What happened with Privatbank
Ihor Kolomoiskyi, one of the bank’s former owners, used it to pay large credits to his fictitious firms. In that way, he laundered at least US$2bn. The National Bank of Ukraine declared the bank insolvent in 2016 and nationalized it almost immediately. In fact, the nationalization was done improperly. According to the law, nationalization of the bank takes approximately a year. The first step is that a bank is recognized as a problematic one. Later it has 6 months to reorganize its operations properly. Only after that term, if there are no improvements, the nationalization or liquidation of the bank takes place. In the case of Privatbank, everything was done almost immediately, in a few days of December 2016.
On the other hand, the bank was of national importance, it is the largest bank in Ukraine and its collapse would lead to a deep economic crisis. Therefore, immediate nationalization was required to save it. This improper nationalization was even admitted by Yuriy Lutsenko, Prosecutor General. Yet, he also added that everything was going to collapse and the state just saved the most important bank investing into it UAH160bn ($6bn) through issuing state bonds.
The recent court decision on the improper nationalization of the bank is especially interesting because in 2018 the same court, considering the other claim of the other plaintiff, decided that everything was done properly. Yet, this recent court decision is not likely to be implemented. The only consequence of it may be a liquidation of the bank with compensation of $2bn to Kolomoiskyi. However, such a decision would lead to a collapse of the state banking system and elimination of any support from IMF and western partners. No minister of finance would pass such a decision, especially under the pressure of civil society.
As financial expert Anna Honcharenko says, the real goal of Kolomoiskyi may be to regain his influence, close other cases against him, and get back the possibility to develop his oligarchic business. He wants to get business preferences in those areas where he lost leadership, for example, to regain control over Ukrnafta – an important oil company. The case of Privatbank is merely blackmail, coming along with presidential elections and the victory of Volodymyr Zelenskyy, supposedly affiliated with Kolomoyskyi according to Bihus.info.
Until Zelenskyy, who received a landslide victory over incumbent President Petro Poroshenko on 21 April, appoints his ministers and heads of security services and makes his first real decisions, no one can say for sure whether he will play for Kolomoiskyi and his business interests. Yet, this scenario remains possible.
Why that particular court decided that nationalization is improper just before elections
The simple answer widespread in social media is that judges are reorienting and trying to serve Kolomoiskyi as the next main oligarch in the country. However, no direct proof of these rumors is available yet. What one can say for sure is that courts didn’t change significantly in the last 5 years and their decisions quite often serve certain particular interests.
The District Administrative Court of Kyiv, which made the decision on Privatbank, is a particularly interesting example of the relations within the judiciary. This court is responsible for the majority of disputes of citizens with the authorities. This is the court for business, appealing the decision of National Bank, or citizens who want to cancel an order of the Ministry which violates their rights. This is also the court which became famous for most Ukrainian corruption scandals.
Just a few examples collected by Ukrayinska Pravda:
- Roman Nasirov, head of the state fiscal service, became a symbol of Ukrainian corruption. He was suspected of illegally allowing companies from the scheme of MP Oleksandr Onyshchenko to set off tax debts, which caused a budget loss of UAH 2bn. In March 2017, the Cabinet of Ministers dismissed Nasirov from the position of the head of the state fiscal service. However, the court not only didn’t sentence him but also restored him to the position of the head of the state fiscal service and even obliged fiscal service to pay Nasirov a salary for “forced absenteeism.”
- In March 2018, Kateryna Amosova was dismissed from the position of the president of the Bohomolets National Medical University due to divergences in the digital report and “violations of financial discipline, which resulted in a budget loss of about UAH 3.5mn.” The District Administrative Court of Kyiv restored her to the position and even forbid the office to be held by anyone except Kateryna Amosova. She was later dismissed by the Ministry due to absenteeism.
- In 2013, Ablov, a judge of the same court, issued a decree which allowed the special street police (Berkut) to disperse the protesters of the Euromaidan Revolution. On 9 December 2013, he examined the lawsuit of a physical entity in only 6 hours and ordered “authorized persons” to disperse the enormous protests which engulfed central Kyiv. This judge wasn’t dismissed from the court during the last 5 years.
- The District Administrative Court of Kyiv is that very court which, by its decision on 5 February 2019, forbid Uliana Suprun from performing her duties as a Health Minister. This case was vehemently protested by civil society and finally won by Suprun, the driver of healthcare reform in Ukraine.
The decision on the improper nationalization of Privatbank by this court does not come as a surprise after all the previous decisions. However, how is something like this possible in a country successfully undergoing other reforms? This is the largest mystery of Poroshenko’s presidency. Poroshenko and his team were the main authors and initiators of laws on judiciary reform which created new courts but didn’t change judges significantly. On the one hand, such corrupt courts benefit Poroshenko directly with their decisions. Moreover, they played against him, decreasing his rate of public support. However, Poroshenko neither addressed this issue publicly nor did what was within his power as a president to solve the problem.
NGOs like the DEJURE foundation and movement Chesno (“Honestly”), have already created a very detailed list of all the defects of the reform and request changes. A large part of Zelenskyy’s voters, especially those from civil society who supported him, hope that he will implement required steps to establish honest courts.
What is wrong with Ukrainian judiciary and what should be done
The list of requested improvements is very extensive. Yet, almost all of them involve the High Qualification Commission of Judges of Ukraine. According to the design of the reform proposed by Poroshenko and accepted by the parliament, this commission is the key to the purification of the judiciary. The commission has to assess all judges according to their professional skills, involvement in corruption, and psychological adequacy to their responsibilities. The plan was good but implemented poorly.
According to the statistics of Chesno, almost 40% of Ukrainian judges were involved in corruption. This means that all of them had to be dismissed by the High Qualification Commission, or even more. In reality, only 156 judges out of 2409 who have already passed through the commission were determined to be incompatible with their position. Of those 156, only 15 judges were actually dismissed by the High Council of Justice. That means less than 1% instead of 40% – practically nothing.
By the way, all of those three judges, who made the decision on the Privatbank, were declared unfit for service by Chesno. Yet, their consideration in the High Qualification Commission was delayed due to unexplained reasons. If they were dismissed, such decisions would not be possible.
There are clear reasons for such inefficiency of the High Qualification Commission, the report of the DEJURE Foundation says. The most important reasons are:
- The Higher Qualification Commission of Judges conducts interviews in a conveyor mode, without public supervision. On average, 320 interviews are conducted per month. Due to the lack of time for each judge, the procedure becomes purely formal, and information provided by the judge during the interview is not checked.
- The decisions of the High Qualification Commission don’t have any explanation. Nobody can check from where these particular grades come.
- The psychological test checks, among other things, loyalty to management. This test is open for manipulations, as too many independent thoughts lead to lower results. The commission itself grades the results of psychological testing without any external control.
- Tests are too easy and formal, and no real professional evaluation takes place.
- The system is ineffective because it doesn’t check judges on their involvement in corruption. Judges who failed to prove the legality of their sources of origin of wealth are still given good marks. The commission does not check data on the inconsistency of judges’ wealth with their official income, although it has the power to do so according to the law.
- Finally, the whole process is generally untransparent, without the active participation of civil society. Because most of the members of the commission are appointed by judges, it means that corrupt judges are to control themselves.
Most defects can be improved within the High Qualification Commission itself, without the intrusion of other authorities. The important is the new law on the members of that commission, where would be less former judges and more representatives from the civil society.
Iryna Shyba, manager of the DEJURE foundation, says on that issue that:
“Public representatives should be involved in the process of evaluating the judiciary, because the members of the Public Integrity Council [representatives of civil society], as well as international experts involved in the contest to the Anti-corruption court, have shown the possibility to perform effectively. Moreover, according to the data of the Foundation “Democratic Initiatives, they are trusted by 47% and 29% of the population, respectively, and only 8% would entrust the purification of the judicial system to the judicial authorities. Of course, the public must have real powers and opportunities to influence the process.”
If the responsible members of High Qualification Commission are appointed, they would change the process of evaluation: slow it down, verify the judges’ statements, check sources of their income, as well as create more complicated tests. This essence of the reform should yet be brought into the system. First of all, by the new laws on the High Qualification Commission as well as on other institutions responsible for the control over the system and dismissal of judges.