The Law on Deoligarchization: a step towards the Integration of Georgia
in the European Union or a Simulation of Reforms?
Malkhaz Nakashidze – November 12, 2022
On June 23-24, 2022, the European Council adopted a decision regarding the EU membership applications of Georgia, Ukraine and Moldova. The Council recognized the European perspective of Ukraine, Moldova and Georgia and noted that the future of these countries and their citizens lies in the European Union, although it granted candidate status only to Ukraine and Moldova. The European Council emphasized the importance of the implementation of reforms by the countries to fulfill the Copenhagen criteria and developed recommendations for Georgia, Moldova and Ukraine. 
One of the important challenges of EU integration for all three countries in these recommendations is the influence of oligarchs on politics. In general, the issue of oligarchy is not new in politics and law. It has been actively discussed since the collapse of the Soviet Union, mainly in relation to the former Soviet republics. Oligarchy can be briefly defined as a system of governance in which a small and informal group of people, using their vast resources, is able to control a state or exert a major or dominant influence on its policy. When characterizing ologarchic rule, such a concept as “state capture” is also used. That’s why de-oligarchization in such countries depends on the de-politicization of specific state institutions, in particular of those fighting the corruption, and on the de- monopolization of the media sector and key economic sectors. If we want to change the oligarchs’ status, we can pose demand upon them that they are prepared to accept, change their incentives or alter the economic, legal and political environment within which they operate.
Over the years, the influence of oligarchs has been the main obstacle to the implementation of reforms in these countries. They enjoyed especially great influence in Ukraine and Moldova, which prevented them from normal democratic development for decades. Regarding Georgia, this issue has been actively discussed since 2012, when the political party “Georgian Dream” founded by billionaire Bidzina Ivanishvili came to power.
Ukraine is the first country where, to eliminate the excessive influence of oligarchs on politics, a special law “On prevention of threats to national security related to excessive influence of persons with significant economic and political weight in public life (oligarchs)” was adopted. The law was developed taking into account the recommendations of the Venice Commission of the Council of Europe. Although at the time of adoption of the law, there were differences of opinion regarding its compliance with human rights,  including freedom of expression, however, according to the authors, the bill was based on international experience. Due to the fact that Ukraine has already taken one of the important steps in this direction, the European Commission advises it to implement the anti-oligarch law in order to limit the excessive influence of oligarchs in economic, political and public life. It is also the recommendation of the European Commission that the implementation of the law should be done in a legally correct manner, taking into account the future opinions of the Venice Commission regarding the relevant legislation.
The European Commission also raises the issue of deoligarchization before Moldova and Georgia. The European Commission indicates that both countries must fulfill the obligation of “de-oligarchization” by eliminating the excessive influence of private interests in the economic, political and public life of the country. Regarding Georgia, it is also worth noting that before the conclusion of the European Commission, the European Parliament adopted a resolution, which directly refers to Bidzina Ivanishvili as an oligarch. At this stage, only Ukraine has created mechanisms to reduce the influence of oligarchs on politics at the legislative level regarding the issue of “de-oligarchization”. However, there is another circumstance to be considered. In Ukraine and Moldova, the oligarchs were officially removed from power after the last democratic elections were held. In Ukraine, Volodymyr Zelensky’s party won the parliamentary elections, and Zelensky then became the president of Ukraine. In Moldova, too, Maya Sandu’s political union won a majority in the parliament, and then she was also elected president. In these countries, there is a strong political will to implement de-oligarchization. In Georgia, the party founded by billionaire Ivanishvili is still in power for the third term. Ivanishvili himself formally left politics, although for many, including the European Union, there is no doubt that he still maintains influence over the ruling party and, accordingly, state institutions.
Implementation of deoligarchization in Georgia is not an easy process. The EU’s recommendation has caused differences of opinion among politicians, civil society and experts. If the opposition and the critical society consider Bidzina Ivanishvili, the founder of “Georgian Dream” and former Prime Minister, as an oligarch, the representatives of “Georgian Dream” and their supporters do not consider Bidzina Ivanishvili as an oligarch. According to the Prime Minister of Georgia, the goal of the de-oligarchization campaign is to discredit the country’s governance system,and according to the chairman of the ruling party, Ivanishvili is not meant to be an oligarch, the concept of an oligarch does not apply to him, but this concept can include many people who are directly connected to the opposition. The ruling party also announced that indirect international sanctions against Bidzina Ivanishvili are already in effect and no one can scare her with these sanctions. 
In this way, from the beginning, criticism from the side of the Georgian government was followed by the European Commission’s different decision towards Georgia. However, later, the ruling team of Georgia slightly changed its political tactics and presented a plan to implement the 12-point recommendations of the European Union. The party said it would translate, revise and adopt a similar Ukrainian law on de-oligarchization to respond to the European Commission’s recommendations. The ruling party created a working group for the implementation of the recommendations, including a working group on the issue of de-oligarchization, which prepared the new bill on de-oligarchization and it was already adopted by the Georgian Parliament in the first reading.
What does the new bill propose? According to the explanatory card, the bill refers to the issue of “de-oligarchization” and serves to fulfill one of the priority tasks defined by the European Commission to grant the EU membership candidate status to Georgia. It is indicated there that the bill was developed on the example of the Ukrainian law with similar content and essentially repeats the norms of the Ukrainian law. The purpose of the law is to overcome the conflict of interests arising from the merger of politicians, media and big business, to prevent the increase of property through the use of political power, to ensure the national security of Georgia in the economic, political and information fields, to protect basic human rights, democracy and state sovereignty. According to the first article of the law, the law defines the legal basis for the functioning of such a system, which should ensure the prevention of threats related to the excessive influence of persons with significant economic and political weight in public life (oligarchs), and also determines the content and procedure of enforcement measures directed against these persons. Article 3 of the law defines the concept of a person with significant economic and political weight in public life (oligarch). A natural person who meets at least 3 of the following criteria at the same time, for the purposes of this law, is considered a person with significant economic and political weight in public life (oligarch): a) he participates in political life; b) it has a significant influence on mass media; c) he is the final beneficiary of the entrepreneurial legal entity that, after the entry into force of this article, has a dominant position in the market in accordance with the Law of Georgia “On Competition”, and which maintains or improves this position for 1 year; d) The confirmed amount of assets of him and those entrepreneurial legal entities where he is a beneficiary, as of January 1 of the relevant year, exceeds 1,000,000 times the subsistence minimum established for able-bodied persons.
According to the bill, after being recognized as an oligarch, a person is prohibited from donating his funds to support political parties, performing work, providing goods, services or cash through related persons and/or through such legal entities where he is the ultimate beneficiary, performing work, providing goods or services; Also making donations to the candidates’ election fund (except for their own election fund) and financing political parties during the election process; to be a buyer (beneficiary of the buyer) in the process of privatization of large-scale facilities; Funding any political campaign, holding gatherings or demonstrations with political demands.
These provisions of the law of Georgia were transferred from the similar law of Ukraine, and today the main issue for Georgia is how effective this law will be, whether it will respond to the recommendations of the European Commission. The main goal of the law in both Ukraine and Georgia is to reduce the influence of oligarchs on state institutions, politics, media and economy. In contrast to Ukraine, the ruling party in Georgia does not consider the founder of the party, Bidzina Ivanishvili, to be an oligarch, because he has distanced himself from Georgian politics, although in my opinion, this is very visible if we rely on the concept of “oligarch” that has been formed to date. No additional evidence is needed to prove whether Ivanishvili still maintains influence over the ruling party and Georgian politics. That is why, in its resolution, the European Parliament considers Bidzina Ivanishvili to be the only person who has a great influence on Georgian politics. It is known to everyone that Ivanishvili is the richest and only billionaire in Georgia, the founder of the ruling party and twice served as Prime Minister. And after making a statement about leaving politics, the prime ministers, ministers, other officials of Georgia are still his assistants, lawyers, partners from their own business. Most of them were not involved in politics at all until 2012, and they hold positions in the government precisely because of Bidzina Ivanishvili’s decision. For example, as of 2017, there were at least 38 people in power who previously worked for Ivanishvili or his associated companies. This situation has not changed significantly even today, and it is acceptable even considering the fact that the retired Prime Minister Gharibashvili returned to the position of Prime Minister for the second time, and the composition of his and other Prime Ministers’ cabinets were represented by people appointed during Ivanishvili’s prime ministership.
Bidzina Ivanishvili’s property and financial capabilities represent almost a third of the Georgian budget, which means that she can have a great influence on the country’s economic processes. No other person in the country has such an opportunity. The concept of oligarch implies the rule of a narrow, informal group, control of the state thanks to its resources or dominant influence on politics, and according to this definition, the only oligarch in Georgia is Bidzina Ivanishvili. Ivanishvili is mentioned as an oligarch in the international media at different times. Unlike the ruling party, the majority of Georgian citizens know who the oligarch is. According to the CRRC-Georgia survey of July 2022, most of the respondents (35%) consider Bidzina Ivanishvili as the addressee of the de-oligarchization recommendation. According to this survey, although 51% of Georgian Dream supporters do not know who the European Commission means by oligarchs, the majority of opposition supporters (60%) assume that the European Union is referring to Bidzina Ivanishvili when talking about de-oligarchization.
I would also like to point out that not all rich people are oligarchs. An oligarch is a person or a small group of people who control a state or exercise great influence over politics or the economy. In a democratic state, the participation of business representatives in the financing of political parties and various campaigns is accepted, but at the same time there is an appropriate legislation to protect the public interest and prevent corruption. On the contrary, in the process of adopting the de-oligarchization bill in Georgia, all rich people are presented as oligarchs, which can become a mechanism of political pressure on them. Thus, the main problem with the oligarchs is that there are no institutions in the country that would check their power. Rich people influence politics in many countries, but the difference is that in democracies there are state institutions, an independent judiciary. They may have influence on politics, but they will not be able to capture all political power in an uncompetitive environment and control political and economic processes for a long time.
Does this law ensure compliance with the EU recommendation? The political position expressed by the ruling party from the beginning and the content of the bill confirm that it will not be able to fulfill this task. Georgia should have adopted the deoligarchization law, however, taking into account the reality, context and needs of the country, which required thorough work in the parliament. The ruling party of Georgia has not performed this task. They translated the law of Ukraine directly, literally, with the exception of some provisions, into Georgian. It is clear to everyone that the law written for Ukraine, where oligarchic rule differs from Georgia in many ways, cannot work in Georgia.
The ruling party acted in this way for two reasons: first, if the law was directly translated, it would not apply to Bidzina Ivanishvili, and second, they would tell the European Union that they adopted exactly the same law, which was considered positive by Ukraine, and accordingly we fulfilled the recommendation of the European Union. Such an approach is very frivolous and is only a populist decision, the purpose of which can only be to create the illusion of fulfilling the recommendations. This kind of goal is confirmed by the fact that the ruling party refused to submit the billto the Venice Commission with the argument that the bill was an exact copy of the Ukrainian law, on which the Venice Commission had already issued its conclusion. Such an approach is also part of populist politics, the goal of which is to avoid the recommendations of the Venice Commission.
If we take into account that the ruling party will consider as oligarchs only the owners of media outlets critical of the government, the leaders of the opposition party, this law will not actually fulfill the goal of de-oligarchization. There is a great danger that it will turn out to be a mechanism of political settlement on the part of the government. Here we should take into account that, unlike the law of Ukraine, the decision to recognize a person with significant economic and political weight in public life (oligarch) is made by the Government of Georgia, a member of the National Security Council, the National Bank of Georgia, the State Security Service of Georgia, a legal entity under public law – the Competition of Georgia The Parliament of Georgia receives information from a national agency, a member of the Parliament of Georgia, a committee of the Parliament of Georgia or a parliamentary faction. The rules related to the register, including the rules for its creation and production, are approved by the Parliament of Georgia. The creation and production of the register is ensured by the office of the Parliament of Georgia.
Such a system can be problematic from the point of view of exercising control over this process. The law does not specify the decision-making procedure in detail. If we take into account that Georgian Dream has a majority in the parliament, it will easily make the mentioned decision independently. That is why the purpose of adopting the law in this form is not de-oligarchization, but simulation of the fulfillment of EU requirements, which will become the basis of another criticism of Georgia from the EU side. If the adopted law does not apply to Bidzina Ivanishvili, then the issue of its enforcement will be in doubt, because the European Parliament has expressed “concern about the destructive role he plays in the political and economic life of Georgia” to Ivanishvili. That is why I have to agree with the opinions of the members of the European Parliament that this law may not respond to the recommendations of the European Union.
Jean Monnet Professor,
Batumi Shota Rustaveli State University
Batumi, November 12, 2022
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