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Has Russia Anything to Fear from Ukrainian Sanctions?


Dmytro Shemelin, lawyer at Ilyashev & Partners Law Firm
Source: The Dilova Stolytsa

Ukrainian politicians have widely criticized the United States and the European Union for footdragging with introducing new sanctions against Russia. Surprisingly though, Ukraine herself hardly ever used this tool. It was not before last week that the government announced the setup of a task force which within 10 days has to come up with a list of Russian individuals and companies that will be subject to sanctions. Ilyashev and Partners’ Dmytro Shemelin has the story:

Possible sanctions are likely to include prosecution of Russian citizens. For me, this is more of a “battle of nerves”. It will have little impact because the prosecution is ex parte and the suspects are unlikely to go to court. Additional measures can include import or export customs bans and visa/admission restrictions for certain individuals. For example, in June President Poroshenko ordered the cease of Ukrainian defense and military supplies to Russia. However, the most effective may be the sanctions imposed under the money laundering and terrorist financing regulations. These include, in the first place, asset circulation restrictions and bans on financial transactions, which may be associated with terrorist financing. However, Ukrainian legislation in this area is not too developed. For until recently, Ukrainian regulators and supervisory authorities have never seen and dealt with the cases of wholesale terrorism financing.

Sanctions can come back like a boomerang, with Russian investors suing Ukraine in international courts. For example, recently Governor of Dnipropetrovsk and businessman Igor Kolomoisky has announced that he was going to sue Russia in the International Court of Justice in connection with the loss of capital he had invested in the Crimean airport of Belbek. Similarly, any Russian citizen or corporation who lost their property in Ukraine is likely to sue our government for damages. A test case is already there: an investment arbitration tribunal is now hearing a case against Ukraine brought by the former shareholders of Ukrainian UkrTatNafta from Tatarstan, who lost their shares upon the orders of Ukrainian courts.

Under international law, the imposition of sanctions for terrorist financing will likely be regarded as a legitimate use of the state’s “police powers” and will not result in compensations. However, Ukraine will be better off if it complied with several conditions. First, our sanctions should be predictable for the offender (that is, there must be a principle of legal certainty). Secondly, even if sanctions are imposed by an administrative decision and not through the court, a principle of a fair trial should be respected. The “defendant” should have the opportunity to appeal against sanctions and to be able to defend its grounds, to submit evidence, etc. Under conditions when sanctions are imposed on an emergency basis, with lists of sanctioned persons compiled in a week, this condition is hardly feasible. Finally, sanctions must be justified as a response to a threat to public safety posed by the ” defendant”, and not just in connection with “military expediency”.

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