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What can be gained by shrinking the number of regulatory inspection bodies in Ukraine?

22.01.2013
European integration /
Integration processes

There are ongoing problems in the relationship between the Ukrainian government and the citizens of Ukraine. Some of this is directly related to the actions of the government, but to blame the current administration for all the problems of the Ukrainian state would be a historic simplification. The inheritance of the history of modern Ukraine is a burden to borne by everyone living and working in Ukraine. This is not unique for Ukraine, for that matter. Every state is a sum of its historical parts. 


There are ongoing problems in the relationship between the Ukrainian government and the citizens of Ukraine. Some of this is directly related to the actions of the government, but to blame the current administration for all the problems of the Ukrainian state would be a historic simplification. The inheritance of the history of modern Ukraine is a burden to borne by everyone living and working in Ukraine. This is not unique for Ukraine, for that matter. Every state is a sum of its historical parts. 

This fact makes the integration of the Ukrainian state to European standards all the more important. And much effort has been put into reforming the relationship between the government and citizens, particularly in areas concerning economic regulations as a means of fulfilling the criteria of the EU/Ukraine Association Agreement. The successes and failures of regulatory reform are, however, only a part of the bigger transition in Ukrainian society.

Another area that gets almost no attention at all is that of regulatory inspection. The “cutting of red tape” is very important, but application of simplified regulation must also itself be simplified. Rules are only as good as they are applied. According to the International Finance Group (a part of the World Bank), the citizens and businesses of Ukraine continue to be some the highest inspected in the world. (See the IFC report on “Investment Climate in Ukraine”. It is from 2011, but the changes since them do not take away from the general conclusions.)

There are a number of problems associated with inspections in Ukraine. They include a legal uncertainty with regards to the status of bodies responsible for inspection. Some bodies are under the responsibility of the central government, some under independent agencies, some are directly responsible to local public bodies. The names of the various inspection bodies very often do not reflect the fact that they carry out inspections. There is also a problem with conflicts of interests within government agencies, with one part of the agency in charge of inspecting the work of another part of the agency, creating a culture of corruption. Some bodies perform inspections without supporting legislation, leading to a failure in the principle of legal certainty. Laws meant to regulate the actions and procedures of inspection bodies are lacking or inadequate, a good example of this the gap between laws concerning inspections and the law on administrative offences. These problems can be attributed to an antiquated ideology concerning the role of the state in the lives of citizens. Problems in society are dealt with not through real reform but through new organs of control and supervision.

There is a gap in the on-going reform process of the Ukrainian legal system. Despite the decree of the President with that was intended to simplify the organization of regulatory inspections, too little is being done. There are too many regulatory inspection bodies in Ukraine.

I have looked closely at five EU countries (Estonia, Sweden, Slovenia, Poland and Czech Republic) in order to compare the number of regulatory inspection bodies in each country with a list of regulatory inspection bodies in Ukraine. EU legislation with regards to regulatory inspection bodies is area specific. The number and manner of regulatory inspection bodies in each member state has not been delegated to Brussels. But in those areas to which power has been moved from the member states to the EU there are examples of recommendations with regard to a minimum standard for investigations. This is best exemplified in the area of environmental investigations and food safety. (For example seeRecommendation 2001/331/EC on providing for minimum criteria for environmental inspections in the Member States or Regulation (EC) No 902/2002 on food inspections.)

Although there is no binding EU legislation on the number of regulatory inspection bodies in each member state, the numbers in each state are very similar. Estonia has 22 regulatory inspection bodies, Sweden 25, Slovenia 26, Poland 27 and Czech Republic has 26. This can be compared to the organization in Ukraine. There are officially 12 inspection bodies under the government. There are, however, 34 other bodies that have been given inspection powers but are not listed as inspection bodies.This confusing legal framework makes it difficult for citizens to plan for, and to follow, regulations.If limiting the actual number of bodies with inspection powers results in more efficient application of regulatory legislation in these other European countries compared to Ukraine is left to unexplored here. But the fact that there is such a discrepancy between Ukraine other countries in Europe is remarkable.

There is much that can be gained by minimizing the number regulatory inspection bodies. One that I would like to highlight in particular is the burden of over-inspection falls disproportionally on small businesses. Where larger enterprises can financially accommodate regulatory burdens, it is much more difficult for those of smaller means to adjust. One way of helping small businesses with their regulatory burden is by limiting the number of regulatory inspection bodies that the businesses have to deal with.

In an influential review of regulatory inspection bodies in the United Kingdom entitled “Reducing administrative burdens: effective inspection and enforcement”, Philip Hampton argued that “by eliminating unnecessary inspection, more resourcescould be directed to advice. This can reduce administrative burdens by reducing the time taken to comprehend regulations, and any data requirements under them. It can increase the probability of compliance, and hence regulatory outcomes. More broadly, better advice eases businesses concerns about the requirements of regulation, and helps them to comply.”

By making the number of bodies lower Ukraine will also go about supporting whatthe World Bank calls a culture of compliancein itsguidelines for inspection reform from 2005. The sheer number of bodies that citizens must deal with makes it difficult to know the scope of a given inspection, and if at any given time another body may require a similar inspection. The risk for inspection overlap increases with every regulatory inspection body.

The Council of Europe provides another benefit for minimizing the number of regulatory inspection bodies. The Council does not expressly deal with the issues of inspection reform per se, but rather is concerned with the relationship between good governance, regulatory reform and good administration(See for example the Venice Commission‘s “Stocktaking on the Notions of ‘Good Governance’ and ‘Good Administration’” from 2011, the Committee of Minister’s recommendation on administrative procedures from 1987 and its recommendation on administrative sanctions from 1991).The point of the Council is that good administration is part of the rule of law. This point is supported by the IFC, which argues that inspections should be applied following “lawfulness, equality, impartiality, proportionality, legal certainty, taking action within a reasonable time limit, participation, respect for privacy and transparency” (IFC, Investment Climate in Ukraine 2011).

But the EU is not a catch-all solution to the problem of regulatory inspection bodies. The creation of a multi-national organization with its own regulatory bodies could, if miss applied, lead to unintended complications. Member states of the EU have since the inception to the Union struggled with the problems of multi-level governance. But I would argue that the focus here is should not be on possible future problems, but rather taking inspiration from EU experience and applying in to local Ukrainian realities.