Corruption Risks of the New Amendments Related to the National Bank of Georgia

News | Rule of Law and Human Rights | FIGHTING CORRUPTION | Publications | Analysis 30 June 2017

Author: Mariam Tutberidze


The Parliament of Georgia discusses amendments to the law on Conflict of Interest and Corruption in Public Service. The draft law was elaborated by the National Bank and initiated by the government of Georgia. The draft law is already approved by the Legal Issues and Budget and Finance Committees.


The suggested amendments are contrary to the principles of accountability and fighting against corruption in public sector:


- The draft law establishes unequal approach to the board members of the National Bank;


Threatens the constitutional guarantees of high standard of integrity and accountability for the persons elected under the Constitution of Georgia;


Leaves the family members of the part of the Board members beyond the regulation of the rules on conflict of interests and limits the obligation of disclosing of economic interests for part of the Board members.


- Violates the principle of hierarchy envisaged for the prevention of corruption. The highest supervisory body of the National Bank, which is appointed by the Parliament, will be exempt from the Law on conflict of Interest, except for the President and Vice-President;


- The conclusion of the Secretariat of Anti-Corruption Council is not attached to the draft law ( see draft law and explanatory note).  


Current regulation under the Law:


Article 2


1. For the purposes of this Law, the term “official” includes the following persons:


o) the President of the National Bank of Georgia and members of the Board of the National Bank of Georgia;


y) any other person elected, appointed or approved under the Constitution of Georgia.


The changes under the draft law:


P) the President of the National Bank of Georgia and  the Vice-Presidents;


sh) any other person elected, appointed or approved under the Constitution of Georgia, except for the Board members of the National Bank of Georgia;


The assessment of IDFI

The National Bank Board Member – official


For the revision of the content of draft amendments it is important to analyze justification given in the explanatory note:


“The following amendments are derived from the Article 7 section 10 of the Organic Law on the National Bank of Georgia, which states that the Board member of the National Bank is not public servant”.


IDFI considers, that this statement could not be deemed neither legal, nor reasonable rationale for the amendments. The Board Member is not public servant, and is not covered by the Law on Public Service, similar as for example the Judges and the President of the National Bank him/herself. The Board Members are considered as officials and in this capacity the Law on Conflict of Interest and Corruption in Public Service (Law on Conflict of Interest hereafter) applies on them. The provision of the Organic Law that stipulates that the Board Members are not public servants does not contradict with the Law on Conflict of Interest, since high ranking public officials are those individuals whose work is related to the high responsibility, participate in the governance of the country, and whose activities serve the security and defense of the country.


The explanatory note indicates that the Vice-President will replace the Board Member in the definition of official, for clarification of some issues. IDFI deems such justification unsupported and incoherent, because the Board is highest ruling organ of the public institution, the National Bank, and its role is guaranteed by the Constitution. According to the amendments only three Board Members (the President and Voce-Presidents) will be subjected to the rules that apply to the positions that require high transparency, accountability and freedom from political influence is guaranteed. The other four members are subjected only to the narrow regulations of the Law on National Bank, which is unequal approach.


The Article 2 of the Law on Conflict of Interest demands equal approach to the officials whose election or appointment is prescribed by the Constitution. The draft law makes exception from this approach only for the Board Members of the National Bank. This exception threatens the maintenance of constitutionally protected guarantees. That also raises the risk of demand of similar exceptions from the Law on Conflict of Interest by other governing councils in the future.

Different approach to the Board Members of the National Bank

The explanatory note states following problem:


“The Board Members of the National Bank shall be the citizens of Georgia or foreign country, professional in the spheres of economics, finances or other relevant fields and with outstanding integrity. Consequently, the existence of additional requirements might hinder selection process”

The legislator indicates with this justification that the selection process of only four members might be hindered, while the impediments remain for the President and Vice-Presidents of the National Bank. It creates the impression, that the evasion of any hindrance is important for only four members of the Board, while the obstacles for the selection of President and Vice-President of the National Bank does not represent the challenge. Moreover, it is unclear how regulation adopted 1997, became problematic in 2017.

The explanatory note also indicates that limitations under the Law on the National Bank “is enough for fulfilling duties of the member of the Board of the National Bank”.


Firstly, explanatory note does not show the reasoning for considering regulation under Organic Law being “enough”. Moreover, no guarantees are suggested for avoiding future challenges to conflict of interest derived from exemptions from regulations of four Board members. In addition,  unequal approach to the Board members is also clearly visible here, since the rationale  of amendments suggest that the regulations under Organic Law is not enough for three members, while  is sufficient for other four.


It is interesting to compare regulation of the conflict of interest under the Organic Law on National Bank and Law on Conflict of Interest. The National Bank Law prescribes that member of the Board could not be at the same time: public servant, head of legal entity, representative of the Georgian financial sector, or employee of it. Such a narrow regulation excludes possibility of applying law on conflict of Interest on the family members of the high ranking public officials, which is very important in the process of prevention and detection of corruption.      

Subjecting family members of high ranking officials to the rules of the conflict of interest

The limitations under the Law on Conflict of Interest is much broader, and includes family members of the high ranking officials. Such limitations are specified in the Article 13. In addition, according to the amendments the members of the board will be exempted also from Chapter IV of the Law on Conflict of Interest, which covers declaration and publication of economic interests (the asset declaration).

Due to importance of interests of family members in the issue of conflict of interest, the European standards, namely European Banking Authority Conflict of interest Policy specifies declaration of family members’ interests. Furthermore, according to the Article 9 of the Code of Conduct for the members of the Supervisory Board of the European Central Bank “conflict of interest arises where the members of the Supervisory Board and other participants in Supervisory Board meetings have private or personal interests that may influence the impartial and objective performance of their tasks including any potential benefit or advantage to themselves, their family members or their recognized partners”. Any situation that might rise the suspicion of the conflict of interest should be declared in the written form on meeting of the Supervisory Board.



IDFI considers that adoption of amendments to the law threatens the principle of equal approach to the public institutions. The draft law creates an unequal approach to the members of the Board, and limits the application of the principle of openness and accountability on the governing councils/boards of public institutions. The amendments, negatively affect the prevention of corruption among high officials as well.    


IDFI believes that without consultations with all interested parties the adoption of these amendments rules out the possibility to study the risks, and creates negative precedent. Consequently, IDFI calls on the parliament of Georgia not to adopt amendments to the Law on Conflict of Interest and Corruption without risk analysis and involvement of all stakeholders. The parliament should ensure open and transparent process before adoption of the amendments that serves prevention and fighting corruption in the country.

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