Ukraine Takes a Baby Step Toward Curbing Corruption

(Bloomberg Opinion) -- Ukraine on Thursday took a key step toward establishing an anti-corruption justice system that would operate separately from its notoriously venal regular one. The parliament’s vote  to set up the court likely paved the way for the release of further International Monetary Fund loans. Whether the new system will work is an open question.

Corruption may present a bigger obstacle on Ukraine’s path to Europe than even Russia’s depredations. The former Soviet republic shares the 130th place of 180 with Sierra  Leone, Iran, Myanmar and the Gambia in Transparency International’s corruption perception ranking. Graft is the biggest concern for international donors and creditors who have backed the country since the 2014 Revolution of Dignity. 

In 2015, Ukraine created the National Anti-Corruption Bureau, or NABU, an investigative agency to specifically target graft cases, along with an anti-corruption prosecutor’s office to handle the prosecution of those cases. The new bodies ran into problems with the largely unreformed, and probably unreformable, Ukrainian courts. So far, the old courts have ruled in only a quarter of the more than 100 cases the NABU has brought for prosecution. By the end of 2017, only one person -- an intermediary in the bribing of a judge – had been sent to prison. There were 18 more convictions, but all were the result of plea-bargain deals by minor accessories to corruption schemes, according to NABU’s public report. The agency hasn’t obtained a single high-profile conviction, and it openly blames the court system’s deliberate foot-dragging. 

The report says:

The absence of court rulings allows corrupt top officials, whose just punishment is justifiably awaited by society, to avoid criminal responsibility. It also makes it impossible to return to the government budget funds frozen during investigations.

One way to remove the bottleneck in the old courts was to create a special court where NABU could channel its cases. Ukraine’s Western partners, including the IMF and the U.S., seized on this as a key reform. The IMF, which approved a $17.5 billion loan program for Ukraine soon after the 2014 revolution, had disbursed $9 billion by April 2017, and Ukraine hasn’t received another tranche since, in large part because it has moved too slowly on the anti-corruption court. 

Ukraine’s president, Petro Poroshenko, has never been a fan of a parallel court, ostensibly because it could be seen as a humiliation for his country. No European nation has a similar system, and Ukraine’s foreign partners have demanded veto power over appointments to the court. This represented a loss of sovereignty Poroshenko was unwilling to accept. Yet, under U.S. and European pressure, he finally submitted a bill on the court to parliament in December. Western Ukraine-watchers denounced it as a sham, and the IMF promptly announced it would need to be amended to satisfy its demands.

The bill passed on Thursday is the result of months of negotiations with the IMF and among Ukrainian politicians, not all of whom want the court to be effective. It contains a complex procedure for nominating judges and vetoing appointments. The  process involves Ukraine’s Higher Judicial Qualification Commission, which currently handles judicial appointments, and a special council of six foreign experts to be nominated by international organizations. To veto an appointment, a majority of the Qualification Commission’s 16 members and three of the foreign experts must object to it.

Some of the Ukrainian legislators and activists who have fought for the court for years, including the member of parliament Mustafa Nayyem and the anti-corruption activist Vitaliy Shabunin welcomed the decision, despite obvious drawbacks, such as the diluted influence of international experts who don’t get the final say on the choice of judges. In their view, it’s a major step forward after years of stalemate; Shabunin in particular, who was behind the NABU statute, was getting frustrated with the agency’s failure to get convictions in the existing court system.

The IMF said Thursday that it still needed to review the final version of the bill. And, in any case, a separate law is necessary to actually establish the court. It’s likely, however, that Ukraine’s partners will eventually accept the compromise, if only because the long freeze on the IMF program is beginning to create the appearance of a serious rift between Ukraine and its Western backers. Those are not the optics the U.S. and the European Union want, despite their concerns about Ukrainian corruption. A nod in Poroshenko’s direction is overdue.

Whether the parallel justice system will actually do much to eradicate graft is a tough question. In Ukraine, even the most perfect institutional design is far less important than the personalities entrusted with implementing it. NABU is well liked in Ukraine thanks to the single-mindedness of its head, Artem Sytnyk. The anti-corruption court will need similarly enthusiastic and pressure-resistant judges. Given the breadth of corruption, powerful forces will seek to politicize the court’s work.

The Poroshenko administration has been uncomfortable with Sytnyk’s activity and has put pressure on him. On Thursday, the parliament voted to appoint an 81-year-old diplomat as one NABU’s three auditors, passing over a former U.S. prosecutor. The diplomat, Volodymir Vasilenko, is said to be friendly to Poroshenko and the other two auditors are directly appointed by the president and the government. It’s clear Poroshenko wants to establish political control over the anti-corruption system as he heads into the 2019 election without much popular support (recent polls put him behind the populist ex-prime minister Yulia Tymoshenko).

It’s difficult for Ukraine’s Western partners to apply the right amount of pressure on Poroshenko to keep Ukraine from backsliding into its usual post-Soviet quagmire of corruption. In the case of the anti-corruption court, Westerners will be tempted again to avoid squeezing too hard. As a result, another potentially useful institution will have built-in backdoors that allow leaders like Poroshenko to bend it to their  purposes. That’s still better than nothing, though: If Ukraine ever gets a less self-serving government, the backdoors will fall into disuse and the system will work as intended.

©2018 Bloomberg L.P.