• Ivan Bozhko

    Attorney at Law,
    Ilyashev & Partners

Ilyashev & Partners

Address: 11 Kudryavska Street, Kyiv, 04053, Ukraine

Tel.: +380 44 494 1919

E-mail: office@attorneys.ua

Web-site: www.attorneys.ua

Founded in 1997, Ilyashev & Partners is one of the most prominent and respected full-service law offices in the CEE region. We have achieved this by employing leading experts in various areas of law practice, innovative thinking and strict compliance with ethical standards in relationships with our clients.

Ilyashev & Partners provides services in almost every practice area to well-known European and American companies, leading Ukrainian companies and financial institutions, government agencies, law offices and consulting companies. With offices in Kyiv, Kharkiv, Dnipro, Simferopol, Moscow and Tallinn, the firm employs 50 highly-professional lawyers.

Ilyashev & Partners has many years of experience in international commercial arbitrations according to all major arbitration rules. Chambers Global, Chambers Europe and The Legal 500 — EMEA have been recommending Ilyashev & Partners as one of the leading law firms in Ukraine in the field of dispute resolution and arbitration over the years. According to the survey 50 Leading Law Firms of Ukraine, in 2018 the firm provided legal advice in over 40% of major public litigations and arbitrations.

Our services include:

— International commercial arbitration;

— International investment arbitration;

— Representation in International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry (ICAC at the UCCI) and Maritime Arbitration Commission of Ukrainian Chamber of Commerce and Industry;

— Drafting arbitration clauses, choosing an arbitration body and place of arbitration;

— Recognition and enforcement of
arbitral awards issued in Ukraine and abroad;

— Legal support in foreign courts;

— Enforcement of court judgments and arbitral awards against assets located in and outside of Ukraine;

— Obtaining expert legal opinion on international law for Ukrainian courts;

— Providing expert legal opinion on Ukrainian law for foreign court or arbitration proceedings.

The firm was the first to successfully recognize the order of an English Court in Ukraine in accordance with the principle of reciprocity. Today, Ilyashev & Partners provides legal assistance in the process of challenging arbitral awards and also recognition and enforcement of arbitral awards in Ukraine and abroad.

An Overview of the Sanctions Systems of Ukraine and Russia

The past year will be remembered for a number of events in the sanctions space which were both somewhat unique (in particular, the introduction by the US of a ban on operations with the Venezuelan national cryptocurrency, which was the first time that restrictive measures have been introduced against digital assets), and characterized by an unpre­cedented scale. The latter includes the renewal and significant ramping up of the US sanctions program against Iran, which impacts a number of key sectors of the country’s economy (transport and energy spheres, oil industry), and includes personal restrictive measures. At the same time, the said US sanctions were negatively perceived by the EU allies of the US.

Despite the fact that at the global level the US and EU sanctions regimes are playing a more significant role, those businesses which are working with the Ukrainian and Russian markets are more interested in the restrictive measures “exchanged” by both countries.

Amendments to the Sanctions Regimes of Ukraine and Russia

In 2018, the Ukrainian sanctions lists were traditionally extended by new names, and included 2289 individuals and 899 companies (by comparison, the initial sanctions lists of 2015 included 388 individuals and 105 companies), which means that in the last four years there has been quite significant growth. In addition, 2018 saw an extension of the list of optional sanctions, which were applied along with the sanctions expressly provided for in Article 4 of the Law On Sanctions. The new types of restrictive measures include: “banning Ukrainian business entities from using electronic trading systems in their activities”, “restricting export operations”, “banning the execution and performance of contracts for the integration and maintenance of production software pro­ducts” and “blocking access by Internet providers to the Internet resource”.

As regards the Russian Federation, the previous year may be considered to be a debut year in terms of application of personal sanctions. The sanctions were based on the Presidential Decree On the Application of Special Economic Measures in Connection with the Unfriendly Actions of Ukraine Towards the Citizens and Companies of the Russian Federation No. 592 of 22 October 2018. These restrictive measures were declared to be counter-sanctions, since their adoption was triggered by the introduction of Ukrainian sanctions against Russian individual and legal entities. The sanctions lists were comple­ted in the form of Government Resolution No. 1300 of 1 November 2018, which later (on 25 December 2018) was supplemented and currently contains 567 individuals and 75 companies. However, it should be noted that the sanctions imposed by Russia initially apply to a wider range of sanctioned subjects, also extending to organizations controlled by persons from the sanctions lists. In addition, unlike the Ukrainian sanctions laws, Russia has limited itself to several types of sanctions only, namely: freezing non-cash monetary assets, non-documentary securities and property in Russia and imposing a ban on transferring funds (withdrawal of capital) outside the territory of the Russian Federation.

The sanctions systems of both countries were built on the basis of the experience of their foreign colleagues, though the sanctions themselves may be characterized by certain particularities.


When analyzing the sanctions of Ukraine and Russia, what stands out first of all is that adding the names to the sanctions lists is not supported by the substantiation of introduction of such restrictions regarding a particular person. This differs strikingly from sanctions policies of the US and EU which fairly often display such information in sufficient detail when making their relevant decisions. The reason for this is, first of all, that econo­mic sanctions are initially directed at influencing a sanctioned subject to make it change its behavior and/or abandon certain activities.

The principle of operation of this tool can be demonstrated through the example of the restrictive measures introduced by the US towards the Russian companies RUSAL, En+ and EuroSibEnergo. In particular, the Office of Foreign Assets Control of the US Department of the Treasury lifted the sanctions from these companies due to the fulfillment of requirements in the form of reducing the share of direct and indirect ownership exercised by Russian oligarch Oleg Deripaska, as well as in connection with the appointment of independent persons to the management bodies of enterprises and consent to the introduction of unprecedented transparency in the course of its business activities.

In view of the absence of such information, the individuals to whom the restrictions on the part of Ukraine and Russia were applied, may often be unaware which of their actions/transactions triggered the application of sanctions. This, in turn, does not create any incentives for them to bring their activities into accordance with the requirements advanced by the country which initiated the sanctions (if such requirements are feasible).


US and EU sanctions regimes provide for the possibility of obtaining permits (licenses) to enter into transactions with the sanctioned companies. These may be general licenses (authorizing transactions of a certain type with a certain circle of persons without the need to obtain separate permits), as well as one-time licenses (authorizing the conduct of a specific one-time operation by a certain person subject to the fulfillment of a number of criteria). In turn, Ukrainian sanctions laws do not stipulate for such a mechanism at all, and the laws of Russia, although permit its use, but only subject to the initiative of the Mi­nistry of Finance by sending a correspon­ding proposal to the Government. In such way, both the sanctioned subject, as well as other interested parties, are virtually deprived of the possibility to conduct any separate ope­rations controlled by the sanctions initiating state that would not carry any threat of violation of the sanctions regime in principle, or in which such initiating state would be interested itself. Therefore, the absence of such procedures indicates the inflexibility of the sanctions regimes of Ukraine and Russia.

The Appeal Procedure

The only mechanism available today for appealing against sanctions, both in Ukraine and Russia, is the procedure of challenging the legal acts based on which they were introduced. In other words, in Ukraine this is an appeal against the Presidential Decrees, by which the decisions of the Council of National Security and Defense of Ukraine are brought into force, and in the Russian Federation, appeal against the Government’s resolutions. In Ukraine and Russia, such disputes are within the jurisdiction of the Supreme Courts. Such judicial trials in Ukraine are distinguished by the fact that often the information — based on which the decision to impose sanctions was upheld — contains a state sec­ret, therefore, to familiarize themselves with such information, the claimant’s representatives must obtain the corresponding permits which, in turn, results in delaying the consi­deration of cases. Due to the particularities of the legislation of the Russian Federation, a legal act may be abolished should a certain body exceed its jurisdiction in the process of its adoption or if there is an inconsistency with a legal act of a higher legal force. At the same time, the Supreme Court of the Russian Federation does not have the right to analyze the expediency of adoption of challenged legal acts, since it falls within the competence of the state body that adopted it.

Thus, although the procedures for appealing the sanctions are formally at hand, they are not realizable in practice and the absence of such kind of judicial precedents is the direct confirmation of this. The problem is that the absence of an effective appeal mechanism leads to a situation when persons on whom sanctions were imposed due to a mistake (and such cases do exist) are deprived of the opportunity to protect their violated rights.

Liability for Violating and Dodging the Sanctions

Another feature distinguishing Ukrainian and Russian sanctions laws from the laws of their foreign counterparts is the lack of special liability for violating or dodging these sanctions. In the event of non-compliance with the restrictive measures, a person may be brought to criminal or administrative liability for violation of the procedure of conducting certain business activities or for carrying out certain business operations. For example, in certain cases, under Ukrainian law, the persons who violated the sanctions regime may be held criminally liable for legalizing (laundering) criminal proceeds, financing terrorism and/or violating the procedure of entering/leaving the temporarily occupied territory.

Terms of Application of Sanctions

Ukrainian laws share similarities with EU legislation in terms of the duration of sanctions, since the introduction of personal restrictive measures is accompanied by the establishment of their deadline further to which sanctions should be lifted (this is usually a three-year period), unless the authorized body decides to extend them. As for Russia, the situation here is rather more similar to the US, where sanctions, for the most part, are valid until the moment a special decision to cancel them is taken. In particular, the sanctions decree of the Russian Government No. 1300 of 1 November 2018 ties this moment to the abolition by Ukraine of restrictive measures imposed against individuals and legal entities from Russia.

Summing up the results of 2018, we can conclude that the systems of economic sanctions of Ukraine and Russia are escalating further, which is often limited to tightening of restrictive measures, increasing their number, as well as expan­ding the list of persons to whom they apply. Current Ukrainian sanctions laws are in need of reform, since they lack certain mechanisms allowing both to increase the effectiveness of sanctions by achieving the goal of introducing them against a specific person, and providing guarantees and opportunities to protect violated rights. In addition, there is still a problematic issue with the lack of clarification regarding the use of certain types of restrictive measures, which makes it difficult to use them in practice and affects compliance with them by the sanctioned persons and their counterparties.