Under a sword of Damoclus: the prospects of contesting Ukrainian restrictive measures (sanctions)

26 04 2019

Background

In August 2014, nearly six months after the beginning of Russian military aggression in Crimea and Donbass, Ukrainian Parliament (Verkhovna Rada) passed a Law “On Sanctions”. There was a set of rules creating a completely new legal mechanism under this short title. It aimed to discourage entities and individuals from involving in malicious actions against Ukrainian statehood. Mindful of the “need for immediate and effective reaction to both real and potential threats to national interests and national security of Ukraine”, Ukrainian legislator established twenty-five types of restrictive measures. Every year since 2015 the President of Ukraine has been issuing a decree imposing sanctions on natural and legal persons. The number of sanctions addressees is constantly growing with 2603 natural persons and 1072 legal persons being subject to the sanctions in 2019.

How it works

Before anyone can find his name on a sanctions list, Ukrainian authorities carry out a long and sophisticated procedure. First, one of five institutions mentioned by the Law (the Parliament, the President of Ukraine, the Cabinet of Ministers, the National Bank of Ukraine or the Security Service) submits its proposal to impose, amend or lift the sanctions. Then the proposal is examined by the National Security and Defense Council of Ukraine (the Council) and the latter decides on the imposition, amendment or elimination of the sanctions. However, only the President of Ukraine has a final say on the matter since he issues a decree granting legal effect to any decision of the Council. This decree specifies which types of restrictive measures are applied (in most cases, these measures consist of assets blocking, entry ban, prevention of capital withdrawal and restriction of trade operations). Normally, restrictive measures are limited in time and can be amended on the motion of the Council or of one of the institutions which initiated the measures. They can also be lifted if they have fulfilled the aim for which they were initially introduced.

Once a person is listed in a sanctions decree, the restrictive measures become legally effective. In principle, they shall be enforced by everyone concerned – both private individuals and government agencies. For example, the National Bank of Ukraine adopted a more elaborated guideline for banks on how to implement asset freezing and capital withdrawal prevention measures. The Cabinet of Ministers of Ukraine was expected to introduce a similar guideline for executive bodies, though it failed to do it so far. The Security Service of Ukraine also has its set of internal procedures, but it remains clandestine for security reasons. Same goes for the Border Service of Ukraine.
Several widely known cases proved that Ukrainian authorities became extremely prudent and intelligent in choosing their methods since sanctions hit the target as a complete surprise. Goods can be arrested, ships can be detained, trains can be blocked, banking assets can be frozen – all this is without any advance notice. Even if a sanctioned entity continues to operate after being listed, it does not mean that the sanctions are dead. Conversely, they can affect when they are expected least which only adds to their effectiveness.

Judicial remedy – a path full of thorns

The effectiveness of the sanctions is preserved mostly due to the secrecy of their imposition. The Security Service of Ukraine conducts all the initial works in most cases and the results thereof are protected by the state secret regime.

On the other hand, such secrecy results in murky prospects of judicial review of the sanctions. As for now, there are nearly 50 cases in which entities or individuals contested the sanctions imposed on them. However, none of them ended up in a ruling on the merits, since they are literally stuck in the Supreme Court at the preliminary stages due to state secret obstacles. The matter is aggravated by the fact that all parties to the proceeding, including the judges, need to obtain the clearance to access state secret. As such, no court decision can be analyzed on the merits.

The legal basis for the sanctions (more precisely – the absence thereof) may serve as a reason for annulment of the sanctions. The Law establishes several grounds to impose the sanctions: some of them are specifically designated (e.g. resolutions of UN Security Council or of General Assembly, decisions and regulation of the European Union), while the others are worded in broad terms (actions creating real or potential threats to the national interests, national security, sovereignty and territorial integrity of Ukraine). At the same time, the sanctions shall be based on the principles of legality, transparency, impartiality and proportionality.

Yet the exact reasoning varies from case to case so only case materials and evidence gathered by the State Service of Ukraine can reveal all background information. For these reasons, the information laying down the foundation for the sanctions presents vital importance for questioning legality of the sanctions.

Is any alternative there?

As mentioned above, the sanctions can be amended or cancelled by the Council if they have reached their purpose. That is apparently determined by the Council at full discretion and on the proposal of the institution having initiated the sanctions. It leads to the option of petitioning either directly to the Council or to the Secret Service of Ukraine and arguing that the sanctions lack sufficient reasoning and are thus unlawful. In the annex to such request, a person should attach evidence confirming that he/she or a company was listed erroneously and does not present any threat to Ukrainian national security or statehood.

Unlike in the case with judicial review, the authorities would not need to disclose secrete data they possess and there is a chance that they will reconsider their decision and lift the sanctions. However, this option too has not proven its practical effectiveness yet (aside one case where a natural person successfully argued for lifting the sanctions imposed by technical mistake).

Yet, as they say, the road is made by walking.

Authors: Oleg Kachmar, Yevhenii Konovalov