The Verkhovna Rada is currently considering draft law No. 7319, which proposes to change the approach to the management of state-owned enterprises in which the state is a shareholder (founder, participant) during martial law.

These include such companies as Ukrzaliznytsia, Ukrenergo, Ukrposhta, Ukrainian Sea Ports Authority, Boryspil International Airport, and Ukrhydroenergo.

The new draft law introduces a completely different approach to the election, operation and dismissal of supervisory board members.

The main difference between the new draft law and the current legislation is that the appointment of supervisory board members is done without competition.

However, we found corruption risks in the draft law. In particular, it concerns excessive powers:

• The company's management will have the right to independently determine the candidates for supervisory board members in certain cases, which means that anyone can be appointed in a non-transparent manner.
• The draft law does not define the main areas of such additional management features, which creates a risk of the CMU making decisions at its own discretion. Such decisions may be both economically and administratively unjustified, which will contribute to corruption risks.
• The head of a state-owned enterprise will be given excessive powers to procure goods, works and services to meet defence needs.
• All this will contribute to the procurement of relevant services at inflated prices and inefficient spending of budget funds; reduction of the level of economy, efficiency and proportionality of procurement of these services, effective and transparent procurement, which prevents corruption in this area; limitation of competition in such procurement.

 

The Institute of Legislative Ideas does not object to the adoption of this draft law with its further revision for the second reading and elimination of the identified risks and shortcomings.

For more details, please see our conclusion.