How Ukraine is losing Ukraine Facility funds

European countries have created the Ukraine Facility, an EU-funded economic support programme to provide financial assistance to Ukraine and to help it implement reforms. Decentralisation, which has been recognised by the democratic world as one of Ukraine’s most successful reforms since 2014, must be continued. With decentralisation reform being one of the most successful (if not the only) reforms since 2014, it seems important to continue it. 

The Europeans recommend a clear delineation of powers, strengthening the relevant internal structures of municipalities, and ensuring a proportional system of supervision over local governments in line with the European Charter of Local Self-Government. Such provisions are envisaged in the Ukraine Facility in the same sentence, so they should be implemented simultaneously.

In the Plan for the implementation of the Ukraine Facility approved by the Government of Ukraine, these provisions are divided into two indicators: change in the territorial organisation of the executive branch and delineation of powers. The Government views the change in the organisation of executive power as reformatting local state administrations into prefectural bodies in order to organise a reasonable system of ensuring the rule of law in the activities of local governments. The Government also promises to ensure coordination of territorial bodies of central executive authorities in the implementation of state policy at the local level. And then, in a year’s time, it planned to ensure an optimal delineation of powers between local governments and executive authorities.

While there have been statements and declarations of unity from all sides in Ukraine, Europe has consolidated its non-military financial assistance to Ukraine into the Ukraine Facility and funds the state only if Ukraine implements reforms that preserve democracy and bring the country closer to self-reliance. However, the Europeans will evaluate the reforms based on the indicators proposed by the Government of Ukraine. However, the Europeans will evaluate the reforms based on the indicators proposed by the Government of Ukraine. Even though the Ukraine Plan was developed in violation of the Regulations and partially ‘distorted’ the Ukraine Facility, our partners supported and are financing it.

What about Ukraine?

I want to emphasise that the Ukraine Plan was prepared in violation of the Regulation on establishing the Ukraine Facility, and the reforms specified by the Europeans were seemingly included, but not exactly.

Considering that the funds will be granted on the condition that reforms are implemented, the Central Government will do everything to meet the indicators. Therefore, we must make every effort to implement the changes Ukraine needs, not merely profane ones, because we are living in the conditions created by these reforms.

Ukraine is now facing a difficult choice: to reverse or continue the decentralisation reform. This is an important choice for every Ukrainian and our partners, because strong local self-government is a prerequisite for democracy.

One of the indicators of the Plan for the implementation of the Ukraine Facility in the Decentralisation and Regional Policy block is the entry into force of legislation on reforming the territorial organisation of executive power in Ukraine. The Plan envisages that in the first quarter of 2025, a certain Law of Ukraine, with no specific draft number, ‘On Amendments to the Law of Ukraine "On Local State Administrations" and Some Other Legislative Acts of Ukraine on Reforming the Territorial Organisation of Executive Power in Ukraine’ will be adopted, as well as bylaws for its implementation.

Please note that the law and its bylaws should be adopted by the end of March. 

It is already March, the law is not available, so it is even technically impossible to adopt the regulations in compliance with the law, and the indicator has already failed.

And what is more.

There is no registered draft law in the Parliament today that would ensure the task set out even in the Plan, not to mention the Ukraine Facility. There is not a single draft law that would ensure the ‘reformatting of local state administrations’, as Ukraine promised.

Since 2020, the Verkhovna Rada of Ukraine has had Draft Law No. 4298 registered, which is an attempt by MPs to introduce supervision of local self-government and has had a long, not-so-good history of constant manipulation and violations of the Rules of Procedure of the Verkhovna Rada of Ukraine.

For some reason, the MPs decided to ‘fulfil’ their obligations with this particular draft law, although this number is not mentioned in any documents. 

However, the development of the next version of this draft law only began in February 2025, a month before the deadline for the adoption of the law and its bylaws.

On 25 February 2025, the Subcommittee on Administrative and Territorial Structure and Local Self-Government of the Verkhovna Rada Committee on State Building, Local Self-Government, Regional Development and Urban Planning once again reviewed for the second reading the Draft Law of Ukraine ‘On Amendments to the Law of Ukraine "On Local State Administrations" and Certain Other Legislative Acts of Ukraine on Reforming the Territorial Organisation of Executive Power in Ukraine’, reg. No. 4298. No one except the chairperson saw what was approved there, since during the decision-making process, no specific provisions from the draft law were voiced and no article-by-article votes were taken, so we can analyse the version sent by the MP to the Association of Ukrainian Cities and which was considered by the Subcommittee.

The text of the new version of Draft Law No. 4298 clearly shows that the year that has passed since the Committee considered the previous version of Draft Law, to which the Council of Europe provided its comments (link to the Conclusion and the Board of the Association of Ukrainian Cities), has not been enough for the MPs to prepare the draft law necessary for municipalities, continue the decentralisation reform and implement the Ukraine Facility.

Draft Law No. 4298 considered by the Subcommittee:

— fails to solve the tasks set by the Ukraine Facility in any way - local state administrations are not reformed, they retain sectoral powers, the coordination specified in the Draft Law is actually implemented as a full-fledged management of units, and the right to supervise and suspend municipal decisions without a court decision is added to this. This combination further jeopardises the implementation of the European recommendation on municipalities – legal entities;

— retains the norms to which the Secretariat of the Congress of the Council of Europe expressed reservations regarding the large number of powers of local state administrations in various areas (paragraphs 59, 62 of the Council of Europe Opinion), simply placing them in another part of the draft law, which means a deviation from the subsidiarity provided for in Article 4 of the European Charter of Local Self-Government. Moreover, the new version of Draft Law No. 4298 postpones another indicator on the delineation of powers for an indefinite period of time. No one will ever voluntarily give up the network of pressure on local self-government that this Draft Law No. 4298 creates;

— ignores all the comments of the Association of Ukrainian Cities, thus marking the start of the end of the decentralisation reform.

Notably, the authors of the draft law deliberately included all the provisions that are openly negative for Ukraine and every Ukrainian in the final and transitional provisions. This was done to deceive both European partners and Ukrainian citizens. It is already mid-March, and there is no official version of the new version of draft law No. 4298 on the Parliament's website, yet the authors once again propose this draft law for consideration. The intention is that no one in Ukraine or the EU will have time to read the entire draft before it is considered. This is what they did in the same Committee with draft laws No. 5655 and No. 9559-д, where they used the declared positive intentions to hide the openly unacceptable provisions. That is why these draft laws have not been signed by the Guarantor of the Constitution.

Very briefly, the essence of the new version of Draft Law No. 4298, authored by MP V. Bezgin, which was voted on by the Subcommittee chaired by V. Bezgin, can be summarised as follows:

— a new regional supervisory body is created in each region, the costs of which will be borne by each taxpayer;

— this supervisory body will be the 27th in the list of controllers and supervisors of local governments will reinforce the folk wisdom: ‘Too many cooks spoil the broth’;

— this body will simultaneously regulate sectoral issues, appoint heads of enterprises, implement state policy in the region, control local self-government and have the right to suspend decisions of local councils without a court decision.

Obviously, introduction of the proposed version of Draft Law No. 4298 is obviously contrary to all Ukraine’s commitments to continue the development of the decentralisation reform, violates the European Charter of Local Self-Government and returns the conditions of local self-government to the pre-Revolution of Dignity, during the era of the Party of Regions.

Can this draft law be adopted?

Absolutely not.

It should not even be submitted to the Committee, given the lack of the Draft Law on the website, the opinions of European partners, and the unequivocal negative opinion of the Association of Ukrainian Cities with detailed expert comments.

Has Ukraine already lost the Ukraine Facility opportunities due to Draft Law No. 4298?

No, although it is losing them.

How to remedy the situation?

Members of the Ukrainian Parliament who are genuinely interested in further development of local self-government should submit to the Verkhovna Rada a short draft law to create a reasonable system of ensuring the rule of law in the activities of local governments, as envisaged in the indicator of the Plan for the implementation of the Ukraine Facility. It should oblige local administrations to coordinate 26 controlling territorial executive authorities in the implementation of state policy. Besides, it is necessary to introduce order in the existing system of supervision and control, in which today both hands do not know what the other is doing, and both are reaching for the whip to local self-government.

We have to continue the decentralisation reform simultaneously with the ongoing fight against the aggressor. Therefore, today an open working group should also be formed in the Committee today to prepare a comprehensive draft law on the delineation of powers, which will be the next indicator in this area. We have to defeat russia and preserve democratic achievements to avoid turning into a dragon.

Oksana Prodan, Advisor to the Chair of the Association of Ukrainian Cities, Member of Parliament of the VII-VIII convocations