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On Friday 21 May 2021, the President of Ukraine signed a presidential Order enforcing the National Security and Defense Council Decision of 14 May 2021 “On Imposition of Personal Special Economic and Other Restrictive Measures (Sanctions)” (the “NSDC Decision”).
The NSDC Decision imposes (or extends) sanctions against 674 individuals and 138 companies, predominantly Russian citizens and their affiliated companies in Ukraine and elsewhere. Some of the prominent names on the personal list include Alexey Fedorenko, owner of Russian Parus Corporation, and Boris Nuraliev, owner of 1C corporation. The companies list, respectively, includes Parus and 1C companies in Ukraine and internationally.
TYPES OF RESTRICTIONS
Generally, the list of possible restrictions (sanctions) is prescribed by the Law of Ukraine “On Sanctions”, and contains 24 sanctions types. However, this list is not exhaustive, therefore other sanctions may be imposed.
Other companies falling under the sanctions include Russian payment systems and IT services, such as: WebMoney, Qiwi, Megasoft, Kaspersky Lab, Dr.Web, Yandex, YooMoney, ABBYY and Galaktika.
The NSDC Decision also targets the leaders of Russia-supported entities in the temporarily occupied East of Ukraine and of the Russian-occupied Crimea, as well as a large group of individuals believed to be the leading criminal figures in Ukraine (“zlodii u zakoni”).
Usually, the sanctions imposed constitute freezing of all assets of the relevant company/individual, termination of any contracts and ban on any further transactions. The restrictions may be imposed for a certain period or indefinitely.
ENFORCEMENT AND LIABILITY FOR THE BREACH OF SANCTIONS
It has to be noted that Ukraine has somewhat patchy regulation of the way the sanctions are enforced.
The Law of Ukraine “On Sanctions” does not provide for any specific type of liability directly linked to the fact of breach of the restrictions imposed by the sanctions.
On the other hand, there is substantial sectoral legislation that effectively prevents a sanctioned person from conducting business or other activity in Ukraine.
One of the main filters is the banking system supervised by the National Bank of Ukraine. Non-dealing with sanctioned persons is also provided by the anti-money laundering, privatization, and antitrust legislation. Moreover, the provisions excluding sanctioned persons from certain types of activity are prescribed in legislation regulating TV and radio broadcasting, securities and stock market, as well as in land regulations.
We may expect that by the end of 2021 Ukraine will gradually establish more robust system of enforcement of the sanctions imposed by the NSDC.
Accordingly, all national and international companies doing business in Ukraine are advised to plan and establish relevant compliance practices and procedures to ensure that they are not dealing with the persons included in the sanctions list.
Furthermore, a person dealing with the sanctioned individual or company may be theoretically subject to allegation of legalization (laundering) of proceeds from crime and financing terrorism (under Article 209-1 of the Criminal Code of Ukraine).
In commercial relations, a party to a contract with a sanctioned party may argue that the contract must be terminated or suspended due to the imposition of the sanctions, with potential invocation of a force majeure or other relevant provisions.
Two draft laws were submitted to the Ukrainian Parliament in December 2020 and March 2021 to provide clarity and certainty to the question of sanctions enforcement. Both drafts propose to introduce liability for breach of sanctions in the form of large fines and even imprisonment.
The NSDC maintains a database of all sanctioned persons on its website. As of today, the database includes 3769 records for individuals and 1776 records for companies. The database is available (in Ukrainian) available here.
The text of the Presidential Order of 21 May 2021 is available here (in Ukrainian).