Government must consider conflict of interest risks while appointing regulatory commission chairs
According to media reports, the Georgian Government is presently considering several candidates for the position of the chairperson of the National Regulatory Commission for Energy and Water Supply.
Protecting independent regulatory commissions from the influence of the companies operating in the markets they regulate is a prerequisite to their effective functioning. Otherwise, a threat arises that, instead of being guided by public interests, regulatory commissions will promote the interests of the companies whose activities they are supposed to supervise. For this reason, the Georgian Law On Independent National Regulatory Bodies prohibits commissioners and their family members from having any direct or indirect economic interest in any of the licensed companies operating in the corresponding markets.
The so-called revolving door process – the movement of individuals between the private and the public sectors – is another potential source of such negative influence. This type of movement creates problems when individuals continue to lobby the interests they acquired during their work in the private sector after joining the public sector, or when individuals who have moved from public offices to the private sector use the influence they have retained in public institutions to gain advantage for their companies. For this reason, the movement of officials between independent regulatory commissions and the companies operating in their field of regulation involves certain risks.
The situation in the Georgian National Communications Commission (GNCC) is an example of the problems arising from conflict of interest risks (as well as from the shortcomings of the current law). Former GNCC Chairman Irakli Chikovani worked in private companies operating in the same field before assuming the office and retained corresponding commercial interests during his time in the commission. An ad hoc parliamentary commission is presently investigating possible irregularities in the commission’s work under Chikovani.
Conflict of interest has also occurred in Georgia's energy sector. We wrote last year that Kakha Kaladze, candidate for the position of the energy minister’s position, had commercial interests in this sector. It should also be noted that Deputy Energy Minister Mariam Valishvili (who has held the office since 2008) combined her work in the ministry with the position of private company TOT Energy’s director until November 2012.
Before appointing the head of the regulatory commission, the Georgian Government should weigh all possible risks arising from conflict of interest. Moreover, the Georgian Government and Parliament need to undertake to improve the provisions of different laws designed to separate public and private interests and prevent conflict of interest in public institutions.
Transparency International Georgia will soon publish a detailed study of the problems arising through the interaction of private and public sectors and will present specific recommendations for the improvement of relevant legislation to the Georgian Parliament.
The article was prepared with financial support from the EU