Reform Index 234: ethical lobbying and regulation of capital and commodity markets

Reform Index 234: ethical lobbying and regulation of capital and commodity markets

Photo: unsplash.com / Vladimir Solomianyi
24 May 2024
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Seven regulations were included in the 234th issue of the Reform Index. From March 11 to March 24, 2024, the Index increased by +0.9 points — almost twice as much as in the previous issue. This issue contains the law on ethical lobbying. Despite its adoption being one of the EU’s requirements for the start of negotiations on Ukraine’s accession, the experts negatively assessed this law in its current form, and it became the first anti-reform measure in nearly two years (since July 2022).

Graph 1. Dynamics of the Reform Index

Graph 2. Values of the Reform Index and its Components in the Current Assessment Round

The law regulating capital and commodity markets, +2 points

Law 3585-IX is a new version of the law on state regulation of the securities market in Ukraine, which has been in effect since 1996. Adopting the law was among the conditions for Ukraine to receive a $1.5 billion loan from the World Bank in March 2024.

The novelties introduced by the law align with the Principles of the International Organization of Securities Commissions (IOSCO). Among the key changes are strengthening the institutional capacity of the National Securities and Stock Market Commission (NSSMC) by granting it powers to investigate violations in the capital markets, new rules for appointing the Chair and members of the commission, taking into account their business reputation and based on open competitive selection, and increasing the independence of its employees through higher salaries. The law also establishes that professional participants in the capital markets and organized commodity markets must avoid conflicts of interest and implement a mechanism to regulate conflicts of interest if they arise.

Information about the Reforms Index project, the list of Index experts and the database of the regulations assessed are available here.

The law on lobbying, -0,5 points

Ukraine has long awaited the creation of a lobbying law, as this area needed to be brought out of the shadows and have common rules established. Additionally, adopting a law regulating lobbying activities in Ukraine was one of the requirements for initiating negotiations for Ukraine’s accession to the EU (Fourth Evaluation Round; Corruption Prevention in Respect of Members of Parliament, Judges, and Prosecutors). However, the lobbying law proposed by the Cabinet of Ministers (3606-IX) sparked broad public discussion instead of receiving comprehensive support. Among the main criticisms of the law are:

  • Lack of clear distinction between lobbying and advocacy, hence ambiguity in applying the law regarding civil society organizations.
  • Narrowing the law’s scope of regulation. Thus, the “subject of lobbying” is defined as a regulatory legal act regarding which the interested party influences individuals or bodies that can adopt it. However, general policies or specific administrative decisions, the implementation of which may also be in the interests of stakeholders, are not included in the regulatory scope.
  • Weakly defined incentives for lobbyists to register in the Transparency Register (free public access to up-to-date and reliable information about lobbying entities and their reporting).

As a result, the law received a negative assessment from the experts of -0.5 points (-0 points in the “Fighting Corruption” subcategory, -0.5 points in the “Business Regulation” category). It became the first anti-reform effort in a long while.

Chart 3. Value of Reform Index components and number of events

Reform Index from VoxUkraine aims to provide a comprehensive assessment of reform efforts by Ukraine’s authorities. The Index is based on expert assessments of changes in the regulatory environment in six areas: Governance, Public Finance, Monetary system, Business Environment, Energy, Human Capital. Information about the Reforms Index project, the list of Index experts and the database of the regulations assessed are available here.

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