Ukraine

According to the information on the Defence Ministry website, the last auction was announced more than a year ago and none appear to have taken place since. There is no data available publicly on customers and final prices for the Army assets sold. However, it is possible to find out the register of assets through the MOD balance sheets. There are a few media reports available that state military weapons have been sold in open auctions. In the majority of cases the asset sales consisted of demilitarized vehicles.

There is a degree of parliamentary control over the process. For example, when Anatoliy Grytsenko was the head of the parliamentary committee on national security and defence he blocked the draft law on MOD lands sale (No. 6644) highly promoted by the MOD Department of Assets disposal.

The government reviewer reports that the defence sector does not carry out its own sales of military property. Instead, implementation is carried out according to the procedure of alienation and sales of military equipment of the Armed Forces, approved by the Cabinet of Ministers of Ukraine number 28.123.2000 1919, through authorised government state enterprises. There is some evidence however, that when the issue of asset disposal is transferred to the MOD state enterprises, the relatively weaker system of checks and balances can raise the corruption risk in this process.

For example, as peer reviewer 2 notes, Tymoshenko recently declared that she passed to the Security Service of Ukraine evidence of corruption in the Ministry of Defence and &quoute;Ukroboronprom&quoute; - the state-owned defence company conglomerate (5). Also AC reportedly was informed about corruption in the Ministry of Defence and &quoute;Ukroboronprom&quoute; in 2012-2013 (6).

There is evidence of internal and external scrutiny of assets disposal. Internal scrutiny is conducted by the Control-Revision Department of the MOD, and external scrutiny is performed by the Accounting Chamber and State Financial Inspection. However, the results of their inspections are not always made public. For instance, the results of the assets disposal by the MOD on the AC website are available only for the period of 2001-2004, alongside a summary for 2011.

As the government reviewer also notes, the audits of defence activities are undertaken with relative frequency. However, I could find no public evidence to suggest that results of these assessments are released.

The defence budget is not made available on government websites, although general information on the budget can be requested according to the Law on Access to Information. Nevertheless, the percentage of Ukrainian defence spending that goes on secret items and programmes in unknown.

Article 7 of the Law on State Secrets (2) stipulates that &quoute;secret spending&quoute; is done out of the general budget of the state or state institutions, and such spending must be mentioned as a &quoute;separate line&quoute; in a budget -- but not disclosed to unauthorised people. Article 31 of the the Budget Code of Ukraine further stipulates that &quoute;secret spending&quoute; is included in the state budget without disaggregation or explanation (5). This suggests that secret spending can occur, although the government reviewer for this assessment states that it does not.

The government reviewer reports that the National Security and Defence Committee, in accordance with Article 14 of the law on &quoute;Committees of the Supreme Council of Ukraine&quoute;, monitors actual budgetary allocations to relevant programs of SSU, ministries and departments from general and special funds.

However, the quality of the scrutiny is questionable. While all agencies/services and ministerial bodies are under scrutiny of the Parliament, the National Security Council (NSC) of Ukraine, directly formed by and accountable to the President, is not.

In accordance with recent legislative amendments, NSC enjoys wide executive powers in matters of defence policy, coordination of and influence over the work of defence and security-related Ministries and agencies. Yet, it is not accountable to the parliament and its powers are defined by law and Councils' own acts. Decisions of the council appear to be able to override decisions of the bodies it coordinates (which are accountable to the Parliament) (4).

Article 31 of the the Budget Code of Ukraine stipulates that &quoute;secret spending&quoute; must be included in the state budget, albeit without disaggregation or explanation. The law does not mention whether the Parliament or relevant committees are allowed to scrutinise or debate the planned secret budget prior to its allocation.

It does stipulate, however, that secret spending is controlled/scrutinised by the Ministry of Finance and Parliament's Accounts Chamber (the latter can amount to a form of independent control). Reports on secret spending from relevant bodies (presumably including the Accounts Chamber) are presented after the fact of spending to the Parliament, its Budget, Anti-corruption, Law enforcement and Security and Defence committees. Such reports are reviewed in &quoute;closed sessions&quoute;, meaning no public information is released as a result. As peer reviewer 2 notes, in accordance with article 27 of the Law on State Secrets, members of parliament can have access to all levels of state secrets only upon signing a written commitment to preserve those state secrets.

There are no media reports, nor any further parliamentary or government information about practices of secret spending planning or scrutiny. The law, as demonstrated above, does create a framework for some post-facto scrutiny, but there is no evidence to evaluate how effective or independent that is.

The government reviewer reports that the National Security and Defence Committee, in accordance with Article 14 of the law on &quoute;Committees of the Supreme Council of Ukraine&quoute;, monitors actual budgetary allocations to relevant programs of SSU, ministries and departments from general and special funds.

However, the quality of the scrutiny is questionable. While all agencies/services and ministerial bodies are under scrutiny of the Parliament, the National Security Council (NSC) of Ukraine, directly formed by and accountable to the President, is not.

In accordance with recent legislative amendments, NSC enjoys wide executive powers in matters of defence policy, coordination of and influence over the work of defence and security-related Ministries and agencies. Yet, it is not accountable to the parliament and its powers are defined by law and Councils' own acts. Decisions of the council appear to be able to override decisions of the bodies it coordinates (which are accountable to the Parliament) (6).

Article 31 of the Budget Code of Ukraine stipulates that reports on secret spending from relevant bodies (presumably including the Accounts Chamber) are presented after the fact of spending to the Parliament, its Budget, Anti-corruption, Law enforcement and Security and Defence committees. Such reports are reviewed in &quoute;closed sessions&quoute;, meaning no public information is released as a result.

There is no public evidence either of the content of these reports -- e.g. whether they are narrative, or in form of accounts, what is the level of detail etc. -- or of the quality of scrutiny and debate resulting from the reports. The reports themselves being subject to state secrecy regulations, there is no evidence as to whether they are presented to the legislature or its committees at all. In accordance with article 27 of the Law on State Secrets, members of parliament can have access to all levels of state secrets only upon signing a written commitment to preserve those state secrets.

The government reviewer reports that the National Security and Defence Committee, in accordance with Article 14 of the law on &quoute;Committees of the Supreme Council of Ukraine&quoute;, monitors actual budgetary allocations to relevant programs of SSU, ministries and departments from general and special funds.

However, the quality of the scrutiny is questionable. While all agencies/services and ministerial bodies are under scrutiny of the Parliament, the National Security Council (NSC) of Ukraine, directly formed by and accountable to the President, is not.

In accordance with recent legislative amendments, NSC enjoys wide executive powers in matters of defence policy, coordination of and influence over the work of defence and security-related Ministries and agencies. Yet, it is not accountable to the parliament and its powers are defined by law and Councils' own acts. Decisions of the council appear to be able to override decisions of the bodies it coordinates (which are accountable to the Parliament) (4). There is therefore no strong evidence that audit reports containing secret expenditure are presented to the legislature.

As mentioned by the government reviewer in question 28, off-budgets expenditures are authorised by the CoM decrees in case of emergency issues. When the MOD needs additional money for some standard articles, it redirects money from other budget articles after the consultations with the Ministry of Finance and Budget Committee of the VRU. According to the government reviewer, the process of raising funds for extraordinary expenditures is as stated in Article 13 of the Budget Code of Ukraine: &quoute;The first group - revenues from payment for services provided under the legislation (payment for services provided by budgetary institutions according to their main business, revenue from additional (economic) activity, rent for property and proceeds from the sale of of budgetary institutions in the prescribed manner. The second group - other sources of own revenue budget institutions (donations, grants and gifts, funds are budgetary institutions from businesses, organizations, individuals and other budget entities to perform targeted measures, including costs (cost of inputs ) receiving budgetary institutions within the framework of international technical assistance programs. The funds for the second group of own revenues are usually not planned. Estimates for the use of these funds to the law approved by the fact of their receipt.&quoute;

According to recently amended laws “On the Armed Forces”, the armed forces are allowed “to receive the donations from individuals and entities for promoting of fighting, mobilization readiness, fighting capacity and operating of the Armed Forces of Ukraine.&quoute; The amount of money received by the MOD in this regard is tracked and the information about it is regularly updated on the MOD website. The intended destination for this money is also listed. However, there is no evidence provided to show that the money is flowing in the same direction as is listed online.

Nevertheless, the government reviewer states that, in accordance with paragraph 9 of Article 13 of the Budget Code of Ukraine, extra-budgetary funds are not allowed. This provision notwithstanding, it appears that there are some exceptions to be made in time of crisis and conflict and donations in this respect would appear to be off-budget than extra-budgetary. In these cases, the government reviewer suggests that relevant reports must be drawn up, and these are approved and implemented in the same way as the original estimates and allocation plans (the form of the report is approved by the Ministry of Finance).

Response to government reviewer:
I have raised the score from 1 to 2 to take into account the controls on off-budget expenditure in times of crisis that you cite.

Off-budgets expenditures are authorised by the CoM decrees in case of emergency issues. When the MOD needs additional money for some standard articles, it redirects money from other budget articles after the consultations with the Ministry of Finance and Budget Committee of the VRU.

According to the government reviewer, the process of raising funds for extraordinary expenditures is as stated in Article 13 of the Budget Code of Ukraine:

&quoute;The first group - revenues from payment for services provided under the legislation (payment for services provided by budgetary institutions according to their main business, revenue from additional (economic) activity, rent for property and proceeds from the sale of of budgetary institutions in the prescribed manner.

The second group - other sources of own revenue budget institutions (donations, grants and gifts, funds are budgetary institutions from businesses, organizations, individuals and other budget entities to perform targeted measures, including costs (cost of inputs ) receiving budgetary institutions within the framework of international technical assistance programs. The funds for the second group of own revenues are usually not planned. Estimates for the use of these funds to the law approved by the fact of their receipt.&quoute;

There is no evidence that off-budget expenditures involve illicit economic activity. According to recently amended laws “On the Armed Forces”, the armed forces are allowed “to receive the donations from individuals and entities for promoting of fighting, mobilization readiness, fighting capacity and operating of the Armed Forces of Ukraine.&quoute; The amount of money received by the MOD in this regard is tracked and the information about it is regularly updated on the MOD website. The intended destination for this money is also listed. However, there is no evidence provided to show that the money is flowing in the same direction as is listed online. The money received from the charity aid and their expenditures are scrutinized and to some extent transparent. The score has been selected on the basis that the extent of such expenditure is not occasional and there are risks given the lack of evidence that money is allocated to intended destinations.

According to Art. 4 of the the Law on State Secret (2), the Ukrainian Parliament determines the policy on the management of state secrets. This happens through the passage of legislation.

Art 5 of the same law determines that the State Security Service has the competence to manage state secrecy (i.e. requests for information to be classified for the protection of state security), which happens through creating a list of classified types of information. The list is further interpreted, in coordination with the SSU, by relevant ministries and agencies (4). State security and reasons of defence are the primary reasons for information to be classified.

Secret information is excluded from the remit of the FOI law for the duration of classification, which for different classes of secret info ranges between 5 and 30 years.

According to Art 31 of the Law on SSU, Parliament constantly monitors the activity of SSU, whose head is supposed to report yearly to the legislature. Art 32 stipulates -- in more detail -- that the President of Ukraine carries out constant control over the operations of SSU and SSU's state secrecy protection with regards to how SSU's activities honour the constitutional rights of citizens. This effectively means that the control function over the final assessment of the lawfulness of classification of information is vested in the President.

Ministerial and other bodies -- and hence MOD, MOI etc. -- coordinate their information classification with the SSU, who has the law enforcement function with regards to state secrecy.

As the government reviewer suggested, “In accordance with Law no. 2939-VI on &quoute;Access to public information&quoute;, the MoD deals with requests for information from physical persons, legal entities and public organizations. The Ministrer of Defence issued order &quoute;The provision of access to public information in the Ukrainian Ministry of Defence and the UAF&quoute; (№ 455of 27.07.2011) and approved the &quoute;Instructions on the implementation of the law on 'Access to public information' in the Ukrainian Ministry of Defence and the UAF&quoute;.

&quoute;According to the Law, the MoD responds to all public requests of access to information. It is forbidden to set limits on the information on general budget of the MoD, its scope and main activities, as well as cases of illegal actions of MoD representatives. However, there is a limit on disclosure of classified information.
According to the Law classified information is confidential information, secret information and service information. The Minister of Defence by order № 48 of 26.06.2012 approved the list of service information in the MoD.&quoute;

The list of types of information is publicly accessible on the Internet (4), yet there is no evidence -- by the very nature of how state secrecy functions -- of how it is applied, and whether it is applied lawfully. There appear to be no provisions for oversight that would allow for prevention and control of abuse of state secrecy law (other than the President's function). There is no public evidence (media or otherwise) that evidence of classification rules are abused or bypassed, but equally there is no evidence to the contrary. There are certainly not subject to effective and independent scrutiny.

There is no institute of Information Commissioner in Ukraine, but disputes over the right to access public information can be taken to the Human Rights Ombudsman in the Parliament. There is no public evidence that the Ombudsman (or the President) has handled disputes over access to secret information.

Response to government reviewer:
Agreed - score raised from 2 to 3 although given the lack of an effective mechanism for scrutiny, the score should lie between 2 and 3. However, it is recognised that there have been recent improvements in the access to information framework which include the passage of the Open Data Bill to encourage the publication of government data and release of information from the archives of Soviet-era files. Freedom House 2015 also reported an improvement in freedom of information for the press.

According to the Unified Register of state property, the Ministry of defence of Ukraine owns 126 state-owned enterprises, economic entities and self-financing institutions. The information on its operations and finances are occasionally available in the media and through analytical reports. Lately some detailed reports on prosecutions and court decisions on the MOD state enterprises have been published (8).

Ukroboronprom is the largest state-owned conglomerate of defence and engineering organisations, comprising companies in the following industries: Armored Vehicles, Artillery Armament, Automotive Vehicles, Engineering and Special Equipment, Shipbuilding and Marine Equipment, Aircraft Engineering and Repair, Radar, Radio Communication and Air defence Systems, High Precision Armament and Ammunitions, and Special exporters (10).

It is possible to establish some of the controls over state-owned enterprises from public sources; for example, Ukraine reported to the OECD Competition Committee in 2015 on the principles of competitive neutrality that are meant to ensure that state-owned enterprises are not given beneficial treatment. In the evidence submitted, it is stated that &quoute;state ownership is not an obstacle in the application of penalties to economic entity and not a reason to give certain preferences, privileges etc.&quoute; (9).

According to the government reviewer for this assessment, the government is currently implementing measures to improve the current system of administrating of the enterprises.

Military-owned enterprises are subject to scrutiny (auditing divisions, military prosecutors, SSU counter-intelligence units). However, the capacity of internal auditing divisions has been shown as rather limited, given several scandals surrounding the assignment of military equipment and weapons by the MOD enterprises.

The transparency surrounding the operation of these state enterprises differs depending on the industry that they work in. For example, the work of the repair industry is more transparent whereas the activity of production enterprises and MOD enterprises managing forestry and lands are less transparent and more subject to alleged violations. Most notably, the MOD owns 2% of forests in Ukraine. Illegal amber mining is destroying many of Ukraine's forests (10), and there have been reports that the SSU and MOI are involved in the protection of illegal amber mines in the Zhytomyr region (9). Nevertheless, it is uncertain whether the defence institution as a whole is complicit, or whether individual personnel are engaging in illegal enterprise.

It is possible to establish some of the controls over state-owned enterprises from public sources; for example, Ukraine reported to the OECD Competition Committee in 2015 on the principles of competitive neutrality that are meant to ensure that state-owned enterprises are not given beneficial treatment. In the evidence submitted, it is stated that &quoute;state ownership is not an obstacle in the application of penalties to economic entity and not a reason to give certain preferences, privileges etc.&quoute; (8).

It should also be noted that lately there has been an increasing trend of media reports on prosecutions and court decisions on the MOD state-owned enterprises. As peer reviewer 2 also notes, there have been visible corruption scandals surrounding state enterprises that are controlled by the MOD. In 2014, the Prosecutor General`s Office of Ukraine released information on the violations of law at 17 enterprises subordinated to state-owned &quoute;Ukroboronprom&quoute; (11).

The government reviewer reports that, in 2014, the Audit Service conducted 417 investigations, which covered 349 controlled entities, 250 of them a violation of fiscal discipline (72% tested). These details are not available in the public domain.

According to Art 3 of the Law of Ukraine on Preventing Corruption, military officials of the Armed Forces of Ukraine and other established military units, SSU, MIA, are liable for administrative and criminal corruption offences. Conscripts are excluded from such liability, and treated as private citizens for the purpose of the law. Officials are forbidden to be engaged in any business activities or to be a member of the Board, other executive or supervisory bodies or supervisory board of a company or organization that seeks profit.

Failure to comply constitutes an administrative corruption offence. According to Art. 172-4 of the Administrative Offence Code of Ukraine, the penalty for engaging in any profitable activity (except for the permitted one -- normally university teaching) while holding a public / military office, is a fine and confiscation of all profits from the activity. The fine ranges between UAH 5100 and 8500 (ca. 150 and 260 GBP). The penalty -- which is between about 1.5 and 2.5 times the average monthly salaries in Ukraine -- is not very strong, in particular in the face of participation in large profitable businesses.

The referenced media articles allege a number of cases when unauthorised private enterprise is owned or related to military, security or defence ministry employees. For example, the MOD owns 2% of forests in Ukraine, while Illegal amber mining is destroying many of Ukraine's forests (8), and there have been reports that the SSU and MOI are involved in the protection of illegal amber mines in the Zhytomyr region (7). Nevertheless, it is uncertain whether the defence institution as a whole is complicit, or whether individual personnel are engaging in illegal enterprise.

Similarly, recent cases of smuggling in and out of the &quoute;Anti-Terrorist Operation&quoute; (ATO, the official name for war in the East) areas, gave rise to accusations of SSU officers creating protection for smugglers. The ex-governor of the Donetsk region claimed that the coordinating centre of ATO is in fact implicated in the &quoute;protection&quoute; of smuggling. The head of the Civillian-Military Administration of the Luhans'k region, made very similar allegations of smuggling against high-rank military officials. Likewise, MPs have accused some regional branches of SSU in being implicated in a &quoute;smuggling mafia&quoute;. In the Zakarpattya region, SSU members were allegedly involved in a large-scale smuggling operations between Ukraine and the Slovak Republic.

Participation of military officials in &quoute;smuggling&quoute; through the &quoute;ATO zone&quoute; border has been officially confirmed, but there's been no evidence of large-scale criminal organisation. There is evidence of some action being taken against collusion with smugglers.

Outside of the main structure of the MOD and army, there have been a number of allegations about the infiltration of people involved in organised crime into the &quoute;volunteer battalions&quoute; that have been formalised as parts of MOI in one form or another. As Mark Galeotti writes, &quoute;Nationalist Right Sector leader, Oleksandr Muzychko, killed in a gun battle with security forces in March, for example, was actually wanted for membership of an organized crime gang.&quoute; Recently, members of the Right Sector - which is both a political organisation and a battalion fighting in the East of Ukraine - participated in a shoot-out with private security guards, and then with the police. There were allegations that these Right Sector fighters, who were also said to have taken part in the ATO, started the shoot-out with the private security as a turf war over proceeds from smuggling from/to Hungary. The Right Sector had allegedly been hired by another MP interested in controlling smuggling operations. There's an investigation in place.

Response to government reviewer:
While 4 military officials were found guilty of engaging in unauthorised private enterprise in 2014 and court decisions are made public by the MoJ, this does not stand as evidence that sanctions are usually applied. For example, those four officials would appear to be but a fraction of the number of military officials who might reasonably be expected to be engaged in illicit enterprise according to the reports above. This precludes a higher score.

After the new Minister of Defence was appointed, the MOD evidently became more active in expressing positions on different issues and announcing new initiatives, including corruption, building national integrity and optimization of the MOD structure. In the recent interview to the newspaper “Narodna Armia” newly appointed Minister of Defence Mykhaylo Koval mentioned that there are many problems with the Army maintenance accumulated over the years and connected to corruption. His special concern was towards the leadership of some military state enterprises. Some time ago the MOD also announced that it would like to eliminate duplicate functions of the defence Ministry and General Staff.

As peer reviewer 2 notes, “Non-transparency of the MOD alongside with the well established tradition of applying shadow schemes makes the ministry quite vulnerable from the perspective of the corruption risks. However increasingly high public demand for transparency and fighting corruption force the leaders of the ministry to apply &quoute;new rules of the game&quoute; including visible anti-corruption measures.&quoute;

The former Minister of Defence Valeriy Geletey also points out that corruption is among the key problems to be solved in the Ukrainian army (4). However, he himself is often blamed in being involved in the corruption schemes (5).

Nevertheless, as the government reviewer notes, the leaders of the Ministry of defence of Ukraine and the General Staff of the Armed Forces of Ukraine conducted 10 briefings and television conferences with representatives of the military media, and 4 - with civilians, which, in particular, highlighted the issue of combating corruption. The newspapers &quoute;People's Army&quoute;, &quoute;Wings of Ukraine&quoute; and &quoute;Fleet Ukraine&quoute; magazine &quoute;Army of Ukraine&quoute; regularly publishes materials on anti-corruption issues. In addition, the Central Television and Radio Studio of the Ministry of defence of Ukraine produced more than 30 television spots and programs on anti-corruption issues.

Overall, some members of the MOD leadership like Igor Kabanenko have been commenting on the current crisis in Ukraine and the necessary reforms to the AF. However, while the crisis in the East may have sparked debate on anti-corruption in the military, it remains to be seen how much the turbulence will have a detrimental impact on reform efforts.

In the section “Countering corruption” on the website of the MOD, there is information that in 2013 the MOD submitted to the prosecutor’s office 167 scrutiny materials, consequently, the prosecutor initiated 44 criminal investigations against military officials. In the same manner 85 protocols on commitment of administrative corruption offenses were filed against the MOD and Armed Forces officials. As a result 44 officials were imposed to administrative penalty in the form of fines. 43 officials were fired from the defence sector.

However, there is no public evidence of how effective these measures are and how the small corruption instances and statistics available reflects the overall corruption level within the armed forces personnel . Despite a big number of high-level corruption-related offences reported in the mass media recently, there is a little evidence that such cases were followed through all the way to prosecution, conviction and sentencing.

According to the government reviewer, the Law on &quoute;Amendments to certain legal enactments of Ukraine in connection with the adoption of the Law on 'The principles of preventing and countering corruption'&quoute; came into force on 13 June 2012. It introduced amendments to a series of laws, in particular the Laws on &quoute;Military duty and military service&quoute; and &quoute;Social and legal protection for military personnel and their dependants&quoute; and the UAF Statute on Internal Service. Inter alia, the amendments enshrine the regulation on the compulsory discharge of military personnel (excluding military conscripts) not only for committing a criminal offence but also in connection with the entry into legal force of a court decision on prosecution for administrative corruption violations.

Individuals who have committed a corruption offence will have criminal, administrative, civil law or disciplinary proceedings brought against them in accordance with the law on &quoute;The principles of preventing and countering corruption&quoute;. For example, in the event of a court decision which has taken effect in respect of criminal or administrative proceedings against a civil servant for corruption offences, he is suspended from service for three days from the date when the agency for which he works receives a copy of the relevant court decision.

Response to government reviewer:
Agreed. Score raised from 2 to 3.

As the government reviewer points out, Article 53 of the Law on the Prevention of Corruption sets out the framework for state protection of whistleblowers as &quoute;people who assist in preventing and combatting corruption&quoute;. Persons reporting acts of corruption to the relevant law enforcement agencies are under state protection, and if needed, can be taken under specific protection measures stipulated in the Law On the Safety of Persons Involved in Criminal Proceedings. Para 3 of Art 53 stipulates that whistleblowers or members of their family cannot be fired or forced to resign or &quoute;be subject to any other negative method of influence&quoute; in relation to the act of blowing the whistle.

Paragraphs 4 and 5 further stipulate that state authorities -- including the MOD and AFU bodies -- must provide infrastructure for reporting (telephone helplines etc.). Reports can be anonymous, and the National Anti-Corruption Bureau that will begin operating on Oct 1, 2015, will provide facilities for anonymous reporting.

All this can be seen as evidence of the government making an effort to protect whistleblowers.

In practice, however, the system is yet to prove itself. Buromenskyy and Serdiuk argue that Ukrainians, and especially those working in law enforcement and the military, have negative moral evaluation of whistleblowing. This may relate, they imply, to the corporatist work cultures. The authors cite results of a representative poll (conducted in 2010-2012), which put mistrust of law enforcement and fears about the preservation of anonymity as the primary reasons for not blowing the whistle among civil servants. 25% of those polled opined that blowing the whistle on one's colleagues is immoral -- a tendency that Buromensky and Serdiuk claim is even stronger among officials of law enforcement agencies.

Buromensky and Serdiuk's arguments allow to speculate about whistleblowing in the MOD and other defence and security agencies only tangentially. They do argue that in the society as a whole, between 2010 and 2012, there has been a swing towards a more positive acceptance of whistleblowing (more than 60% of those polled view it positively). But, importantly, the authors point to the fact that whistleblowing is often stopped by the reliance of officials on informal, interpersonal relations in their workplace -- a situation that will only lead to blowing the whistle in cases of severe conflict.

There is no recent publicly available evidence of 'internal' whistleblowing in the military. As such, this evidence would exist in court case materials, which aren't accessible to the public. There have been no big cases of whistleblowing in the MOD and other institutions recently, or, to the best of the assessor's knowledge, at all.

Response to government reviewer:
Agreed. Score raised from 0 to 2.

There are specific qualification criteria for selection or appointment in sensitive positions. For instance, members of the tendering committee cannot be officials and representatives of the participants, their families and the deputies of the Verkhovna Rada of Ukraine, the Autonomous Republic of Crimea and members of local or oblast councils. Membership in the tender committee should not create a conflict of interests between the customer and participants in the procurement procedure, the presence of which could affect the objectivity and impartiality of the decision on selecting the winner of the procurement process.

There are no limitations on rotation or time in position. However, Article 10 of the basic anti-corruption law can be interpreted as a post-retirement restriction in sensitive positions. According to which, persons authorized to perform the functions of the state or local government, who resigned from work (services) or otherwise ceased activities associated with the functions of the state or local government, within one year from the date of termination are prohibited (a) to sign employment agreement with the enterprises associated with his/her previous activity (b) to disclose information from the previous place of work, and (c) represent the interests of any person in the case (including those discussed in the courts), in which the other party is a body(ies) in which he/she was previously employed.

According to the government reviewer, the Order of the Ministry of Defence of Ukraine of 26.06.2012 № 417 established that the appointment of heads of entities in the public sector are held solely on the results of the contest that prevents stakeholders on the results of selection. In addition, the government reviewer notes that The Ministry of Defence of Ukraine has begun to compile annually updated lists of positions of civil servants and military officials of the Ministry of defence of Ukraine who work (military service) in areas where there is a high risk of corrupt practices (Deputy MoD order from 06.06.2013 № 54).

Response to government reviewer:
Agree with a score of 3.

Having searched numerous official publications and the MOD website (1, 2, 6), it has been concluded that numbers of military and civilian personnel are not published by the establishment. Nevertheless, the government reviewer has confirmed that, currently, the number of the Ministry of Defence of Ukraine is 770 positions, of which 170 are soldiers. They did not provide troop numbers, which are likely to be in flux, particularly since the army has reportedly increased from 6,000 to 200,000 men since the start of the conflict in the East of the country (7).

Some salary information is openly published on the MOD website. For example, the average salary for air force personnel is stated as around 2650 UAH (4), while privates and sergeants get a reported 2400-3200 per month, and officers from around 4000 to 5700 UAH (5). However, these numbers are pieced together from a number of official bulletins rather than from one official source of this information. The figures are highly aggregated and there is no information on bonuses, allowances, or wages for other ranks.

While the government reviewer suggests that “official salaries for servicemen of the Armed Forces of Ukraine are set out in Annexes 1, 6 and 7 of the Cabinet of Ministers of Ukraine on November 7, 2007. Number 1294 &quoute;On the organization of the structure and terms of financial support military servicemen and officers of and some others.&quoute;&quoute;, the law itself does not give a detailed breakdown of figures for salaries (rather the percentage increase between grades, bonuses for length of service, etc.)

Outside of official sources, it is reported that the government is paying soldiers bonuses based on their performance in the conflict in the East:

&quoute;Ukrainian authorities have introduced a programme of bonus payments for the nation's soldiers... Under the new plan, soldiers will receive extra payments for their achievements on the battlefield. Prime Minister Arseniy Yatsenyuk explained the details in a February 1st post on his Facebook page. According to Yatsenyuk, soldiers will receive an additional 1,000 hryvnia for each day in battle. Fighting units will receive bonuses for successfully completing combat operations: brigades will receive 365,000 hryvnia; regiments will receive 243,000 hryvnia; battalions will receive 121,000 hryvnia; and companies will receive 60,000 hryvnia. Yatsenyuk added that soldiers will also receive additional payments for destroying enemy equipment. &quoute; (7)

The issue of payment is regulated by government decrees and is transparent and comprehensive (see government reviewer's comments for more detail).

Nevertheless, despite the fact that payment has been paid on time in previous years, this April (partly due to the mobilization of the Armed Forces, the creation of the National Guard and also funding constraints) pay was slightly restrained.

Additionally, there are some recent media reports that mobilized personnel have received payment that amounts to 1000-2000 UAH less than they expected. According to the Cabinet Minister of Ukraine's document &quoute;Questions of Pay for Soldiers Performing Military Service Mobilization in a Special Period&quoute;, mobilized personnel shall be paid in the manner and amount as contract individual officers or ordinary sergeants.

Response to government reviewer:
Given the current problems in distributing pay on time and of the correct amount, a higher score cannot be awarded.

There are some regulations, HR policy and a programme of implementation for 2008-2011 that indicates the presence of objective and meritocratic criteria of appointment in defence sector.

According to the HR policy (1), transparency and competitive appointments are at the heart of the appointments system of military personnel of the MOD and AF. Mid- and top-level military vacancies are indeed published on the MOD website (but there is no way to assess whether all the vacancies are public), with (very brief) job descriptions that list requirements from the candidates, but do not in fact describe responsibilities of the job (6, 7). There is no evidence how competitive appointments practice is, for there is little transparency around appointments.

There is some evidence, and various allegations, pointing towards instances of bribery, nepotism or favoritism in the appointment system. The areas most vulnerable to corruption in the appointments system are the initial assignment after graduation on pre-selected positions, business or political promotions on the MOD senior positions and discretionary power of a superior (commander) in the appointment process. There is some indication of such practices in direct military appointments but most of this is not reported in the mass media.

The interviewee mentioned an example of the appointment of a senior official where outside influence allegedly played a role. This was also covered by the media (4).

The government reviewer suggests that there are annual assessments of military personnel performance, and annual appraisals of civil service staff from the MOD too. However, this appears to apply to promotions rather than appointments, which are covered by the following indicator.

The formal regulations on HR procedures / promotion are public -- see the Instructions, implemented by the Ministerial Decree N. 170 of 10.04.2009. There seem to be no other publicly verifiable (or more detailed) regulations.

The Instruction stipulates that an annual performance appraisal and regular examination must be carried out, whereby the performance and promotion potential of individual members of staff is assessed by their immediate managers. There is a mechanism for the independent review of appraisals within the institution, and a mechanism for appeal, but they are all enshrined within the management structure of the military unit and there does not appear to be a system of democratic control or oversight.

On the basis of annual appraisals, servicemen can be included into the Promotion reserve that is maintained by the HR department of the military unit and signed off by the unit's commander (Art 4.3 of the Instruction). There are also Attestation Commissions at all levels of military organisation of AFU (Art. 4.1). ACs review promotion reserves of the unit and can make recommendations for appointments. The ACs function as promotion boards; there is no evidence their activity, decisions or membership are made public.

The promotion process, therefore, is deeply enshrined in the existing chain of command and its formal structure is likely to favour people who nurture good relations with those higher up in the chain of command.

There is no evidence of independent oversight over promotions of any sort. However, there is no systematic public evidence to the contrary, namely that promotion mechanisms are abused or undermined by corruption, nepotism etc. The latter would be not inconceivable, however, given the relatively weak regulation of promotions which does not seem to try to undermine subordination within the chain of command in favour of meritocracy, objectivity and transparency.

A citizen report on the website of the Helsinki Group (a large human rights support NGO in Ukraine) claims that attestation boards have been abused in one recent case in the Border Guards Service. The latter is not part of the MOD or AF or MOI, yet the case can be read as a a paradigmatic example of misuse of attestation (promotion) boards. There are also unproven allegations of bribery against high-ranking military officials responsible for appointing the Ukrainian PK contingent in Liberia. A media report alleges that officials took bribes for appointing PKs to the contingent.

Response to government reviewer:
Agree with a score of 2.

On May 1, 2014 Ukraine renewed compulsory conscription for military service in Ukraine because of the intensification of conflict in the East of the country. There are some rules against corruption for avoiding compulsory conscription.

Despite the fact that people are being conscripted out of a national emergency, conscription remains unpopular among some segments of the population and many are keen to avoid service. This heightens the risk of corruption in the recruitment process. There have been allegations of bribery in voyenkomats (military recruiting commissions) and medical commissions, with bribes reportedly paid for exemptions based on medical conditions (the so-called “white ticket”). In October 2014, a Ukrainian man called up to the army relayed his dilemma in whether to spend $2,000 on the military equipment needed to protect himself during war, or $2,000 on a bribe to obtain papers falsely testifying he was medically unfit (5).

It is not obvious how many conscription-related corruption cases were launched in recent years and how many people have been prosecuted, despite one high-profile case reported in the media (3). No evidence of specific policy or guidance on corruption in the conscription process could be found, although the country does have anti-corruption legislation in place more generally (6-8).

Response to government reviewer:
Given the evidence that bribery is taking place, a higher score cannot be awarded.

Military prosecutors and the counter-intelligence branch of the SSU are in charge of investigating corruption cases in conscriptions. Citizens can report on corruption in the recruiting process, but as, in this case, the majority of cases of this type of corruption are initiated by citizens the number of reports or complaints on corruption have remained rather low.

There have been allegations of bribery in voyenkomats (military recruiting commissions) and medical commissions, with bribes reportedly paid for exemptions based on medical conditions (the so-called “white ticket”). In October 2014, a Ukrainian man called up to the army relayed his dilemma in whether to spend $2,000 on the military equipment needed to protect himself during war, or $2,000 on a bribe to obtain papers falsely testifying he was medically unfit (5).

It is not obvious how many conscription-related corruption cases were launched in recent years and how many people have been prosecuted, despite one high-profile case reported in the media (3). No evidence of specific policy or guidance on corruption in the conscription process could be found, although the country does have anti-corruption legislation in place more generally (6-8), which would apply.

This is a difficult question to answer, as there is little public evidence about the system of payment of personnel. The government reviewer suggests that &quoute;the salaries of military personnel and other staff are paid on the basis of distribution lists or by means of card accounts established in accordance with legislation&quoute;, but this could not be verified by public sources. Indeed, as the government reviewer notes, while the Ministry of Defence &quoute;provides the State Statistics Service with reports on numbers of military personnel, level of salary and the payment situation... [it] does not report or publish these state statistics.&quoute;

Reports of ghost soldiers appear to be more a result of occasional lapses in payment systems rather than a widespread issue. For example, as the government reviewer states, &quoute;cases of “ghost soldiers” on the payroll are random in the UAF (in 2013 – 3 cases). If a case is found, it becomes the subject of investigation for the military prosecutors.&quoute;

Nevertheless, the lack of clarity surrounding the number of serving personnel, particularly since the army has reportedly increased from 6,000 to 200,000 men since the start of the conflict in the East of the country (2), means that it is possible that the phenomenon occurs.

This is a difficult question to answer, as there is little public evidence about the system of payment of personnel. The government reviewer suggests that &quoute;the salaries of military personnel and other staff are paid on the basis of distribution lists or by means of card accounts established in accordance with legislation&quoute;, but this could not be verified by public sources. The government reviewer states that &quoute;financial agencies are subordinate to managers/commanders of military units, institutions and organizations of the UAF,&quoute; but there does not appear to be any information in the public domain to verify this against.

The Law of Ukraine &quoute;On approval of Instruction on payment of salaries to servicemen of the Armed Forces of Ukraine&quoute; does not detail the mechanism for payment.

There is a Code of Honour for the military. However, this is a set of moral and ethical standards, which are based on values, and ideals, outlook of officers and regulates officer’s relations with society, often referred to as the “esprit de corps”. It does not cover issues of bribery, gifts and hospitality, conflicts of interests, and post-separation activities etc., which are instead enshrined in Ukraine's anti-corruption laws.

As suggested by the government reviewer, Chapter VI &quoute;Ethical Rules of behavior&quoute; of the Law of Ukraine &quoute;On Prevention of Corruption 'is required for compliance with requirements of persons authorized to perform state functions. In addition, the Law of Ukraine &quoute;On principles of anti-corruption policy in Ukraine (Anti-corruption Strategy) for 2014 - 2017&quoute; provides for the implementation of specific measures to create a virtuous public service, particularly at the National Agency for Prevention of Corruption will be charged with monitoring the practice of ethical standards and providing guidance to correct deficiencies in the practice of their implementation.

These do not, however, constitute an official code of conduct precluding a higher score. As mentioned by the government reviewer in Question 35, the Law on &quoute;Amendments to certain legal enactments of Ukraine in connection with the adoption of the Law on 'The principles of preventing and countering corruption'&quoute; came into force on 13 June 2012. It introduced amendments to a series of laws, in particular the Laws on &quoute;Military duty and military service&quoute; and &quoute;Social and legal protection for military personnel and their dependants&quoute; and the UAF Statute on Internal Service. Inter alia, the amendments enshrine the regulation on the compulsory discharge of military personnel (excluding military conscripts) not only for committing a criminal offence but also in connection with the entry into legal force of a court decision on prosecution for administrative corruption violations. This has been considered here as conduct standards (within legislation) with respect to bribery and corruption and the score has been selected accordingly.

There is no Code of Conduct for the defence sector in Ukraine. Instead, there is a Code of Honour, but this does not cover corruption.

Chapter VI &quoute;Ethical Rules of behavior&quoute; of the Law of Ukraine &quoute;On Prevention of Corruption 'is required for compliance with requirements of persons authorized to perform state functions. In addition, the Law of Ukraine &quoute;On principles of anti-corruption policy in Ukraine (Anti-corruption Strategy) for 2014 - 2017&quoute; provides for the implementation of specific measures to create a virtuous public service, particularly at the National Agency for Prevention of Corruption will be charged with monitoring the practice of ethical standards and providing guidance to correct deficiencies in the practice of their implementation.

These do not, however, constitute an official code of conduct. There is evidence, however, that bribery and corruption are addressed by the establishment, as mentioned in Question 35. The score has been selected on the basis that there are no other conduct standards specified in legislation aside from bribery and corruption more widely, as mentioned in Question 47.

Response to government reviewer:
Without a specific code of conduct in place (not just anti-corruption legislation) a higher score cannot be awarded.

The new Anti-Corruption Programme for the MOD for 2015-2017 prescribes at least 5 different anti-corruption training items -- from training of teachers and trainers, to anti-corruption training of senior MOD and AFU personnel. From the Programme it appears that the training planned will not be very expansive and will only target those in high civilian and military positions. Training will be administered on the basis of the National Defence University (part of the MOD), using TI-DSP's materials. The programme stipulates that the training will be repeated annually, its scope expanding each year.

According to the Security Sector Reform Resource Centre, the National Defence University's Building Integrity Training and Education courses include a five day basic residential course, a pre-deployment course for Ukrainian personnel deploying to missions outside Ukraine and also for personnel deploying on Anti-Terrorist Operations (ATO) within Ukraine. Furthermore, a mobile three-day course is taught at military training establishments across the country. The BITEC is reportedly also implementing building integrity training into the university curriculum and plans to deliver courses to officers in the military General Staff and in the Ministry of Defence beginning in 2016. The centre will also be developing a business integrity handbook for reference and use throughout the defence sector as well as courses that focus on addressing risks inherent to the defence procurement process.

The Government reported on BI workshops, e.g. the first one in 2014 focused on training internal auditors, which is evidence some training does happen.

Note from Transparency International:
We can confirm that the Ukrainian National Defence University seconded a team to Transparency International in 2012 to produce a Colonel-level training course on building integrity, which led to the NDU delivering its own building integrity courses in 2013/4. There is now a specialist building integrity delivery unit at the NDU that consists of around 15 permanent personnel. In January 2015, Transparency International ran a Senior Leaders Day with the Ukrainian MOD which was attended by the Deputy Defence Minister and almost all Heads of Department.

There is a policy on making public information about the results of anti-corruption prosecutions. In accordance with Article 19, competent anti-corruption bodies (at the moment this is the Attorney General's office, but with time, this will be also the National Anti-Corruption Bureau) are required to publish, not later than by 10 February of each year, annual statistics about the results of their anti-corruption activities, including the number of people charged and the number of people who were successfully prosecuted.

The Attorney General's office does indeed publish such annual information, although they don't contain the details of individual cases except fro the most high-profile ones. The latest report - for 2014 - states that criminal charges were brought to court against 262 state officials, of them 39 from AFU. 17 administrative corruption charges were brought to court against AFU officials. Reports do not contain information on court verdicts in these cases.

There is also a practice, which may be informal but must be sanctioned from somewhere, of publishing current reports on successful prosecutions in anti-corruption and other cases in the &quoute;News&quoute; section of the Attorney General's Office's web-site.

The Military Prosecutor's office follows a similar practice of publishing information about charges brought against military and civilian personnel in the area of Prosecutor's jurisdiction. Information published regularly includes reports about successful prosecutions (i.e. indicting verdicts). Such publications provide some contextual information as well as statistics.

There are therefore examples of some effective prosecutions in the recent years, but the statistics suggests that in general anti-corruption law enforcement and prosecutions in general and in the defence and security sector in Ukraine are not very common.

Response to government reviewer:
Agreed and information incorporated into the response above.

According to the basic laws on anti-corruption (1), bribes -- if we are to interpret facilitation payments as bribes -- are strictly illegal in Ukraine, including in the defence and security sector. Sanctions for bribery are mostly regulated by art.s 368-370 of the Penal Code that mandate several years of imprisonment depending on circumstances. There is no specific mention of the circumstances surrounding bribes (for example, to speed up the fulfillment of an official function). There is also evidence of cases of law enforcement (4, 5).

However, if we look at the official anti-corruption statistics of the Attorney General's office for 2014 (the latest available), we will see that only 49 criminal law cases of bribery were brought to courts (some more might have been brought to court as administrative law cases -- but there are no statistics for this). This basically means that prosecutors uncovered 49 cases of bribery in all state/public institutions in Ukraine during the entire year, which appears to point to inactivity of anti-corruption law enforcement in Ukraine.

According to recent official statistics, in the first 6 months of 2015, the Military Prosecutor's office has brought 16 cases with charges of bribery to court. Since the authority's jurisdiction is mainly over the MOD, AFU, MOI and SSU, it is safe to assume that there have been only 16 bribery prosecutions in the defence and security sector as a while in Ukraine. On the basis of this, I would suggest that law enforcement in the area of facilitation payments in Ukraine does take place, but appears to be of little effect, which in its turn is a weak deterrent to those willing to take bribes.

On the 25th of August 2015, following a period of research and a public consultation that included members of civil society, the MOD presented its new military doctrine and an optimisation and reform programme for the AFU. There is government and media evidence that a consultative round-table discussion, and an independent civil society discussion focusing on the development/critique of the Doctrine, took place. Both produced recommendations to the MOD.

Nevertheless, the Doctrine has to yet be officially enshrined, and parliamentary debates are yet to take place. There is extensive media scrutiny of military operations and activity of the MOD, although, curiously, the Doctrine and the Security Strategy haven't received much attention.

There is, however, evidence that corruption is recognised as a strategic issue for operations in previous iterations of military doctrine (which will be replaced soon). For example, in the 2004 doctrinal decree (which was amended in 2012), corruption is mentioned as a risk: &quoute;The internal conditions that significantly limit the ability of Ukraine to address the issues, respond to the negative effects and can provoke hostile actions of other states are:

-unbalanced and incomplete system reforms, including in the security and defence;
-difficult economic situation, high levels of poverty and unemployment;
- corruption, high crime, including organized;

[these factors reduce the] defence capability, combat readiness of the Armed Forces of Ukraine and other military formations.&quoute; (4)

As confirmed by the government reviewer, at present the MoD has no military doctrine concerning combating corruption in peacetime and during a conflict. At the same time corruption is recognized as one of the strategic issue on operations.

The new Anti-Corruption Programme for the MOD for 2015-2017 prescribes at least 5 different anti-corruption training items -- from training of teachers and trainers, to anti-corruption training of senior MOD and AFU personnel. From the Programme it appears that the training planned will not be very expansive and will only target those in high civilian and military positions. Training will be administered on the basis of the National Defence University (part of the MOD), using material developed jointly by NDU and TI-DSP experts. The programme stipulates that the training will be repeated annually, its scope expanding each year.

The scale of training plans for 2015-17 suggest that training workshops will physically not be able to accommodate all officers in commanding positions. There is no public evidence of any kind that would speak about the regularity of training, their content, or how long they have been running etc. According to the Security Sector Reform Resource Centre, the National Defence University's Building Integrity Training and Education centre courses include a pre-deployment course for Ukrainian personnel deploying to missions outside Ukraine and also for personnel deploying on Anti-Terrorist Operations (ATO) within Ukraine. Furthermore, a mobile three-day course is taught at military training establishments across the country has also been held.

The Government reported on BI workshops, e.g. the first one in 2014 focused on training internal auditors, which is evidence some training does happen. In May 2015, a two day seminar with the Lviv Military Academy was conducted with trainers from the Peace Support Operations Training Centre (Bosnia and Herzegovina), the University of Science of Sofia (Bulgaria) and the Georgian Ministry of Defence which representatives from the National Defence University participated in as well. This seminar focused on, among other topics, corruption risks in operations. It is unclear how many participants it encompassed and their respective ranks.

Finally, there is no evidence that anti-corruption knowledge is used in the field by officers in commanding positions. Whatever evidence of corruption in the AFU / MOI emerges, it does not contain information about officers mishandling corruption risks, or handling them at all. However, recent cases of smuggling in and out of the &quoute;Anti-Terrorist Operation&quoute; (ATO, the official name for war in the East) areas, gave rise to accusations of SSU officers creating protection for smugglers. These are basically allegations of collusion between officers and criminals, which suggests that corruption issues are being mishandled in the field.

Note from Transparency International:
The Ukrainian National Defence University seconded a team to Transparency International in 2012 to produce a Colonel-level training course on building integrity, which led to the NDU delivering its own building integrity courses in 2013/4. In 2014, NDU staff were also seconded to TI to develop Pre-Deployment Training courses. There is now a specialist building integrity delivery unit at the NDU that consists of around 15 permanent personnel. In January 2015, Transparency International ran a Senior Leaders Day with the Ukrainian MOD which was attended by the Deputy Defence Minister and almost all Heads of Department.

Response to government reviewer:
Agree with a score of 2.

There is no public evidence that corruption risk monitors are deployed on peacekeeping mission or on operations.

International organizations and Ukrainian law enforcement bodies point to the lack of effective oversight (e.g. from the prosecutor) over the enforcement of laws by Ukrainian peacekeeping contingents. There are apprehensions that the absence of an effective strategy for combating corruption among Ukrainian PK contingents and efficient oversight has led to new cases of corrupt misconduct.

Nevertheless, the government reviewer notes that &quoute;the MoD takes efforts to minimize the risks of corruption in peacekeeping missions (over the Military Service and defence internal audit)... For example, in 2010, the Military Service in cooperation [with NATO] uncovered a well organized criminal group of Ukrainian peacekeepers involved in smuggling oil to the Republic of Kosovo using UN documents so as to avoid paying customs duties and taxes. The materials were brought to Office of the Public Prosecutor of Ukraine and criminal procedure was started against the guilty Ukrainian authorities.&quoute;

Indeed, the fact that corruption cases have recently been investigated and brought court speaks of Ukraine’s commitment to tackling corruption among members of national PK contingents.

There is no public evidence that trained professionals are deployed to monitor corruption risk in the current operations of MOD and MOI (for example in the East of Ukraine). There is, in fact, no institution of professionals trained to monitor corruption risks in operations as this is meant to be part of the professional responsibilities of any state official in Ukraine.

The government reviewer has stated that “Over the last four months, trained professionals have been deployed (officers of the Military Law Enforcement Service) to monitor corruption risk in the field, in some units (within the territory of the state).&quoute; This was not possible to verify using publicly available sources.

Response to government reviewer:
Agreed. Score raised from 1 to 2.

There is no public evidence of any guidelines or training that focus on corruption risks in contracting whilst on operations or PK missions.

According to the Security Sector Reform Resource Centre, the National Defence University's Building Integrity Training and Education Centre (BITEC) courses include a a pre-deployment course for Ukrainian personnel deploying to missions outside Ukraine and also for personnel deploying on Anti-Terrorist Operations (ATO) within Ukraine. Furthermore, a mobile three-day course on Building Integrity is taught at military training establishments across the country. No evidence could be found to suggest that these courses cover contracting. The centre will also be developing courses that focus on addressing risks inherent to the defence procurement process; however, this has not yet been implemented and it is unclear whether it would extend to operational contracting.

According to the government reviewer, when personnel are being selected and trained for PK operations, commanders and divisions carry out &quoute;appropriate activities related to the prevention and detection of corruption, including: instruction and explanations concerning the implementation of anti-corruption legislation in Ukraine; analysis of the risks of corruption associated with restrictions on the use of official status and conflicts of interests; warning of liability for corruption offences and the discharge from military service of individuals who have committed such offences.&quoute; This could not be verified using public sources, and there is no specific mention of contracting risk.

Response to government reviewer:
Without evidence of training relating specifically to addressing corruption risks in contracting whilst on deployed operations or peacekeeping missions, a score of 1 has been chosen.

DSP comment: DSP staff can verify that the short courses/modules for senior staff deploying to the ATO and for international forces in country does contain information on contracting during operations though the courses have yet to be delivered.

There is no evidence that PMCs are employed by the Ukrainian Armed Forces or other defence establishment. However there were media reports that on the territory of Ukraine some Ukrainians PMCs were officially deployed . Recently Russia also blamed Ukraine in the use of foreign militaries in the Anti-terrorist operation in Eastern Ukraine, however, Ukraine as well as NATO denied this information.

There have been reports of oligarchs hiring their own private security forces to protect their businesses amid the ongoing turmoil. For example, members of a private army &quoute;reportedly backed by Ihor Kolomoisky showed up at the headquarters of the state-owned oil company, UkrTransNafta. The standoff occurred after Kiev fired the company’s chief executive officer... Kolomoisky said that he was trying to protect the company from an illegal takeover.&quoute; (4)

Some of these private battalions may have been brought under the authority of the military or the National Guard; however, this could be verified and it is unclear whether there are any legal controls on their usage. Poroshenko did, however, vow that the country's governors will not have their own private armies. (5) Score of 2 reflects that there is no clear evidence on the use of PMCs by the armed forces and there are no regulations prohibiting such use either.

Response to government reviewer:
Given that there are indications of PMCs being employed in Ukraine without specific legal guidance to scrutinise their usage, a higher score cannot be awarded.

Ukrainian defence procurement is carried out under two separate regimes depending on whether the items are classified as &quoute;defence purchases&quoute; (relating only to weaponry etc.) or &quoute;regular purchases&quoute; (food, fuel, small pieces of equipment). These have different legal regimes, with different implications for transparency. &quoute;Defence&quoute; purchases are regulated by the Law on Defence Procurement (7). &quoute;Regular&quoute; purchases are regulated according to the Law on Public Procurement (8).

The general law on public procurement exempts all: &quoute;goods, works and services procurement of which is classified as a state secret in accordance with the Law of Ukraine &quoute;On State Secrets&quoute;&quoute; (5). The Law on Defence Procurement does cover items considered to be state secrets, but only to exempt them from normal procurement procedures. The law itself states that, if the purchase of goods, works and services are classified as a state secret, purchase can be made &quoute;without the use of competitive procedures.&quoute; (7) There are no provisions for the independent scrutiny of these 'exempt' items in either law, making it plausible that large defence purchases can be conducted outside of the existing legal framework for procurement.

There is also evidence that an increasing number of defence purchases are being exempted from normal procurement procedures, even when these concern 'regular' procurement rather than the purchase of weaponry or classified goods. For example, there have been recent amendments to the Law of Ukraine &quoute;On Public Procurement&quoute; that have been in place since May 2014 (6). Amendments implement a flexible procurement procedure for the defence services because of the deteriorating military and political situation in the country. This means that there is now an exemption from the normal rules of competition for contract negotiations for 'regular' defence procurement for the duration of a &quoute;special period&quoute;, which can be understood as 'extraordinary circumstances' or a ' national emergency'. However, the amendment does not define what the special period is, when it ends, or which products and services can fall under this exemption. The official text is below [translated from the original Ukrainian]:

Exemptions to the negotiation procedure for procurement: &quoute;the urgent need for the implementation of procurement because of the emergence of special economic or social circumstances that prevent compliance with the terms of the customers for competitive bidding procedures, namely related to the immediate aftermath of emergencies and in connection with the special period, if the customer is the Ministry of defence of Ukraine and its intelligence agency, the Ministry of Internal Affairs of Ukraine, Security Service of Ukraine, the National Guard of Ukraine, the State Border Guard Service of Ukraine, the Foreign Intelligence Service of Ukraine, State Service of Special Communication and Information Protection of Ukraine, State Service of Ukraine for Emergencies and other military units and / or parts and also the provision in the prescribed manner humanitarian assistance to Ukraine to other states. Application of the negotiating procurement procedure in such cases, is done on a case-by-case basis based on the decision of the customer&quoute; (8, Article 39, Paragraph 3).

As the government reviewer notes, &quoute;the Law of Ukraine &quoute;On principles of anti-corruption policy in Ukraine (Anti-corruption Strategy) for 2014 – 2017&quoute; determined that the problem of corruption in public procurement remained extremely serious. Losses due to corrupt deals during public procurement procedures constitute 10-15 percent of state spending each year. Much procurement is carried out in non-competitive procedures (one supplier).&quoute;

The government reviewer proposes that one way to &quoute;reduce corruption risks in this sphere is to review the Law of Ukraine &quoute;On Public Procurement&quoute; subject to its application, the need for further improvement of its provisions, including the prevention of conflict of interest, increasing penalties for violations of its provisions and so on.” However, the fact that there are increasing exemptions for defence items contained within this law, heightens corruption risk within the sector.

In sum, while Ukraine has legislation covering defence procurement, it is clear that there are (ever more) frequent opportunities to by-pass the rules. Exemptions from general procurement procedures now exist for 'regular' items such as food, fuel, and small pieces of equipment; as well as for larger, 'secret' items. The fact that these exemptions will last for an unspecified &quoute;special period&quoute; is likely to complicate the process of scrutinising defence procurement as it is now unclear exactly what rules apply, and discretion is left to the defence services to choose whether to follow the existing legislation or not.

As discussed in questions 22 and 23, there is some information made available regarding asset disposals. Researchers did not find any information about the announcement, contractor selection process, bid implementation and finalization of implementation. The MOD website listed an annual plan of public procurement and one tender announcement about the disposal of ammunition at the expense of budget funds (deadline: March, 2014) and the list of documentation needed for competition participation. Hence, the procurement cycle process could be observed only on the stage of assessment of needs.

However, there is also evidence that an increasing number of defence purchases are being exempted from normal procurement procedures, even when these concern 'regular' procurement (food, fuel, etc.) rather than the purchase of weaponry or classified goods. For example, there have been recent amendments to the Law of Ukraine &quoute;On Public Procurement&quoute; that have been in place since May 2014 (4). Amendments implement a flexible procurement procedure for the defence services because of the deteriorating military and political situation in the country. This means that there is now an exemption from the normal rules of competition for contract negotiations for 'regular' defence procurement for the duration of a &quoute;special period&quoute;, which can be understood as 'extraordinary circumstances' or a ' national emergency'. However, the amendment does not define what the special period is, when it ends, or which products and services can fall under this exemption. The official text is below [translated from the original Ukrainian]:

Exemptions to the negotiation procedure for procurement: &quoute;the urgent need for the implementation of procurement because of the emergence of special economic or social circumstances that prevent compliance with the terms of the customers for competitive bidding procedures, namely related to the immediate aftermath of emergencies and in connection with the special period, if the customer is the Ministry of defence of Ukraine and its intelligence agency, the Ministry of Internal Affairs of Ukraine, Security Service of Ukraine, the National Guard of Ukraine, the State Border Guard Service of Ukraine, the Foreign Intelligence Service of Ukraine, State Service of Special Communication and Information Protection of Ukraine, State Service of Ukraine for Emergencies and other military units and / or parts and also the provision in the prescribed manner humanitarian assistance to Ukraine to other states. Application of the negotiating procurement procedure in such cases, is done on a case-by-case basis based on the decision of the customer&quoute; (6, Article 39, Paragraph 3).

In sum, while Ukraine has previously displayed some form of procurement planning and process, it is clear that there are (ever more) frequent opportunities to by-pass the rules. Exemptions from general procurement procedures now exist for 'regular' items such as food, fuel, and small pieces of equipment; as well as for larger, 'secret' items. It is now unclear exactly what rules apply, and also discretion is left to the defence services to choose whether to follow the existing legislation or not. The score is between 0 and 1, however, 1 has been awarded as it cannot be said that no information is made available at all.

There are a number of defence procurement oversight mechanisms in place:

-The legislative anti-corruption committee established a Sub-Committee on Spending Effectiveness, which has previously questioned details of a fuel procurement contract of the MOD. There is, however, no evidence that the Committee or its Sub-committee are exercising systematic and continuous oversight.

-The Accounts Chamber audits government budget spending and reports back to the parliament four times a year. As a part of this, it can scrutinise MOD procurement, although there is no public (web) evidence it has done this in the past year. The Accounts Chamber -- the audit body of the Parliament -- is independent from the executive, but is directly subordinate to the legislature, which technically compromises its independence and makes the composition of the Chamber dependent on appointments by a parliamentary majority.

Legislative oversight function is therefore legally in place, but there is no systematic evidence of its continuous activity, especially in face of recent procurement scandals exposed by the civil society and the executive. To the extent that the oversight is exercised, it is transparent, for the Parliament and its committees publish transcripts and protocols of their sessions, and the Accounts Chamber reports to the Parliament and publishes annual reports (though the latest currently available is for 2013).

There are also systems of external and internal oversight over procurement practices in the MOD and Ministry of the Interior, and some evidence of their activity and transparency:

-The State Financial Agency, according to its powers granted by primary and secondary legislation, carries out planned and extraordinary audit of procurement practices. However, there is no evidence to suggest that the SFA consistently monitors procurement rounds at MOD and MOI: normally, the SFA draws up a plan of thematic checks in state institutions and scrutinises procurement in those. It can also carry out audit of specific practices on request of other authorities. Therefore, where oversight does happen, it is not complete. The SFA is part of the executive (its head is chosen by the PM and appointed by the President), and as such is not independent. Recently, the head of the SFA was implicated in a scandal about alleged impropriety: the Prime minister fired him and launched a commission to investigate alleged &quoute;bias&quoute; of SFA's audit of the Antonov concern, and the head of the SFA responded with corruption accusations against the PM.

-The MOI's Department of Internal Audit rarely reports on results of its activities. (in fact, there is only one such report on the Government's official web-portal, it is not related to procurement). It is difficult if not impossible to assess its effectiveness because of the lack of transparency.

-The MOD's Department of Internal Audit and Financial Control has recently started to publicly report on its activities. The first quarterly report of 2015 (so far, the only one published) includes aggregated information about funds lost and recovered and appears to incorporate results of a procurement efficiency audit. There is no detailed disaggregated information, however, and as such transparency is limited.

As the government reviewer notes, &quoute;the Law of Ukraine &quoute;On principles of anti-corruption policy in Ukraine (Anti-corruption Strategy) for 2014 – 2017&quoute; determined that the problem of corruption in public procurement remained extremely serious. Losses due to corrupt deals during public procurement procedures constitute 10-15 percent of state spending each year. Much procurement is carried out in non-competitive procedures (one supplier).&quoute;

The government reviewer proposes that one way to &quoute;reduce corruption risks in this sphere is to review the Law of Ukraine &quoute;On Public Procurement&quoute; subject to its application, the need for further improvement of its provisions, including the prevention of conflict of interest, increasing penalties for violations of its provisions and so on.” However, the fact that there are increasing exemptions for defence items contained within this law, heightens corruption risk within the sector.

There have been recent amendments to the Law of Ukraine &quoute;On Public Procurement&quoute; that have been in place since May 2014 (4). Amendments implement a flexible procurement procedure for the defence services because of the deteriorating military and political situation in the country. This means that there is now an exemption from the normal rules of competition for contract negotiations for 'regular' defence procurement for the duration of a &quoute;special period&quoute;, which can be understood as 'extraordinary circumstances' or a ' national emergency'. However, the amendment does not define what the special period is, when it ends, or which products and services can fall under this exemption. The official text is below [translated from the original Ukrainian]:

Exemptions to the negotiation procedure for procurement: &quoute;the urgent need for the implementation of procurement because of the emergence of special economic or social circumstances that prevent compliance with the terms of the customers for competitive bidding procedures, namely related to the immediate aftermath of emergencies and in connection with the special period, if the customer is the Ministry of defence of Ukraine and its intelligence agency, the Ministry of Internal Affairs of Ukraine, Security Service of Ukraine, the National Guard of Ukraine, the State Border Guard Service of Ukraine, the Foreign Intelligence Service of Ukraine, State Service of Special Communication and Information Protection of Ukraine, State Service of Ukraine for Emergencies and other military units and / or parts and also the provision in the prescribed manner humanitarian assistance to Ukraine to other states. Application of the negotiating procurement procedure in such cases, is done on a case-by-case basis based on the decision of the customer&quoute; (8, Article 39, Paragraph 3).

The fact that these exemptions will last for an unspecified &quoute;special period&quoute; is likely to complicate the process of scrutinising defence procurement as it is now unclear exactly what rules apply, and discretion is left to the defence services to choose whether to follow the existing legislation or not.

For the purpose of the assessment, &quoute;defence purchase&quoute; are interpreted as all types of procurement purchases made for the purposes of defence. This is because the Ukrainian law defines &quoute;defence purchase&quoute; separately as relating only to weaponry etc. At any times, the MOD will carry out &quoute;defence&quoute; and &quoute;regular&quoute; procurement. There are different legal regimes, with different implications for transparency. &quoute;Defence&quoute; purchases are regulated by the Law on Defence Procurement. &quoute;Regular&quoute; purchases are regulated according to the Law on State Procurement.

While there is a policy for the publication of information on actual and potential &quoute;regular&quoute; (non-secret) purchases (see below), as the government reviewer notes, there is no such policy with regards to &quoute;defence&quoute; -- secret -- purchases. Regular purchases must be planned in advance, and plans are published on the website of the MOD. &quoute;Defence&quoute; procurement plans are discussed in closed sessions of the Government, and sanctioned through a classified executive decision of the Council on National Security and Defence and the President.

&quoute;Regular&quoute; purchases:
Art 4 of the Law on State Procurement stipulates that the institution carrying out the procurement (say, MOD), must publish on-line, for general access, a yearly plan of purchases and any subsequent plans amending it.

Article 10 of the law stipulates that information about the tender must be published on the website of the institution carrying out the tender (and free access must be guaranteed) not less than 20 days before the expected results of the tender selection; and publish results of the selection not more than 3 days after the report on the results is finalised. Similarly, reports on the results of the procurement contract must be published on-line.

Nevertheless, there is also evidence that an increasing number of defence purchases are being exempted from normal procurement procedures, even when these concern 'regular' procurement rather than the purchase of weaponry or classified goods. For example, there have been recent amendments to the Law of Ukraine &quoute;On Public Procurement&quoute; that have been in place since May 2014 (8). Amendments implement a flexible procurement procedure for the defence services because of the deteriorating military and political situation in the country. This means that there is now an exemption from the normal rules of competition for contract negotiations for 'regular' defence procurement for the duration of a &quoute;special period&quoute;, which can be understood as 'extraordinary circumstances' or a ' national emergency'. However, the amendment does not define what the special period is, when it ends, or which products and services can fall under this exemption.

The exemption largely concerns the normal competition clauses in procurement legislation, rather than the publication of details of actual and potential defence purchases. However, it does exempt procurement by the defence services from Article 10 of the public procurement law, which is the one that stipulates that tenders must be published. The official text is below [translated from the original Ukrainian]:

Exemptions to the negotiation procedure for procurement: &quoute;the urgent need for the implementation of procurement because of the emergence of special economic or social circumstances that prevent compliance with the terms of the customers for competitive bidding procedures, namely related to the immediate aftermath of emergencies and in connection with the special period, if the customer is the Ministry of defence of Ukraine and its intelligence agency, the Ministry of Internal Affairs of Ukraine, Security Service of Ukraine, the National Guard of Ukraine, the State Border Guard Service of Ukraine, the Foreign Intelligence Service of Ukraine, State Service of Special Communication and Information Protection of Ukraine, State Service of Ukraine for Emergencies and other military units and / or parts and also the provision in the prescribed manner humanitarian assistance to Ukraine to other states. Application of the negotiating procurement procedure in such cases, is done on a case-by-case basis based on the decision of the customer&quoute; (6, Article 39, Paragraph 3).

In sum, exemptions from general procurement procedures now exist for 'regular' items such as food, fuel, and small pieces of equipment; as well as for larger, 'secret' items. The fact that these exemptions will last for an unspecified &quoute;special period&quoute; is likely to complicate the process of scrutinising defence procurement as it is now unclear exactly what rules apply, and discretion is left to the defence services to choose whether to follow the existing legislation or not.

The broad application of this exemption risks negating recent progress that had been made in the transparency of defence procurement (albeit for smaller defence purchases that were not classified). For example, the MOD had started to publish yearly plans and announcements of procurement rounds through regular bulletins on its web-site. It had also recently switched completely to an anonymous electronic tendering system for the procurement of food, clothing and other non-&quoute;defence&quoute; supplies. The contract value and contracts themselves were made public.

The government has, however, offered some form of security justification for these new exemptions, citing a &quoute;special period&quoute; that is being interpreted to refer to instability in the East of the country.

Ukrainian defence procurement is carried out under two separate regimes depending on whether the items are classified as &quoute;defence purchases&quoute; (relating only to weaponry etc.) or &quoute;regular purchases&quoute; (food, fuel, small pieces of equipment). These have different legal regimes, with different implications for transparency. &quoute;Defence&quoute; purchases are regulated by the Law on Defence Procurement (3). &quoute;Regular&quoute; purchases are regulated according to the Law on Public Procurement (4).

For regular procurement, Article 17 of the Law on Public Procurement offers guidance on the criteria for refusing to allow a company or entity to enter the procurement process. This contains a provision for refusal on the basis that &quoute;there is irrefutable evidence that the member or participant... gives or agrees to give, directly or indirectly to any official of the customer, other state body remuneration in any form (proposal on recruitment, valuable thing, service etc.) to influence the decision to determine the winner of the procurement procedure&quoute; (4, Article 17, Paragraph 1). This effectively bars entities proven to have bribed (or attempted to bribe) officials from the procurement process.

In addition, for goods, services, or works whose value exceeds 20 million UAH, participants can be barred if they do not have an anti-corruption programme (or no authorisation to implement an anti-corruption programme) in place (4, Article 17, Paragraph 9). As the government reviewer notes, these provisions were put in place following the adoption of the Law &quoute;On amendments to some laws of Ukraine on public procurement to bring them into line with international standards and measures to combat corruption&quoute; on the 15th of September 2015 (5). While there are some new exemptions from this legislation for defence procurement (2), these do not appear to apply to Article 17.

Nevertheless, it must be noted that these provisions only apply to 'regular' purchases rather than the procurement of weaponry. There is no equivalent provision in the Law on Defence Procurement (3). This precludes a higher score. Accordingly, score 1 has been selected given the law on public procurement does not apply to the procurement of weaponry and the value of such procurement is likely to be a significant proportion of overall defence procurement signifying heightened risk.

The Strategy of National Security of Ukraine has several key priorities, among which: the restoration of territorial integrity, the establishment of an efficient security and defence sector, the enhancement of defence capacity of the state, the development of defence-industrial and military-technical cooperation with NATO and EU member-states, and the achievement of full independence from Russia in the production of military equipment.

However, it is difficult to assess whether the current link between the national security strategy and procurement is formalised. For example, defence purchases are nominally based on the Annual Procurement Plan of the MOD, but recent amendments to the law on public procurement that have been in place since May 2014 have introduced a more flexible procurement procedure for the defence services because of the deteriorating military and political situation in the country (5).

In part, this could be viewed as a decision that has been made to follow a national strategy that is oriented towards quelling instability in the East. However, the fact that amendments are being made to procurement laws to allow legislation to be bypassed throughout the current &quoute;special period&quoute;, also suggests that purchases are being made on an emergency basis that may not be reflected in the MOD's Annual Procurement Plan, and that there may be no formal requirement at the moment to examine actual procurement practices against the national security strategy.

Defence purchases are nominally based on the Annual Procurement Plan of the MOD and some current requirements of national security (see government reviewer's response for more detail on the process). However, it is difficult to assess whether there are any opportunistic or unplanned purchases that fall outside of these plans, particularly since there is no requirement for the MOD to publish details of &quoute;defence&quoute; purchases such as weaponry (6). For 'regular' purchases such as fuel, food, and small equipment, recent amendments to the law on public procurement that have been in place since May 2014 (5).

Article 10 of the law &quoute;On Public Procurement&quoute; stipulates that information about the tender must be published on the website of the institution carrying out the tender (and free access must be guaranteed) not less than 20 days before the expected results of the tender selection; and publish results of the selection not more than 3 days after the report on the results is finalised. Similarly, reports on the results of the procurement contract must be published on-line.

However, amendments implement a flexible procurement procedure for the defence services because of the deteriorating military and political situation in the country. This means that there is now an exemption from the normal rules of competition for contract negotiations for 'regular' defence procurement for the duration of a &quoute;special period&quoute;, which can be understood as 'extraordinary circumstances' or a ' national emergency'. However, the amendment does not define what the special period is, when it ends, or which products and services can fall under this exemption.

The exemption largely concerns the normal competition clauses in procurement legislation, rather than the publication of details of actual and potential defence purchases. However, it does exempt procurement by the defence services from Article 10 of the public procurement law, which is the one that stipulates that tenders must be published. The official text is below [translated from the original Ukrainian]:

Exemptions to the negotiation procedure for procurement: &quoute;the urgent need for the implementation of procurement because of the emergence of special economic or social circumstances that prevent compliance with the terms of the customers for competitive bidding procedures, namely related to the immediate aftermath of emergencies and in connection with the special period, if the customer is the Ministry of defence of Ukraine and its intelligence agency, the Ministry of Internal Affairs of Ukraine, Security Service of Ukraine, the National Guard of Ukraine, the State Border Guard Service of Ukraine, the Foreign Intelligence Service of Ukraine, State Service of Special Communication and Information Protection of Ukraine, State Service of Ukraine for Emergencies and other military units and / or parts and also the provision in the prescribed manner humanitarian assistance to Ukraine to other states. Application of the negotiating procurement procedure in such cases, is done on a case-by-case basis based on the decision of the customer&quoute; (7, Article 39, Paragraph 3).

The mass media have highlighted a number of violations in MOD purchases of medical supplies and equipment, accommodation, spare parts for equipment, food, fuel, coal etc (2, 3). Indeed, the fact that amendments are being made to procurement laws to allow legislation to be bypassed throughout the current &quoute;special period&quoute;, suggests that purchases are being made on an emergency basis that may not be reflected in the MOD's Annual Procurement Plan. There is, however, some evidence of the formal analysis of requirements, for example where spokespersons from the MOD conduct press conferences on materials purchased and repaired, and foreign assistance received, throughout the instability in the East (8).

For the purpose of the assessment, &quoute;defence purchase&quoute; are interpreted as all types of procurement purchases made for the purposes of defence. This is because the Ukrainian law defines &quoute;defence purchase&quoute; separately as relating only to weaponry etc.There are different legal regimes, with different implications for transparency. &quoute;Defence&quoute; purchases are regulated by the Law on Defence Procurement. &quoute;Regular&quoute; purchases are regulated according to the Law on State Procurement.

Ukrainian defence procurement is carried out under two separate regimes depending on whether the items are classified as &quoute;defence purchases&quoute; (relating only to weaponry etc.) or &quoute;regular purchases&quoute; (food, fuel, small pieces of equipment). These have different legal regimes, with different implications for transparency. &quoute;Defence&quoute; purchases are regulated by the Law on Defence Procurement (7). &quoute;Regular&quoute; purchases are regulated according to the Law on Public Procurement (8).

The Law on Defence Procurement states that, if the purchase of goods, works and services are classified as a state secret, purchase can be made &quoute;without the use of competitive procedures.&quoute; In addition, there have been recent amendments to the Law of Ukraine &quoute;On Public Procurement&quoute; that have been in place since May 2014 (6). This means that there is now an exemption from the normal rules of competition for contract negotiations for 'regular' defence procurement for the duration of a &quoute;special period&quoute;, which can be understood as 'extraordinary circumstances' or a ' national emergency'. However, the amendment does not define what the special period is, when it ends, or which products and services can fall under this exemption. The official text is below [translated from the original Ukrainian]:

Exemptions to the negotiation procedure for procurement: &quoute;the urgent need for the implementation of procurement because of the emergence of special economic or social circumstances that prevent compliance with the terms of the customers for competitive bidding procedures, namely related to the immediate aftermath of emergencies and in connection with the special period, if the customer is the Ministry of defence of Ukraine and its intelligence agency, the Ministry of Internal Affairs of Ukraine, Security Service of Ukraine, the National Guard of Ukraine, the State Border Guard Service of Ukraine, the Foreign Intelligence Service of Ukraine, State Service of Special Communication and Information Protection of Ukraine, State Service of Ukraine for Emergencies and other military units and / or parts and also the provision in the prescribed manner humanitarian assistance to Ukraine to other states. Application of the negotiating procurement procedure in such cases, is done on a case-by-case basis based on the decision of the customer&quoute; (8, Article 39, Paragraph 3).

As the government reviewer notes, &quoute;the Law of Ukraine &quoute;On principles of anti-corruption policy in Ukraine (Anti-corruption Strategy) for 2014 – 2017&quoute; determined that the problem of corruption in public procurement remained extremely serious. Losses due to corrupt deals during public procurement procedures constitute 10-15 percent of state spending each year. Much procurement is carried out in non-competitive procedures (one supplier).&quoute;

The government reviewer proposes that one way to &quoute;reduce corruption risks in this sphere is to review the Law of Ukraine &quoute;On Public Procurement&quoute; subject to its application, the need for further improvement of its provisions, including the prevention of conflict of interest, increasing penalties for violations of its provisions and so on.” However, the fact that there are increasing exemptions for defence items contained within this law, heightens corruption risk within the sector. The fact that these exemptions to 'regular' procurement will last for an unspecified &quoute;special period&quoute; is likely to complicate the process of assuring competition in defence procurement as it is now unclear exactly what rules apply, and discretion is left to the defence services to choose whether to follow the existing legislation or not. As the interviewees noted, in peaceful times more defence procurement was conducted on the principle of open competition. However, in conditions of the anti-terrorist operation undertaken recently, the majority of defence procurement has been conducted through single sourcing.

In sum, while 'regular' defence procurement was, in principle, subject to open competition, it is clear that there are (ever more) frequent opportunities to by-pass the rules. Classified items have always been exempted from competition clauses in the law &quoute;On Defence Procurement&quoute;. The fact that all defence purchases are now officially allowed to be exempt from competition principles means that the score has been adjusted from 1 to 0.

Ukrainian defence procurement is carried out under two separate regimes depending on whether the items are classified as &quoute;defence purchases&quoute; (relating only to weaponry etc.) or &quoute;regular purchases&quoute; (food, fuel, small pieces of equipment). These have different legal regimes, with different implications for transparency. &quoute;Defence&quoute; purchases are regulated by the Law on Defence Procurement (2). &quoute;Regular&quoute; purchases are regulated according to the Law on Public Procurement (1).

There are no specific regulations or codes of conduct for tender boards in the Law of Ukraine &quoute;On Public Procurement&quoute;. It is only stated that members of tender boards are selected from among public officials within the procurement agency (Ministry, mayor’s office, regional administration etc) and appointed to the board by the head of the agency. They do not receive additional payment for sitting in the board.

Though the tender board may order specific technical assessment of the bids from outside organizations, it bears sole responsibility for any decisions taken about the bid. The decisions of the tender board are subject to conventional audits that are applicable to any governmental bodies (inspections by the Accounting Chamber, the State Financial Inspectorate etc).

The Law on Defence Procurement does not mention tender boards, making it unclear whether or not they operate for the MOD's purchase of some weaponry. However, the law does state that if the purchase of goods, works and services are classified as a state secret, purchase can be made &quoute;without the use of competitive procedures.&quoute; This suggests that competitive tenders are not in operation for material that falls under the defence procurement law.

It is also worth noting that there have been recent amendments to the Law of Ukraine &quoute;On Public Procurement&quoute; that have been in place since May 2014 (3). Amendments implement a flexible procurement procedure for the defence services because of the deteriorating military and political situation in the country. This means that there is now an exemption from the normal rules of competition for contract negotiations for 'regular' defence procurement for the duration of a &quoute;special period&quoute;, which can be understood as 'extraordinary circumstances' or a ' national emergency'. However, the amendment does not define what the special period is, when it ends, or which products and services can fall under this exemption. The official text is below [translated from the original Ukrainian]:

Exemptions to the negotiation procedure for procurement: &quoute;the urgent need for the implementation of procurement because of the emergence of special economic or social circumstances that prevent compliance with the terms of the customers for competitive bidding procedures, namely related to the immediate aftermath of emergencies and in connection with the special period, if the customer is the Ministry of defence of Ukraine and its intelligence agency, the Ministry of Internal Affairs of Ukraine, Security Service of Ukraine, the National Guard of Ukraine, the State Border Guard Service of Ukraine, the Foreign Intelligence Service of Ukraine, State Service of Special Communication and Information Protection of Ukraine, State Service of Ukraine for Emergencies and other military units and / or parts and also the provision in the prescribed manner humanitarian assistance to Ukraine to other states. Application of the negotiating procurement procedure in such cases, is done on a case-by-case basis based on the decision of the customer&quoute; (1, Article 39, Paragraph 3).

The fact that these exemptions will last for an unspecified &quoute;special period&quoute; is likely to complicate the process of scrutinising defence procurement as it is now unclear exactly what rules apply, and discretion is left to the defence services to choose whether to follow the existing legislation or not. In sum, while 'regular' defence procurement was, in principle, subject to open competition and tendering processes, it is clear that there are (ever more) frequent opportunities to by-pass the rules. Classified items have always been exempted from competition clauses in the law &quoute;On Defence Procurement&quoute;. The fact that all defence purchases are now officially allowed to be exempt from competition principles means that the score has been adjusted from 1 to 0.

Response to government reviewers:
Given the recent amendments to the Law of Ukraine &quoute;On Public Procurement&quoute;, plus the fact that competitive tenders are not part of the Law of Ukraine &quoute;On Defence Procurement&quoute;, provisions are in place to allow all defence procurement to operate outside of the normal provisions for competitive procurement. This precludes a higher score.

There is no specific legislation discouraging and punishing collusion between bidders for defence and security contracts (1, 2, 3). There is, however, over-arching anti-trust legislation which forbids such behavior during public procurement bids (6). The Anti-monopoly Committee of Ukraine is empowered to monitor and uncover collusion, which is then sanctioned.

There is no publicly available data on collusion that has been discovered or investigated by the Ministry of Defence. According to statements by former heads of the anti-monopoly committee and the content on their website, defence does not appear to be one of their priorities. As discussed in question 69, there are concerns regarding the application of sanctions to corrupt suppliers within the context of exemptions from procurement legislation in absent times. Its extension to cases of collusion are highly likely as well.

The Public Procurement Department of the MOD is organised into one professional staff department, however there is no public evidence to show what sort of training they might receive. Article 11 of the Law of Ukraine &quoute;On Public Procurement&quoute; states that the Chairman, Secretary and other members of the Tender Committee may receive training on organisation and procurement, which suggests that those in charge of defence procurement do receive some formal instruction.

The deputy chairman of the tender committee is the head of the Public Procurement Department, who can be hired and dismissed by the consent of the Defence Minister. According to the government reviewer, the tender committee also includes representatives from the Department of internal audit and financial control, the Department for the prevention and detection of corruption, the Finance Department, the Legal Department, and two representatives of volunteer movements. Only after the arrival of a new leader in the Public Procurement Department is a full rotation of the tender committee members possible.

The government reviewer indicates that monitoring systems for inspecting the quality of procured goods and services for the MoD are the responsibility of the Military Representations Directorate of the MoD, and the quality of food products, fuels and lubricants is inspected by the appropriate institutions of the MoD. If the quality requirements are not met, this leads to a breach and non-performance of the contract conditions and also penalties.

Response to government reviewer:
Agreed, and score raised from 1 to 2.

The Anti-Monopoly Committee (AMC) of Ukraine is a state body responsible for reviewing complaints about malpractice in procurement. If a permanent member of the administrative board is related to the party of the entity appealing , the Chairman of the anti-monopoly Committee of Ukraine should determine an alternative person for participation in review of such a complaint.

There are media reports that the AMC suspended decisions on the public procurement of 28,000 bulletproof vests. The Anti-Monopoly Committee claimed that &quoute;On June 18 the Committee registered a complaint from the LLC &quoute;Ammo C&quoute; on the Ministry of Defence of Ukraine about the discriminatory requirements for competitive bidding documents for procurement&quoute; and the AMC, as a body of appeal, has had no reason not to accept the complaint.

In addition, the Lviv office of the AMC said that it is currently considering 33 complaints regarding malpractice in tender procedures held by the Ministry of Defence of Ukraine. It is therefore clear that companies do sometimes complain about malpractice in defence procurement, and there are no public reports of future discrimination against companies who have lodged complaints.

Response to government reviewer:
Agreed, and score raised from 2 to 3.

The Anti-Monopoly Committee of Ukraine, prosecutors, specialized units on organized crime of the Ministry of Internal Affairs of Ukraine, and the Security Service of Ukraine can launch investigations of suppliers' activities on the initiative of the procurement executive. Depending on the offense, sanctions vary from fines to criminal responsibility according to the current legislation (Administrative and Criminal Codes of Ukraine).

For regular procurement (i.e. not of weaponry), Article 17 of the Law on Public Procurement offers guidance on the criteria for refusing to allow a company or entity to enter the procurement process. This contains a provision for refusal on the basis that &quoute;there is irrefutable evidence that the member or participant... gives or agrees to give, directly or indirectly to any official of the customer, other state body remuneration in any form (proposal on recruitment, valuable thing, service etc.) to influence the decision to determine the winner of the procurement procedure&quoute; (4, Article 17, Paragraph 1). This effectively bars entities proven to have bribed (or attempted to bribe) officials from the procurement process.

These provisions were put in place following the adoption of the Law &quoute;On amendments to some laws of Ukraine on public procurement to bring them into line with international standards and measures to combat corruption&quoute; on the 15th of September 2015 (5). There is, however, limited evidence of this being applied.

In February 2014 the Prosecutor General announced a check of ministries on the subject of the conduction of public procurement. For example, according to information from the Prosecutor General Office in 2001, 300 trials were launched on violations in public procurement as a result of which 848 officials were imprisoned and around 700, 000 UAH recovered.

Ukrainian defence procurement is carried out under two separate regimes depending on whether the items are classified as &quoute;defence purchases&quoute; (relating only to weaponry etc.) or &quoute;regular purchases&quoute; (food, fuel, small pieces of equipment). These have different legal regimes, with different implications for transparency. &quoute;Defence&quoute; purchases are regulated by the Law on Defence Procurement (3). &quoute;Regular&quoute; purchases are regulated according to the Law on Public Procurement (4). There is no equivalent provision for the punishment of the corrupt behaviour of a supplier in the Law on Defence Procurement (3). The score has been selected on the basis that there appears to be no provisions for sanctions applying to suppliers for a substantial portion of purchases.

Provisions for offsets contracts are contained within the Law of Ukraine &quoute;On Defence Procurement&quoute;, which states that offset agreements are a prerequisite for any defence imports that exceed a value of five million euros (1, Article 8, Paragraph 2).

There is additional legislation governing the management of offset contracts (including those within the defence sector, as the two pieces of legislation are officially linked within Article 8 of the Law On Defence Procurement), in the Resolution On Adoption of The Regulation on Conclusion Of The Compensation (Offset) Agreements (3).

Types of offset arrangement include the following:

-Works related to maintenance and repair of military and special equipment and military property
-The provision of services, including training of specialists in the field of defence and security
-Providing investment
-Transfer of intellectual property rights
-Conducting research in Ukraine applied research and design developments
-Purchase of Ukrainian goods or services for an amount corresponding to partial or full value of goods exported (countertrade)
-Providing Ukrainian industrial companies additional export opportunities
-Technical assistance for the reform of the defence sector and security

However, the section on the control over fulfillment of the offset agreement made by the parties (4, Article 12) does not contain any information on due diligence requirements on contractors. Article 13 contains a mention of &quoute;punitive sanctions for failure or improper fulfillment of offset obligations&quoute;, but does not mention what these are.

There is no mention of any auditing requirements on offset contracts in the related legislation.

Response to peer reviewer 1:
Without evidence of due diligence on offsets contracts, a higher score cannot be awarded.

Provisions for offsets contracts are contained within the Law of Ukraine &quoute;On Defence Procurement&quoute;, which states that offset agreements are a prerequisite for any defence imports that exceed a value of five million euros (1, Article 8, Paragraph 2).

There is additional legislation governing the management of offset contracts (including those within the defence sector, as the two pieces of legislation are officially linked within Article 8 of the Law On Defence Procurement), in the Resolution On Adoption of The Regulation on Conclusion Of The Compensation (Offset) Agreements (3).

Types of offset arrangement include the following:

-Works related to maintenance and repair of military and special equipment and military property
-The provision of services, including training of specialists in the field of defence and security
-Providing investment
-Transfer of intellectual property rights
-Conducting research in Ukraine applied research and design developments
-Purchase of Ukrainian goods or services for an amount corresponding to partial or full value of goods exported (countertrade)
-Providing Ukrainian industrial companies additional export opportunities
-Technical assistance for the reform of the defence sector and security

Article 13 details the information that is needed in order to conclude an offset agreement:

-names of the parties, the place of the contract;
-object of offset obligations;
-the value of offset obligations;
-schedule of offset obligations;
-form and timing of reporting;
-contract terms and procedure for acceptance of offset obligations;

There is, however, no provision for details of offset contracts to be made public.

Response to peer reviewer 1:
Without evidence that offsets contracts are made public, a higher score cannot be awarded.

Provisions for offsets contracts are contained within the Law of Ukraine &quoute;On Defence Procurement&quoute;, which states that offset agreements are a prerequisite for any defence imports that exceed a value of five million euros (1, Article 8, Paragraph 2).

There is additional legislation governing the management of offset contracts (including those within the defence sector, as the two pieces of legislation are officially linked within Article 8 of the Law On Defence Procurement), in the Resolution On Adoption of The Regulation on Conclusion Of The Compensation (Offset) Agreements (3).

Types of offset arrangement include the following:

-Works related to maintenance and repair of military and special equipment and military property
-The provision of services, including training of specialists in the field of defence and security
-Providing investment
-Transfer of intellectual property rights
-Conducting research in Ukraine applied research and design developments
-Purchase of Ukrainian goods or services for an amount corresponding to partial or full value of goods exported (countertrade)
-Providing Ukrainian industrial companies additional export opportunities
-Technical assistance for the reform of the defence sector and security

There is, however, no provision for competition for offsets contracts mentioned in either piece of legislation. Offsets contracts are simply described as &quoute;a foreign trade agreement concluded in writing between the central body of executive power authorized by the Cabinet of Ministers of Ukraine and
foreign business entities&quoute; (1, Article 8, Paragraph 3). The wording here suggests that these are bilaterally agreed rather than being openly competed.

In general, The Law on Defence Procurement states that, if the purchase of goods, works and services are classified as a state secret, purchase can be made &quoute;without the use of competitive procedures.&quoute; (1)

Response to peer reviewer 1:
Without some level of competition for offset contracts, a higher score cannot be awarded. It should also be noted that, as discussed in Q64, defence procurement is permitted officially to be exempt from competitive processes.

Ukrainian defence procurement is carried out under two separate regimes depending on whether the items are classified as &quoute;defence purchases&quoute; (relating only to weaponry etc.) or &quoute;regular purchases&quoute; (food, fuel, small pieces of equipment). These have different legal regimes, with different implications for transparency. &quoute;Defence&quoute; purchases are regulated by the Law on Defence Procurement (1). &quoute;Regular&quoute; purchases are regulated according to the Law on Public Procurement (2).

There is no mention of controls (or use) of agents or intermediaries in the Law on Public Procurement, nor is there anything specific in the Law on Defence Procurement aside from general provisions in Article 11 to &quoute;control the quality of products, works and services at all stages of development, production, upgrading, recycling and repair the targeted use of funds, checking and coordination of documents on formation of contract prices&quoute;.

Response to government reviewer:
I could find no evidence that the use of agents or intermediaries is outlawed in relevant Ukrainian legislation. Score maintained.

The principal aspects of the financing package surrounding major arms deals are not disclosed before a deal is finalised, and there is no legislative provision that there should be (1, 2). However, there have been instances of some information being leaked to the mass media (3, 4).

The government does not require that the main contractor ensures subsidiaries and sub-contractors adopt an anti-corruption programmes. There are, however, provisions to ensure that the contractors themselves have an anti-corruption programme in place for some kinds of defence procurement.

For goods, services, or works whose value exceeds 20 million UAH, participants can be barred if they do not have an anti-corruption programme (or no authorisation to implement an anti-corruption programme) in place (4, Article 17, Paragraph 9). These provisions were put in place following the adoption of the Law &quoute;On amendments to some laws of Ukraine on public procurement to bring them into line with international standards and measures to combat corruption&quoute; on the 15th of September 2015 (5). While there are some new exemptions from this legislation for defence procurement (2), these do not appear to apply to Article 17. Nevertheless, it must be noted that these provisions only apply to 'regular' purchases rather than the procurement of weaponry. There is no equivalent provision in the Law on Defence Procurement (3).

There is no public evidence that the government encourages contractors to ensure that their subsidiaries and subcontractors follow suit.

Response to government reviewer:
The legislation that you cite does cover main contractors (which is assessed in a previous question), but makes no mention of subsidiaries or sub-contractors. Score maintained.

The current conflict in the East of Ukraine has forced the Ukrainian Government to seek military assistance from the West, and to disrupt any defence sector cooperation with Russia.

According to media reports, the Ukrainian government has voiced pleas for support, including supplies of lethal and non-lethal military equipment from the West. All these requests have been justified on the basis of military exigency, however, it has been clear that any supplies, many of which are offered in form of free help, are seen in Ukraine as a sign of Western political support to the country. The supply of lethal military equipment has largely been refused.

There is no evidence of political influence (or pressure) on Ukraine regarding particular supply contracts. Nor is there any evidence of impropriety in relation to agreeing contracts with foreign suppliers. One notorious recent case concerns an unpopular (and outdated) British &quoute;Saxon&quoute; APCs that had been reportedly sold to Ukraine by a private company prior to the conflict, but arrived in the midst of the conflict in the East. The Ukrainian and UK press questioned the deal, for the &quoute;Saxons&quoute; had been deemed unsuitable for combat, and yet the Ukrainian side seemed to make no secret of its intention to use Saxons for light combat situations.

The UK MOD was not involved in the deal directly, and later exonerated itself from any responsibility. Ukrainian media investigated the deal and found those allegedly responsible for it in Ukrspetseksport, a group of SOEs of the MOD.

This is the only recent case of questionable/controversial supplies, but there is no evidence, nor are there allegations, of foreign political influence on the contract, only of domestic Ukrainian misconduct. There is no evidence to suggest that political considerations are prioritised over actual military need.