This piece was originally run on Michael Tooshi’s FCPA-RUCIS blog and is republished here with permission.
The new Anti-Corruption Initiative between the European Bank for Reconstruction and Development (the EBRD), Ukraine, the OECD and other parties who signed a Memorandum of Understanding (or MOU) on May 12, 2014, confirming the initiative, is an important step forward for Ukraine’s integration into the European economic framework. The country is expected to receive a significant amount of investment and other funds in the form of aid in the upcoming months. Considering Ukraine’s history of corruption and the compliance challenges facing companies in Ukraine, it is essential that an effective framework be put into place to both monitor the use of funds flowing into Ukraine as well as to protect the business community from unfair treatment and corruption in all of its forms.
One of the most significant aspects of the new Anti-Corruption Initiative is the creation of an independent Ombudsman Institution for Business. According to Principle 7 of the MOU, the Ombudsman is an independent entity “guided by a profound understanding of commercial, community and regulatory concerns in Ukraine.” Its mission consists of receiving and processing complaints related to corruption and ascertaining the systemic causes of such unfair treatment, as well as to issue reports on such issues. Moreover, the MOU provides for an institution comprised of an Ombudsman, two deputies and a secretariat. It is also of significance that the Ombudsman Institution is appointed by the Group of Parties to the MOU, is independent from the government of Ukraine and is not a law enforcement institution with the powers to conduct criminal investigations. According to the EBRD, “It will be the first point of contact for companies seeking redress against unfair treatment.” Supporters of the Anti-Corruption Initiative anticipate the new institution to contribute to the growth of transparency in business practices and emphasize that the Ombudsman’s reports will be made public.
The original concept behind the initiative came about in 2013 and currently involves eight signatories, as this week’s MOU has been signed by Arseniy Yatseniuk, the Prime Minister of Ukraine, the EBRD, the OECD (the Organisation for Economic Co-Operation and Development), the American Chamber of Commerce in Ukraine, the European Business Association, the Federation of Ukrainian Employers, the Ukrainian Chamber of Commerce and Industry and the Ukrainian League of Industrialists and Entrepreneurs.
The Anti-Corruption Initiative comes at nearly the same time as the EBRD’s prognosis, announced in Warsaw this week, that Ukraine is likely to face economic decline in 2014. The Anti-Corruption Initiative most likely is aimed at improving the recent financial forecasts and encouraging more investment in the country through efforts designed to enhance conditions for the business community and foreign investors in particular. Significantly, the EBRD stated that “combating corruption in Ukraine has become increasingly urgent because of the impact it is having on the willingness of companies to invest in the country.” Of course, anti-corruption measures are a significant part of this effort; although it is apparent an improvement in the geopolitical situation regarding Russia as well as internal stability following the national elections on May 25 are certain to have a crucial impact on the business and investment climate in the region. A recent improvement in Ukraine’s rankings in the World Bank’s Doing Business report still ranks the economy at number 112, indicating that much more has to be done to attract capital and technology to the country.
FCPA-RUCIS strives to provide its readers the latest updates on the most relevant compliance issues facing compliance professionals and investors in the RUCIS nations and will continue to monitor the legal and policy changes in Ukraine as the situation develops.