Personal sanctions were imposed on a number of individuals and legal entities

On 22 September 2015 Ukraine personal sanctions were imposed on a number of individuals and legal entities (mostly of Russian origin) associated with support of the continuing violation of the national sovereignty and territorial integrity of Ukraine. Restrictive measures were introduced under the Presidential Decree dated 16.09.2015 No.549/2015 "On Decision of the National Security and Defense Council of Ukraine dated 2 September 2015 "On Application of Personal Special Economic And Other Restrictive Measures (Sanctions)."

While sanctions on individuals are prohibit their entry into Ukraine and freeze their assets located in Ukraine, sanctions on legal entities can be classified under the following groups:

  • Restriction and suspension of transit and traffic of resources through Ukraine;
  • Ban on participation in public procurement;
  • Freezing of assets and a ban on doing business in Ukraine;
  • Ban on financing companies that are subject to the sanctions.

The most notable restrictive measures are sanctions against Russian transport companies. Thus, airlines that performed flights to Crimea after acquiring the peninsular had acquired the status of a temporarily occupied territory shall be prohibited to fly to Ukraine and transit passages through the airspace of Ukraine. A major Russian operator of railway wagons – the PJSC "First Cargo Company" forbidden to effect carriages in Ukraine (actually, this operator’s wagons may not be used on the territory of Ukraine) and to transit through the territory of Ukraine.

It should be separately noted that the sanctions applied to sea ports of Kerch and Sevastopol provide for prohibitions or restrictions on the entry of foreign non-military vessels and warships into the territorial sea of Ukraine. Thus we can assume that this is an official ban on any ships’ entry to these ports. It should be noted that these ports (and other Crimean ports) were closed previously. However, there was no direct ban for vessels to visit these ports. Anyhow, any visit of foreign vessels to Crimean ports would be considered by Ukraine a violation of its state border and of the temporarily occupied territory regime.

The above sanctions have been imposed for one year.

Conclusions and recommendations

Most of the applied restrictive measures require action from the State rather than from the private sector, as most sanctions involve physical restriction of certain activities, which can only be controlled by certain state regulators within the scope of their authority.

Nevertheless, it is advisable for companies to consult the list of entities subject to sanctions, if suspicions arise that restrictive measures apply to a particular contractor.

The greatest risk of violation of the sanctions is the acquisition of property from a person whose assets have been frozen, i.e. in case of temporary restrictions on the use and disposal of property located in Ukraine.

It should be noted that Russian banks subject to the sanctions may not operate in Ukraine. However, the Ukrainian subsidiaries of Russian financial institutions are not on the list of entities the restrictive measures are applied to. This means that Ukrainian companies are allowed to work with subsidiaries of Russian banks in Ukraine.

It is notable that there is no enforcement mechanism, by means of which public authorities or banks could block illegal transaction. In practice, compliance with the sanctions regime is possible only if all those concerned regularly monitor the relevant lists of entities subject to sanctions and voluntarily refrain from actions that may violate the regime of restrictive measures. Also, the Government should provide some clarifications on the effect of particular sanctions.

Additionally, it should be stressed that the relevant Law of Ukraine "On Sanctions" does not establish any liability for breach of the sanctions regime.

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Lawyers of interindustry working group “Occupied Territories” of Arzinger Law Firm continue to review legislation and to search for the best solutions for clients, whose economic activity is related to Crimea, to help them to adapt to new conditions and protect their business.

Please do not hesitate to contact us in case of any questions regarding the information above.

Sincerely yours,

Andriy Selyutin

Counsel, Head of South Ukrainian Branch

Lana Sinichkina