Ukraine: the latest on sanctions
Our Briefing earlier this week alerted readers to the possibility of targeted sanctions being imposed by, amongst others, the EU and the US against individuals and interests in Ukraine, and possibly Russia.
Some initial sanctions have now been imposed (see more detail below) and there are threats of further sanctions to follow. This is a fast moving area and commercial organisations with an interest in the region will need to keep the political and diplomatic situation under careful review.
The issues are thrown into stark focus by the decision of the Crimean parliament to secede from Ukraine and reposition the peninsula as part of Russia. There are arguments about the legitimacy of that decision (which are outside the scope of this Briefing) and a referendum on secession is due to take place on 16 March, but this has scope to significantly change the landscape.
At the same time, the EU has agreed to suspend visa and investment talks with Russia, whilst at the same time pushing ahead with a political pact to draw Ukraine closer to Europe.
The EU has now imposed sanctions against former President Viktor Fedorovych Yanukovych and 17 other individuals (primarily ministers and other politicians), which the Regulation says have been "identified as responsible for the misappropriation of Ukrainian State funds and persons responsible for human rights violations in Ukraine, and natural or legal persons, entities or bodies associated with them, with a view to consolidating and supporting the rule of law and respect for human rights in Ukraine".
The effect of these sanctions is to freeze the assets of the 18 individuals and also to prohibit the supply of funds or economic resources directly or indirectly, to them or for their benefit. Companies should take immediate steps to ensure that they are not trading with one of the sanctioned individuals, or a commercial organisation which they own or control or which acts for their benefit.
The EU has not yet published any trade sanctions against Russia, but has said that travel bans and asset freezes could be imposed, depending on developments in Ukraine. In a Statement from EU Heads of State and Governments yesterday (6 March) they called on the Governments of Ukraine and the Russian Federation to start negotiations "within the next few days" to "produce results within a limited timeframe", in the absence of which the EU will decide on additional measures (with preparatory work on these measures already commenced).
US domestic sanctions
The United States has now also imposed sanctions which have domestic effect (ie on US nationals and assets in the US), but not extra-territorially. These freeze the funds of individuals who have not yet been identified, but who we understand will be identified by the US Office of Foreign Asset Control (OFAC) and listed as Specially Designated Nationals.
The grounds for designation are that the individuals (or entities) are responsible for or complicit in, or have engaged in, directly or indirectly, any of the following:
- Actions or policies that undermine democratic processes or institutions in Ukraine.
- Actions or policies that threaten the peace, security, stability, sovereignty, or territorial integrity of Ukraine.
- Misappropriation of state assets of Ukraine or of an economically significant entity in Ukraine.
Individuals or entities who are determined to have asserted governmental authority over any part or region of Ukraine without the authorisation of the Government of Ukraine may also be listed as SDNs and their funds frozen.
There is likely to be significant overlap with the EU list of 18 individuals.
Needless to say, this is a highly dynamic situation. We recommend that any businesses with interests in Ukraine (and particularly Crimea) should monitor the situation closely. This will likely involve a review of the position under contracts, an analysis of the status of counterparties in Ukraine and a consideration of what steps, if any, should be taken with respect to any employees or assets in Ukraine. We will publish further Briefings as the situation develops.
If you need up-to-date advice, please contact Daniel Martin, Partner, on +44 (0)20 7264 8189 or firstname.lastname@example.org, or Matthew Parish, Partner, on +41 (0)22 322 4800 or email@example.com, or your usual contact at HFW.