“Guillotine” for Soviet-Era Laws: How Deregulation Works


Over the past few years, the word “deregulation” became a cliché and a tired idea. All speeches of politicians, government officials or international experts concerning the business climate and investments include this word. And that makes sense, because quality regulation implies establishing clear rules of the game.  

The simpler the rules, the more interested players there are, and hence – the larger market and the more rapid inflow of investments.

Over the six waves of deregulation, the Cabinet of Ministers has abolished 760 outdated legal acts, most of which were the Soviet legacy.

Just one “deregulation” day resulted in dumping of 318 Soviet-era regulations, instructions, rules and orders. Most of them were archaisms that have not actually been used.

However, remaining in the legal field, such archaisms have always kept the door open to corruption.

Or they created unnecessary barriers, because Soviet standards were focused on state-planned economy and state-owned property.

Under market conditions, they look like rust on a huge car – you can deal with them, but they won’t be able to operate for so long.

As part of a special EP (Economichna Pravda) project on quality regulation, we have found out what the current progress of the Ukrainian legislation desovietization is and when Ukraine will finally ensure the end of wholly outdated rules of doing business.

Populism Against Deregulation

According to Oleksandr Honcharuk, the Head of the Better Regulation Delivery Office, almost every second abolished act is of the Soviet era.

The oldest of them is dated 1922 and contains a list of categories of workers, whom an employer should provide with a laundry soap (400 grams per month) to take it home.

“Such little things do not kill business, but they create an extra trouble, in particular, in communication with trade unions, public organizations and, in general, with inspectors who are trying to find “at least something”.

We’ve spent so much time trying to convince the Government to abolish this rule, because trade unions insisted on the opposite,” Honcharuk said.

“Most of the abolished Soviet-era acts relate to social issues. First, just because there is a large number of such acts, and secondly, it is difficult to abolish these acts because of populism.

We have to agree this step with trade unions,” Maksym Nefyodov, the First Deputy Minister of Economic Development and Trade of Ukraine, explained.

“By the way, there is still no notification about the abolition of the resolution on the soap supply in the database of the Verkhovna Rada,” he adds.

“We have deregulation meetings of the Cabinet of Ministers every 2-3 months. In most cases, laws regulating one or another area are no longer in effect, but there are orders and instructions at the level of by-laws.

So, someone may demand to comply with their requirements. Large businesses have lawyers to deal with it.

And those who have no opportunity to address this problem pay bribes or meet outdated standards,” the Deputy Minister commented.

Most of the abolished Soviet resolutions relate to the agrarian sector.

In particular, these are documents that regulate the mineral fertilization, although today agricultural companies identify the need to use drones for mineral fertilization, not to mention the latest formulas of fertilizers.

Other rules contain tips on farm disinfection by using outdated agents, which not only are less effective than the modern ones, but also are not safe to use.

Another example is the decree of the Council of Ministers of the Ukrainian SSR of February 11, 1949, that provided for giving names to wines in respect of grape varieties: “Perlyna Stepu” – from “Aligote”, “Naddnipryanske” – from “Risling”, “Oksamyt of Ukraine” – for wines from “Cabernet Sauvignon” and so on.

This resolution was in force until November 2016.

Hindering Business Performance

A significant part of the legislation “desovietization” takes place in construction. For example, such laws include the decree of the Council of Ministers of the Ukrainian SSR of October 30, 1958 on approval of the regulation for cooperative building groups and individual developers in cities and town settlements.

In particular, the document provided for the size of land plots for the construction of multi-apartment buildings.

Oleksiy Honcharuk said that they also included strictly Soviet-era standards contained in state building codes.

“Starting from October 1, new changes to the DBN have come into effect. They were not Soviet ones, but some of their provisions were copied from the Soviet legislative legacy.

They reproduced the Soviet principles while the Government provided businesses with guidance on how to be effective.

For example, there was a requirement to place a kindergarten only in a separate building.

This is not economically profitable – sometimes a small kindergarten is needed, sometimes there should be a lot of different kindergartens for the competition to be fair.”

The Soviet legacy in the cash discipline legislation is another story.

Only on October 11, the Ministry of Finance issued an order that deprived Ukrainian businessmen of the Soviet-era practice and cancelled the compulsory use of accounting books of settlement operations, which are a thick notebook with daily reports and pasted sales checks, for entrepreneurs.

There was little point to write these data in such a book and paste “zero checks”, since cash registers send data to the SFS in electronic format.

“In the end, tax inspectors with printed records of these sums came, opened these books and tried to find where a person made a mistake by hand,” Serhiy Badritdinov, the Chairman of the Retail Trade Committee at the Union of Ukrainian Entrepreneurs and Intertop CEO, explained.

Actually, the list of abolished Soviet-era documents looks like a set of small instructions, rules and procedures, which are so stupid that it’s hard to imagine who could use it nowadays.

They include the market trade rules, hay harvesting rules or rules for equipping and operating infectious disease control centres of 1959, which, in particular, required to cover window frames and doors with oil paint and allowed only rubber or wooden toys in children’s units.

What Remains, or the Housing Code and the October Revolution

According to experts, there are still many Soviet atavisms in the Ukrainian legal field. Recently, the Ministry of Economic Development and Trade mentioned a new initiative – to cancel books of complaints and suggestions.

The representatives of the Union of Ukrainian Entrepreneurs that appealed to the MEDT with such an initiative explained that the function of complaints books was not to punish, but improve services or goods provided.

“It makes no sense to look at the date of the act, if it reproduces purely Soviet-era approaches. A book of complaints and a consumer’s corner were copied from the Soviet practice when there was no Internet and it was virtually the only possible way for consumers to express their comments regarding services. Now the Internet has been long servicing as such a book, and you can leave feedback on a manufacturer’s or store website. There are special websites that collect feedbacks on different companies or businesses. But complaints and suggestions books have a quite different meaning for inspectors,” Tetyana Palamarchuk, the Co-chairman of the Union of Ukrainian Entrepreneurs Committee on Enterprise Development, commented.

Under the competitive climate, entrepreneurs are always ready to improve their services, listen to the wishes of consumers both on the Internet and beyond it. They will try to improve the quality.

If a company is careless, then you should not expect its managers to respond to complaints in such a book. If you have some complaints, you should appeal directly to the State Service on Food Safety and Consumer Protection.

“At the same time, there are cases when entrepreneurs were fined for not having made changes to the information provided in their “consumer’s corner” after the relevant office of this Service has changed its telephone number,” Palamarchuk added.

But, according to the Ministry of Economic Development and Trade, two massive documents (the Labor and Housing Codes) contain the most amount of Soviet-era rules.

“Today, we are supposed to keep to the Housing Code that begins with the words: “As a result of the victory of the Great October Socialist Revolution in our country, we created all the prerequisites necessary to solve one of the most important social problems – meeting the housing needs of working persons”, Oleksiy Honcharuk said. “Imagine what is written there.

This is about post-war residence halls, the resettlement of families, the order, in which people have to settle in apartments. These things no longer exist, but we still have these rules. And some “persons” are trying to use these rules for their own interests.”

Same with the Labor Code that aims to establish rules for large groups and state-owned enterprises, which was natural when the relations were regulated administratively.

At its “deregulation” meetings, the Cabinet of Ministers abolishes documents, which it is entitled to abolish. Some outdated acts are regulated by presidential decrees of the Soviet era, which were equated with laws by the Soviet Constitution. So, only the Parliament can abolish them.

According to Nefyodov, at the current pace, it is possible to clear the legislation of Soviet-era and simple outdated debris in two years.

Instead, the Verkhovna Rada registered the draft law 4650 on the abolition of Soviet legislation.

“This is a radical decision, a kind of “Soviet guillotine”: everything adopted in the Soviet times will be abolished within a transitional period.

If it turns out that some instruction is really needed in this period, there will be time to adopt it. The draft law is included in the priority list, but it’s not time yet,” Maksym Nefyodov summed up.

By Anna Rodichkina, for the EP

Source: Ekonomichna Pravda