Today, March 6, 2014, the European Union (EU) published a regulation imposing sanctions on several specific Ukrainian persons, including the former president of Ukraine, Viktor Yanukovych. In addition, today President Obama signed an executive order authorizing the imposition of U.S. sanctions in connection with the situation in Ukraine.
The EU regulation freezes the assets and economic resources of persons “identified as responsible for the misappropriation of Ukrainian State funds and persons responsible for human rights violations.” The EU sanctions target 18 persons, listed in Annex 1 to the EU regulation. The targeted individuals include former President Viktor Yanukovych, as well as the former prime minister of Ukraine and several other former Ukrainian government officials. Close family members and certain Ukrainian businessmen are also among the targeted individuals.
The EU regulation provides that no funds or economic resources can be made available—directly or indirectly—to any of the targeted persons. The EU sanctions define “funds” and “economic resources” very broadly, essentially covering assets of any kind and any instruments relating to those assets.
The EU sanctions also provide for limited exceptions, under which economic resources can be released by the EU member states. For example, frozen funds may, in certain circumstances, be released to satisfy basic needs, pay for reasonable professional services or cover service charges for the holding of frozen funds. In some circumstances, frozen funds may also be released to fulfil arbitral awards or fulfil pre-existing contractual obligations.
President Obama signed a new executive order that allows for imposition of U.S. sanctions in connection with the situation in Ukraine. The summary issued by the US Department of the Treasury (Treasury) provides that the new executive order is
in direct response to threats to the peace, security, or stability of Ukraine, as well as efforts to assert governmental authority in the Crimean region without the authorization of the Government of Ukraine. This Executive Order allows the United States to sanction any individual or entity that is responsible for or complicit in actions or policies that undermine democratic processes or institutions in Ukraine or that threaten the peace, security, stability, sovereignty, or territorial integrity of Ukraine. It further allows the United States to sanction persons who are involved in the misappropriation of state assets of Ukraine or have asserted governmental authority over any part or region of Ukraine without the authorization of the Government of Ukraine.
As of this writing, no specific U.S. sanctions have been imposed. However, the executive order provides clear authority for the relevant U.S. government agency (Treasury) to identify specific individuals and entities for sanctions, including the blocking of assets and denial of U.S. visas. Treasury is expected soon to identify individuals and entities to be sanctioned, and reports indicate that sanctions may be targeted at Russian as well as Ukrainian persons.
McDermott’s trade compliance lawyers are closely following these sanctions developments. With fast-changing events in Ukraine, the responsive actions by the EU and U.S. governments may likewise develop quickly. Businesses with interests in the region are well advised to monitor developments and to be prepared to comply, as applicable, to the legal requirements imposed by new trade sanctions.