Law on oligarchs

23 September 2021
Law on oligarchs
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The top issue of the last parliamentary week for the Verkhovna Rada was the adoption of the draft bill on oligarchs. The bill is a good example of a pompous title covering inconsiderate decisions. In our digest, we will analyze in detail what the bill proposes and what its consequences will be.

Law on oligarchs (draft bill # 5599 of June 2, 2021)

Status: adopted in the second reading.

Who is affected: the President, political parties, politicians, media, and big business.

Summary of the bill: the bill defines three criteria to recognize a person as an oligarch:

  • participation in political life:
    • occupies a top public position/his or her relatives occupy top public positions
    • donates money to political parties, sponsors political campaigns or street actions with political agenda
  • significant influence over media
  • ownership of companies with a natural monopoly or a monopoly in at least one economic sector of the state
  • ownership of assets of more than 1 mln living salaries worth — near ₴ 2.4 bln as of 2021.

A decision to recognize a person as an oligarch is supposed to be made by the National Security and Defense Council (NSDC) upon the submission by the Cabinet, a member of the NSDC, the National Bank, the Security Service, or the Anti-Monopoly Committee. NSDC’s decisions on the matter have to be enacted by presidential decrees. Persons recognized as oligarchs by the NSDC’s decisions will be included in the register of oligarchs maintained by the Apparatus of the NSDC.

Persons recognized as oligarchs will be unable to do the following:

  • to make donations to political parties or candidates (except to their own parties or if they run for office themselves)
  • to buy large companies
  • to sponsor political campaigns or street actions with political agenda

Oligarchs will have to submit the same asset declarations as public officials. All persons fulfilling functions of the state — from the President to civil servants, generals, and heads of state-owned companies — will be obliged to report any contacts with oligarchs or persons connected to oligarchs. Failure to report such contacts will be a legitimate cause for dismissal of top officials: the Head of the Security Service, members of the Anti-Monopoly Committee, management of the National Bank, the National Anti-Corruption Bureau, or the Central Election Commission.

What is wrong:

  • to grant the President the right to recognize persons as oligarchs via NSDC’s decisions is a severe violation of the Constitution:
    • there is a conclusive list of presidential powers and the right to make such decisions is not on that list
    • restrictions that will be enforced for oligarchs are equivalent to penalties and thus cannot be introduced bypassing decision by a court
    • the deliberation procedure for NSDC’s session is similar to court proceedings. In making decisions about recognizing people as oligarchs, the NSDC becomes a special or emergency court, and the creation of such courts is strictly prohibited
    • by enacting the NSDC’s decision, the President de facto becomes a judge and thus violates the principle of separation of powers into legislative, executive, and judiciary. The head of the state will interfere with the judiciary
  • the NSDC and the President will replace the Anti-Monopoly Committee that is supposed to determine whether a particular commercial entity is a monopolist and take steps provisioned by law
  • the bill does not solve the problem of oligarchs’ influence on politics but instead will draw the President and oligarchs closer since they will become partially dependent on him
  • asset declarations are now submitted by persons fulfilling the functions of the state. To make oligarchs also submit asset declarations will turn them from a tool that ensures transparency into a form of punishment and thus will discredit the idea of civil service and demotivate potential candidates that want to work as public servants. The bill equates civil servants, judges, local councilors, and oligarchs
  • restrictions on the freedom of assembly and participation in political life violate human rights and look like an attempt to get at political rivals or monopolize the power
  • the bill will unavoidably be challenged in the Constitutional Court. The period when the Court will be considering the matter will be a period of uncertainty for the media, political parties, and those willing to buy large state companies.

Alternative solution:

  • to reform the judiciary
  • to make prosecution and law enforcement agencies independent from the politicians in power
  • to protect the Anti-Monopoly Committee and independent regulatory bodies from the influence of big business and top officials
  • to create the system of protection of the critical infrastructure (it will decrease the influence of oligarchs on the state)
  • to help the Public Broadcasting Company of Ukraine to become a high-quality media (an information source alternative to media owned by oligarchs).