The director's contract at AOZ should be extended until the audit is complete, according to the Moscow Arbitration Court.
The contract of the director of the State Agency for Defense Procurement (AODP) was supposed to be extended until the audit was completed. Statements about the "extension of the contract for a year as an assessment of the effectiveness of the AODP leadership" do not reflect reality.
This is stated in a statement by the Public Anti-Corruption Council under the Ministry of Defense of Ukraine, as reported by Tsenzor.NET.
The Public Anti-Corruption Council noted that, according to paragraph 4 of the Regulations on the Public Anti-Corruption Council under the Ministry of Defense, one of the Council's tasks is to ensure transparency in the activities of the Ministry of Defense and to implement civilian oversight.
"For us, the fight against corruption is not only about exposing individual cases but also about maximum transparency in the relationships between institutions, because systemic corruption is impossible without systemic problems and mistakes. That is why, upon facing the existing conflict between the leadership of the Ministry of Defense (MOD) and the leadership of the AODP immediately after the election and approval of the updated composition of the MOD's Anti-Corruption Council, we began to address the issue that had been submerged in speculation, lies, leaks of information to journalists, and ineffective management over the past six months," the statement reads.
It was noted that before commenting on the situation, members of the Public Anti-Corruption Council communicated with all parties involved.
"We had discussions with the Minister of Defense, the heads of the State Logistics Operator (SLO) and the AODP, individual members and the chairman of the Supervisory Board of the AODP, as well as with certain representatives of the relevant committee in the Verkhovna Rada. We heard the positions of all parties and can state the following," the MOD's Anti-Corruption Council stated.
The statement from the Public Anti-Corruption Council indicates that according to part one of Article 11-4 of the Law of Ukraine "On the Management of State Property," the exclusive competence of the Supervisory Board includes the appointment and termination of the powers of the director, approval of the terms of the contract with him, establishment of the director's remuneration, conclusion and termination of the contract with him, and monitoring compliance with the contract terms. The legal question remains open as to whether such an extension of the contract contradicts the principle of selecting the director on a competitive basis.
At the same time, in December 2024, the Ministry of Defense made amendments to the charters of its two procurement agencies: the AODP and the State Logistics Operator (SLO), violating the aforementioned norms. Thus, the Ministry of Defense, by breaching the requirements of the Law "On the Management of State Property," granted itself the right to appoint agency directors bypassing the supervisory boards "in case of identifying existing or potential threats to the national security of Ukraine."
"Such actions do not comply with the principles of independent corporate governance and constitute a gross violation of the OECD Guidelines on Corporate Governance of State-Owned Enterprises," the MOD's Anti-Corruption Council emphasized.
The statement mentions that the formation of the AODP Supervisory Board was delayed for various reasons by all parties, and the blame for this was publicly and privately assigned to each other by both sides. There were complaints that responses to letters from candidates for the Supervisory Board were delayed by the Agency, or letters were left unanswered altogether.
The signing of contracts was prolonged, and there were numerous problems with internal communication between the AODP and candidates for the Supervisory Board, and later with members of the Supervisory Board. At the same time, the formation of the council itself was further delayed by the Ministry of Defense after the approval of the list for several months.
"De jure and de facto, the AODP Supervisory Board was formed a month before the expiration of the contract of the AODP head. De jure, there were 5 members in the Supervisory Board (3 independent + 2 from the state), de facto - one of the independent members refused to sign the contract and distanced himself from working in the Supervisory Board. We are talking about Patrick Auroy (France)," the MOD's Anti-Corruption Council stated.
It is noted that Patrick Auroy did not attend any of the meetings and did not have definitively formulated bilateral relationships with the Council. On January 20, 2025, he was sent a letter withdrawing his candidacy from the Supervisory Board.
"As far as we know, the members of the Supervisory Board had not seen this letter as of the evening of January 24, 2025, and do not know about any further actions regarding this letter. Thus, based on available information, after the Ministry's decision to withdraw two members from the Supervisory Board, de jure there remain three members, while de facto only two. Does this leave the Supervisory Board legitimate, and does the Supervisory Board's decision to extend the contract with the current leader remain in force? If so, then the decision to appoint the head of the AODP as the chairman of the SLO has no legal force, at least until the Ministry and the Cabinet of Ministers adopt a decision to revoke Patrick Auroy's status as a member of the Supervisory Board," the statement reads.
A correct solution in the event of dissatisfaction with the management of a specific enterprise and the inability to find consensus from the "shareholder" is to change the composition of the Supervisory Board, which in turn will elect a new leader. However, the form of the decision made raises serious doubts about its legality and criticism from international partners.
"The Supervisory Board of the AODP is an important element of the reform of corporate governance in the public sector. However, it seems that the institution of the supervisory board was treated as a beautiful showcase story by the AODP and as a technical body without ownership subjectivity by the MOD," the MOD's Anti-Corruption Council noted.
For instance, the Supervisory Board faced issues in selecting both an independent legal advisor and a corporate secretary for its work; reports were sometimes provided too late for processing, etc. - one of the most striking examples was the provision of the annual report of the AODP for the Supervisory Board's review just 15 minutes before the start of the meeting.
The Public Anti-Corruption Council notes that at the last meeting of the Supervisory Board, two decisions were made: to extend the contract with the director for one year and to conduct an international audit of the AODP. Since the month that the Supervisory Board had been functioning at that point (still without a legal advisor and corporate secretary) was clearly insufficient for a detailed understanding of the Agency's work, according to our information, there was an agreement that the AODP director's contract would be reviewed (and could be terminated) by the Supervisory Board immediately after the audit was completed, while the Supervisory Board would continue to delve into the AODP's affairs. All publications that emphasized the "extension of the contract for a year as an assessment of the effectiveness of the AODP leadership" were deliberate or unintentional speculation and did not describe the actual state of affairs.
The MOD's Anti-Corruption Council notes that prior to this meeting, a letter was sent from the MOD to the Supervisory Board expressing the MOD's position against the extension of the contract with the AODP chairman. However, the meeting of the Supervisory Board took place before this letter was received.
"One of the accusations that the Minister of Defense publicly leveled against the head of the Agency concerned the leak of information. Indeed, the number of instances in which sensitive information, including contracts with arms manufacturers, entered the media space increased along with the escalation of the conflict. At the same time, members of the MOD's Anti-Corruption Council possess information that leaks occurred from both sides," the statement reads.
The story regarding the so-called merger of agencies, namely the Agency for Defense Procurement (which deals with arms procurement) and the State Logistics Operator (SLO, which procures everything that is not arms) - was a public manifestation of the Ministry of Defense's dissatisfaction with the leadership of the Anti-Corruption Council. Until the public reaction from partners, speculation on this topic diminished the public legitimacy of the interaction between the MOD and the AODP.
The MOD's Anti-Corruption Council notes that at a meeting with the previous composition of the Public Anti-Corruption Council, the Minister of Defense publicly promised not to merge the agencies.
Conclusions of the Public Anti-Corruption Council under the Ministry of Defense of Ukraine:
- We believe that the scandal that has arisen either has no rational reasons and explanations, or these reasons have never been publicly communicated by either party. Mutual accusations serve any purpose except addressing problems and aiding Ukraine's defense.
- We believe that the situation could have been rectified at any moment over the past few months, and the lion's share of the blame for the failure to do so lies with the Ministry of Defense of Ukraine.
- This entire situation is a glaring example of poor corporate governance, where the communication function of "clarity" between management and shareholder was not fulfilled by the active desire of both sides.
- We consider the idea of effectively merging two agencies with different functions under one leader to be undoubtedly harmful to both agencies and to the procurement system as a whole at this historical moment.
- We believe that