Ukraine Gambling Bill Faces Corruption Claims

  • Legal department warns Treasury has too much power to appoint regulators
  • Anti-corruption agency points to numerous concerns with the current draft

Two government agencies have pointed to risks of serious corruption if Ukraine’s storied gambling bill becomes law, yet the draft could still progress through a second reading on Friday.

Already the subject of numerous delays and amendments, the bill that would re-legalise all forms of gambling in Ukraine must now navigate two authorities warning of cronyism and corruption in its drafting.

On Tuesday, the Main Legal Department of the Verkhovna Rada, the Ukrainian parliament, claimed provisions detailing how the country’s new Commission on Gambling Regulation would be set up are unconstitutional.

The finance ministry will have the power to appointment senior commissioners without checks and balances — scope that goes against the Ukranian constitution, the legal department argues.

Attention may have been drawn to this area of the law by businessman Boris Baum, whose close involvement with the development of the gambling bill is the subject of much press coverage in Ukraine.

Baum, who now acts as an advisor to deputy leader Kirill Tymoshenko, has connections to the gambling industry through his role at Russian oil company VS Energy, which owned the Premier Palace Hotel and Casino in Ukraine, and as a former director of First National Lotteri Ltd, a company registered in the British Virgin Islands that was shut down in 2011.

In a recent interview, Baum said he would like to be appointed head of the commission and Tymoshenko backed his candidacy.

It was also announced on Wednesday that the National Agency for the Prevention of Corruption (NAPC) was opening an investigation into the draft gambling act.

Although it was initially reported that this could suspend progress on the bill for up to ten days, by the evening it appeared that the agency had already sent its report to parliament.

The NAPC report highlights numerous corruption risks, including a lack of detail in paying for and obtaining a licence and the list of bodies authorised to perform certification.

Among other concerns, it noted that the grounds for obtaining or revoking a licence were also not consistent with Ukraine’s Law “On Licensing of Economic Activities”.

“If the bill is passed without changes, it could lead to numerous corruption risks and cause multimillion-dollar losses to the state,” a NAPC spokesperson warned.

The draft act was scheduled for a second reading on Thursday, but in the wake of the reports slipped onto Friday’s agenda.

Despite the serious corruption concerns raised, one local legal expect said he did not expect them to slow forward progress on the bill.

The legal department memo would not derail the the process, said Ilya Machavariani, head of the Russian and CIS gambling practice group at Dentons law firm in Moscow, who said that the bill should “hopefully” be voted on, on Friday.

Bills in Ukraine can have up to three readings before being passed or rejected.

A few weeks ago, Machavariani warned of the inevitable political “chaos” that would surround the bill in these final stages.

For international operators eager to become involved in the new Ukrainian market, fears still persist over high licence fees and the as-yet unknown tax rate, which will be decided by future legislation.

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