ANNUAL REPORT 2015 CONTENT CONTENT Foreword ..................................................................... 4 The Year in Review..................................................... 7 The Office ....................................................................................................................................8 The Team ...................................................................................................................................12 Milestones .................................................................................................................................14 1 Key figures for 2015 ................................................................................................................16 Complaint trends ..................................................... 19 Volume of complaints received ............................................................................................20 Nature of complaints received .............................................................................................22 Timeliness of the preliminary review of complaints .......................................................25 Number of investigations conducted and reasons for declining complaints ..........26 2 Timeliness of conducting investigations ............................................................................31 Geographical distribution of complaints received ..........................................................32 Government agencies subject to the most complaints .................................................35 Summary of key matters and results of important investigations .............................43 Feedback from claimants ......................................................................................................75 Systemic issues and recommendations ................ 81 Systemic issues identified in the reporting period .........................................................82 Recommendations made to relevant authorities ............................................................84 Implementation and follow-up of systemic recommendations made 3 to authorities ...........................................................................................................................85 Cooperation with stakeholders ............................. 93 Working visits ............................................................................................................................94 Cooperation with government agencies............................................................................96 4 Public outreach and communication .................................................................................99 Advocating for business with the government 3 FOREWORD OF THE BUSINESS OMBUDSMAN Dear Friends, Colleagues, and Partners, It is my pleasure to present the 2015 annual complaints from Kharkiv, Dnipropetrovsk, report of the Business Ombudsman Council Kyiv, Odesa, and Zaporizhzhya regions. The of Ukraine. Our first year of operations was fewest complaints were lodged in Chernivtsi, truly a challenge, both in terms of encouraging Khmelnytskyi, and Rivne regions. Ukrainian businesses to lodge complaints and Of all complaints lodged in 2015, the tax issues seek our assistance, and in terms of establishing (dilatory VAT refund, inspections by state tax productive cooperation with the government authorities, problems with the electronic VAT institutions against whom the most complaints administration, customs matters) topped the list were lodged. Having said that, I am glad to of problematic areas. The relationships with the report that we began tangibly delivering on the law enforcement agencies were also acute for promise the Council made to the Ukrainian businesses in 2015. businesses at the beginning of operations: to improve the business climate by easing the In addition to specific recommendations the regulatory burden and maintaining ongoing Council issued to the government agencies, dialogue with entrepreneurs and government our team prepared several systemic reports institutions. providing practical recommendations and legislation amendment advice on Ukraine’s In the reporting year, the Council received 585 most pressing problems related to business complaints from businesses all over Ukraine, climate. The reports covered the following almost 60% of which were eligible for our topics: “Getting Access to Electricity”; “Selected investigation. We successfully closed 151 cases – Problems with Business Activity due to the out of the 342 investigations initiated. Following Anti-Terrorist Operation and the Annexation of these investigations, the Council provided 123 Crimea”; “Problems with Administering Business recommendations to the respective government Taxes in Ukraine”; and “Problems with Cross- agencies, over a half of which was implemented Border Trading in Ukraine”. The work on two as of December 31, 2015. The cumulative direct more reports prepared by us in 2015 – on the financial impact of our investigations in the activities of natural monopolies and abuse of reporting year was UAH 2.7 billion. powers by law enforcement agencies – started In 2015, we received complaints from all in early 2016. I am happy to inform you about Ukrainian regions. City of Kyiv remained the substantial progress in all the areas targeted by most active in terms of submitting complaints. our systemic reports. We received a considerable number of 4 www.boi.org.ua To ensure transparency and reciprocity of my visits, several state administration leaders cooperation from the government authorities publicly declared their commitment to fight most frequently involved in our investigations, corruption and to participate in the the Council signed the Memoranda of Council’s work. Partnership and Cooperation with them. The I remember how tremendous the task before Memoranda we signed with the State Regulatory us seemed when the Council opened its Service of Ukraine, the Ministry of Justice of doors last year. I also remember the cautious Ukraine, and the State Fiscal Service of Ukraine optimism I felt and the skepticism the local are aimed at addressing specific complaints businesses shared when we were starting our from businesses, improving the business first investigations. I am looking back twelve climate, preventing corruption, and eliminating months later at how our team has grown, provisions in legislation that restrict business at the businesses we helped protect their activity. lawful interests, at the state authorities who In order to maintain transparency of evaluating became our allies on the journey to improving the Council’s work, we sent feedback Ukraine’s business climate – and I know we questionnaires to Complainants after closing are on the right track. We still have a long road each case. At the end of the reporting period, ahead of us: cases to solve, investigations to 77% of сomplainants were very satisfied, and conduct, legislation to discuss and draft, more 23% said they were satisfied with our work. No government institutions to partner with, more negative feedback has been received so far. businesses to protect. And standing where I am now, I am confident that we, together, can make We have also encouraged mass media to find the big change happen – one small step after out more and spread the word about the another. Council’s operations. Our efforts resulted in more than 3000 media citations, 99% of which were positive and constructive. During 2015, I paid nine working visits: to Chernigiv, Kharkiv, Lviv, Krasnoarmiisk, Dnipropetrovsk, Odesa, Rivne, Lutsk, and Sincerely, Cherkasy to meet with the local entrepreneurs Algirdas Šemeta and state administrations leaders. Following Business Ombudsman Advocating for business with the government 5 THE YEAR IN REVIEW 1.1. THE OFFICE THE BUSINESS OMBUDSMAN COUNCIL IS an independent permanent advisory body of the Cabinet of Ministers of Ukraine, with a mandate to help establish a transparent business environment and prevent corruption at the central and local government levels, and in state-owned and state- controlled companies within the scope of their administration. The Council is meant to be the initial point of contact for companies seeking redress against unjust treatment. IN ITS ACTIVITY, THE BOC ABIDES BY Constitution Decrees of the Legislative acts of the Verkhovna Resolutions and the laws of President Rada, in line with the Constitution of the Cabinet Ukraine and the laws of Ukraine of Ministers BOC OPERATES IN ACCORDANCE with Cabinet Resolution #691, dated November 26, 2014, and the Memorandum of Understanding with the Ukrainian Anticorruption Initiative, dated May 12, 2014. The BOC and the Council are used interchangeably throughout the text to refer to the Business Ombudsman Council 8 www.boi.org.ua ОГЛЯД РОКУ THE COUNCIL: reviews complaints by businesses conducts investigations; regarding maladministration by liaises with the public state authorities and civil servants and the relevant authorities to as well as state-owned or state- share its findings. controlled companies; THE COUNCIL HAS THREE MAIN OBJECTIVES: facilitate the battle against corruption $ and other business abuse; contribute to greater investment attractiveness in Ukraine; promote a public service culture of fairness, openness and accountability. Advocating for business with the government 9 BOARD THE SUPERVISORY BOARD, INDEPENDENT the Council’s governing body, BUSINESS ASSOCIATIONS: includes authorized