On a way to the EU. An Overview of the Reforms in the Fourth Quarter of 2022

Key reforms

In the fourth quarter of 2022, no decision scored above +2 points (in the range of -5 to +5), which experts believe separates significant changes from less important ones, with five laws scoring precisely +2 points.

The law on media (Reform Index 195) was a kind of long-term project waiting in Parliament since 2020, with over 2,350 amendments between readings and about 300 pages of text. Its adoption was one of the requirements to confirm the EU candidate status. The law implements the requirements of the European directive on securing media pluralism, consumer rights, and access to information regarding media outlets’ ownership structure. A notable innovation is that Internet resources and video services are subject to regulation for the first time in Ukraine.

The law on the public health system (Reform Index 189) fulfills Ukraine‘s commitments contained in the EU Association Agreement. It introduces the concept of “public health” at the legislative level to describe activities aimed at strengthening health care, preventing diseases, and increasing life expectancy. The law is designed to promote more efficient use of funds in the medical system, emphasizing disease prevention. In addition to information work, it includes the definition of scientifically based safety parameters (sanitary standards and regulations), the classification of chemical substances, and the state registration of dangerous factors.

The law on liability insurance in place of fire inspections (Reform Index 191) allows low- and medium-risk business entities to replace checks with civil liability insurance (high-risk entities were permitted to do so back in 2002). Among the law’s advantages is a straightforward compensation procedure for insurance companies in case of accidents, reduced corruption risk during the inspection of businesses, and the possibility of reducing the number of State Emergency Service inspectors.

The law on chemical safety and management of chemical products (Reform Index 195) helps align Ukrainian laws with European legislation regarding registering (REACH regulation) and labeling and packaging chemical substances (CLP regulation). A state register of chemical substances and a register of hazard classification and elements of information about the dangers of chemical products will be created to systematize information about chemical substances in Ukraine.

The last in this block but not least in the public eye, is the law on women’s voluntary military registration (Reform Index 190). According to it, women with medical or pharmaceutical training are subject to military registration as liable for military service, with others able to do it voluntarily. This law responded to a public outcry caused by a Ministry of Defense order obligating women of over 300 professions to undergo military registration.

Zero score

In the fourth quarter, one law received 0 points from experts.

Law on Postal Service (Reform Index 193) is a step towards harmonizing Ukrainian and European postal laws and significantly updates the legislation. It finally separates postal services from delivery services, outlines the functions of the “designated postal operator” providing universal (mandatory throughout Ukraine) services, and increases the inclusiveness of postal services by introducing shipments for the blind using an embossed font.

The regulation’s minuses earning it zero points are an excessive (over and above the requirements of the European directive) increase in the powers of the state regulator (the National Commission regulating electronic communications, radio frequency spectrum, and the provision of postal services) enabling it to control the activities and access financial data not only of the designated postal operator but also of other operators. In the opinion of its critics, another drawback of the law is decreased competition in the market. The definition of the “designated operator of postal services” includes a provision enabling it to receive exclusive rights to carry out certain postal activities. The law also establishes that international postal items can be submitted for customs inspection only by the designated postal operator and postal service providers registered with the Universal Postal Union (currently, Ukrposhta and Meest Express).

Anti-reform

At the year’s end, only one event received a negative score, namely the law restricting the circulation of medicinal products from Russia and Belarus (-1.0 points, Reform Index 189). Despite the noble goal of prohibiting the circulation of Russia or Belarus-made drugs (as stated in the explanatory note),  the law is written so that nearly all medicines can be banned.

Thus, medications can fall under the ban if at least one legal entity in the chain of manufacturers, suppliers, or their separate representative offices is linked to legal entities producing medication or carrying out transactions on the territory of the aggressor states. That is, a tool was created that allows one to ban medicines produced in any country if, say, “paint for packaging comes from somewhere in Russia or Belarus,” explains Inna Ivanenko, a representative of the Patients of Ukraine charity foundation. The NAPC pointed out that the law carries corruption risks and therefore needs to be revised.

What are the changes in key areas?

The Reform Index tracks regulatory changes in six areas: governance, public finance, monetary system, business environment, energy, and human capital. In the fourth quarter, the “Business environment,” “Human capital,” and “Governance” showed the most progress. Next, we will show you what key decisions landed them at the top.

Business environment

In the third quarter, the authorities adopted 22 essential regulations in the “Business environment” category. Half of the reforms were initiated by Verkhovna Rada deputies (11), nine by the Cabinet of Ministers, and two by the President.

Among the key sub-areas that made progress in this area are intellectual property protection and product safety.

Intellectual property protection. At the year’s end, the Verkhovna Rada adopted the law on copyright and related rights (+1.5 points, Reform Index 195), implementing several European directives and international agreements into Ukrainian law. The regulation updates the list of intellectual property objects by adding music and light shows, circus performances, landscape formations, theatrical productions, artistic forging, etc. It introduces the concept of orphan works (those whose copyright holders cannot be found), broadly regulating the protection mechanisms for copyrighted items and such rights’ period of validity. In addition, a law was signed in December, increasing fines for copyright infringement (+1 point, Reform Index 195). It raises penalties for illegal use of copyrighted items from 10-200 to 50-300 (currently UAH 850-5100) of non-taxable minimum incomes (ntmi), with fines increasing from 200-1000 up to 300-1000 ntmi for illegal reproductions of copyrighted material. Also, the law removes the responsibility for the absence of the labeling of audio and video and computer programs with control marks.

Also adopted in the same quarter were: a deregulation law simplifying the registration process for plant varieties (+1 point, Reform Index 194); a law protecting geographical food product brands (+1.3 points, Reform Index 189) expanding the scope of terminology and establishing the conditions for granting legal protection to geographical indications used for agricultural products and foodstuffs; and the law on geographical indications for alcoholic beverages (+1 point, Reform Index 195) establishing the rules for using geographical indications for alcohol and the specific use and protection of such names. Thus, individual producers of spirit drinks have the right to register a geographical indication if they are the only producers of such beverages in a particular geographic location and if the area producing the drinks differs from the surrounding territories, affecting the beverages’ characteristics. Brand names can also be registered by groups of producers (even from different countries) or the state.

Environmental protection and chemical safety. In addition to the law on chemical safety, several more recent regulations were included in this block. In November, Volodymyr Zelensky signed a law on the safety of food contact materials (+1 point, Reform Index 192). It establishes requirements for the properties and labeling of materials intended for use with food products and creates a state register of substances permitted for such use. The law also establishes the need for state registrations of the plastic recycling process, the safety requirements, and those responsible for ensuring safety regarding recycled plastic items.

The law regulating the handling of pesticides and agrochemicals (+1.1 points, Reform Index 195) aligns Ukrainian laws with European regulations, creating a common terminology, labeling, requirements for licensing packaging and producing chemicals, and the state registration of such substances. The Ministry, with a mandate for environmental protection, is tasked with formulating and publicly publishing a plan for state testing and scientific research of pesticides. The law also initiates the establishment of a publicly accessible register of pesticides allowed in Ukraine (the procedures for maintaining these records are to be approved by the Cabinet of Ministers).

The law on the National Pollutant Release and Transfer Register (+1 point, Reform Index 189) creates an online map to mark the entities polluting the environment and each facility’s emissions and waste data. This will make emissions monitoring more transparent and give the public a tool for tracking emissions and advocating for reducing industrial pollution.

Human capital

We spotted 11 crucial changes in this area in the three months. Six were initiated by the Verkhovna Rada, four by the Cabinet of Ministers, and one by the President.

Health. In addition to the above laws on public health and the prohibition of drugs from Russia and Belarus, three more changes took place in this area. The law on strengthening controls over dispensing medicinal products (+1.5 points, Reform Index 191) prohibits dispensing prescription drugs without a prescription, with a prescription issued in violation of the law’s requirements, and with an expired prescription. The law extends these provisions to narcotic drugs and psychotropic substances. In the summer of 2022, prescriptions became required for dispensing antibiotics. This step prepares Ukraine’s complete transition to electronic prescriptions. The changes will take effect three months after the end of martial law.

112 became Ukraine’s single emergency response system number (+1 point, Reform Index 189). It is a “one-stop shop” enabling people to pass information to other services providing emergency assistance (101: rescue services (firefighters), 102: police, 103: emergency medical assistance, and 104: gas service).

The law on the state registration of human genomic data (+1 point, Reform Index 191) is part of Ukraine’s ratification of the Council of Europe convention on protecting children against sexual exploitation and sexual abuse. Collecting genomic information and storing it in an electronic registry should help solve crimes, identify people who cannot provide information about themselves due to their condition, and identify the deceased. 

Genomic information of suspects and those convicted of serious crimes, unidentified human remains, missing people, and those who cannot provide information about themselves due to their health condition is subject to mandatory state registration. The rest can register their genomic information voluntarily.

Labor market. In the fourth quarter, the authorities continued to work on improving labor market regulation. The requirements for hiring foreign workers were eased to attract more staff (+1 point, Reform Index 190). The law abolishes the need to pay foreigners at least five times the minimum wage if they work for public or charitable organizations or ten times the minimum wage in other areas. Also, the law specified the rules for part-time work for foreigners. Another law aiming to revive the labor market is the new procedure for encouraging the employment of those unemployed (+1 point, Reform Index 191), introducing compensation for the employers hiring unemployed people (based on a suggestion from the Employment Center) in the amount of the USC paid for these individuals (but not more than double the amount of the minimum contribution) for a period of 12 months on condition that they work at the company for at least two years. When employing the jobless with less than five years left before retirement, up to 50% of the salary will be reimbursed to the employer, but not more than the minimum wage.

The law combating workplace harassment (+1 point, Reform Index 194) harmonizes Ukrainian anti-discrimination legislation with European regulations. It introduces the “mobbing (bullying)” concept into Ukrainian legislation, defining possible forms of putting psychological and economic pressure on employees. The law entrusts the employer with the responsibility of ensuring the safety and protection of their employees’ physical and mental health. In the case of proving facts of mobbing in a court of law, the victim can make claims for moral compensation and the severance pay of at least three months’ average salary in the event of dismissal.

Governance

In this area of monitoring, we spotted eleven critical changes. Six reforms were initiated by the Verkhovna Rada, four by the Cabinet of Ministers, and two more by the President.

State property. MPs continue to look for ways to use state property more efficiently. In November, the Verkhovna Rada unblocked the privatization of state property subject to tax liens (+1 point, Reform Index 193) on condition that the buyer repay the tax debts on this property within six months from the privatization date. The law on selling and rent property of state-owned enterprises in electronic auctions, too, is designed to improve the process of using state property (+1 point, Reform Index 195).

Judiciary. In the fourth quarter, the Verkhovna Rada adopted the long-awaited law on changes to the procedure for selecting judges for the Constitutional Court (+0.5 points, Reform Index 195). Despite its importance and being listed as a requirement for starting Ukraine’s negotiations on joining the EU, experts did not give the law a very high score since it fails to ensure the public’s and international experts’ influence on the selection of judges. The competition commission will consist of representatives of the Government, the President, the Parliament, and the Congress of Judges. Without external experts, corrupt judges’ chances of getting to the CCU increase massively. European Commission representatives also stated the need to change the law. Another news in this area is Ukraine’s accession to the European Public Law Organization (+1 point, Reform Index 190), which makes it possible to engage this organization’s specialists to help adapt Ukrainian legislation to European regulations on the way to joining the EU.

Culture. At the year’s end, the Verkhovna Rada voted for the European integration law on national minorities (communities) (+1 point, Reform Index 195), written to align with the Framework Convention for the Protection of National Minorities. The law establishes that national minorities are “integrated, and organic parts of Ukrainian society,” and their culture is part of Ukrainian culture. Representatives of national minorities have the right to self-identify, preserve their language and cultural identity, and have education in their mother tongue. The state must ensure these rights by promoting the national minorities’ history, culture, cultural and artistic events and by providing budgetary assistance to fund activities aimed at community development. Centers for national minorities should be established in all regions. During martial law and within six months after its lifting, minorities identifying themselves ethnically with the aggressor state are prohibited from using some of the minorities’ rights. It is the right to peaceful assembly and creating public associations of national minorities, funding community activities from the budget, being part of bilateral intergovernmental commissions on ensuring the rights and freedoms of persons belonging to national minorities, etc.

Social protection. The main event in this sub-area was the merging of the Pension Fund and the Social Insurance Fund (+0.8, Reform Index 190). This step is also designed to reduce the administrative costs of maintaining two structures dealing with social security. The law creates a single information system and a single funds management system to ensure stable pensions and insurance payments to working citizens (temporary disability, payments relating to pregnancy and childbirth, etc.).

Who are the biggest reformers?

In the fourth quarter of 2022, the Verkhovna Rada led the way by adopting 26 reform regulations, followed by the Cabinet of Ministers, which initiated and adopted 19 laws and resolutions. The President initiated six reforms, and the NBU adopted two essential resolutions.

Compared to the previous quarter, in the fourth quarter of 2022:

• important regulations’ numbers increased from 47 to 51;
• the average round score fell from 0.9 to 0.7 points;
• the average event score decreased from +1.2 points to +1 point in the range of -5 to +5.

Ukraine took significant steps in harmonizing its laws with European regulations during the past year. At the year’s end, the widely discussed laws on media, national minorities, and the principles for selecting judges for the Constitutional Court were adopted. However, these are only the first steps. It is good that the EU “tied” the 2023 funding (EUR 18 billion) to reforms (although Ukraine needs reforms in the first place, we, unfortunately, often forget about this). Ensuring the work of anti-corruption bodies and judicial reform are traditionally on the list. The EU also expects Ukraine to start reforming law enforcement agencies in 2023, criminalizing large-scale smuggling, and maintaining the State Enterprise “Medical Procurement of Ukraine” to carry out the procurement at the national level.