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Sanctions/Disputes

M.S.L. v. Ukraine case: did the ECtHR break a new ground on Ukraine`s NSDC sanctions?

On 16 October 2025, the European Court of Human Rights delivered its judgment in the case of M.S.L. LLC v. Ukraine. The case concerned one of the first sanction packages introduced by a Presidential Decree back in 2015 under the recently enacted Law of Ukraine «On Sanctions». Citing threats to national security, the Ukrainian applicant company was subjected to economic sanctions for a one-year period, including the freezing of its assets – measures that were subsequently extended twice, until 2018. The company challenged these sanctions as unlawful and disproportionate. The case attracted considerable attention, as it marked the first time the European Court of Human Rights provided guidance on judicial review of sanctions imposed under Ukraine’s national mechanism operated by the National Security and Defence Council (NSDC). It is noteworthy that this was Ukraine’s first experience in applying national sanctions to counter concealed, hybrid actions and threats that had emerged since 2014. Spoiler: The European Court of Human Rights did not question the legality or legitimacy of the sanctions imposed by the National Security and Defence Council (NSDC). Instead, it focused on the procedural aspects of their implementation and judicial review before the national courts. Scope of review The European Court of Human Rights examined only one restrictive measure – the freezing of the applicant’s assets imposed by the first Presidential Decree of September 2015. Other sanctions contained in that Decree were not assessed, while the complaints concerning subsequent extensions of the sanctions in 2016 and 2017 were declared inadmissible due to the applicant's own refusal to challenge them in national courts. In other words, the Court’s review was limited to a single episode from an earlier period, belonging to Ukraine’s initial sanctioning practice, rather than the current sanctions system in place. Assessment of the national security context and the possibility of imposing sanctions on Ukrainian nationals. The European Court of Human Rights acknowledged that the adoption of the Law of Ukraine «On Sanctions» (hereinafter – the Law) took place amid an unprecedented threat to the national security and territorial integrity of the State. This threat required a prompt response from the Ukrainian authorities, which could not be ensured solely through traditional criminal proceedings. Considering that the provisions of the Law were intended to cover various forms of conduct regarded as threatening to national security, the Court accepted that these provisions were drafted in broad terms, the interpretation and application of which are matters of practice (§§ 95-96). This conclusion of the European Court of Human Rights indicates that the Law’s generally worded provisions permit practice-based, clarifying interpretation to address emerging forms of threats. In this vein, it can support the Supreme Court’s position that sanctions may be applied to Ukrainian nationals – provided such interpretation is grounded in the purpose of the Law and is accompanied by adequate procedural safeguards. What did the Court find, and is any of it new for the judicial system? The violation found by the European Court of Human Rights concerned the lack of individualized reasoning in the relevant Presidential Decree, which merely reproduced the statutory grounds in a generic manner (§ 98). The Court also found the scope of judicial review in the national proceedings to be unduly limited: the Supreme Court did not verify whether the Decree rested on a sufficient factual basis or whether the allegations against the applicant company were supported by proper evidence – specifically, proof that russians or russian companies were among the company’s ultimate beneficial owners (§§ 102-104). As a result, the Court concluded that the review carried out in this case did not afford the applicant a real opportunity to effectively challenge the measures (§§ 108-109). Importantly, the Court did not assess the proportionality or legitimacy of the sanctions themselves (§ 110), confining its analysis strictly to procedural aspects. For Ukraine, these conclusions are not new. As early as 2020, in case No. 9901/259/19, the Cassation Administrative Court of the Supreme Court, granting the claim of Tolexis Enterprises AG to declare unlawful and void the 2019 Presidential Decree imposing personal economic sanctions on the claimant, held that sanctions must be based on real, objectively existing facts supported by evidence that reliably indicates conduct creating real or potential threats to Ukraine’s national interests and security, and that such evidence constitutes the grounds for inclusion in sanctions lists under the Law. In another case, No. 990/176/23, by its judgment of 10 February 2025, the Supreme Court reaffirmed this legal position and further clarified the scope of the judiciary’s duties when reviewing the legality of sanctions. The Court emphasized that judicial oversight must extend beyond the formal grounds for issuing a Presidential Decree to also encompass the existence of a sufficient factual basis for the imposition of sanctions. Thus, the position of the Supreme Court is generally consistent with that of the European Court of Human Rights: the imposition of sanctions must be based on verified and proven facts, and judicial review must be genuine rather than merely formal. The absence of proper reasoning in a Presidential Decree or of evidence supporting the factual grounds for sanctions constitutes sufficient basis for declaring such a decree unlawful and void, in line with the rule of law and the approach taken by the European Court of Human Rights. Effectiveness of national legal remedies Particular attention should be paid to §120 of the judgment, in which the Court emphasized that its finding of a violation of Article 13 of the Convention was of an individual nature, specific to this unique case, and did not cast doubt on the overall effectiveness of proceedings before the Supreme Court in similar matters. The Court acknowledged that, in the absence of excessive delays, the national mechanism of judicial review meets the standards of effective legal protection. This conclusion is an important confirmation that Ukraine’s system of judicial review of sanction-related decisions complies with the effectiveness requirements, and that the deficiencies identified by the Court relate solely to the circumstances of this particular case. Regarding compensation Having examined the circumstances of the case, the European Court of Human Rights found no causal link between the alleged damage and the actions of Ukraine. In §134, the Court stated that the mere finding of a violation of the applicant’s rights guaranteed by the Convention constituted sufficient just satisfaction for any moral or other damage the applicant might have suffered. Accordingly, the Court did not award any compensation. Conclusion The judgment in M.S.L. v. Ukraine does not establish a universal precedent that would call into question the existing sanctions system or the mechanisms for its judicial oversight. It concerns a specific case and highlights key procedural requirements – individualized reasoning, substantive judicial review, and reasonable timeframes for consideration. The European Court of Human Rights reaffirmed that sanctions, as an instrument of state policy, may remain a lawful means of responding to threats to national security.
Koziakov & Partners - October 27 2025
Dispute Resolution

A law has been adopted that allows booking men who are not registered or are wanted by the TCR

On October 9, the deputies adopted a law that provides for the possibility of booking men liable for military service who are not registered or are wanted by the TCR (draft law No. 13335). According to the draft law it will be possible to book even those employees of critical enterprises and enterprises of the defense-industrial complex who: - are not registered with the military; - have missing or incorrectly executed military registration documents; - have not specified their personal data in the TCR; - are wanted for violating the rules of military registration, legislation on defense, mobilization training and mobilization. Such employees can be booked for 45 calendar days from the date of conclusion of an employment contract, regardless of the number of people already booked at the enterprise. At the same time, such a reservation is provided only once a year and does not exempt from liability for violation of the rules of military registration. However, it should be noted that currently information is being disseminated in the open access that before the final vote, the mention of critical enterprises was excluded from the draft law. That is, there is a possibility that the final version will refer to the possibility of reservation under the new rules only those military personnel who work at defense enterprises. However, it will be possible to analyse the content of the final version of the document only after it is signed by the President of Ukraine and officially published. Follow GOLAW updates to always be up to date with the latest legal news. Author: Natalia Matviichuk, Senior Associate at Litigation and Dispute resolution practice at GOLAW, Attorney at law
GOLAW - October 22 2025
Corporate, Commercial and M&A

GOVERNMENT EASES IMPORT RULES FOR EQUIPMENT IN LARGE-SCALE INVESTMENT PROJECTS: WHAT HAS CHANGED AND HOW IT WILL WORK

On 9 September 2025, the Government approved amendments to the Procedure for importing new equipment (machinery) and components into the customs territory of Ukraine and their targeted use, which are imported by an investor with significant investments exclusively for their own use in the implementation of an investment project with significant investments in accordance with a special investment agreement, concluded in accordance with the Law of Ukraine “On State Support for Investment Projects with Significant Investments in Ukraine” (the “Amendments” and the “Procedure” respectively). The basic Procedure was approved by Resolution of the Cabinet of Ministers No. 860 of 11 August 2021. Information about the Amendments has been published on the website of the Ministry of Economy. What are the Amendments about? The aim is to cut red tape for investors implementing special investment agreements. The amendments concern the deadline for submitting equipment lists, the requirement to indicate country of origin, and the method of calculating estimated value. The purpose is to align regulation with real business processes, making it simpler and quicker to import equipment for investment projects. What exactly has changed? Deadline for submitting a written request to the Ministry of Economy of Ukraine The Amendments establish a new deadline for investors to submit a list and volumes of equipment — instead of five days, it is now twelve months from the date of receipt of the conclusion on the feasibility of the project. The requirement to indicate the country of origin in the list of equipment has been abolished This eliminates the need to re-approve documents when changing a manufacturer or sub-supplier, which is particularly important for international supply chains. The definition of the ratio between the estimated and customs value of equipment has been clarified The cost of equipment is now indicated in the currency of the supply contract with a parallel reflection of the total amount in hryvnia, which reduces the risk of discrepancies due to currency fluctuations. It should be noted that the key conditions for participating in the programme remain unchanged: investment of more than €12 million, the creation of at least 10 jobs, projects implemented in defined sectors (from manufacturing and transport to healthcare, education, and tourism), and a maximum implementation period of five years. What does this mean in practice? Based on the available information, the following conclusions can be drawn: extending the deadline to twelve months gives investors greater flexibility and time to run tenders and procurement without rushed decisions; dropping the country-of-origin requirement removes unnecessary bureaucracy and repeated approvals when suppliers change; the updated valuation rules, linking prices to the contract currency with parallel hryvnia figures, lower currency-related risks, and simplifying customs procedures; and the fact that the core eligibility criteria remain the same confirms the stability of the state support model — the amendments are targeted simplifications rather than a complete redesign. Authors: Oleksandr Melnyk, Partner at GOLAW, Head of Corporate Law and M&A Practice, Attorney at Law Vladyslava Zaichko, Paralegal at Corporate Law and M&A Practice at GOLAW
GOLAW - October 21 2025
Tax

Beneficial owner of income for applying benefits under DTTs: the Ukrainian approach

International double taxation treaties (“DTTs”) often provide that income of non-residents from Ukraine in the form of dividends, interest or royalties, can be subject to preferential tax rates. However, these benefits are not automatically applicable – certain requirements must be complied with to activate them. Application of the preferential tax rate usually requires, inter alia, confirmation the status of beneficial (actual) recipient (owner) of income (“BO”). Though it may appear simple, the practical application of the BO status often leads to considerable difficulties for taxpayers. 1. The definition of BO In accordance with the provisions of the Tax Code of Ukraine (“Tax Code”), the BO is a person (legal or individual) who is entitled to receive such income and is its beneficiary, i.e., has the right to actually dispose of this income. However, a legal entity or individual is not a BO, even if it is entitled to receive it, but acts as an agent, nominee (nominal owner) or performs only intermediary functions. This may be indicated if such a subject: does not have sufficient authority or right to use and dispose of the income; and/or transfers the income received (or the majority of it) to another party without performing significant functions, using significant assets and bearing significant risks in such a transaction; and/or lacks the necessary resources (qualified personnel, fixed assets owned or used, sufficient equity capital, etc.) to actually perform the functions, use the assets and manage the risks associated with the income formally assigned to it. Additionally, the interpretation of the concept of BO is contained in the Commentaries of the OECD on the Article 11 “Interest” of the Model Tax Convention on Income and on Capital. The Commentaries state, inter alia, that “a conduit company cannot normally be regarded as the beneficial owner if, though the formal owner, it has, as a practical matter, very narrow powers which render it, in relation to the income concerned, a mere fiduciary or administrator acting on account of the interested parties”. 2. Approaches of Ukrainian courts to qualifying the BO Judicial practice in Ukraine has been actively developing regarding the clarification of the BO status and the criteria for a non-resident to be recognized as a BO. In their decisions, the courts, inter alia, pay attention to the following aspects: obligations to third parties: If an income recipient is under a pre-existing obligation to pass the income on to a third party, it cannot qualify as the BO. The BO should be the entity that ultimately receives and controls the income without being subject to such obligations (the judgement of the Supreme Court dated March 18, 2025, in case No. 500/1744/24); delay of funds on "technical accounts": The duration of funds being held by a “transit” company is not decisive in proving or disproving the BO status. Even if the transfer to the real recipient occurs years later, the company may still be regarded as a “transit company”. What matters is the actual flow of funds and the identity of their final recipient (the judgement of the Supreme Court dated April 17, 2025, in case No. 160/18691/23); decision-making right: In order to confirm the status of the BO, it is essential that the recipient of income has the genuine right to decide how the income will be used. This means the recipient must have real right to make decision to retain the funds, reinvest them, distribute them, or otherwise manage them at its own discretion (the judgement of the Supreme Court dated May 29, 2025, in case No. 480/9226/23); influence of related parties: The existence of a connection between companies – income payer and income recipient, common beneficiaries, related companies or structuring of assets between them is not recognized under the Tax Code as a valid ground for challenging the status of BO. Even if entities are linked by common owners but comply with the requirements set by law when conducting transactions, then the recipient of income will be recognised as the BO (the judgement of the Supreme Court dated June 24, 2025, in case No. 120/10439/24). It is necessary to consider these aspects when applying for tax benefits, as in the case of a court dispute, the court will also take into account the case law. 3. The application of the “look through approach” In accordance with the provisions of the Tax Code, if a non-resident – a direct recipient of income originating from Ukraine – is not the BO of such income, the DTT provisions with the country of residence of the actual BO can be applied. This approach, known in the doctrine as the “look through approach”, allows to “skip” the intermediary straight to the actual BO. To confirm the status of BO in this case, the following documents must be provided to the tax agent paying income: from the income recipient – a statement in free form confirming that such a subject does not have the status of the BO, as well as confirming that the other non-resident has such status; from the actual BO – a statement in free form confirming that such a subject has the status of the BO and documents confirming this status (including, but not limited to, licences, contracts, official letters from competent authorities), as well as a document confirming the tax residency. In summary, to take advantage of this approach, the correct determination of the BO within the chain of intermediaries, is also the key point. The issue of determining the status of the BO is one of the main factors in the possibility of applying the tax benefits provided by DTTs. Failure to clearly understand and comply with the special criteria may result in significant tax risks for taxpayers. Ukrainian judicial cases demonstrate that courts analyse the essence of transactions and the real role of the non-resident owner of income in depth. Formal compliance usually is not sufficient if there is no real economic function and control over the income. Taxpayers are advised to be particularly careful when structuring cross-border transactions with passive income. It is important to document the economic substance of such transactions and be prepared to prove the status of the BO. Authors: Viktoriia Bublichenko, Partner at GOLAW, Head of Tax, Restructuring, Claims and Recoveries practice, Attorney at law; Tetiana Fedorenko, Senior Associate at Tax, Restructuring, Claims and Recoveries practice at GOLAW, Attorney at law; Vadym Zhukov, Paralegal at Tax, Restructuring, Claims and Recoveries practice at GOLA
GOLAW - October 17 2025