Archive for January 16th, 2018


IMF and WB take the stage in the Anti-Corruption Court theatre

January 16, 2018

At the end of 2017 an entry appeared noting obvious Bankova legislative gymnastics relating to the text of the Venice Commission Opinion and the creation of an Ant-Corruption Court in Ukraine, required to complete the Ukrainian domestic anti-corruption architecture.

The issues noted by the blog were, to be blunt, glaring.  So clearly undermining of any potentially independent anti-corruption court was the proposed Draft text, that it was obviously going to draw both ire and irritation from external supporters of Ukraine – be they national, supranational or institutional.

Timed as the presidential submission was to fall after the last plenary session of 2017 had concluded, notwithstanding granting a hiatus from immediate international criticism due to the festive period, that respite has now passed.

The first Verkhovna Rada plenary session of 2018 began on 15th January, by which time both the IMF and World Bank had submitted terse letters to all leaders of The Bankova, Verkhovna Rada, and relevant Ukrainian ministries, outlining the clear perceived failings of the draft legislation – very much in tandem with the blog observations of late December 2017 per the first link of this entry.

Furthermore, it appears that both the IMF and WB interpret the Bankova draft legislation to fail to meet the Ukrainian obligations undertaken with both international lenders.

To be entirely clear, The Bankova will have been very aware of the shortcomings of the submitted legislation, and further it would have been expecting the prickly diplomatic and institutional response of those that have entered contractual agreements and ratified international instruments to support Ukraine during its most dire contemporary times.

Can Ukraine, or indeed President Poroshenko afford to lose the support of those backers?  No.

Does it further the Ukrainian cause to be understood by those backers to be failing in either contractual or ratified agreements?  Naturally not.

Will it in any way win votes for President Poroshenko if the perception seeps through the Ukrainian constituency that such external backing is less than robust and/or that external faith in him has rescinded by any degree?  Hardly.

So what are the options – for despite President Poroshenko stating that the Draft Bill sufficiently accommodates/is in line with the Venice Commission Opinion, it clearly is not (as he will be well aware).

Naturally, Ukraine is a sovereign nation (whatever thoughts The Kremlin may otherwise have).  There are no obligations upon any nation to undertake and implement a Venice Commission Opinion as obligatory.  Said Opinion can simply be ignored.   Ukraine can also decide to breach any clauses within contractual undertakings with the IMF or WB.  It can also renege upon its ratified obligations within any internationally ratified instrument – or indeed withdraw from them.

But there are clearly going to be repercussions in doing so.  That is the entire point of contracts and/or ratified legal instruments.

Should this Draft Bill be forced through the Verkhovna Rada as it currently stands, then both IMF and WB would be well within their rights to defer or desist in providing any further assistance – in part or in full.  Whatever loans and/or grants tied to the “rule of law” and/or “anti-corruption” initiatives via the EU-Ukraine Association Agreement may also suffer, not to mention political relations.  Both the USA and Canada will also express their “disappointment” in tangible ways too.

As such there will be a negative influence over any genuine external (not recycled Ukrainian offshore) corporate FDI into Ukraine.  Trust is a requirement, and trust will not be forthcoming when previous agreements are not honored.

The already unrealistic expectations of privatisation during 2018, (without internal attempts at sabotage of which there appears to be more and more evidence thereof),  will not be met in such an atmosphere – no differently to 2015, 2016 and 2017 privatisation failures.

The Ukrainian constituency will have no trust in an anti-corruption court that those who bailed out Ukraine during its time of absolute need also have no faith in.  Ultimately it would be a vote loser and not a vote winner for The Bankova with such a perception (despite the fact that if and when the court comes into existence it will clearly not be fully functioning until 2020, thus after the next presidential and Verkhonva Rada elections).

Perhaps simply far too politically costly home and abroad to leave the Draft Law as it currently reads?

Yet nothing can be allowed to rock the domestic boat of vested interests either – for the majority of those vested interests will have to align with the current president for him to be reelected – and there are assurances to be given (or threats to be made) for that to happen.

Time will tell just how quickly Messrs Kolomoisky, Bogolyubov and senior PrivatBank officials face criminal investigation for what the NBU has stated is a $5.5 Billion fraud and money laundering “shadow banking” operation per a Kroll report.  How much does President Poroshenko need to keep Mr Kolomoisky (or his media) on side vis a vis any timely prosecution?  What assurances could be given?

Can sufficient number of the 400 individual law suits filed by Mr Kolomoisky (and others) surrounding PrivatBank find their way to a “sympathetic judge” (or several) in order to frustrate criminal prosecution?  After all the entire point of 400 separate law suits is that some will almost assuredly find a “sympathetic judge” somewhere in the system, with the added bonus of causing a due process bottleneck.  Years of civil litigation regardless of criminal investigations.

Ergo, to insure the anti-corruption court is not functional before the 2019 elections are completed, time must be wasted while simultaneously giving the impression that something is being done.

Thus there is a reasonable chance that the Draft Law will be changed during this political theatre.

The Bankova may decide to withdraw the Draft Bill.  It will then take its time submitting another one in order to run down the clock.

A swifter approach perhaps, would be to make the necessary amendments within the Verkhovna Rada – or perhaps not.

The Bankova has sufficient influence within the relevant Verkhovna Rada committees to make that a slow process, notwithstanding delaying its subsequent submission for the parliamentary agenda and any plenary vote.

The entire legislative process within the Verkhovna Rada has to be strung out for as long as possible.

Thereafter the selection process too must also drag on.

This will be one of the most important legislative acts of the year (although perhaps the most interesting for defence and national security wonks will be the creation of the National Bureau of Financial Security – for that will probably herald the long awaited and very necessary reform of the SBU).

The question is when this year the law will finally be passed – and subsequently just how snugly it will fit with the Venice Commission Opinion as well as the expectations of, and perceived commitments to, external supporters and international institutions.

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