On 12 September 2014, the Law of Ukraine “On Sanctions” dated 14 August 2014 (the “Sanctions Law“) became effective. The Sanctions Law establishes the grounds and procedure for Ukraine imposing special economic and trade sanctions against foreign states, foreign legal entities and individuals involved in activities threatening the national security, sovereignty and territorial integrity of Ukraine or the constitutional rights and freedoms of its citizens.
Who and What is Sanctioned?
Sanctions may be introduced against foreign states, foreign legal entities, legal entities controlled by foreign entities or individuals, foreign individuals or any other persons involved in terrorist activities based on the following grounds:
1) the actions of the persons indicated above create a real or potential threat to the national interest, security, sovereignty and territorial integrity of Ukraine, contribute to terrorist activity, violate human rights, public and state interests or result in occupation of territory, expropriation, limitation of ownership rights and damage;
2) the actions indicated in item 1 above in relation to a foreign state or citizens and legal entities of a foreign state;
3) resolutions of the United Nations General Assembly and Security Council;
4) resolutions and regulations of the EU Council; or
5) violations of the Universal Declaration of Human Rights and of the United Nations Charter.
Which Sanctions can be Applied?
The Sanctions Law provides a very extensive list of possible sanctions including the following:
1) blocking of assets;
2) restriction of trade operations;
3) restriction, full or partial termination of flights and transit of resources and goods via the territory of Ukraine;
4) restriction on exit of capital from Ukraine;
5) suspension of performance of economic and financial obligations;
6) annulment of licenses and permits issued by state authorities of Ukraine;
7) prohibition on lease and privatization of state assets;
8) prohibition on state procurement of goods, works and services;
9) full or partial prohibition on executing agreements with respect to securities issued by entities subject to sanctions;
10) restrictions on withdrawal of cash using payment cards issued by residents of the foreign state subject to sanctions;
11) termination of trade agreements, joint projects and industrial programs; and
12) termination of international agreements.
The list of sanctions is not exhaustive and allows the introduction of other measures not directly provided by the Sanctions Law but corresponding to the objectives and principles of the Sanctions Law.
How are the Sanctions Applied?
The sanctions must be approved by the National Security and Defence Council of Ukraine (the “Security Council“) at the suggestion of the Verkhovna Rada of Ukraine, the President of Ukraine, the Cabinet of Ministers of Ukraine, the National Bank of Ukraine or the Security Service of Ukraine.
The Decision of the Security Council must be approved:
§ in case of sectorial sanctions, both by the President and the Verkhovna Rada;
§ in case of personal sanctions, by the President.
The decision on sanctions should contain the term of their application unless the nature of the sanctions imposed does not allow temporary application.