Sanctions: state registry, "sanction" cases in High Anti-corruption Court, strengthening liability of banks, minus 1 sponsor of the war

Since the beginning of summer 2023, Ukraine's sanctions regime has undergone a number of changes. In this alert, we are going to highlight the most significant changes and their implications.

1. State Registry of Sanctions and other amendments to Sanctions legislation

The Parliament has recently adopted a law providing for the establishment of the State Registry of Sanctions and improving the procedure for imposing sanctions in the form of asset forfeiture in favour of Ukraine. This is the Law of Ukraine "On Amendments to Certain Legislative Acts of Ukraine on the Imposition of Sanctions" (hereinafter the "Law"), which entered into force on 29 July 2023 (except for the provisions on the State Registry of Sanctions).

State Registry of Sanctions

As one may know, the current legislation imposes a number of restrictions on sanctioned persons. In particular, the law obliges state registrars, notaries, financial institutions, etc. to check whether their clients (or their related parties) are subject to sanctions. However, such check often appeared to be too complicated or even ineffective due to the absence of a unified and official registry of sanctions imposed under the Law of Ukraine "On Sanctions". Therefore, the new Law, which has just entered into force, envisages the establishment of the State Registry of Sanctions (hereinafter "Registry").

The Registry shall be maintained in Ukrainian and English and is designed to provide free public access to up-to-date and reliable information on all persons subject to Ukrainian sanctions, in particular:

• grounds for imposing, cancelling or amending sanctions;
• list of sanctions that are imposed, cancelled or amended;
• list of sanctioned persons and information enabling their identification;
• data on authority that initiate to impose, cancel or amend sanctions;
• state authorities responsible for the enforcement of the decision to impose, cancel or amend sanctions.

It should be noted that the Registry shall contain information on all and any sanctions, even those imposed before the Law came into force.

The sources of information for the Registry are:

• decisions of the National Security and Defence Council of Ukraine (hereinafter the "NSDC") enacted by decrees of the President or approved by resolutions of the Parliament,
• decisions of the High Anti-Corruption Court (hereinafter the "HAAC") on the imposition of a sanction in the form of asset forfeiture in favour of Ukraine.

Importantly, the private data of sanctioned persons, together with other information related to the implementation of the Law and submitted to the Registry, is not classified as confidential. Its processing and disclosure are conducted without the consent of such persons in the interests of national security, economic welfare, and human rights enforcement.

The procedure for maintaining and accessing the Registry shall be determined by the respective Regulation on the Registry. The NSDC is responsible for the development of such Regulation.

As to the expected timeframe for launching the Registry, the NSDC shall ensure the establishment and functioning of the Registry no later than six months after the Law enters into force, i.e., through 28 January 2024.

Amendments to the proceedings on imposition of sanctions in the HAAC

The Law also substantially amended the provisions of the Code of Administrative Procedure of Ukraine regulating the procedure of the HACC in cases of asset forfeiture in favour of Ukraine as a sanction (hereinafter the "Forfeiture").

Firstly, procedural terms for case consideration were extended. Now, the HAAC has to consider the statement of claims filed by the Ministry of Justice on Forfeiture within 30 (instead of 10) days from the date of receipt of the statement of claim. The appeal claim must be considered 15 days instead of the previously established 5 days from the date of receipt of the appeal.

Secondly, the Law specifies the peculiarities of consideration of cases on Forfeiture. This sanction can only be applied during the period of martial law. The Law stipulates that the termination or cancellation of the martial law is not a ground to close proceedings which were initiated during the martial law but were not considered on the day of termination or cancellation of the martial law.

Importantly, the new procedural rules apply to all cases of Forfeiture that are being considered by the HAAC. Thus, all cases are considered, and court decisions enter into force and are appealed under the rules effective from the date of entry into force of the Law.

2. The National Bank has strengthened the liability of banks for violation of sanctions legislation

It is well known that the National Bank of Ukraine (hereinafter the "NBU"), in the course of its banking supervision, is authorised to apply influencing measures (sanctions) to banks, branches of foreign banks and other persons that may be subject to the NBU's inspection. The grounds and procedure for taking such measures are specified in the Regulation on the NBU's imposition of enforcement actions approved by the NBU Board Resolution No. 346 dated 17 August 2012 (hereinafter "Regulation").

At the end of June 2023, the list of grounds for applying measures has been expanded. From now on, the NBU is authorised to apply influencing measures to banks that violate the sanctions legislation, in particular, the Law of Ukraine "On Sanctions".

More specifically, in case of violation of the sanctions legislation, the NBU is authorised to:

• restrict, suspend or terminate certain types of transactions conducted by the bank, including restrictions on transactions with the persons related to the bank;
• impose a fine of 0.01% of the amount of the bank's registered share capital for each type of violation.

Similar to previous regulations, the NBU applies the influencing measures for violations of the sanctions legislation within six months from the date of discovery of the violation, but not later than 3 years from the date of its commission.

Thus, the NBU not only continues to implement the sanctions legislation in the banking sphere but also strengthens the liability of banks for its violation.

3. For the first time, the company was excluded from the List of International Sponsors of War

In June, the National Agency for the Prevention of Corruption (hereinafter the "NAPC") for the first time excluded a company from the List of International Sponsors of War (hereinafter the "ISW List"). Until that time, the Registry was only being supplemented, so this is the first and significant exclusion.

The company in question is the Irish company Peninsula Petroleum Limited, a leading global supplier of marine fuel. According to the NACP, Peninsula Petroleum Limited informed the NACP that it had completed the conditions for excluding companies from the IMR Registry, namely, stopped supplying bunker fuel not only to russian-owned or russian-flagged vessels but also to those transporting russian oil. The company took such steps to condemn russian aggression.

We would like to remind you that the aim of the International Sponsors of War project is to reduce russia's resources, highlight companies that sponsor the war, and bring Ukraine's victory closer.

According to the information available on the War & Sanctions project website, in order to be excluded from the ISW List, a company must:

• withdraw from the russian market or cease conducting any business with russia; or
• provide a realistic, achievable short-term withdrawal plan together with written and public guarantees to ensure its implementation by a specified date; or
• cease all business operations in russia, leaving only a formal presence caused by the complexities of the withdrawal.

If you have any questions about doing business in Ukraine, Business Protection, Compliance and Anti-Corruption practice will be glad to share the expertise.