Exclusive Insights: Iaroslav Gregirchak – Deputy Business Ombudsman (Kyiv Post)

Bohdan Nahaylo: Hello! I’d like to welcome to the Kyiv Post a special guest today. This is Iaroslav Gregirchak, who is the Deputy Business Ombudsman. Yaroslav, please tell us a little bit about this office: what are its tasks, when was it founded?  And later I’ll ask you about its achievements and challenges it faces.
Yaroslav Gregirchak: Thank you for your invitation, Bohdan. The Business Ombudsmen Council, essentially, is a specialized alternative dispute resolution platform enabling businesses to challenge various instances of business malpractice on the part of all types of public authorities in Ukraine by lodging complaints with us, and our mandate is to help them out to resolve those instances on a pre-trial stage based on the principles of neutrality, independence, and confidentiality.
B.N: So, is it a form of arbitration?
Y.G: It’s a form of ADR because ADR comprises arbitration, mediation, and ombudsmen. What we do, is we issue recommendations, which, because of our reputational leverage stemming from who set us up and, I guess, and how professional are the people working there, were implemented by Ukrainian authorities. Imagine that, so far, we’re right now at the seventh year of our operational activity, we issued around 3,000 individual recommendations, out of which, on the aggregate, around 90% of those, as we call them, individual recommendations, has actually been implemented by public authorities.
B.N: Are you based only in Kyiv, in the capital, or do you have regional representatives?
Y.G: No, we are based only in Kyiv, but we are certainly a national institution, we’re operating on the national scale.
B.N: Can you give me an idea of the scale of the operation? How many people work there?
Y.G: [The] team comprises a Business Ombudsman, two deputies, sixteen inspectors, four junior inspectors, four assistants to junior inspectors. We’re, kind of, displaying a bit of creativity while attending to our workload with the proper approach to structuring our team.
B.N: Well, Ukraine hasn’t always had a good reputation externally, because of the issue of corruption, oligarchs, etc. What have been the main challenges that your office has faced over the last years?
Y.G: Well, if you’re asking about the taxonomy of scenarios that we observe in those complaints that are lodged with us, some 60% comprise various tax- or fiscal-related situations. Law-enforcers – it’s about 18% to 20%. Some 15% are alleged malpractices on the part of local authorities. And, since our mandate actually captures every single possible type of agency, ministry, the remaining are, pretty much, everyone else.
B.N: Now, about the legal framework in which you operate, let’s call it the enabling environment. Have things improved or remained static over the last few years? What would be an objective assessment?
Y.G: Well, the answer is, probably, twofold, because, when it comes to operational environment, the first is the framework governing our own status. Currently, we are set up as the consulting advisory body operating under the auspices of the Cabinet of Ministers resolution, where, among other things, it’s specifically referred to the fact that we have been set up jointly by not only the government, but also the European Bank for Reconstruction and Development, OECD, and five large local business associations. Here, the ultimate objective is to seek adoption of the Law of Ukraine as an act of Parliament, which would bring in a stable, perpetual, I would say, legal framework framing up the existence of this institution in Ukraine. Now, if you’re also asking about the overall legal framework, so to say, determining the quality of business environment in Ukraine – things are not static, definitely. There were various systemic wins in topics, areas that we attend to, that proved that things have become easier, it’s just that one needs to convey this positive message as well, and take care about the obligation to do so. I might mention just a few things that have changed, that have characterized certain tangible developments to the better that has occurred since we became operational. The issue of failure to refund the current Value Added Tax, something that we have observed back in 2015-16, has been largely resolved. The problem of customs authorities not refunding importers or exporters in circumstances when they went and won in the court, and the respective administrative decision has been rescinded or cancelled – these has been resolved as well. The sanctions for some even small failures to pay to your foreign counterparty or receive payment in the form of a very stringent currency control regime that we used to have – this has also been resolved. There were various abuses at the stage where law enforcers would come and conduct these searches – we have been instrumental in the past year…
B.N: So-called mask shows?
Y.G: Yes, yes. We help out to streamline the legal framework governing those circumstances that are pretty much unique, actually, in terms of negative factors that characterized Ukraine’s business environment.
B.N: Have there been tensions with some of the law-enforcement agencies, let’s say, those that are somewhat deviant in their behaviour? As we know, these practices have existed in recent years, and there have been attempts to curtail them.
Y.G: Well, in terms of our operational activity and overall, in terms of our task, it is certainly not in either aggravating or flattering law-enforcers. We are not operating as an independent agency, as the complainant’s legal team, we are not their advocates, and, similarly, we are not enemies of the state. And this reputational leverage that we have gained throughout all these years was, among other things, because we have showed, in practice, throughout all these years, that we are capable to maintain this status of the independent and equally distant body. And this is where these tangible results come. So, yes, overall, as I already mentioned, the complaints against law-enforcers is, uncharacteristically, to the extent that it comprises (they comprise) 18%-20% of our workload, is the factor that negatively, as such, characterize the quality of business environment in Ukraine. Ironically speaking, this is the factor that is absent in those international rankings that have been issued, like (the) World Bank’s Doing Business Ranking, now discontinued, or (the) World Economic Forum’s Global Competitiveness Index. Such factor as pressure or abuses on the part of law enforcers is effectively absent there as a criteria to be even taken into account. In our circumstances of post-Soviet jurisdiction, where traditionally the mentality fix was around the idea that the private is to be subordinate to the public. When this … when often not properly structured steps towards market economy has been launched after the breakup of the former Soviet Union, one of the unfortunate ramifications of that process was that the significance of the law-enforcers, the enforcement machine as such. Their authority, the interpretation of that authority has been misinterpreted and abused. And that’s why some 15%-20% is our complaints against law-enforcers. But our practice proves that, at the end of the day, a lot depends upon who are the people actually running those agencies, what’s the quality of the top political leadership. And it took us some time, but, ultimately, where we are right now, I think, we have succeeded in bringing in the [changes tack)and convincing the leadership of the General Prosecutor’s Office, Ministry of Internal Affairs, State Security Service, National Police, National Anticorruption Bureau. Now, by the way, the Bureau for Economic Security is about to be properly… they already launched, but they’re about to become operational and fully-fledged. Well, it took us some time to convince that it’s not counterproductive, it’s actually good to make sure that the level of cooperation with us is on par, because we are an independent agency, and are not being biased in any way. If there are some good things to share about the achievements that we have either on the systemic level or while resolving individual instances, this is a good message that we can send about them to the general public.
B.N: Ok, now let’s turn our attention to your latest report. Now, this is a very valuable source of information about the state of affairs in the country. Your latest annual report was issued not long ago, a few weeks ago, as I recall. That’s the beginning of this year, am I right? Take us through the main findings – what are your main concerns at this stage, as we enter 2022? Where are we headed, and how do you see things working out in the course of this year and the next year?
Y.G: Right. I will try to concentrate, indeed, on our findings in the latest systemic report, which is not the operational report, where we… on the quarterly or annual basis we release our operational statistics, but rather, I would talk about the systemic report, which is the topical product that we issue…
B.N: And the title is important – Abuses and Pressure Inflicted by Law-Enforcers on Business: Systemic Report.
Y.G: Yes. So, we are analysing the substance of certain problems that negatively characterize the quality of business environment in Ukraine in needs… and fields that need improvement. So far, by the way, me and my team, we have attended to such areas as administering taxes, customs, administrative appeal, getting hooked up to electricity, and the issue of the impact on the part of law-enforcers have been addressed already for the second time, by the way. The original report or the first time we attended to this topic was back in 2016. Five years passed by, we just felt we need to revamp and refresh our systemic recommendations. Now, the report effectively acknowledges that about 1/5 of the complaints lodged with us is against law-enforcers, and there’re various stages of this law-enforcement theatre of the criminal proceeding that needs to be streamlined and improved. I can just, for the sake of time, generally mention that we’ve attended to the first stage, when the criminal proceeding is being registered, we have called for an increased digitalization of the process, we have asked to ensure that… We have suggested several steps that are aimed at ensuring that the 24 hours term that needs to be observed after the notification about the alleged criminal offence was lodged is actually complied with in practice. We also reiterated our previous recommendation, where we said: do not open criminal proceedings based on allegations of tax evasion unless the existence of tax debt has been properly approved or reconciled. Thereafter, we have discussed the area of inefficiency of pre-trial investigation, when the course of investigation is superficially delayed. We have, in particular, suggested that the term that has been implemented, 12 or 18 months, are to be expanded to capture old criminal proceedings opened prior to this date in March 2018, because right now, for old ones, you can investigate them forever. We also suggested that in those circumstances when businesses are suffering from closure of criminal proceedings, in circumstances when business is the victim, we suggested expanding certain procedural rights, that are currently lacked by victims, by businesses that are owners or holders of seized property, to enable them to approach an investigator in charge or a prosecutor independently and seek the extension of their pre-trial investigation. By the way, it might be interesting for our listeners to know that the paradigm, as the time passes by, is gradually shifting. Anyway, if we are talking about the taxonomy of these complaints against law-enforcers, in a sense that, in the first years of our activities, many scenarios were of abuses and pressure, where, indeed, in circumstances when business was the object of certain negative impact on the part of the law-enforcement system, where business directly impliedly would fall under the category of a suspect. Now, what we observe is a gradual increase in the number of scenarios related to the law-enforcement’s inaction, inefficiency, when criminal proceedings are actually launched by businesses, and they are seeking some level of productivity on the part of investigators, and this is lacking. So, the paradigm is shifting from business being, in the past, more like a suspect, now, to scenarios where business is suffering in circumstances where they are victims. Let me just finish with a few other tweaks. We have also suggested a comprehensive set of recommendations aimed at improving the whole legal framework governing forensic examinations. Unfortunately, this is often the factor, which delays or negatively affects the quality of investigations, and we also came up with a set of good recommendations aimed at improving the existing system or mechanism of disciplinary liability that police investigators and prosecutors can be brought to. And we also, to the extent that the number of complaints challenging problematic or illicit retention of arrested property constitutes some 36% of all law-enforcement scenarios. By the way, tax scenarios constitute 26% and failure to open criminal proceedings – around 12%. So, when it comes to the problem with arrests of property, we’ve also suggested to effectively incorporate some specific, explicit timelines, deadlines for the law-enforcement system to know, that even if they have succeeded with arrests of the property based on the ruling of the investigatory judge, the arrest cannot last forever, as it is now. We imagined that a certain specific timeline has to be incorporated, and the investigator or prosecutor acting in good faith, would have, would be obliged to approach the investigatory judge seeking extension of the term, and if not granted the previously imposed arrest shall be lifted. So, this is to give you an idea of where we are.
B.N: Fascinating, you sound, you come across as, almost, I wouldn’t say heart surgeons, but you certainly have your fingers on the pulse, and you’re better aware than most how the economic and legal hearts of this country are functioning, or not functioning, its state of health. Anyway, let’s conclude by asking you about the future. You’ve got a new Ombudsman, recently appointed, the former ambassador of Canada to Ukraine, Roman Waschuk. This bodes very well for your office, I would say.
Y.G: Yes, we are very much optimistic. The name itself, Roman Waschuk is, pretty much, a door opener for various meetings and public speaking opportunities for the quality and intensity of liaisoning, that we need with the top officials of this country. What I observe, and this not even the first full month of Roman’s tenure, is that we have achieved a lot in that perspective. And I think that one should (changes tack) I would say I keep my fingers crossed, pretty much, in a sense that this strengthening of the leadership that has occurred should be beneficial for the ultimate objective of having this law about the Business Ombudsman institution being finally adopted. Or, I can say, the determination of our status on the proper legislative level, our task and as the process that needs to be properly taken care of and as a task that needs to be ultimately accomplished, the reputation that Roman’s name brings in to strengthen our leverage is, hopefully, going to be very instrumental and efficient. I very much look forward to continuing working with him on that and other matters.
B.N: Ok, Yaroslav, in a few words, any last minute thoughts, especially messages that you would like to pass on to our readers, to our audience about the work of your office? Any last minute, but important messages?
Y.G: It’s somewhat Ironic, given our status, which is to deal with negativity, to deliver some sort of a positive message, but, I guess, if you are trying. I would try to interpret the mere fact of our existence. I think it proves that the institutional landscape in Ukraine is not still, it’s dynamic. We are operational for the seventh year. Actually, at the end of May it will be the end of the seventh year. And the fact that we exist, the fact of who set us up as a joint initiative, which is, again, government, EBRD, OECD, local business associations, the quality of the team that we have, the manner how we are financed, by the way, we have the EBRD’s multi-dollar account in London, where half of our budget arrives from the European Union, and the remaining 50% – from 13 or 14 countries, proves to us that there’s an opportunity to rely on this political will. The institutional landscape is changing. The top leadership of the country and international dollars has been able to prove, throughout all these years, that they understand the needs and rules of business. Indeed, as the judicial reform is not yet completed, and there’s a certain level of expectations that are not yet met by the judiciary in terms of standards that are set by the international business community. While, indeed, there’s an instrument for the pre-trial resolution of disputes, where you can lodge a complaint with, and where you can be eligible to be considered, even in those matters, which are actually legitimate, on its face, but if it’s unfair, you can still approach us. And from that perspective, what we represent is a nice add-on to another set of bodies. We have UkrInvest, as a classical investment promotion agency, on the one side, and on the other side, you have the Business Ombudsmen Council as the specialized dispute resolution body. And we now have synergy, we cooperate, and we’re there to bring in some tangible results. And also, you know, our mandate as an institution which is equally distant from business and government, we are helpful to all business associations, not only those that are sitting in our office supervisory board but also to the government and governmental agencies themselves, who know who we are.
B.N: I thank you, Yaroslav, for this fascinating discussion. I’ve learned a lot. I’m sure our listeners will, and readers. I’ve been speaking to Yaroslav Gregirchak, the Deputy Business Ombudsman. Thank you very much for watching.
Y.G: And my pleasure!
Read the interview also here.