Ukraine's Most Recent Victory: Ensuring Transparency Of The Extractive Sector, - new blog of Oleksiy Orlovsky in OGP newsletter
New blog for Open Government Partnership Newsletter of the director of the program "Democratic Practice" Oleksiy Orlovsky is devoted to the progress of Ukraine in the implementation of transparency of extractive industries.
Ukraine was not only among the first countries to join OGP in September of 2011 but also became one of the few countries that attempted to increase transparency of the extractive sector in its first OGP Action Plan due to demands from civil society. After joining the Extractive Industries Transparency Initiative (EITI) in 2013, Ukraine committed to publishing its first report according to EITI Standards.
In the process of preparing the current action plan, Ukraine also paid attention to the problem of transparency of the extractive sector and raised the level of its demands concerning this issue even higher. In addition to publishing regular reports according to EITI Standards, the Government of Ukraine moved to adopt a law that would ensure mandatory disclosure of the information in extractive sectors.
A large team comprised of representatives of different sectors (government institutions, private sector, civil society representatives and also the EITI National Secretariat) actively participated in creating this Law. A public organization known as the “Dixi Group” played a titular role in the process. Their donors’ support allowed for proper analytical work to be carried out as well as public consultations, information, advocacy, and legal campaigns at the level of state power bodies. The main partner and driver of this process in the Ukrainian Parliament (Verkhovna Rada of Ukraine) was Olga Bielkova, Deputy Chairperson of the Verkhovna Rada Committee on Fuel and Energy Complex, Nuclear Policy and Nuclear Safety.
It is necessary to mention here that the process to adopt this law in Verkhovna Rada was extremely difficult. The first attempt to adopt the law failed because of active counteraction from different lobby groups who saw it as threat to their private interests. Advocates of the law had to rework and register it again and carry out exhaustive explanation and advocacy campaigns. After several debates, the Verkhovna Rada of Ukraine passed the widely-supported Law 6229 on ‘Ensuring Transparency in Extractive Industries’ on September 18th, 2018. The Law received 244 votes, with the required minimal number of 226 votes.
The Law introduces recommendations of EITI Standards and best practices from other countries, as well as fixed EITI reporting procedures in Ukraine. The new legislation sets out legal principles for the collection, disclosure and dissemination of data about Ukraine’s extractive industries. It is hailed by advocates as a milestone on the road to transparency and accountability in the country’s oil, gas and mining sector. In particular, the Law demands:
- Contract disclosure: Article 11 retains the requirement to publish applications for special permits, information regarding issued special permits and information regarding essential terms and conditions of subsoil use agreements;
- Project-level reporting: Article 6 retains the requirement to publish information regarding total amount of payments, total amount of royalties (rent payments), land fee and environmental tax for every type of payment related to every separate project activity, production volumes of the relevant project activity, amount of state aid, etc.;
- Information disclosure about beneficial owners: Article 6 retains the requirement to provide information regarding ultimate beneficial owners (controllers) in a reporting period in accordance with the Law of Ukraine “On Preventing and Combating Legalization (Laundering) of Proceeds from Crime, Terrorism Financing and WMD Proliferation Financing”, etc.
The Law also sets penalties for nondisclosure of information or violation of the terms of information disclosure as well as for incomplete information in accordance with this Law on activities of the entities engaged in extractive sectors. The Law also anticipated responsibility for nondisclosure of information, violation of the terms of information disclosure in extractive sectors and for responsible persons obtaining payments, for the central body of the executive power providing organization of the state policy in the power sector and in the coal industry as well as for the central body of executive power implementing state policy in the sphere of geological study and rational usage of resources.
The first reporting period, under the Law, is 2018 – so the information will be disclosed in 2019-2020.
It is clear that after this Law was adopted, Ukraine’s executive power will have to carry out a number of tasks on its practical implementation in the next 6 months. Meanwhile, government institutions, business, and civil society organizations of Ukraine have already prepared for the proposals of the Cabinet of Ministers of Ukraine to include obligations to ensure transparency of the extractive sector in the country’s new OGP Action Plan for 2018-2020.
With this momentous example, Ukraine shows how consecutive work to ensure transparency of a specific sector of the economy –within the framework of OGP obligations – can help achieve significant results. Additionally, our experience shows how fulfilling commitments within the OGP framework helps implement initiatives like EITI.
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