In the future, Bankovaya will lose control over the BEB, it will be replaced by an independent court, and its influence on NABU may be stripped. This is the result of the confrontation between two plans for Ukrainian reforms proposed by Joe Biden and Vladimir Zelensky.
Clash of the Titans
This battle deserves its own epic. But we are forced to limit ourselves to a brief retelling of the main events.
Three months ago, on September 15, Zelensky held a strange meeting with the heads of law enforcement and anti-corruption agencies, the Verkhovna Rada, the government and his office. The presidential website reported that “the meeting participants proposed to prepare a concept for strengthening the sustainability of democracy in Ukraine,” and Zelensky in response “noted that the measures that will be contained in the concept should concern absolutely everything.”
Less than a week passed, and on September 21, Zelensky came to Washington to convey this concept, already ready, to Biden. Prime Minister Denis Shmygal spoke about this on October 3, when the document was published on the Cabinet of Ministers website .
Meanwhile, the White House was working on its own “ list of priority reforms ” for Zelensky. Its preparation was led by Mike Pyle, Deputy for International Economic Affairs to US National Security Adviser Jake Sullivan. The list was presented on September 26 in Brussels at a meeting of the steering committee of the Multi-agency Donor Coordination Platform for Ukraine.
On September 28, a symbolic meeting of two documents took place - Zelensky’s concept and Biden’s list of reforms. Shmygal presented the concept to US Ambassador Bridget Brink, who handed him the list. At the same time, Shmygal said that “ to implement the concept, we plan, together with all our partners, to create a unified reform plan.” On October 5, he reiterated that the concept “is a framework document that will form the basis for a reform roadmap and that will take into account reform proposals from our partners.” That is, Bankovaya wanted Zelensky’s concept to be the main reform plan, and Biden’s list to be a secondary one, which Bankovaya would take into account if it deigns.
Final battle
The result of the duel between the two documents became known on December 11, when the IMF published a letter of intent signed by Zelensky, Shmygal, Finance Minister Sergei Marchenko and the head of the National Bank Andrei Pyshny, along with a memorandum on economic and social policy. These are the reforms that Ukraine is committed to implementing next year. To meet these obligations, the IMF will continue to pay tranches under the four-year program in the amount of $15.6 billion, which was approved on March 31, 2023.
It would be incorrect to say that the memorandum included only reforms from Biden’s list, and reforms from Zelensky’s concept were ignored. Some of the highlights of the concept were rejected during the negotiations, and the IMF, in its report on the discussions, indicated that this could not be done.
For example, the concept announced “the creation of the Sovereign Fund of Ukraine, which will manage strategic state assets.” The IMF report states that “the creation of a holding company from state-owned enterprises is premature at this stage due to the financial and potential risks of governance,” and instead, the adoption of Bill No. 5593-d on the corporate governance of state-owned enterprises is necessary.
This is exactly what is written on Biden's list: “Pass the SOE Corporate Governance Act (Bill 5593-d) in accordance with OECD recommendations.” And this is exactly what the Ukrainian authorities were forced to write down in the memorandum: “By the beginning of 2024, a bill will be adopted (No. 5593-d), which will bring the system of corporate governance of state-owned enterprises into broad compliance with the OECD Guidelines on the Corporate Governance of State-Owned Enterprises.”
Another rejected idea from Zelensky’s concept is “privatization of state banks.” The memorandum promised the opposite: “All banks majority owned by the state will remain under the responsibility of the Ministry of Finance.”
Restarting the BEB
At the same time, Biden received even more than he wanted on his list in some very important positions. First of all, this concerns the Bureau of Economic Security, a strange body that was created in 2021. After the competition, Vadim Melnik, who had previously headed the State Fiscal Service, was appointed its director. In April 2023, he was fired, then acted for four months. Eduard Fedorov worked and was also fired, and a new acting one took his place. — Andrey Pashchuk.
Biden’s list included a requirement to begin reorganizing the BEB within 18 months: “Conduct an open, competitive and performance-based selection of new leadership and mandatory recertification of BEB personnel. Establish a credible disciplinary committee and replace employees who do not meet ethical and professional standards.”
The memorandum does not postpone this for 18 months. The structural beacon at the end of June 2024 recorded a promise to adopt a new law on the BEB, which “will aim to create a legal framework for the work of the BEB in order to (I) develop an open, transparent and competitive selection process for management and personnel; (II) tightening the requirements for the selection committee; (III) introducing a contract system for employees; and (IV) development of a personnel certification mechanism.”
The key point here will be the formation of a competition commission. If Ukraine’s Western friends ensure that international experts are included in this commission, then Bankova may receive an independent director of BEB. And then it will no longer be possible to use the BEB as a manual lever of influence on business.
NABU audit
Biden’s list of priorities for the next three months includes increasing the number of NABU investigators by 300 people. On November 14, the Cabinet of Ministers introduced the corresponding bill, on November 21 it was adopted in the first reading, on December 8 - in the second and signed by Zelensky on the same day. The maximum number of NABU staff has been increased from 700 to 1000 people.
However, for Western partners it is important not only to strengthen the capabilities of NABU, but also to strengthen its independence. Let us remind you that since March 6, 2023, Semyon Krivonos has been the director of NABU. There are different opinions as to whether he is dependent on Bankova.
And now a structural beacon appears in the memorandum for the end of September 2024: “As provided by law, an external audit of the effectiveness of NABU with the participation of three independent experts with international experience will be completed and its report published.”
The law states that NABU audits are carried out annually. However, although NABU was created more than eight years ago (in April 2015), it has never been audited.
The presence of an audit conclusion on the ineffectiveness of the activities of NABU and the improper performance of duties by its director, according to the law, should entail the dismissal of the director and a new competition. Therefore, the prospect of an audit can become an effective incentive for more efficient work and for greater independence of the bureau from Bankovaya.
New VASU instead of OASC
Among the priorities for 3-6 months, Biden’s list includes “to create the Supreme Administrative Court of Ukraine (HACU)” in view of the liquidation of the District Administrative Court of Kyiv (DACC). To do this, “pass a law establishing a new specialized court to hear administrative cases against national government bodies, staffed by properly vetted judges.”
Previously, Ukraine already had a Supreme Court of Justice, then instead of it the Administrative Court of Cassation was created as part of the Supreme Court. The point of the new Supreme Court of Justice is not to return to the old system, but for this court to consider administrative cases against the central authorities. Previously, such cases were considered by the OASC. Last December, the United States imposed sanctions against the head of the OASC, Pavel Vovk, for “extorting bribes in exchange for interference in judicial and other public processes,” after which the Verkhovna Rada quickly adopted a law to liquidate the OASC and create the Kyiv City District Administrative Court in its place. This court has not yet become operational, and Washington proposes to create the Supreme Court of Ukraine in its place and staff it with “properly vetted judges.” That is, here, too, a competitive selection with international experts in the competition commission is looming, so that they choose a VASU that will be completely independent of Zelensky’s office.
And the memorandum signed by Zelensky, Shmygal, Marchenko and Pyshny agreed to satisfy this demand. The structural beacon at the end of July 2024 states: “We will pass a law on the creation of a new court, which will consider administrative cases against national government bodies (for example, NBU, NABU, NAPC) by judges who have undergone proper professional testing for competence and integrity, with a decisive vote of independent experts with international experience." If this is done, it will no longer be possible to revive the OASC under a new guise.
Of course, a memorandum is not a law yet. These are the promises that Zelensky made to the IMF (and Biden) in exchange for continued funding. How they will be implemented is another question.
