If Ukrainian President Petro Poroshenko thinks he can drag out the process of creating a credible anti-corruption court without anybody noticing, he’s got another thing coming.
People are getting wise to the president’s ways of stalling on crucial reforms.
Backed on Oct. 6 by the European Commission for Democracy through Law, better known as the Venice Commission, the West delivered an unambiguous opinion to Poroshenko: Establish rule of law, a key component of which for Ukraine is the creation of an independent anti-corruption court.
Just ahead of the Venice Commission findings, Poroshenko switched sides. Ater denigrating the idea of such a court for a year, he came out in favor, at least nominally adopting the same long-held position of many Ukrainians and their friends abroad.
France is among them.
“We are supporting firmly the establishment of an independent, specific anti-corruption court,” French Ambassador to Ukraine Isabelle Dumont told the Kyiv Post in an Oct. 10 interview in Kyiv.
Such a court can and should be set up by the end of the year, Dumont says.
“If there has to be only one reform made until the end of the year, it is the creation of an anti-corruption court with judges who have integrity,” Dumont said. “This is really the top priority. You won’t have foreign investments until investors know that, if they are facing a problem, they have a proper judicial system. Take the population — people will not stay in this country if they feel that they cannot trust the justice system. The socioeconomic way forward in Ukraine is linked to the justice system.”
The courts are only one facet of deep problems in Ukraine’s legal system, including distrusted and ineffective police and prosecutors. As for the newly appointed 111-member Supreme Court, she said, it is too early to judge.
While Dumont praised successful reforms since President Viktor Yanukovych fled power in the EuroMaidan Revolution on Feb. 22, 2014, the failure to fight corruption and build effective legal institutions is a glaring omission.
“We do have to worry that it has not been done yet after three years,” she said.
No EU offer forthcoming
Without progress, Ukraine’s politicians can forget about any offer to join the European Union, from France’s perspective at least.
“This is not on the agenda,” Dumont said. “EU membership cannot even be mentioned when the situation with corruption is what it is today in Ukraine.”
Dumont said Ukraine’s priority with the EU should be fully implementing the political and trade association agreement that came into effect this year.
“Believe me, there’s a lot to do in this area,” she said.
Some lawmakers in Ukraine are seeking EU approval for a “Marshall Plan,” named after the post-World War II reconstruction program for Europe. They envision a multibillion-dollar annual aid and investment program for Ukraine.
Dumont says that it’s hard to take such requests seriously while billionaire oligarchs like Ihor Kolomoisky are able to allegedly steal $6 billion from PrivatBank, bankrupting the nation’s largest private bank and forcing the Ukrainian government to take ownership and pay out the losses with taxpayer money.
Despite the accusations of Kolomoisky’s bank fraud, from no less an authority than the National Bank of Ukraine, the politically powerful oligarch — who owns energy companies, media outlets and Ukraine International Airlines — is facing no legal consequences.
“We are not forgetting about” PrivatBank, Dumont said. “We know what happened. We are following very closely. People should not forget that a big part of the money given to Ukraine through the EU, International Monetary Fund and European Bank for Reconstruction and Development is money from the French taxpayer.”
The Kolomoisky case and others reinforce the conclusion that Ukraine remains an oligarchy.
“What is at stake now is to transform the situation from an oligarchic economy to a more regular economy with rule of law and a functioning judicial system,” she said. “There is no need for more money in this country. Ukraine is a rich country with poor people. The problem is getting the wealth better distributed to the population. The problem is keeping the wealth in the country and not evaporating somewhere else. The problem is having big businesses paying their taxes to the budget. The problem is to have rich people not using their money to buy judges in order to continue with impunity.”
Sanofi test case
After 26 years as a nation, Ukraine remains starved for foreign investment — attracting only $50 billion, far less than many neighboring countries and not enough to lift millions out of poverty in a nation with an economy output of just $100 billion.
Attracting investment requires strong rule of law, Dumont says, and French companies have had their share of bad experiences with Ukraine’s corrupt courts and bureaucracy.
One court case being watched by France as a bellwether of Ukraine’s investment climate involves the Ukrainian division of Sanofi Group, a global pharmaceutical company.
Sanofi accuses a Ukrainian vendor of stealing nearly $1.9 million through forged documents. A Kyiv business court of appeals upheld the vendor’s claim on Oct. 5. Consequently, Sanofi is appealing the ruling to a higher court and has threatened to file an international arbitration claim against the Ukrainian government. The company alleges that the fraudulent actions took place with the help of representatives of the judicial system and law enforcement, Interfax-Ukraine reported.
According to STAT news, which covers the pharmaceutical industry, the Sanofi dispute involves a contract with a vendor that supplied promotional materials to pharmacies.
“The company hopes that the country’s leadership will take all necessary steps to stop financial raiders, whose actions cause significant damage to the country’s investment image and cause outflow of foreign direct investment from Ukraine,” the company’s press service said, quoting Guilhem Granier, director of Sanofi-Aventis Ukraine.
“The Sanofi case is very important,” Dumont said. “It is a test case for Ukrainian justice. We will see what the court will decide in the end. Sanofi has given proof that this money should not belong to the firm that claims it. Ukrainian authorities are aware of the whole situation.”
International litigation “would be quite bad news for Ukraine,” Dumont said. “Sanofi is known internationally as one of the world’s largest pharmaceutical companies. They are not facing this sort of problem in other countries. I hope Ukrainian authorities will understand the symbolic importance of this issue, for what it means for foreign investments.”
Such disputes, coupled with the lack of an independent judiciary, keep many French investors away, Dumont says.
“French investors are interested in the market. They would like to come,” she says. “One message that comes regularly — and this is the core of the difficulty as I can see it — is that small business cannot afford to come into Ukraine. For most of them, it’s too complicated. The big companies, they don’t care. I say that with all friendship and love to Ukraine. But they don’t need Ukraine to make themselves bigger.”
Although Ukraine has “a big market and a big population,” companies also worry that doing business in Ukraine will harm their reputations. “They are waiting for green lights. One of those green lights will appear on the day when there will be a proper anti-corruption court functioning. It will be a signal for investors that they can come in.”
France’s key role
Irritating France is not a good idea. Already, the French president has had to personally intervene in disputes involving French businesses in Ukraine, Dumont said.
France plays a key role in trying to bring an end to Russia’s war through peace talks in the Normandy Format, along with Germany, Ukraine and Russia. On that score, French President Emmanuel Macron is solidly on Ukraine’s side in supporting economic sanctions against Russia, holding Vladimir Putin accountable and refusing to accept Russian occupation of Ukraine’s Crimean peninsula and eastern Donbas.
While the war turns four years old in April, Dumont sees the idea of creating an international peacekeeping force as worth pursuing.
“We’re talking with Ukrainians, first and foremost, and talking also with the Russians.” Defining the parameters of a peacekeeping force “is how we are going to be able to understand what the Russians have in mind: Is it a real step forward or is it not?”
But just as with the fight against corruption, no breakthrough has yet taken place on the war front, leaving Ukraine with plenty of domestic and foreign challenges ahead, enemies from without and from within.