Defending businesses and entrepreneurs in Eastern Europe and Central Asia

By Tatiana Korotka, Deputy Business Ombudsman of Ukraine and Olga Savran, Manager of the OECD Anti-Corruption Network for Eastern Europe and Central Asia

The active development of institutions that protect the rights of entrepreneurs began in the 90s in the European Union, United States and Australia. Only recently have similar institutions been established in the post-socialist regions of Eastern Europe and Central Asia. This trend responds to strong demand from the private sector for the protection of their rights and legitimate interests from various abuses by public administrations in countries where the justice system is not able to provide such protection.

The recently-created Business Ombudsman institutions in Eastern Europe and Central Asia are all very different. Some are part of the government, such as the Business Ombudsman of Georgia, Minister for the Protection of Business in Albania and SME Ombudsman of Poland. In countries with presidential systems, the business ombudsman is based in business chambers but appointed by the president, like the Commissioner for Protection of Rights and Legitimate Interests of Entrepreneurs under the President of Uzbekistan and the Ombudsman for the Protection of the Rights of Entrepreneurs of Kazakhstan. Two countries follow a different model – Business Ombudsman Council of Ukraine and the Commissioner for the Entrepreneur’s Rights Protection of Kyrgyzstan – where they are intendent bodies established by governments and business associations with the assistance of international partners.

Business ombudsman institutions in Eastern Europe and Central Asia are somewhat similar to the High Level Reporting Mechanism (HLRM) some Latin American countries have put in place. However, they do not seek protection of high-level authorities, as there is no trust in them in this region. Instead, Eastern European and Central Asian business ombudsman institutions rely on their independence and professionalism and their power to influence governments.

Georgia hosted the first ever meeting of business ombudsman institutions from Eastern Europe and Central Asia in 2019. Albania, Georgia, Kazakhstan, Kyrgyzstan, Poland, Ukraine and Uzbekistan participated in this meeting. All participants, whatever model they represented, were eager to find out how to become more independent and more influential. The trend of establishing a business ombudsman is set to grow and now is a timely moment to discuss good practices for these institutions.

The Ukraine Business Ombudsman Council (Ukraine BOC) provides an interesting model.

The Ukraine BOC is an independent institution established in 2014 by a Memorandum of Understanding between the Cabinet of Ministers, the EBRD, the OECD and five business associations, including the Chamber of Trade and Commerce, the Union of Industrialists and Entrepreneurs, the American Chamber and European Business Association. An important feature of the Ukraine BOC is that the Business Ombudsman is selected by a supervisory board established by the founding organisations composed of expats.

The Ukraine BOC receives alerts from companies, assesses them to establish if there are good grounds for taking the case for protection, and brings them to the attention of the relevant authorities. The Ukraine BOC follows up on cases until they care completed. The average time it takes to process a complaint is about three months. To date, the Ukraine BOC has received over 6000 complaints from businesses alleging malpractice by state bodies and closed over 4000 cases. The Ukraine BOC has helped companies to recover over 700million euros in damages, put an end to hundreds of episodes of state bodies’ malpractice, closed dozens of ungrounded criminal cases, and helped businesses to obtain licenses and permits. The services of the Ukraine BOC are free for companies.

In addition to helping companies in specific cases, the Ukraine BOC analyses the most common problems and prepares systemic reports about why these problems occur and proposes solutions. Reports prepared to date cover issues such as tax, customs, illegal use of law-enforcement against companies, access to electricity, land use, conducting business in occupied territories, and more. The Ukraine BOC presents these reports to the relevant state bodies for follow up. The Business Ombudsman also brings them up in meetings with the Prime Minister who helps to implement the recommendations. Selected key achievements include:

• The National Commission responsible for state regulation in the fields of energy and utilities has approved fixed tariffs for connecting companies to electricity, with the calculation of prices based on the declared electric capacity.

• The State Architectural and Construction Inspectorate has launched online register that contains all the documentation information on construction, thereby eliminating the risks of abuse by government agencies responsible for construction supervision.

• The cancellation of a previously-obligatory fee that construction companies building residential housing had to pay to local communities for the development of their infrastructure.

• The threshold amount of unpaid taxes, levies and unified social tax that could trigger a criminal investigation has been increased.

• In 2018, the Verkhovna Rada adopted a law on “currency and currency transactions”. One of the most important measures introduced was the cancellation of sanctions related to foreign economic activity. Previously, tenterprises engaging in foreign economic activity were liable to sanctions such as, the application of an individual license regime and the temporary suspension of foreign economic activity. These sanctions often resulted in the actual cessation of activities by Ukrainian enterprises.

• In 2017, a law providing new rules for conducting searches was applied, f.i. mandatory video recording of searches by law enforcers (also well known as #MaskShowStop), has come into force. On November 4, 2018, the law known as “MaskShowStop-2, entered into force, expanding mechanisms for challenging malpractices of law enforcers and bringing them to personal liability. In particular, this law simplifies bringing to account the investigator, the prosecutor, the law enforcement officer who made illegal decisions to open criminal proceedings and which were later canceled by the court.

The activities of the Ukraine BOC since 2016 are showing companies that it is possible to do business in Ukraine without corruption. While much still has to be done to fight the pervasive corruption in Ukraine, the Ukraine BOC has contributed significantly to the change in the overall business environment, where clean companies can prosper and invest into their long term operations both in the Ukrainian and international markets. Many of the Ukraine BOC’s clients and other companies that have chosen integrity as their development business model have recently created a new collective action – Ukrainian Network for Compliance and Integrity (UNIC) that will further promote business integrity in the country.

For more information on the OECD Anti-Corruption Network for Eastern Europe and Central Asia, please visit http://www.oecd.org/corruption/acn/

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