Petro Poroshenko’s European Solidarity party purchased “war bonds” with budget funds, and their purchase is not provided for in the law “On Political Parties.”
In addition, such actions may have signs of misuse of funds, the punishment for which is the termination of government funding without the opportunity to correct the situation, Rukh Honestly reported.
State funding of parties in Ukraine is regulated by the law “On Political Parties”. It states that political forces can spend public funds only to carry out their statutory activities. However, the law does not specify what statutory activities are.
The law also stipulates that the party is a non-profit organization and cannot make a profit. An exception is income from such funds being on deposit. However, budget funds cannot be deposited for longer than one year when the party received them from the state budget.
The law has no more exceptions. It can only be provided by the NAPC clarification dated March 14, 2022. In it, the National Agency noted that political parties can spend funds for purposes related to ensuring the defense of Ukraine and the safety of the population.
Although the clarifications do not have legal force and are rather advisory in nature, they may be one of the reasons why the EU bought bonds with budget funds.
Purchase
On February 29, 2024, the party buys domestic government loan bonds “War Bonds”. And he spends more than 46 million hryvnia on them. More than 35 million of this amount came from the state budget.
War bonds are securities issued by the government. Thanks to their sale, the country actually borrows money from its own citizens to support the economy and army. They can buy weapons, equipment, and medicines for them. Then the state returns these funds with interest, which is also tax-free (unlike a deposit).
The party did not want to communicate with HONESTLY the situation with the purchase of bonds before the start of the trial. Therefore, we can only guess about her motivation based on the data available to us.
So, in particular, after the publication of the news that the NAPC filed a lawsuit to establish the fact of misuse of EU budgetary funds, the Movement’s message was HONESTLY commented by the people’s deputy from the political force Nina Yuzhanina.
From her arguments we can conclude: purchasing bonds is essentially a deposit. And the purchase of military bonds is an expense for defense-related purposes.
However, a deposit and war bonds are not the same thing.
The NAPC correctly determined in its conclusion: the party is a non-profit organization. And the purchase of securities pursues the goal of generating income. In addition, the possibility of purchasing government bonds with public funds, unlike a deposit, is not clearly provided for by law. So the party will buy bonds, receive a profit from the use of them by the state, and then what? To what account should these funds be returned? What is the status of funds received as profit? These mechanisms have not been defined, explained political finance expert Julia Salzberg to HONEST.
Moreover, if the party wanted to spend money on improving the country’s defense capability, it could simply refuse government funding for the same amount with which it bought bonds.
Error
From the text of the NAPC conclusion we can assume: when spending on the purchase of bonds, the party was confident that it could spend the funds in this way.
A week before their purchase, on February 22, the EU asked the NAPC for clarification on whether political parties could buy “war bonds” whose maturity exceeds a calendar year from the date the funds were first credited to the political party’s account.
From this we can conclude that the party did not ask whether this money could be spent in this way. She was only interested in whether it was possible to keep this money in bonds longer.
In addition, on February 29, without waiting for a response from NAPC, the political force nevertheless bought securities.
However, the NAPC responded, in particular, that the law does not establish such an obligation for the state to spend funds from the sale of bonds for specifically defined purposes. Including ensuring the defense and safety of the population.
After that, on March 27, European Solidarity sold the bonds for the same amount as it bought: more than 46 million hryvnia. The money from sales went to the current account. After that, they lost their budget status.
“European Solidarity” decided to play it safe, Rukh Honestly believes, because on April 23, even before the party submitted its financial report, MPs from the EU, in collaboration with representatives of other parties, submitted a bill to the Verkhovna Rada. They wanted to make changes to the law “On Political Parties”.
The proposed changes proposed allowing parties to purchase war bonds. And also, for the duration of martial law, allow spending funds for purposes related to ensuring the defense of Ukraine and the safety of the population.
In an explanatory note, EU People’s Deputy Maxim Savrasov noted:
The NAPC clarification “is not a regulatory legal act”, and “the possibility of providing funds on loan through the acquisition of government bonds “War Bonds” to ensure the defense of Ukraine and finance the needs of the Armed Forces of Ukraine is not expressly provided for by the Law of Ukraine “On Political Parties in Ukraine”. In general, all of the above causes legal uncertainty for political parties, which, in turn. may lead to their violation of the procedure for making expenditures of a political party.
This bill was not approved by the Main Scientific and Expert Directorate of the Verkhovna Rada of Ukraine.
One of the justifications why GNEU did not include it in the Verkhovna Rada’s Legislative Work Plan is that budget funds will “be directed to the state budget, and at the same time the state will also pay income on such bonds.” Therefore, “this looks somewhat doubtful from the point of view of the efficiency and rationality of using budget funds.”
EU representatives failed to make changes to the law, and on October 3, NAPC appealed to the Kiev District Administrative Court to establish the fact of misuse of funds by the party.
Production
The national agency appealed to the Kyiv District Administrative Court. And here it is interesting on what principle the NAPC elected him. The Law “On Political Parties” specifies that it is the court that must establish the fact of misuse of funds. However, it does not provide clarity on where exactly to apply.
We tried to find out from the National Agency what it was guided by when determining jurisdiction. However, we were told that official comments would only be provided when the court made a final decision.
Therefore, we can only assume the reason for this decision: NAPC is a government body that carries out public functions. Therefore, the case falls under administrative proceedings. However, administrative courts do not tend to consider cases to establish any fact.
Therefore, in order to avoid confusion with the determination of jurisdiction, the law should provide that in order to establish facts of misuse of funds, it is necessary to determine which court to apply to.
Movement Position HONESTLY
Stopping or terminating government funding is an extreme sanction, in practice it is the strictest punishment for violating the rules of financing and use of government funds. However, such sanctions have been applied or may be applied for the fifth time in four years.
On the one hand, this means that the NAPC checks party reports quite carefully and it is difficult to accuse it of political bias. On the other hand, the frequency of such harsh sanctions may indicate problems at the legal level, in particular, the disproportionate nature of sanctions.
Source: Racurs
I am David Wyatt, a professional writer and journalist for Buna Times. I specialize in the world section of news coverage, where I bring to light stories and issues that affect us globally. As a graduate of Journalism, I have always had the passion to spread knowledge through writing.