Extractive Industries Transparency Initiative (UA0065)

Event: Implementation in Ukraine of the Extractive Industries Transparency Initiative; Implementation timeframe: 2016-2018; Entities responsible: Ministry of Coal and Energy, Ministry of Economic Development, Ministry of Finance, Ministry of the Environment, State Geology and Subsoil Resources Service.; Partners: Renaissance International Fund, German Corporation for International Cooperation (GIZ), American Chamber of Commerce in Ukraine, non-governmental organisations Dixie Group, Analytical Centre for Regional Cooperation, Energy Transparency Association, the international initiative Publish What You Pay, other civil society institutions and international organisations (by consent).; Expected results: Ensuring the: Support in the Verkhovna Rada of Ukraine for the draft Law of Ukraine “On the disclosure of information in extractive industries” (until adoption). Publication of reports in Ukrainian and English based on the standards of the Extractive Industries Transparency Initiative (December 2016, December 2017).

✪9. Implement the Extractive Industries Transparency Initiative

Commitment Text:

Implementation in Ukraine of the Extractive Industries Transparency Initiative

Expected results: Support in the Verkhovna Rada of Ukraine for the draft Law of Ukraine “On the disclosure of information in extractive industries” (until adoption). Publication of reports in Ukrainian and English based on the standards of the Extractive Industries Transparency Initiative (December 2016, December 2017).

Responsible institutions: Ministry of Coal and Energy, Ministry of Economic Development, Ministry of Finance, Ministry of the Environment, State Geology and Subsoil Resources Service.

Supporting institutions: International Renaissance Foundation, German Corporation for International Cooperation (GIZ), American Chamber of Commerce in Ukraine, non-governmental organizations Dixie Group, Analytical Center for Regional Cooperation, Energy Transparency Association, the international initiative Publish What You Pay, other civil society institutions and international organizations (by consent).

Start date: December 2016..                         End date: August 2018

Editorial note: This commitment is clearly relevant to OGP values as written, has transformative potential impact, and is substantially or completely implemented and therefore qualifies as a starred commitment.

Commitment Aim:

This commitment aims to implement the Extractive Industries Transparency Initiative (EITI) in Ukraine as a continuation of commitments in two previous action plans. Ukraine became an EITI candidate country in 2013, published its first EITI report in 2015, and has passed some legislative amendments to introduce EITI standards. However, the government need to put forth additional efforts to pass EITI assessment, publish annual reports, and introduce a new law that would adopt EITI standards to the fullest extent. This commitment aims to win support in the Verkhovna Rada for the law and publish the EITI reports.

Status

Midterm: Substantial

By midterm, the multi-stakeholder group, including Extractive Industries Transparency Initiative (EITI) Ukraine, had helped to prepare the draft law. Parliament first debated it in February 2017, but it did not pass. The second updated draft law, under new registration number #6229, was submitted on 23 March 2017. [160] The parliamentary committee recommended it for voting, but the draft law was not included in the parliamentary agenda. The second EITI report was published in February 2017. This report, written by an independent organization (the so called “administrator”), covered two calendar years (2014 and 2015). The report included additional extractive industries not illuminated in previous reports. Its scope covered 97 extractive companies that together paid more than 99 percent of the extractive industries tax revenues to the state budget. Overall, 51 of 97 companies responded to a request for information during the preparing of the report. After the Russian annexation of the Crimean Peninsula and the eruption of armed conflict in the Donetsk and Luhansk regions, the multi-stakeholder group proposed that the EITI board adapt implementation of EITI standards for the 2014 and 2015 fiscal years. In October 2016, the EITI board approved the group’s request pertaining to the 2014–2015 EITI report. To cover the information gaps and respond to an EITI board request, the State Fiscal Service of Ukraine provided full unilateral disclosure of total income. This disclosure included information from nonreporting companies and data for each material revenue stream. For more information, please see the 2016–2018 IRM midterm report. [161]

End of term: Complete

The draft law #6229, On Ensuring Transparency in Extractive Industries, [162] underwent intensive debate. After several failed attempts of a coalition of civil society organizations and members of Parliament to include it in the parliamentary agenda in 2017, on 1 March 2018 the number of supportive Parliament votes was sufficient for Parliament to approve the law in general in the first hearing. On 5 June 2018 the parliamentary committee sent Parliament the list of suggested edits. However, on 3 July 2018 the draft law did not receive the required number of votes for a final adoption. Parliament sent it back to the parliamentary committee for review. A civil society activist conducting the advocacy of the Extractive Industries Transparency Initiative (EITI) believed that previous votes failed because members of Parliament affiliated with certain companies avoided extra transparency for those companies. This activist predicted that other members of Parliament without a conflict of interest would contribute to successful voting. [163] Indeed, on 18 September 2018 Parliament adopted the law. The law was passed due to joint efforts of a wide coalition of civil society organizations, business associations, multilateral organizations, the EITI Secretariat, the Cabinet of Ministers, members of Parliament, and the speaker of Parliament. [164] Civil society organizations in the coalition included DiXi Group and International Renaissance Foundation. Business coalitions involved included the Association of Gas Extracting Companies and the American Chamber of Commerce. Government and multilateral organizations that helped the process included the European Commission, the European Bank for Reconstructions and Development, and the US Agency of International Development. Also, the coalition managed to reach an effective compromise with stakeholders (business, civil society, and the government agencies) [165] about the provisions of the law. [166] The law requires private and state companies conducting activities in extracting industries, recipients of revenues, and related ministries to disclose information on payments and revenues in reports and on websites in a publicly accessible, open data format. It also established the procedures for the multi-stakeholder group and for writing and publishing EITI reports by a specially selected, independent administrator. The law introduced consequences for violations of the law (mostly fines). On 6 June 2018 the third EITI report (on 2016) was published. [167]^, [168] It covered legal, corporate, and financial information on the coal, oil, natural gas, iron ore, titanium ore, manganese ore, fireclays, high-melting clays, and quartz sand industries.

Did It Open Government?

Access to Information: Outstanding

The government intended for this commitment to introduce a comprehensive framework for transparency in the sector. The three Extractive Industries Transparency Initiative (EITI) reports provide an immense amount of financial information about extractive industries in a detailed format. [169] According to the civil society actor promoting transparency policies on behalf of the DiXi Group, the reports constitute the only source of aggregated and verified information about the sector. Diverse stakeholders submit information, and an independent auditor verifies it. [170] The representative of the EITI Secretariat confirmed this assessment of the special standing of EITI reports. The representative admitted that the reports constitute the most extensive multidimensional source of data in the field. [171]

Compared to the first report, the second one expanded the scope of information disclosed by opening up previously closed information on iron ore, titanium ore, and manganese ore. The third report disclosed information on fireclays, high-melting clays, and quartz sand. In addition to the EITI Ukraine reports, the Ministry of Coal and Energy published EITI reports and source datasets in an open data format [172] in the government open data portal. [173] Moreover, the Ministry of Coal and Energy, the State Geology and Subsoil Resources Service, and State Fiscal Service voluntarily disclosed additional information. [174] The government has made datasets for all three reports available in .xls and .csv formats. One serious limitation involves the temporarily occupied territories, for which around 95 percent of the information required for disclosure is available. [175] On 29 June 2018 global EITI completed Ukraine's validation against the standard, which commenced on 1 July 2017. EITI acknowledged that EITI Ukraine made meaningful progress in meeting the EITI Standard. [176] In particular, the EITI praised the transparency of beneficial ownership and civil society engagement, noting that it went beyond expectations. Finally, law #6229, On Ensuring Transparency in Extractive Industries, [177] made the disclosure of information according to EITI standards mandatory and introduced accountability mechanisms. This progress can be acknowledged as an outstanding advance in access to information on extractive industries in Ukraine.

Carried Forward?

The IRM researcher recommends developing and launching a digital online platform for reporting and publishing information according to EITI standards and information about payments to local budgets.

[160] “The Draft Law on Ensuring Transparency in Extracting Industries,” #6229, the Verkhovna Rada of Ukraine, http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61409.

[161] “Ukraine Mid-Term Report 2016–2018,” Open Government Partnership, https://www.opengovpartnership.org/documents/ukraine-mid-term-report-2016-2018-year-1/.

[162] “The Draft Law on Ensuring Transparency in Extracting Industries,” #6229.

[163] Olena Pavlenko (DiXi Group), interview with IRM researcher, 29 August 2018.

[164] Olena Pavlenko (DiXi Group), email exchange with IRM researcher, 18 October 2018.

[165] Dina Narezhneva (EITI Ukraine), email exchange with IRM researcher, 18 October 2018.

[166] Oleksii Orlovskyi (International Renaissance Foundation), email exchange with IRM researcher, 18 October 2018.

[167] “Third UAEITI Report Published,” UAEITI, http://eiti.org.ua/en/2018/06/third-uaeiti-report-published/.

[168] “Library,” UAEITI, http://eiti.org.ua/en/library/.

[169] “Library,” UAEITI, http://eiti.org.ua/en/library/.

[170] Olena Pavlenko (DiXi Group), interview with IRM researcher, 29 August 2018.

[171] Dina Narezhneva (EITI Ukraine), email exchange with IRM researcher, 18 October 2018.

[172] “Information Contained in ЕІТІ Reports is Available in the Format of Open Data,” DiXi Group, http://dixigroup.org/news/dani-zvitiv-ipvg-dostupni-u-formati-open-data/.

[173] “National Ukraine EITI Report,” Open Data Portal, https://data.gov.ua/dataset/da1849bf-140f-4161-a71f-2f6a904fffb5.

[174] Dina Narezhneva (EITI Ukraine), interview with IRM researcher, 9 August 2018.

[175] Oleksii Orlovskyi (International Renaissance Foundation), interview with IRM researcher, 4 August 2018.

[176] “EITI Ukraine,” EITI, https://eiti.org/ukraine.

[177] “The Draft Law on Ensuring Transparency in Extracting Industries,” #6229.