TI Georgia has studied cases of one of the forms of conflict of interest, the “revolving door” employment, and the legislation that regulates it. The study has established that the law does not work in practice, which has two main reasons:

1. The text of the law is vague, which makes it difficult to identify the revolving door phenomenon and to reveal cases of this type of conflict of interest.
2. There is no agency responsible for revealing and responding to such cases.     

What is the revolving door?

Movement of individuals between the public and private sectors (which is known as “revolving door”) may contain risks of conflict of interest and corruption when such movement occurs within one sphere. For example, a public official who takes part in the regulation of a sphere may use his/her position for the benefit of a private company hoping that he/she will get a high-paying job in the same company. In addition, a former official who has moved to a private company may use his/her influence and ties with the authorities for lobbying and gaining an unfair advantage for this company.

Another form of the revolving door phenomenon is the movement from private sector to public service. Movement of people who work in executive positions in large corporations to positions of high-ranking government officials creates risks that they will take a tendentious approach when implementing policies and regulations.

In order to protect public interests and maintain transparency, many counties try to subject this issue to regulation. Statutory restrictions are aimed not at total elimination of mobility of staff between the private and public sectors but at the prevention of exceeding of powers in the event of such mobility.    

What the Georgian legislation says     

According to Paragraph 10 of Article 13 of the Law on Conflict of Interest and Corruption in Public Service, “A dismissed public servant may not, within one year after dismissal, start working in the public institution or carry out activities in the enterprise which has been under his/her systematic official supervision during the past three years. Within this period, he/she also may not receive income from such public institution or enterprise”.

It is also noteworthy that the Georgian legislation does not regulate another type of the revolving door phenomenon in which people move from the private sector to bodies that regulate the same sphere. The concept of such type of the revolving door phenomenon has existed in international anti-corruption practice for a long time and it involves cases when, for example, representatives of large corporations take executive positions from which they will exert an influence on the company’s obtaining public procurement contracts or other types of privileges.   

In addition, Ordinance No. 200 of the Government of Georgia on Establishing General Rules of Ethics and Conduct in Public Institutions recognizes the possibility of existence of conflict of interest at the time of movement from private to public sector and vice versa, although the Ordinance does not provide for a mechanism for restricting mobility. 

How the law is enforced

The practical enforcement of the law is problematic, because it does not contain a definition of “systematic supervision” and it is not clear which cases the aforementioned restriction may extend to.

In the correspondence with TI Georgia,_^[1] the Civil Service Bureau provided an interpretation according to which a former public official is prohibited, for the duration of one year, from holding a position only in an institution within the public service which was under his/her official supervision before. This means that, based on the interpretation of the Bureau, this norm does not restrict public officials from moving to a company which was under their regulation during their time in public service (the goal of such a norm should be precisely to decrease the risks emerging at the time of movement from the public sector to the private sector).

The wording “under systematic official supervision during the past three years” is vague – it is unclear whether it implies uninterrupted supervision during three years or supervision with any duration in the past three years (in the former case, the norm will be largely useless).

In addition, the law does not specify which agency is responsible for the monitoring of the enforcement of the said norm. With regard to this issue, we approached the Civil Service Bureau, which replied that the Bureau was not responsible for monitoring the enforcement of this norm and didn’t have information about the practice of violation or application of the norm.

Therefore, if we accept the Civil Service Bureau’s interpretation of the norm, as of now: 

• The flaws of the legal framework render the norm of the law which is supposed to decrease the risks related to the problem of the revolving door phenomenon practically useless, as the law does not clearly determine which category of cases the respective norm extends to.
• There is no mechanism for enforcing this norm in practice, as the law does not determine the body responsible for monitoring the enforcement.

According to such interpretation of the norm_^[2] by the Civil Service Bureau, the Georgian legislation does not contain – either in theory or in practice – a norm that restricts the revolving door phenomenon.                                                

Noteworthy cases in recent years

Due to the aforementioned flaws of the regulatory system, cases of employment of former public officials in the private sector which contain signs of conflict of interest are left without consideration and response. From the cases that took place in recent years, one should mention the following:  

• In May 2019, the former Chairman of the Management Board of the Georgian State Electrosystem, Sulkhan Zumburidze, and a former member of the company’s Management Board, Mamuka Papuashvili, founded Parvus Group LLC which operates in the energy sector and received government contracts to build hydro-power plants a few months after registration. On August 3, 2020, state-owned non-profit, Open Net, signed a contract worth GEL 10 million (GEL 10,037,000) – directly and without a tender – with Parvus Group LLC.
• The former Minister of Economy and Finance of Adjara, Davit Baladze, became the director of Alliance Group LLC after leaving office. While he was serving as the Minister, the Batumi Municipality transferred a large land plot beside the Hilton Hotel to the Ministry of Economy and Finance of Adjara, which the Ministry sold to Alliance Group LLC. A new hotel is now being built on this land plot. A year and a half after resigning from the Minister’s position, Baladze became the director of Alliance Group LLC.
• In the years 2011-2014, Badri Romanadze was the Head of the Architecture Service of the Municipal Administration of Kobuleti. On February 20, 2015, he became the director of Georgian Stone LLC. In the years 2015-2020, the company obtained more than GEL 35 million from public procurement contracts, GEL 24 million of which the company obtained in Kobuleti.
• In 2015, after leaving the position of the Deputy Governor of Samtskhe-Javakheti, Avtandil Kachkachashvili became the owner of a 15% stake in Road Construction Division No. 2 LLC. Currently, he is the director and owner of a 30% stake of the company. From the beginning of 2017 to September 2020, the company received GEL 13,607,970 from the public procurements of the Samtskhe-Javakheti region.
• In September 2016, Murtaz Kikoria resigned from the position of the Director General of the Bank of Georgia. In December of the same year, he became a member of the Board and Vice-President of the National Bank of Georgia. After serving in this position for two years, he returned to the private sector again – in July 2019, he was elected as an independent member of the Board of JSC Liberty Bank.
• Zurab Svimonishvili left the position of the Deputy Head of the Municipal Administration of Telavi in 2017. On January 30, 2019, he founded New Building LLC. Five months after its founding, the company started obtaining simplified procurement contracts. In 2019, the company won 8 simplified procurement contracts worth GEL 105,181.39 and 3 tenders with a value of GEL 60,233.07 in the Telavi Municipality alone. The company won all the 3 tenders without competition.
• Irakli Gvenetadze, founder and director of privately owned Alliance of Rugby Supporters R-15 LLC in the years 2013-2016, became the president of municipal N(N)LE Regional Rugby Club of Samtskhe-Javakheti ‘Tao’ in 2016. In fact, for a period of two months in 2016 Gvenetadze headed both organizations at the same time. The said municipal legal entity is funded from the budgets of all the six municipalities of Samtskhe-Javakheti.

TI Georgia discussed other cases of the revolving door phenomenon in a study published in 2019.

What should be done to improve regulation

For the purpose of effective regulation of the risks of conflict of interest and corruption related to the revolving door phenomenon, TI Georgia gives the following recommendations:

• The legislative norm on the revolving door phenomenon should be fully revised in view of international practice and worded in such a way that rules out vagueness as to which cases the restriction applies to;
• In a number of countries, the mechanism of the so-called cooling-off period is applied against the revolving door phenomenon, which prohibits former officials from being employed in some categories of jobs in the private sector for a certain period after leaving the public service. According to the applicable legislation of Georgia, the cooling-off period lasts for one year. TI Georgia recommends that the cooling-off period should last at least two years;
• The issue of individuals who have moved from private to public sector should also be added to the law. It is necessary to establish proportional restrictions and a cooling-off period of at least two years;
• It is necessary to add to the legislation a restriction that will prohibit, for the duration of two years, the companies of former officials from participating in the public procurements of agencies that they were in charge of or supervised;
• The law should clearly determine the agency that will supervise the observance of requirements of the law by former officials. The functions of the responsible agency should also include the monitoring and recording of cases of the revolving door phenomenon;
• With regard to state-owned enterprises, the regulations that restrict the revolving door phenomenon currently only extend to those enterprises in which the State owns a 100% stake. We recommend that the law also extend to former executives of those limited liability companies in which the State owns a substantial stake;
• According to the applicable legislation,_^[3] from the information included in an asset declaration, the Civil Service Bureau is not obliged to make public an official’s places and dates of employment and remuneration before appointment and after dismissal from office. This exception renders the mechanism of asset declaration useless for the purposes of public monitoring of the revolving door phenomenon. It is necessary to remove the exception and to ensure that the public knows the officials’ places and dates of employment and remuneration before appointment and after dismissal.