Compliance with EITI (UA0040)

Taking measures concerning the acquisition by Ukraine of the status of compliance with the Extractive Industries Transparency Initiative standards

8. EITI Compliance

Commitment Text: 8. Taking measures for Ukraine to obtain the status of compliance with the Extractive Industries Transparency Initiative standards.

Expected result: national legal framework brought into conformity with the EITI standard; a report in Ukrainian and in a foreign language prepared according to the above-mentioned standard.

Lead institution(s): Ministry of Energy

Supporting institution(s): Ministry of Economic Development, Ministry of Finance, Ministry of Ecology and Natural Resources, International Renaissance Foundation, NGO Dixie Group, NGO Kyiv International Energy Club Q-Club, NGO Analytical Centre of Regional Cooperation, the international initiative “Publish What You Pay,” other unspecified NGOs and international organisations

Start Date: Not specified                                                        End Date: 31 December 2015

Commitment aim

In October 2013, prior to the commitment period, Ukraine was accepted as an Extractive Industries Transparency Initiative (EITI) candidate country. This commitment aimed to advance Ukraine’s compliance with EITI standards, which was an important step for ensuring transparency and preventing embezzlement of revenues received from the extractive industry. While the title of the commitment (“taking measures”) was too broad, the expected outputs included bringing national law into compliance with EITI standards, and preparing a report in line with those standards. A similar commitment was included in the previous OGP action plan. According to the State Statistics Service, the oil and gas sector’s contribution to Ukraine’s GDP is about 1.3%. The 2013 EITI report documented USD 3.3 billion of payments by oil and gas companies (including oil and gas transportation companies).^{[Note 33: https://eiti.org/ukraine.]}

Status

Midterm: Substantial

The national multi-stakeholder group (MSG) developed the terms of reference for the independent administrator for Ukraine’s first EITI report. The report was to include the oil and gas sectors. The first country EITI report was scheduled to be prepared by the end of 2015.^{[Note 34: http://bit.ly/1ODYqyS. ]} In August 2015, the MSG selected the company, Ernst & Young, to independently develop the EITI report. It also selected the national secretariat for the MSG through an open competition.^{[Note 35: http://bit.ly/1jQx6jZ. ]} The report was eventually delayed due to the failure of the Ukranafta company (majority stake owned by the state) and the State Fiscal Service to provide information required for the report.^{[Note 36: Independent Reporting Mechanism (IRM) Progress Report 2014-15: Ukraine, 42. ]}

In addition, in June 2015, Parliament adopted the Law on Amendments in the Legislation to Ensure Transparency in the Extractive Industries. The draft law was prepared by MSG members and civil society experts. In its preamble, the law directly refers to the OGP plan. It includes important changes in the Subsoil Code within the Law on Oil and Gas. It also instructs the government to develop procedures for ensuring transparency in the extractive industries, and to adopt the international reporting standards by users of subsoil resources. The amendments of June 2015 were seen as an interim measure. The MSG started working on a new comprehensive draft law on the transparency of extractive industries.^{[Note 37: Ibid, 42-43. ]}

End of term: Substantial

Ukraine’s first EITI report for 2013 was published in November 2015. The country’s validation against the EITI Standard will commence on 1 July 2017.^{[Note 38: https://eiti.org/ukraine. ]} According to the government’s self-assessment report, the preparation of the second national report has begun; based on the tender, the government selected an independent administrator to prepare the report, which was due in December 2016.^{[Note 39: Text of the report available at http://bit.ly/2nAPbaw.]} The country’s second report will include the coal and iron ore sectors. In December 2015, the government adopted regulations on ensuring transparency in the extractive industries in accordance with the 2015 law. It also reported on a number of awareness-raising activities with civil society involvement.

In June 2016, a group of MPs submitted to Parliament a draft law on the disclosure of information in extractive industries. The draft law builds on the 2015 amendments, and suggests a comprehensive framework for transparency in the sector. It was developed by the Ukrainian multi-stakeholder group, together with external experts and Members of Parliament, in line with recommendations from the first EITI Report. It institutionalises the EITI national coordination and reporting mechanism, aligns Ukrainian legislation with the relevant EU law, and establishes detailed requirements on disclosure of information in the sector, including beneficial ownership.

Did it open government?

Access to information: Major

Civic Participation: Major

Public accountability: No change

The commitment sought to continue working toward compliance with international standards on transparency in extractive industries. If the overall goal of the commitment (i.e., obtain status of compliance) is achieved, it could have a transformative effect. Following a delay, the government published its first national EITI report, which has become an important milestone. The report discloses information about key Ukrainian oil and gas fields, license holders, production volumes, as well as the payments companies made to budgets of all levels.

The government also began preparing the second national report. Additionally, Parliament passed important amendments in the legislation to introduce transparency instruments in the extractive industries and government policy. A comprehensive law on transparency in the extractives sector has been developed, and is pending in Parliament. The EITI process in Ukraine was the first to involve genuine multi-stakeholder dialogue within the MSG, including with a number of NGOs and experts.

The Multi-Stakeholder Group is composed of six CSOs (International Renaissance Foundation; “Centre of Globalistics Strategy I,” DIXI Group, Sustainable Development Institute, Analytical Centre of Regional Cooperation, Chapter in Donestk Oblast of the NGO “All-Ukrainian People’s Control”), six private enterprises, and six government ministries. As members of the MSG, civil society groups play an active role in monitoring and evaluating EITI compliance. The MSG oversees EITI reporting, including selecting and managing the Independent Administrator in charge of carrying out evaluations. CSOs share an equal level of decsion-making power as all other MSG members, and directly influence and decide policies related to EITI activities.^{[Note 40: Main UA EITI Work Plan 2015-2016 https://eiti.org/sites/default/files/documents/2015_ukraine_work_plan.pdf.]} During its meeting in November 2016, the MSG decided to train local NGO representatives on how to use the EITI report data and monitor implementation of recommendations.^{[Note 41: Institute for Budgetary and Socio-economic Research, 16 November 2016, http://www.ibser.org.ua/en/news/msg-meeting-covering-operational-results-ukraines-extractive-industries-2014-2015.]}

All these activities have strongly improved progress toward full EITI compliance as envisioned by the commitment. The cooperative process has also increased access to information and civic participation in a major way. 

Carried forward?

The commitment was carried over to the new action plan. It provides for the adoption of the law on the disclosure of information in extractive industries, and publication of the second and third national reports (in December 2016 and December 2017, respectively). The commitment no longer aims to achieve Ukraine’s compliance with the EITI Standard, a factor that diminishes the commitment’s ambition.

Theme III. Prevent and combat corruption