Sanctions as an instrument of the Ukrainian government

Specifically, in 2021, Chinese investors in Motor-Sich were the first to be sanctioned. At the same time, sanctions were imposed on three Chinese investment companies. Subsequent sanctions were directed against the Republic of Nicaragua, given the fact that the country has opened its consulate in the territory of occupied Crimea.

The most resonant decisions were made by the National Security and Defense Council of Ukraine in February. These include sanctions against people’s deputies Taras Kozak, Viktor Medvedchuk and a number of TV channels, including 112, ZIK, and NewsOne. In March, economic sanctions were imposed on former officials and others who helped strengthen Russia’s occupation of Crimea and Donbas, including Viktor Yanukovych and Mykola Azarov.

There was much discussion of the imposition of sanctions against 10 Ukrainians and 79 smuggling companies in April. The latest wave of sanctions in May-July 2021 concerned so-called code-bound criminals and criminal leaders, people and companies involved in Russian aggression, Fuks, Firtash and Putin’s entourage, as well as Russian retailer Wildberries.

The active sanctions policy of the state has provoked discussions about the role of restrictive measures in modern conditions: a situational political instrument or a justified restriction of the rights and freedoms of individuals? Let us try to understand.

The procedure for imposition of sanctions

The Law of Ukraine “On Sanctions” (hereinafter referred to as the Law) has been in force since August 2014. Its adoption was due to the need for an immediate response to threats to Ukraine’s national security in the context of Russian military aggression in Crimea and Donbas.

The list of sanctioned persons is exhaustive. In particular, they may be:

• a foreign state;
• a foreign legal entity;
• a legal entity under the control of a foreign legal entity or a non-resident individual;
• foreigners;
• stateless persons;
• entities and individuals engaged in terrorist activity.

The grounds for sanctions are the actions of these persons creating real or potential threats to national interests, national security, sovereignty and territorial integrity of Ukraine, promoting terrorist activities and/or violating human or civil rights and freedoms, public and national interests. For instance, these are actions aimed at supporting the annexation of Crimea, the occupation of Donbass; cyberattacks on critical infrastructure; information threats, including propaganda of separatist sentiments in the territory of Ukraine; support of economic (business) relations in the temporarily occupied territory of Ukraine, etc.

The Law contains 24 types of sanctions, including blocking assets, restricting trade operations, stopping the transit of resources, flights and transportation through Ukraine, preventing the capital withdrawal outside Ukraine, suspending of economic and financial obligations, revoking or suspending of licenses and other permits, etc.

The application of a certain type of sanctions against a particular person is preceded by a procedure as prescribed by law, which includes several successive stages.

Thus, decisions on the imposition of sanctions are made by a special coordinating body under the President of Ukraine – the National Security and Defense Council of Ukraine (hereinafter referred to as the NSDC) on the basis of proposals of the Verkhovna Rada of Ukraine, the President of Ukraine, the Cabinet of Ministers, the National Bank of Ukraine and the Security Service of Ukraine. Decisions of the National Security and Defense Council are enforced by a decree of the President of Ukraine and are binding.

Thus, this procedure allows the state to respond very quickly to significant threats to national interests and effectively block the activities of certain persons. However, there are a number of reasons why the Law is reasonably criticized.

What are the challenges of imposition of sanctions?

Firstly, one of the most controversial from a legal perspective is the question of the legality of the imposition of sanctions to citizens and legal entities of Ukraine. The Law stipulates that restrictive measures may be applied to the latter only if they are attributed to persons engaged in terrorist activity. At the same time, the Law of Ukraine “On Combating Terrorism” provides a fairly broad definition of “terrorist activity”. In addition, the Criminal Code of Ukraine establishes criminal liability for terrorism. And according to the national legislation, prosecution is possible only by a court conviction, which has entered into force.

According to many human rights advocates, the imposition of sanctions against the citizens of Ukraine without ascertainment of their guilt in the manner prescribed by law may indicate a violation of the presumption of innocence established by Article 62 of the Constitution of Ukraine: a person is presumed innocent of committing a crime and cannot be subjected to criminal punishment until his/her guilt is proved in a lawful manner and established by a court conviction.

That is why it is necessary to immediately regulate at the legislative level the issue of imposition of sanctions to the citizens of Ukraine.

Secondly, there are no clear mechanisms for monitoring and control over the implementation of the decisions of the NSDC. For instance, in pursuance of the Law, certain state bodies (the National Bank of Ukraine, the Security Service of Ukraine, the State Border Guard Service of Ukraine) have adopted acts regulating the procedures for implementation of sanctions restrictions. However, as of today, there is no act of the Cabinet of Ministers of Ukraine that would regulate the procedure for imposition and monitoring the effectiveness of sanctions by executive authorities.

Thirdly, there are no administrative, criminal, or financial liabilities for non-compliance with decisions on the imposition of sanctions.

Of course, sanctions are a political tool, but they must meet such a criterion as legal certainty. Therefore, amending the Law and adopting bylaws to eliminate the above shortcomings is a priority for the state to successfully implementation of sanctions policy.

Do Ukrainian courts lift sanctions?

Sanctioned persons may appeal them to the Supreme Court,. It should be added that the decree of the President of Ukraine, which put into effect the relevant decision of the NSDC, is subject to appeal. A plaintiff is deprived of the opportunity to appeal the previous stages of the decision on the imposition of sanctions, as the negative consequences for him/her occur precisely as a result of the implementation of the decision of the NSDC by Presidential Decree.

However, the analysis of the practice of the Supreme Court shows that the abolition in court of decrees of the President of Ukraine on the imposition of sanctions is a challenge. As of today, there is only one positive decision of the Administrative Court of Cassation in the Unified State Register of Judicial Decisions, which declared the relevant presidential decree illegal.

Specifically, in the above-mentioned case, the plaintiff, Tolexis Enterprises AG, was sanctioned for the supply of products (titanium dioxide), which were allegedly produced at a plant illegally expropriated by the Russian Federation in the temporarily occupied territory of Crimea. However, the plaintiff managed to prove that the goods are of Ukrainian origin, as they were registered under Ukrainian law and before the occupation of Crimea. As a result, the Supreme Court found unlawful and lifted the restrictive measures (the decision of June 18, 2020 in case No. 9901/259/19).

However, this decision is still the only exception. In all other cases, courts dismiss the claims of the sanctioned persons. In its decisions, the Supreme Court emphasizes that the sanctions were imposed by the state taking into account a pro rata principle, i.e. for purposes defined by law, in compliance with the national security interests and the degree of interference with fundamental rights and freedoms (for example, the decision of the Supreme Court dated June 1, 2020 in case No. 9901/405/19, the decision of the Grand Chamber of the Supreme Court dated November 4, 2020 in case No. 9901/138/20).

It should be noted that once a person has exhausted all available effective national remedies, he or she has the right to apply to the European Court of Human Rights (hereinafter referred to as the ECtHR). In considering the case, the ECtHR will analyze whether the Convention for the Protection of Human Rights and Fundamental Freedoms has been violated by the state in imposing sanctions, whether the Law of Ukraine “On Sanctions” meets the quality requirements of the Law and whether it is clear, understandable and predictable. 

Taking into account that Ukrainian courts currently support the state’s sanctions policy and are extremely reluctant to revoke decisions on the imposition of sanctions, a number of complaints to the ECtHR against Ukraine in connection with the imposition of sanctions should be expected in the future.

As a conclusion

Therefore, the imposition of sanctions is an effective tool of the government in the event that it is necessary to respond quickly and effectively to threats to national security and national interests. However, discretionary powers of public authorities to impose sanctions should not become arbitrary. Every decision of the state must be substantiated and comply with the principle of the rule of law, which includes legality, legal certainty and respect for human rights. This will minimize the risks for Ukraine, in particular, the risk of the ECtHR making decisions against Ukraine in connection with the imposition of sanctions.