Ukraine has reached a critically important stage in its development — a stage at which state institutions must become not only formal structures, but genuinely reliable partners for businesses and foreign investors.
Despite substantial reforms in recent years, one key problem remains unresolved: the absence of personal liability for public officials whose decisions — whether intentional or due to error — are ultimately deemed unlawful. This issue fuels corruption risks, undermines investor confidence, and makes the interaction between businesses and public authorities unpredictable. To illustrate the systemic nature of the problem, I will share an example from my own legal practice. In the early 2000s, I represented one of the first joint ventures in the former USSR with foreign participation — the Ukrainian-Spanish JV “Intersplav.” The company, acting in full compliance with the law, claimed VAT refunds — a tax it had fully paid as part of purchasing raw materials. Nevertheless, the tax authorities refused to return the VAT, arguing that the company’s suppliers allegedly had not paid this tax to the budget. We won hundreds of court cases. Moreover, for the first time in the history of the European Court of Human Rights, we succeeded in proving that delayed VAT refunds constituted a violation of Article 1 of Protocol No. 1 of the European Convention on Human Rights — the right to peaceful enjoyment of possessions.
Yet even after the ECtHR judgment, the non-refund of VAT continued.
Why?
Because Ukraine still lacks an effective mechanism for personal accountability of officials whose decisions have been found unlawful by the courts. This remains a fundamental risk for any investor — whether a European investment fund, a multinational corporation, or a Ukrainian entrepreneur who seeks a transparent and predictable business environment.
Key Problems
- A general fiscal motivation of state authorities, where fines and additional tax assessments are effectively planned as part of the budget’s revenue — which means that even unlawful penalties are silently incentivized.
- Often, the presence of personal motives behind a public official’s incorrect decision — ranging from a desire for unlawful gain to pressure from competitors, and more.
- No actor capable of initiating accountability procedures against such officials. Businesses often fear demanding justice due to risks of retaliation or additional inspections — and there are simply no other initiators. As a result, despite the extensive variety of sanctions available in Ukrainian law (administrative, criminal, pecuniary), they are almost never applied in practice and therefore remain ineffective.
Consequently, even the most law-abiding investor risks becoming dependent not on the rule of law, but on the will of an individual bureaucrat.
Proposed Solution: Regardless of punitive measures, ensure rapid and guaranteed removal of an official from further decision-making.
To change the rules of the game and create a genuinely safe and predictable environment for investment, three specific legislative steps are proposed. They are simple, justified, and aligned with fundamental legal principles.
1. Automatic dismissal after three unlawful decisions within one year
If a court rules three times that an official’s decision, action, or inaction was unlawful:
- the official must be dismissed;
- a five-year ban should apply prohibiting the individual from holding any position in any
state authority in Ukraine.
2. Automatic invalidity of all subsequent decisions by such an official
After the third final court ruling recognizing an official’s conduct as unlawful:
- all subsequent decisions and actions by this official are automatically deemed invalid;
- the only exception applies to the official’s dismissal procedure and the transfer of their
authority.
This approach protects business “here and now,” while the motives behind the official’s behavior (ignorance versus intent) can be evaluated through separate legal proceedings — after the official
is removed from power and, crucially, prevented from obstructing the investigation.
3. Accountability of supervisors for inaction
If a supervisor fails to dismiss such an official within seven days of the grounds arising, the supervisor is subject to the same mandatory dismissal procedure. This mechanism prevents sabotage of reforms and ensures an integrated system of accountability.
Expected Impact
The introduction of these mechanisms will:
- reduce both direct and indirect losses for businesses;
- significantly decrease corruption incentives;
- improve the quality of public governance;
- strengthen the confidence of foreign investors and international partners;
- ensure truly predictable and stable interactions between businesses and the state.
These measures align with the European principle of the inevitability of legal consequences — a cornerstone of a mature legal system.
Conclusion
Ukraine is approaching a decisive phase of EU integration while simultaneously striving to become a reliable market for investors worldwide. Yet without transparent and automatic mechanisms of public official accountability, any reform remains incomplete.
We call on Ukrainian policymakers, legislators, experts, government advisers, representatives of the European Union, and international organizations:
It is time to establish institutional guarantees for foreign investors and for all businesses
operating in Ukraine. The mechanisms we propose are simple, realistic, and can be implemented within a short timeframe. They will create a new level of trust — the trust upon which investment, economic growth, and successful European integration are built. The Lighthouse team is ready to engage in the development, legal support, and expert implementation of these solutions.
We believe that through joint efforts — of the state, the business community, and international partners — Ukraine can build a system in which the law outweighs the power of any individual official, and in which Ukraine becomes one of the most attractive jurisdictions in Europe for investment and business development.
