraine; offi [email protected], www.siutkin.com

Mykola Syutkin, Kyiv, M&A; Bancruptcy and Debt; Real Estate; Assets Noble Resources Ukraine, Carlo Pazolini Trading, IFD English, Russian, +38 044 383 0000 2006 Nataliya Osadcha Ukraine Securitization; Litigation; Corporate Law; Tax Kapital, Satellit Ukrainian

Vasil Kisil & Partners Leonardo Business Center, 17/52A Bohdana Khmelnytskoho St., Kyiv 01030, Ukraine; [email protected], www.vkp.ua

Agricultural Business; Antitrust & Competition; Alfa Bank (Ukraine), Arricano, BASF, Bayer Consumer, Capital Markets; Corporate / M&A; Energy & Natural BNP Paribas, British American Tobacco, Central English, German, Resources; Finance & Securities; Intellectual Property; Kyiv, European Media Enterprises, Coca Cola, Danone, Swedish, +38 044 581 7777 Andriy Stelmashchuk 1992 International Trade, Project and Trade Finance; Ukraine DuPont, Google, Hubei Changyang Hongxin Industrial Russian, Labour & Employment; Litigation & Arbitration; Private Group, Inditex Group, Mary Kay, Samsung, Seven Hills, Ukrainian Clients; Public Private Partnership, Concessions & Shell, YouTube. Infrastructure; Real Estate & Construction; Taxation

Wolf Theiss LLC 5 Spaska St., Kyiv 04071, Ukraine; [email protected], www.wolftheiss.com

Corporate and M&A; Banking and Finance; Capital EBRD, Geveko, ThyssenKrupp, VIG, QBE, Rubellius English, German Austria, Markets; Tax; Dispute Resolution; Energy, Natural +38 044 377 7500 Taras Dumych 2008 Capital, AVentures Capital, Lukoil, Raiffeisen, Alvogen, Russian, French, Vienna Resources; Competition; Real Estate, Construction; Dr. Oetker Polish, Ukrainian Employment; IP/IT; Agriculture

[KYIV POST LEGAL QUARTERLY] #03/2015 19 Planes, trains & automobiles minister big on future, less so on past crimes or criticizing obstructionist oligarchs

Infrastructure Minister Andriy Pyvovar- sky answers the Kyiv Post’s questions nfrastructure Minister Andriy Pyvovarsky prosecutors and didn't show much interest in on Sept. 22. “My mood is that every single day is my last day in offi ce, so I manages aviation, railways, roads, ports following up about whether criminal charges have to complete as much as possible and postal services – just about every- were ever fi led. by the time I am done,” Pyvovarsky I thing that everybody in Ukraine uses. Since there is no way for anyone to man- says. (Pavlo Podufalov) It's way too much for one person, which is age the 600,000 state employees in his min- why Pyvovarsky is aiming to decentralize and istry, Pyvovarsky relies on key managers privatize parts of the massive structure that at state companies. He exercises more di- By Ilya Timtchenko and has created illicit fortunes for well-placed in- rect control over a 256-person analytical Brian Bonner siders for more than two decades. team that helps him identify problems and [email protected]. [email protected] But when it comes to corruption, priorities. Pyvovarsky is not looking back, only ahead. “If there is a red fl ag then I know that there “My philosophy is that I should do anything is something going wrong,” Pyvovarsky, who possible to prevent such things in the future was the director general of the Continuum and make those changes institutional so that Group and a former managing director of when I am gone… it will be diffi cult to go back Dragon Capital, an investment bank, said. to the old performance,” Pyvovarsky told the “They do their job properly… I don’t need to Kyiv Post in an interview. push them around.” To achieve his goal, one of the strategies The thought of losing good people is one of of the 37-year-old minister has employed his top concerns. He promised his team a fair is transparency. His ministry has one of the and liveable wage, but admits that the state most modern and informative websites in the has not been able to come up with a fund to Ukrainian government. provide decent public sector salaries. It may be the best strategy for the times, but “We just need to come out of the clos- not a fl awless one. He had diffi culty provid- et and start paying bureaucrats well on the ing the number of corruption cases fi led with budget level,” Pyvovarsky says. “If we have

20 #03/2015 [KYIV POST LEGAL QUARTERLY] ADVERTISEMENT competitive salaries, I can bring a lot talent from the street.” He said that an Hr 20,000 monthly salary should be the minimum. Sector by sector, here's a rundown of Pyvovarsky's current chal- Sergey Denisenko lenges and thinking: Counsel with AEQUO Law Firm Railways The state enterprise Ukrzaliznytsia, with a bloated workforce of Antimonopoly Committee. A new way of living 285,000 people, makes up almost half of the ministry’s employees and is expected to end the year with Hr 50 million in losses. But he's Latest months of the Antimonopoly Committee (the “AMC”) activity has brought more practical changes than recent years of shady stability and it looks like there not going to seek privatization of the behemoth. is more to come. The new management team of the AMC is currently initiating a “There are quite a few bad examples of privatization of railways number of long-desired reforms of applicable Ukrainian competition legislation. in the world,” Pyvovarsky said. “In case of Ukrzalizntysa, the infra- Some of the initiatives are already in place and the market players are now treat- structure will never be private. It will be state-owned.” ed according to the new rules. On 15 September 2015 the AMC officially approved and enacted its His strategy is to streamline the management. “Corporatization Recommendations on fines calculation for infringements of the competition leg- will help us create a new structure, bring new people to the compa- islation providing for: ny that will be compensated fairly, will help us clean up the balance • principles of fines calculation; and sheet,” he said. • “amnesty” for historical failures to file for Ukrainian merger clearance. Up until now the AMC had no official document providing for methodology of Slimming the workforce would be a start, but Pyvovarsky said the fines calculation applied for infringements of competition legislation. reductions are not easy to carry out. “It’s a process,” he says. “Until Furthermore, the AMC is currently promoting the Dra Law which provides for we educate the people, there will be populists who will be killing certain amendments into merger control regulations including the increase of fi- me.” nancial thresholds applicable for transactions requiring prior clearance. Respective Yet another move would be inserting a board of directors to make Dra Law has already received a positive expert conclusion of the AMC within the Parliament procedure and is currently being under review of the Parliament com- decisions, rather than one “monarch” deciding everything. mittees with high chances to be adopted by the end of this year. Curiously, news outlets such as ICTV and Fakty – both owned by In this respect and in view of contemplated increase of financial thresholds billionaire oligarch Victor Pinchuk, whose Interpipe business is a one may assume that the number of transactions requiring merger clearance in big customer of the state railways – have been harder on the minis- Ukraine will decrease, and thus the AMC will be more focused on failures to noti- fy the transaction requiring prior clearance. ter than many other Ukrainian media outlets. In view of the above and in preparation for further toughening of merger con- Pyvovarsky says he doesn't know why. trol regime, the AMC has launched an “amnesty” program whereby global cor- “It’s a very interesting situation,” Pyvovarsky says, and one that porates and Ukrainian business groups are now welcome to disclose their group he says confounds him since the Infrastructure Ministry has de- structures to the AMC and voluntarily inform on any historical failures to notify certain transactions to the Ukrainian competition authority. Financial risk of any veloped a mutually benefi cial deal between Ukrzaliznytsia and identified historical breaches of the Ukrainian merger control rules is limited to the Pinchuk’s wheel and pipe company Interpipe. following rather nominal penalty figures: “They buy scrap metal from Ukrzaliznytsia at market prices. We • Equiv. of EUR 850 per one breach (if voluntarily disclosed to the AMC with- buy wheels from them at very favorable prices.” in next 180 days) and • Equiv. of EUR 4 270 per one breach (if voluntarily disclosed to the AMC within next 181-365 days). Aviation We believe that respective amnesty program may present a good opportuni- Although most aviation exports put the blame for Ukraine's uncom- ty to disclose any previous transactions which for any reasons were not filed in petitive airlines industry on billionaire Ihor Kolomoisky's success Ukraine. Respective steps will contribute to bringing the corporate structure of the in nearly monopolizing air travel through his Ukraine International groups in full compliance with the Ukrainian merger control rules. In order to benefit from the respective amnesty program the parties need to ap- Airlines, Pyvovarsky oddly has nothing bad to say about the ply to the AMC with the application for merger clearance. The scope of the infor- oligarch. mation required for such application will be nearly similar to the scope which is Pyvovarsky even disputed the premise that Ukraine International generally required for merger clearance notifications in Ukraine. Airline's dominant role forces air travelers to pay more for less. He Importantly, the AMC is willing and ready not to publicize respective informa- tion regarding any such historical breaches by the applicants which apply for said that Kolomoisky is not an obstacle to the development of a the amnesty program and request that their applications are treated with full competitive air market. Instead, the minister blames the recession confidentiality. and 's war as the chief obstacles that limit choices. Currently the market players have very good chances to bring their corpo- “If you go to the website of Ukraine International, if you try to rate structures in compliance with the applicable merger control legislation. Respective procedure (if applied by the market players) will eliminate any future book tickets in advance, then you will see that in most cases it will risks of imposition of fines for historical failures. be cheaper than any other foreign carrier,” Pyvovarsky says. Respective initiatives clearly evidence on the AMC intention to reboot its re- Not many aviation watchers agree with him. lations with business based on the brand new principles including transparen- Ukraine International Airlines operates 50 percent of aviation cy, predictability and equality of the market operators. Moreover, it appears that current chances for successful practical implementation of competition reforms routes in Ukraine, giving it the right to fl y 170 routes, with no com- based on the above principles are better than ever before. petition in many of them, according to Oleh Marchenko, who con- sults airline companies as a partner with the Marchenko Danevych Vector Business Centre, law fi rm. "In many cases, Ukraine International Airlines abus- 52 Bohdana Khmelnytskogo St., Kyiv 01030, Ukraine; offi[email protected], www.aequo.com.ua es its exclusive position by fl ying only half or less of the number of +38 044 233 6599

[KYIV POST LEGAL QUARTERLY] #03/2015 21 permitted fl ights, while others cannot fl y since they do not “Unless we fi x the weight control issue on the roads we have rights," Marchenko says. will not have good roads ever,” Pyvovarsky says. During the Evgeniya Satska, a spokeswoman for Ukraine past two months, at least fi ve state transportation inspec- International Airlines, said Marchenko's fi gures are exag- tors have been severely beaten by lawbreakers who had gerated. Satska says the airline operates only 37 percent of overweight trucks. To fi x the situation, Pyvovarsky wants aviation routes in Ukraine and 113 routes. to install electronic weight control to remove the hu- The minister also defended Prime Minister Arseniy man factor. “The penalties will be European,” the minis- Yatsenyuk, saying that he was out of the picture regarding ter cautions. the temporary return as head of the State Aviation Service Another systemic problem is low salaries for road of Denys Antoniuk, a person known to be closely associ- inspectors. ated with Kolomoisky. Earlier, Odesa Governor Mikheil “The average salary is Hr 1,200 per month and the guy Saakashvili blamed Yatsenyuk for serving Kolomoisky’s in- can make it in one hour” in collecting bribes, Pyvovarsky terests by reinstating Antoniuk. says. The old inspection agency will be liquidated and “The investigation was done, he was dismissed for the will be substituted with a new one. “The Poles managed duration of the investigation. Then the investigation was to resolve this issue, which means we can do it as well,” fi nished and there was some time taken to fi le the report. the minister says. “Compensation has to be fair for the But by law, since the investigation was fi nished, he re- inspectors.” turned to work,” Pyvovarsky explained. “The report was is- The minister envisions a three-stage process to improv- sued, it was made public… the Cabinet of Ministers decided ing Ukraine’s roads. First, it must be clearly defi ned which based on my request to fi re the guy, and the guy was fi red.” government or private body owns which roads. Second, money should be redistributed according to the owner. Ports Third, Ukravtodor will be decentralized into local govern- More has been achieved in the decentralization of ment bodies. Ukraine’s aging port infrastructure. Ultimately, the state enterprise will simply be anoth- “We conveniently and strategically sited ports, and yet er service oriented customer rather than the inspector and people were bypassing us. In some cases people were go- controller as well, a recipe for corruption. ing to the Baltic states, and then through Ukraine by Ukrzaliznytsya, which is stupid,” Pyvovarsky said. Postal service The main reason for this ludicrous decision-making is Not many know, but Ukraine’s state post offi ce Ukrposhta that the bureaucracy was pushing businesses out of the is under the infrastructure wing as well. It also competes way. “A system was created that institutionalized bribery,” for the title of most corrupt state enterprise. “There are Pyvovarsky said. “We deregulated the system.” lots of opportunities for corruption,” Pyvovarsky says, such The second reason for the ports’ unattractiveness is the as the delivery of private parcels for free by Ukrposhta’s massive depreciation of the seaport system. “We don’t have trucks. enough storage facilities for grain, facilities for handling Pyvovarsky wants to corporatize Ukrposhta. containers, storage facilities for ore, coal, etc.” Pyvovarsky Privatization won’t be the solution since there is a sig- said. “That’s why we’re fi ghting for the privatization of the nifi cant social component that the private sector will not stevedoring activities, for attracting new investments, at- serve. “More than 30 percent of Ukrainians live in villag- tracting professional investors in the seaports that would es. And the Ukrainian post offi ce is the only way to provide help us improve the terminal infrastructure.” the administrative services and connection with the world,” The ministry has been fi ghting for the privatization of Pyvovarsky says. the 13 stevedoring companies for months now. The ap- proval for privatization will have to come from parliament. Conclusion Most deputies with whom Pyvovarsky spoke are interested The minister will be pleased if he meets, by the end of the in pushing through the bill. It is mainly the local bureau- year, these goals: a corporatized Ukrzaliznytsia and the be- cracy at the ports that is creating diffi culties. ginning of a corporatized Ukrposhta; parliament approval “We will have some hiccups, but we will get through,” of legislation for privatization of state-owned stevedoring Pyvovarsky says. port companies; a new Ukravtodor management to start If Ukraine does go through the privatizations, tens of decentralization; and, the adoption of European Union billions of hryvnias will be saved, the minister estimates, safety standards for automotive transport. since more freight will be transported by water, a more effi - “My mood is that every single day is my last day in offi ce, cient form of transportation than roads. so I have to complete as much as possible by the time I am done,” Pyvovarsky says. Roads Kyiv Post staff writer Ilya Timtchenko can be reached at Ukraine’s roads have been in awful condition since the col- [email protected] and Kyiv Post chief editor Brian lapse of the . Bonner can be reached at [email protected].

22 #03/2015 [KYIV POST LEGAL QUARTERLY] State enterprises drain billions of dollars each year, but resistance stalls privatization

By Olena Gordiienko 2014 alone, state enterprises offi cially lost merchants and, in some cases, oligarchs and tycoons who [email protected] Hr 115 billion – more than $5 billion, fueled stand behind them. Inby theft through one corrupt scheme after If many of these enterprises became privately owned, another. they would bring tax revenues instead of fi nancial losses "Every single company continues to be run in the inter- and allow Ukraine's government to shed up to 50 percent of ests of private individuals, unfortunately," Economy Minister its total workforce of more than 1 million employees. Aivaras Abromavicius said in a video prepared for the Yalta Removing these cesspools of corruption and bad man- European Strategy conference in September. "Almost every agement from the taxpayers' shoulders has proven to be single state-owned enterprise sells goods through all kinds diffi cult. of middlemen companies registered in offshore zones. They One of the holdups is a new privatization law moving also purchase a lot of inputs through companies controlled through parliament aimed at ensuring transparency and by them at infl ated prices." competition, as well as protecting the rights of the state An estimated 3,000 state-owned enterprises – from idle and investor. silk producing farms to ports, transport and energy-pro- Those who benefi t from the status quo are putting up viding monopolies abusing their positions – are managed fi erce resistance. by Ukraine's army of bureaucrats. They are not the only "Sabotage comes from the bureaucrats and merchants ones who feed off corrupt schemes. So do intermediary who feed from the schemes,” Oleksiy Zubrytsky, an adviser

[KYIV POST LEGAL QUARTERLY] #03/2015 23 The Kyiv Post analyzed common and devastating scams to Agriculture Minister Oleksiy Pavlenko, told in state enterprises and grouped them according to the Kyiv Post. patterns. There are, however, many more to study. More than 150 appeals sent to law enforce- ment agencies from the Agriculture Ministry are in different stages: pre-court investiga- their procurement deals a year. There are Fake partners and shady tions, indictments sent to court, other types of a lot of criminal cases opened, particularly intermediaries consideration. From just one contract alone, the manage- upon our appeals,” Shcherban said. “We haven’t received any response yet. The ment of Elektrovazhmash, a heavy equip- Energoatom constantly overprices its pro- often asked question is why nobody of those ment producer in , stole about three curement offers from two to six times, los- who were shooting the Maidan is imprisoned? quarters of the annual profi t, Economy ing hundreds of millions of hryvnias while So this is our Maidan, nobody is imprisoned Minister Aivaras Abromavicius said in a vid- buying pipes, protective clothes and equip- either" for embezzlement, Zubrytsky said. eo prepared for the Yalta European Strategy ment. The Anticorruption Action Center has Privatization is seen as the only viable so- conference in September. On Sept. 9, RBK spotted cases for Hr 481.6 million worth of Ukraina news agency published a contract non-transparent tenders over the last three lution for many state enterprises, where purportedly between Elektrovazhmash and years with involvement of Viktor Chebrov, corruption permeates all levels, from depart- an offshore entity called Conor Trading L.P. head of competitive bidding committee. ment directors to engineers and accountants. The offshore then resold the equipment to Chebrov is still working in the company and Offi cially, workers are underpaid and overpro- a customer, showing that the heavy machin- no criminal cases have ever been opened tected, a contributing factor to the fl ourishing ery producer lost $1.6 million from the deal. against him, Energoatom’s spokeswoman corruption schemes. State Food and Grain Corporation and Ilona Zaiets told the Kyiv Post. Apart from that, powerful business clans who state alcohol monopoly Ukrspyrt are two of Ukrzaliznytsia, the unprofi table state rail- stand behind some state enterprises resort to the biggest in assets and losing money un- way monopoly, has Hr 245 billion in as- threatening any new technocratic manager who der the Agriculture Ministry. sets. Prydniprovska Railway, a branch of attempts to clean up the mess, Zubrytsky said. The grain corporation worth $1 billion Ukrzaliznytsia, alone lost Hr 239.8 million Several draft laws will establish new rules could be bringing $100 million annually in on buying electricity in 2012-2014. Deputy on privatization to ban unfriendly buyers from private hands, according to Oleksiy Zubrytsky, Infrastructure Minister Vladimir Shulmeister the auction and cancel requirement to sell estimates the total state losses from such an adviser to the Agriculture Ministy. Instead, 5-10 percent stakes before the state can offer a schemes to be in the billions of hryvnias. its losses amounted to Hr 3.5 billion, or $220 controlling stake in an asset. Corporatization and change in manage- million, last year. The audit shows $300 mil- Other problems in the current law should lion stolen from the company since the es- ment will contribute to more effi cient and also be addressed to make privatization more tablishment of the state enterprise in 2010, honest procurement, Shulmeister told the attractive to foreign investors. “There is al- including $130 million last year through sell- Kyiv Post. Privatization is not currently an most no room for negotiations between an ac- ing grain to four offshore companies that option for the state railways, he said, noting quirer and the fund,” Sayenko Kharenko senior no longer exist. The state never received the the bad experience of other countries that associate Oleksandr Nikolaichyk told the Kyiv payment. have tried. Post. “In addition, investors lack information It also used to be a normal practice for Shadow privatization on the target since there is no effective way to the state fi rm to buy grain from “dead” “It’s happening already, either we want it or perform a proper due diligence.” companies or individuals with advance pay- not,” Zubrytsky of the Agriculture Ministry said. ments, with neither grain or money re- Workers of state entities illegally rent out ceived when the contract is due, Zubrytsky land registered at the enterprise. said. Now advanced payments are banned In other cases, a state company establish- as well as contracts with unknown offshore es a joint venture with a private entity and companies. later fails to comply with obligations. The pri- Tenders vate company sues the state entity and wins “Procurement is a scheme for washing out assets as compensation. All that is left from the funds. Thanks to being monopolies the state entity is a bunch of papers in an of- they have a possibility to accumulate more fi cial’s offi ce. There are around 150 state en- than other companies, and then launder terprises under the Agriculture Ministry that the money via overpriced tenders,” Olena used such schemes and slated for liquidation Shcherban, attorney at the Anticorruption by the ministry. Action Center watchdog told the Kyiv Post. Nashi Groshi, a TV news show, investigat- Shcherban said that, unlike other entities ed the construction of a private luxury sport Ukrzaliznytsia, Ukraine's inefficient, overstaffed and outdated state railway that they selectively monitor, Energoatom, club on 11 hectares of Ukrzaliznytsia-owned monopoly, loses money every year through the state energy producer accounting for 50 land by ex-head of South-Western railway overpriced tenders, embezzlement and percent of all Ukrainian electricity, is a win- branch, Olexiy Kryvopishyn, with state mon- mismanagement. But there are no plans ner in tender corruption. “We dispute 6-7 of ey and materials. A pre-trial investigation is to privatize the behemoth and resistance has slowed the sale of 3,000 other state under way. enterprises. (Volodymyr Petrov)

24 #03/2015 [KYIV POST LEGAL QUARTERLY] NEWS ITEM: The Additionally, the guarantees that an investor receives are nation's 3,000 state- non-enforceable under Ukrainian law. “The acquirer will Let’s owned enterprises simply be unable to benefi t from such protection in post- cost taxpayers $5 pull harder. I billion last year. acquisition litigation,” Nikolaichyk said. think he budged Often, according The State Property Fund is responsible for due dili- a centimeter! to the ministers gence and preparing the state assets who oversee the enterprises, the for sale. Privatization could go more state firms are run smoothly if every government body by corrupt directors did their part, fund director Ihor with powerful individual interests Bilous, said in a Sept. 7 briefi ng. behind them. Out of 302 state enterprises Corrupt schemes designated for privatization, 174 include buying goods through are controlled by ministries, of intermediaries which only seven have been al- at inflated prices ready transferred to the fund for and outright theft. Thus far, the actual sale. forces resisting “The ministries should change have transfer the assets to the “One can work for years in an unregis- tered fi eld, stalled a wholesale privatization drive fund and we will try to sell use unregistered buildings, but as soon as privatization is that many think is those under transparent procedures. Currently it’s moving in question, property issues step forward,” Zubrytsky said the solution. quite slow,” Bilous said. at a press briefi ng on Sept. 29. “Without changes to the leg- The Agriculture Ministry is ready to transfer all 101 en- islation, privatization will not be conducted even next year. terprises designated for privatization to the fund, but many We believe it’s necessary to radically simplify the proce- companies are “stuck in the procedures.” Some 50 are still dure of privatization of the smallest and most loss-making waiting for approvals from the Cabinet and parliament, enterprises.” others are in delay due to paperwork, often also sabotaged Kyiv Post staff writer Olena Gordiienko can be reached at by offi cials on lower levels. [email protected].

20 years in business

Proud winner of the 2014 Missouri Honor Medal for Distinguished Service in Journalism

SUPPORT UKRAINE’S GLOBAL VOICE SUBSCRIBE TODAY!

UNLIMITED ONLINE ACCESS

for for $50 12 months $20 1 month

www.kyivpost.com/payment [KYIV POST LEGAL QUARTERLY] #03/2015 25 Call us today at +380 44 591 7788 to learn about print and online subscription offers! Putting an end to Ukraine’s corrupt public procurement system

By Mariana Antonovych and Olena Gordiienko [email protected] [email protected]

very year, Hr 50 billion – about $2.3 at Icon Private Equity fund to take on the chal- billion – disappears into the big, black, lenge of fi xing the state’s broken public pro- Ecorrupt hole of Ukraine’s public pro- curement machine with the reformist team of curement system. That’s 20 percent of tax- Economy Minister Aivaras Abromavicius. payers’ money that the government allocates “Losses through the public procurement to buying goods, labor and services for pub- sector are one of the main channels through lic needs. which black cash gets into the economy,” Deputy Economy Minister Max Nefyodov Nefyodov said in an interview with the Kyiv wants to plug that hole for good. Post. In February, he gave Almost every state-owned company in the up his manageri- country takes part in corrupt tenders, he said, al post creating built-in resistance to steering the sys- tem away from “preferred” suppliers who have set up well-oiled schemes to siphon off public cash into private pockets. “In the end, it’s the taxpayer who loses out,” Nefyodov said. As you might expect from someone com- ing from the private sector, Nefyodov has tak- en a businesslike approach to the problem. His team has achieved the kind of results that few other ministries can boast of in the year-and- a-half since the EuroMaidan Revolution. So far, the team has: • Created ProZorro, a full-service electron- ic public procurement system, which started operating in pilot mode on Feb. 12; • Held 12,260 electronic tenders worth Hr 3.72 billion as of Oct. 2; • Saved the state Hr 306.4 million on procurement as of Oct.2; • Had public procurement leg- islation passed in parliament, and signed by the president on Sept.b25; • Prepared a bill on electron- ic procurement for approval in parliament; and

On Sept. 11, deputy Economy Minister Max Nefyodov talks with the Kyiv Post about eliminating corruption in public procurement in Ukraine. (Volodymyr Petrov)

26 #03/2015 [KYIV POST LEGAL QUARTERLY] • Reached the fi nal stage of negotiations on Ukraine’s accession to the medium-sized Ukrainian businesses will gain access to state procure- Government Procurement Agreement, which will open access to the ment tenders held in all WTO member countries, opening up a massive World Trade Organization’s $1.7 trillion public procurement market new market to them. for Ukrainian companies. Moreover, the e-procurement bill that Nefyodov is now shepherding “It’s really like you are a start-up founder and then you see people through parliament will complete the transfer from paper to electronic fl ocking to it … and numbers growing… We’re almost doubling every procurement purchases, and allow ProZorro, currently operating in pilot month,” Nefyodov said proudly. mode, to go into more general use by the state. While managing the public procurement reform project as if it was a At the moment ProZorro only covers deals that don’t exceed a thresh- private entity, Nefyodov admits that when it comes to funding, the re- old of Hr 200,000 ($9,070) for goods and services, or Hr 1.5 million semblance to the business sphere ends. ($68,028) for labor. “Anyone could do it with money, but try to do it for free…” Nefyodov If the electronic procurement bill is approved in November, Nefyodov said, noting that “even with public procurement reform, the budget for expects the fi rst set of procuring entities – ministries, regional adminis- it was zero.” trations and the largest state companies – to be able to move to the new While there are some things that can be certainly done for free ini- electronic system in full starting in January, when ProZorro’s software tially, there comes a time when money is needed for the ProZorro elec- will be fully implemented. Within nine months afterwards, all procure- tronic public procurement system developed by his team. ment in the country will be moved to the electronic format, the depu- “It means that things that were done by volunteers, for example IT ty minister hopes. support, now have to be done by professional companies,” Nefyodov But the changes won’t stop there. said. “Electronic procurement is only a tool, and actually putting all pro- The price tag for developing the ProZorro software over the 18 curement into electronic format is only 50 percent of the job,” Nefyodov months is $1 million. said. “That’s because the interesting things - like monitoring and risk ProZorro has so far received funds from partners, who donat- management systems - they only start after that.” ed $10,000 each to develop the system, along with $50,000 from the Despite the lack of funding, resistance from vested interests, the un- Western NIS Enterprise Fund and $17,000 from European Bank for tangling of red tape and need to lobby parliament to adopt innovative Reconstruction and Development. The project is close to receiving legislation, the tremendous effort has been well worth it, Nefyodov said. $60,000 from the Germany’s GIZ state fund, Nefyodov said. “I think it was the right decision … I do think that being in the … pub- The new software was designed to tackle some of the key problems lic sector in Ukraine is currently the most challenging job you can have, of the old state procurement system - low transparency, rigid barriers and here you really can change something,” he said. “I also understand against free participation of business, and the low professionalism of that unless we build the country ourselves, unless we reform the econ- procurement offi cers. omy, there just won’t be any place for complex business, for investment “The more we put procurement into an electronic format, the easier funds, for investment banks, and for professionals in general.” it is for everyone to work with it - including procurement offi cers, sup- Kyiv Post staff writer Olena Gordiienko can be reached at gordiienko@ pliers, regulators … police, prosecutors, ministers, anti-corruption activ- kyivpost.com. Kyiv Post legal affairs reporter Mariana Antonovych can be ists, journalists and others,” Nefyodov told the Kyiv Post. reached at [email protected]. IT support isn’t the only thing ProZorro needs to function properly, however. The system is now backed up with supporting legislation. The new law on public procurement, which covers both We paper and electronic procedures, adds transparency to We are are doing the tenders by making tender committee protocols and fi nan- doing them reforms! cial proposals publicly accessible, as well as introducing a faster! transparent appeals system and demanding the disclosure of the bidder’s fi nal benefi ciary. Increased competition, which is also seen as crucial by Nefyodov, is encouraged through the “post-qualifi cation clause” in the bill. The clause requires bidders to prove their eligibility to bid only if they win a tender. “We want six, seven, 10 companies to participate in each tender, which would make it close to impossible for them to collude in the bidding process,” Nefyodov said. “Even if something wrong happened, there would be lots of competitors that would have a clear incentive to fi le a complaint.” Apart from saving the state money, the new law im- proves Ukraine’s chance of signing up to the WTO’s NEWS ITEM: On Sept. 27, adviser to the head of procurement agreement. If the country accedes to administration Yuriy Golyk and department head of Oblast administration Roman Karmannik debated on Facebook about who is switching to electronic the agreement in November as planned, small- and procurement more quickly.

[KYIV POST LEGAL QUARTERLY] #03/2015 27 ProZorro e-procurement improves transparency, reduces corruption and saves taxpayers $14 million so far

By Bozhena Sheremeta ublic procurement has become a lot more transpar- The ProZorro system reviews the cheapest offer and, if it [email protected] ent with e-procurement. fi ts requirements, is automatically accepted. P ProZorro, an online platform, was launched in The new way has worked well enough to save more than February to shift state purchares online, with the aim Hr 306.4 million, or $14.4 million as of Oct. 2. of increasing transparency, saving money and reducing “In electronic format you can see everything,” says that corruption that costs the state $2.3 billion in annu- Natalia Abesadze, who is in charge of legal coordination at al losses. ProZorro. ProZorro was developed by activists, said Deputy Most state agencies can currently place tenders for Economy Minister Maxym Nefyodov. “It was designed in goods and services worth up to Hr 200,000 and tenders for the fourth quarter of 2014 by Alexander Starodubtsev and labor worth up to Hr 1.5 million. However, state enterpris- Andriy Kucherenko and many other people,” he said. es that are monopolists – like Ukrposhta, Ukrzaliznytsya, More than 800 state agencies are already using the Energoatom and others – are allowed to hold tenders that system. exceed these thresholds. While the Kyiv City State Administration and two min- With adoption of the e-procurement bill, there will be no istries – infrastructure and energy – use it the most, the restrictions on tender amounts, Defense Ministry has held the most expensive tenders by ProZorro is operated by Transparency International far. Its share is Hr 2.73 billion, or 74 percent, of the total Ukraine. But by the end of the year, its databases will be amount. transferred to a state enterprise managed by the Economy A similar system in Georgia spurred the development of Ministry, while bidding platforms will remain in private Natalia Abesadze, ProZorro in Ukraine. ownership. a member of In comparison to closed-door paper tenders, where ad- The team working on ProZorro consists of more than 100 ProZorro team ministrators see all bidders and can adjust terms to ma- people, including specialists in tech, support services and responsible for legal coordination, looks nipulate who wins, administrators of the tender cannot see those who attract new suppliers for participation. Some are through a report applicants in ProZorro. being paid for their work by Transparency International on the electronic In addition, the platform opens up data on the tender to and others are being paid by providers that work with public procurement system on Sept. 29 anyone, not only to potential bidders. The terms of the ten- ProZorro. The Economy Ministry’s employees are also in- in Kyiv. der and the bids are also visible to anyone, while competing volved in ProZorro, but don't get paid for the work by the (Volodymyr Petrov) bidders cannot see each other in the system. government. Andriy Kucherenko, who is in charge of IT system co- ordination at ProZorro, says state offi cials' reaction to ProZorro varies. “There are those who have a positive attitude towards the platform and become leaders in using it. For exam- ple, Defense Ministry, Infrastructure Ministry, Kyiv State City Administration, Energoatom and others,” according to Kucherenko. Other agencies are not as accepting and legis- lation will be needed to get them to use ProZorro. Oleksiy Soloviov from Gide Loyrette Nouel said ProZorro is still a work in progress. “The full integration of ProZorro into the legislation on public procurement will require assurance from its devel- opers for its reliability and, most importantly, predictabili- ty,” says Soloviov. “Who will be the system’s administrator? Who will do the technical expertise and audit?” Kyiv Post staff writer Bozhena Sheremeta can be reached at [email protected].

28 #03/2015 [KYIV POST LEGAL QUARTERLY] [KYIV POST LEGAL QUARTERLY] #03/2015 29 Time running out to sell Ukraine’s ethanol-producing monopoly

By Ilya Timtchenko estimated 600 million hryvnias ($28 million) in losses [email protected] last year and 41 rundown factories – that’s what Roman An Ivaniuk inherited at the beginning of January, when he accepted his latest job as temporary general director of Ukrspyrt. Ukrspyrt, the country's monopoly producer of potable ethanol, is one of Ukraine’s most corrupt state-owned companies within the Ministry of Agriculture. Its previous director, Mykhaylo Labutin, is wanted by Interpol for the misappropriation of at least Hr 300 million, among other charges. The

30 #03/2015 [KYIV POST LEGAL QUARTERLY] state-owned fi rm is still not on the govern- connections with local government offi cials ment’s privatization list, but Ivaniuk is run- over the years in order to create schemes to ning it as if it is. drain cash out of the business. “It’s hard to “I’m still a big believer that the most effi - just get the source of income out of their pock- cient owners of businesses are private entre- ets,” Ivaniuk says. “They use all their pow- preneurs and private businesses,” Ivaniuk says. ers, all their deputies, all these committees The 32-year-old director says it makes much to tell us that the ethanol plants have to be more sense for such a business to be privately nationally-owned.” owned, with no prosecutors and tax inspectors Meanwhile, some of Ukrspyrt’s top cus- sniffi ng around to see “if we’re doing an effi - tomers - Ukrainian vodka producers such as cient job or not.” Khortytsia, Nemiroff and Petrus - are fi ghting In private hands, Ukrspyrt would be twice for the opportunity to produce ethanol them- as effi cient as it is now, the Volyn Oblast na- selves. Ivaniuk estimates that private compa- tive says. “Big national companies have got to nies could save around Hr 80-90 per decaliter be privatized.” if they were allowed to produce ethanol Previously employed as the management independently. director of Concorde Capital, a Ukrainian in- And ahead of its possible privatization, vestment bank, Ivaniuk had also worked at Ivaniuk is looking to make savings at Ukrspyrt Ukrspyrt back in 2006, as head of its fi nancial as well. While he thinks the company would department. In 2014 he ran for parliament in sell for perhaps $300 million today, improve- the Oct. 26 elections for a party in the Bloc of ments in effi ciency could triple its value over Petro Poroshenko, but he failed to win a seat. the next two years, he says. He’s in a different race now – one of fi ve con- While Ukrspyrt is waiting for parliament to testants vying for a permanent position as approve its privatization, it is trying to rebuild Ukrspyrt’s general director. links with the European Union and Turkey. If the state alcohol monopoly is fi nally sold “We use to export more than 10 million deca- off, Ivaniuk has a clear idea how it should be liters back in 2006-2007. Right now we export done. The state business has to be split into zero,” Ivaniuk says. several groups of companies, with the stronger However, the European Union countries ones sold together with weaker ones as a pack- and the United States are mainly interested in age, he says. technical ethanol, or bio-fuel, compared to the “If there were four or fi ve companies like potable ethanol Ukrspyrt makes that is used Ukrspyrt… they couldn’t control prices - they to produce liquor. “The market of Europe is would have to fi ght for effi ciency, modernize 15 million tons of ethanol. Only 10 percent of their production systems,” Ivaniuk says. that is potable,” Ivaniuk says. Other ways eth- Selling each company separately is not an anol is used are in various cleaning fl uids such option, since buyers could be found for no as windshield wash, or in medicines. more than 20 plants, and the rest would have So Ukrspyrt’s new management now wants to be closed down completely. Ivaniuk sees to concentrate on bio-ethanol production. this as a major problem. Even though most of it would be exported, it “Can you imagine shutting down a factory would also prove to be a good substitute at in the middle of nowhere where only 600 peo- home for less effi cient forms of energy - for ex- ple live, in a village, where 150 of the residents ample, it could be a good replacement for nat- work at the Ukrspyrt factory?” Ivaniuk says. ural gas. “That would mean you’d be closing down the The state enterprise is experimenting with village too.” the fuel itself. “Two of our plants don’t use One of Ukrspyrt’s 5,000 employees oversees Corporatization is another option, but the natural gas anymore. Their effi ciency is almost ethanol production at a plant. Out of the 41 temporary director is not a big fan of that idea. 40 percent,” Ivaniuk says. The plan is to re- plants that belong to the state enterprise, Even after such an overhaul Ukrspyrt will still fi t six other similar plants to use the replace- only 17 of them are in constant operation. (Courtesy by Ukrspyrt) “be a package that belongs to the government, ment fuel. so all the problems that I face right now will Other effi ciency measures have resulted in still be there.” Ukrspyrt managing to decrease its use of raw The biggest of those problems is, of course, materials by 20 percent. That, along with sav- corruption. ings from the removal of 25 percent of the Ivaniuk says many of the middle manag- staff from the company’s head offi ce and the ers and directors of ethanol plants have made replacement of top management, should mean

[KYIV POST LEGAL QUARTERLY] #03/2015 31 capacity, while now it’s more like 90 percent. Ivaniuk says the offi cially unused capacity of some companies was in fact being used – to produce alcohol illegally. “That’s why back in 2014 they used so much gas and wheat to produce one liter of product,” he says. “When you have an effi ciently working plant, it means that you cannot simply produce illegal ethanol there.” Yet more savings come from closer cooperation with farming companies. Right now only 17 of Ukrspyrt’s etha- nol plants are fully functioning. To make use of the other three dozen plants, the monopoly is starting to strike deals with local farmers, in which the state enterprise provides storage services to agricultural companies, as a lot of its own storage capacity is empty. Some of the farmers in turn sell grain at lower than mar- ket prices to Ukrspyrt. This is for two reasons, Ivaniuk ex- plains: fi rst, grain producers often prefer to sell their grain right away, in bulk, and so save on transportation costs, and second, the quality of wheat needed to make ethanol can Ukrspyrt’s tempo- Ukrspyrt makes “approximately Hr 300 million in gross be lower, and the grain thus cheaper. rary general director profi t by the end of the year,” Ivaniuk says. This is not another corruption scheme in which the gov- Roman Ivaniuk meets with the Kyiv Just by making it more diffi cult for middle managers to ernment resells the grain at a higher price, he is quick to Post on Sept. 25. steal money during the purchase of raw materials, Ukrspyrt add, and his message to potential Western investors is: (Volodymyr Petrov) is able to save around Hr 20-25 million per month, Ivaniuk “Don’t be afraid, because this is the time to pick up great says. assets at quite a reasonable price.” One way this was done was to establish a “purchasing Ivaniuk believes Ukrspyrt can be sold off - but time is fast commission” consisting of fi ve people. “There is a collec- running out. tive decision, and all the (managers) that sign up to this “We’ve been talking about the privatization of Ukrspyrt agreement know they are responsible for these purchases,” for the last 10 years, and nothing has been done,” he says. Ivaniuk says. “If the company is not sold by the third quarter of 2016, it Increasing operating capacity is another way to improve will be a lost cause.” effi ciency and fi ght corruption at the same time. Previously, Kyiv Post staff writer Ilya Timtchenko can be reached at plants were operating only at round 50 percent of their [email protected].

VERKHOVNA RADA

NEWS ITEM: Ukrspyrt, the mo- nopoly state-owned ethynol producer, has been a cash cow for government offi cials. This is one reason why those in power don't want to privatize it. Ukrspyrt temporary director Roman Ivaniuk says that managers of ethanol plants “use all their force, all their deputies, all these committees to tell us that the ethanol plants have to be nationally- owned.”

32 #03/2015 [KYIV POST LEGAL QUARTERLY] Toms promotes legal ombudsman as a fi x to Ukraine’s justice system

By Olena Goncharova ew Ukrainians trust the police, prosecu- cases as the decisions have no conceivable ba- [email protected] tors and judges who form the nation’s sis in law,” Toms says. Fjudicial system, according to every re- While a court system should be a separate spectable poll taken. branch of government, checks and balances The solution? from other branches are essential to holding A legal ombudsman. That is the answer tout- all of them accountable. ed by Bate C. Toms, an American lawyer and Separation “doesn’t imply that each branch chairman of the British-Ukrainian Chamber can’t review each other,” Toms said. “It’s all of Commerce. The ombudsman would review about checks and balances. In America, you court decisions, write explanatory opinions and can impeach a judge and in Ukraine, you can make advisory reports to parliament. do as well. That’s what the legal ombudsman is “That’s what we want – to take (their re- based on,” Toms said. ports) to parliament and have parliamenta- Toms said the ideal ombudsman would be ry committees then consider impeachment of a jurist from outside the current legal sys- judges who render judgements that are inde- tem whose institution is funded by Western fensible,” Toms explained in an interview with sources. The legal ombudsman, as well as the the Kyiv Post. judges, should be paid well, so they can live At the moment, complaining even at the reasonably. highest level doesn’t bring results as govern- “Everybody understands the cost of un- ment claims to be unable to review and decide derpaying judges – it stimulates corruption,” because offi cials are not lawyers. Toms said. Giving such power to an eminent jurist, se- Toms is trying to build support for the idea. lected by a nongovernmental organization cre- “This country could become so rich and ated by leading business associations, would grow so quickly if we had reasonable rule of clean up the courts in a matter of months, law. In today’s situation this one should work,” Toms claimed. Toms said. “This is different from business Restoring trust to the judicial system ombudsman – it’s a lawyers’ lawyer. He’s there is key to reviving private investment in to intercept gross abuses of justice and stop Ukraine. decisions that have no genuine legal basis.” “Even more than war, we see foreign invest- Toms said he can set up the institution ment blocked abroad as there’s total under- within six months and has some candidates in confi dence in Ukrainian courts to fairly rule on mind for the post.

Bate C. Toms, an American lawyer and chairman of the British-Ukrainian Chamber of Commerce says legal ombudsman would help to clean up Ukraine's court system. (Pavlo Podufalov)

[KYIV POST LEGAL QUARTERLY] #03/2015 33 NEWS ITEM: Bate C. Toms, the head of Alina Sviderska, a lawyer and a project manager with overhaul of investigative bureaus and the General the British Ukrai- EasyBusiness organization, said the idea of creating a legal Prosecutor’s Offi ce. nian Chamber of ombudsman is a timely one. Introduced in Sweden in the early 20th century, legal Commerce, thinks an advisory legal “The legal ombudsman could be like the Venice ombudsman helped transform the country from being the ombudsman to Commission for business and the government organiza- least corrupt and the most prosperous nation, Toms said. review the work of tions to address to,” Sviderska told the Kyiv Post. “But it "It will work in today’s Ukraine,” he said. “Nothing else will the courts will go a long way towards will require political will to listen to such an ombudsman improve the court system." combating corrupt as we know certain cases have been reviewing for years in The legal ombudsman, combined with other reforms, will judges and rulings Ukraine due to political pressure.” help assure investors that court rules can be satisfactorily for hire. Others think that the courts It won’t be the cure-all, however, as the country still justifi ed under the law, according to Toms. and parliament will needs qualifi ed investigators overseeing judges and many Toms also has been pushing for wider availability of po- simply ignore the fi xes to the rest of the criminal justice system, including an litical risk insurance, through a branch of , and ombudsman. the Overseas Private Investment Corporation, a U.S. gov- Legal ernment fi nance institution. Ombudsman “Without increased investment, this country will have diffi culties surviving,” Toms said. “We’re in emergency sit- uation. We need it immediately.” Toms is also an adviser to Education Minister Serhiy Kvit and wants British and American laws schools to set up law programs with universities in Ukraine. “One of the problems in legal education in Ukraine is that the number of scholarships abroad for Ukrainian law stu- dents have been drastically cut. People can no longer afford to go abroad for education,” Toms said. Therefore, he said, it’s more economical to bring in professors from abroad. Kyiv Post staff writer Olena Goncharova can be reached at [email protected].

*The AMC Health and Wellness Plan is a licensed healthcare delivery plan, paid on an annual basis, designed to provide34 primary and urgent care health and assistance services. The above price is AMC's basic Outpatient Plan, #03/2015 [KYIV POST LEGAL QUARTERLY] covering all outpatient services with a plan utilization limit of $10,000 per person, per year. For more information about this and other health insurance products, please call us at (044) 490 7600 or visit us at www.amcenters.com [KYIV POST LEGAL QUARTERLY] #03/2015 35