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Ukraine introduces new mechanism for expropriation of property blocked by sanctions

By on May 26, 2022 0

As of May 24, 2022, Ukraine’s sanctions legislation has been amended to allow for the expropriation without compensation of property held directly or indirectly by sanctioned natural and legal persons who pose a significant threat to national security, sovereignty or sovereignty. territorial integrity of Ukraine, or facilitate such actions being committed by other persons.

Grounds for expropriation

From May 24, 2022, and until the lifting of martial law in Ukraine, Ukrainian courts are authorized to expropriate without compensation the property of sanctioned persons whose property is blocked by the National Security and Defense Council of Ukraine after May 24, 2022, at the request of a special state body if, inter alia, such sanctioned persons are engaged in the following activities:

i) Decision-making and participation in the armed aggression against Ukraine

  • Making decisions on armed aggression against Ukraine (including through funding and material and technical support of various events)
  • Organize (including planning, management and coordination, public financing and logistics) the preparation of the armed aggression against Ukraine
  • Participation in the armed aggression against Ukraine
  • Making decisions on the creation of occupation administrations, the organization of self-proclaimed bodies or the holding of illegal elections/referendums in the temporarily occupied territory of Ukraine
  • Provide the aggressor state with territory, infrastructure (roads, premises, etc.) and military equipment

ii) Financing of the armed aggression against Ukraine

  • Pay taxes and duties to the aggressor state, if the total amount of such payments (excluding customs fees) for the last four consecutive fiscal (declaration) quarters exceeds the equivalent of 40 million UAH (approximately 1. $3 million)[1] for a legal entity and 3 million UAH (about 102,000 USD) for an individual[2]
  • Make donations, charitable contributions, sponsorships, etc., in favor of State bodies or the military administration of the aggressor State, legal and natural persons who undertake actions or take decisions referred to herein above, or provide financing for such activities, if the annual total the amount of such funds or the value of the property is equal to or greater than 750,000 UAH (approximately 25,641 USD)
  • Invest in government bonds of the aggressor state, if the total annual amount of investments is equal to or greater than 3 million UAH (approximately 102,000 USD)

iii) Informational support for the armed aggression against Ukraine in the public media and on the Internet

  • Justification, recognition of legality and denial of armed aggression against Ukraine and occupation of Ukrainian territories
  • Incitement to armed aggression against Ukraine, genocide of the Ukrainian people and discrimination based on Ukrainian citizenship
  • Support for the policy of the aggressor state regarding the non-recognition of the Ukrainian people for self-identification and self-determination, the distortion of the identity of the Ukrainian people and their aspiration for independence
  • Incitement to hatred towards Ukrainian people, Ukrainian culture, Ukrainian language and national identity

New testing requirements

In addition, the economic asset freezing sanction introduced after 24 May 2022 against certain natural persons/legal persons will cover not only the assets they hold directly, but also the assets on which these natural persons/legal persons may directly or indirectly (through other natural or legal persons) perform actions identical to the right of disposal. This necessitates changes to the usual Ukrainian sanctions screening practice introduced after May 24, 2022.

The content is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This may qualify as “lawyer advertising” requiring notice in some jurisdictions. Prior results do not guarantee similar results. For more information, please visit: www.bakermckenzie.com/en/disclaimers.