Verkhovna Rada of Ukraine

The Committee on Ukraine's Integration into the EU has a draft law No. 4454 #AtTheCommitteeConsideration. It aims to improve and strengthen national legislation in the field of restrictive measures and sanctions policy. The author of the draft, MP Valentyn Nalyvaichenko, is convinced that the Law of Ukraine “On Sanction”, which was adopted in 2014, is declarative and ineffective. It lacks the clear terminology in the field of sanctions. For example, “restrictions on trade” – it is unclear what kind of sanctions are these, who has the authority to implement them and in which way. Also, as stated in the explanatory note to the draft law No. 4454, the rules on liability for violating the sanctions regime in the current Law “On Sanctions” make it ineffective, because for seven years of the Law effectiveness there was no case when a fine was imposed on a company or individual.

The current law also lacks a mechanism for controlling and monitoring the application of sanctions. This mechanism is needed to monitor and detect investments from the Russian Federation that flow into strategic enterprises in Ukraine.

What does the draft law No. 4454 propose?

1. Establishes types of sanctions. The draft law identifies almost twenty of them. Among them, in particular, are:
freezing or restricting access to assets;
suspension of financial transactions;
ban on withdrawal of capital outside Ukraine;
termination of transit, flights and transportation through the territory of Ukraine;
prohibition of participation in privatization, lease of state property by residents of a foreign state and persons who are directly or indirectly controlled by residents of a foreign state or act in their interests;
prohibition of issuing permits, licenses of the National Bank of Ukraine for investments in a foreign state, placement of currency values   on accounts and deposits in a foreign state and others.

2. Designates the Ministry of Finance of Ukraine to be responsible for the control and implementation of sanctions policy. Ministry of Finance:
submits to the National Security and Defence Council of Ukraine proposals on the application, abolition and amendment of national sanctions;
monitors the application of sanctions;
together with the State Financial Monitoring Service of Ukraine develops the procedure for maintaining the Register of persons to whom sanctions have been applied, as well as the procedure for implementation and monitoring of sanctions by creating a Unified State Register of Sanctions. Enters, corrects and deletes personal data of individuals and information of legal entities in the Unified State Register of Sanctions;
determines, together with other public authorities, measures to prevent circumvention of sanctions;
prevents the use of controlled subsidiaries, including those registered in other countries, etc.

3. Determines the procedure for applying, repealing and amending sanctions.

4. Establishes liability for violation of the Law: depending on the type of sanctions, the financial liability for their violation will range from three hundred to seven hundred thousand non-taxable minimum incomes.

Sanctions, as outlined in the explanatory note to the draft law No. 4454, should become an effective and efficient instrument of pressure on the offending state to force the offender to change its behaviour in the international arena. Bloomberg Economics, for example, estimates the losses of Russian economy during the period of international sanctions (2014-2019) at 10%, or $150 billion.