Russia's sanctions against Ukrainian legal entities and individuals
On October 22, 2018, the President of the Russian Federation signed Decree No. 592 “On the application of special economic measures in connection with unfriendly actions of Ukraine against citizens and legal entities of the Russian Federation”, according to which federal government bodies, government bodies of constituent entities of the Russian Federation, other government bodies, local government bodies, organizations and individuals under the jurisdiction of Russia must proceed in their activities from the fact that from the date of accession of this Decree, special economic measures are applied to certain individuals and legal entities determined by the Government of the Russian Federation.
In pursuance of Decree No. 592, the Government of the Russian Federation adopted Resolution No. 1300 dated November 1, 2018, which came into force on the date of its official publication, which determined:
1) a list of 322 individuals, including businessmen, individual deputies of the Verkhovna Rada and members of the government of Ukraine (including former ones);
2) a list of 68 legal entities registered and located both in Ukraine and other states (in particular, EastOne Group Ltd, Toledo mining corporation plc (United Kingdom of Great Britain and Northern Ireland), Ferrexpo pic (Switzerland));
3) special economic measures applied to these individuals and legal entities, as well as organizations controlled by them:
- blocking (freezing) of non-cash funds, uncertificated securities and property on the territory of the Russian Federation;
- a ban on the transfer of funds (withdrawal of capital) outside the territory of the Russian Federation.
Thus, individuals and legal entities listed in Resolution No. 1300, and the organizations controlled by them, cannot carry out transactions with non-cash funds located in Russia, as well as transactions with uncertificated securities and property (both movable and immovable).
It should be noted that, since Resolution No. 1300 does not contain a definition of controlled organizations, there is legal uncertainty whether it is necessary to be guided in this regard by the provisions of the Federal Law of June 4, 2018 No. 127-FZ “On measures of influence (counteraction) against unfriendly actions of the United States of America and other foreign states,” Article 1 of which refers to “directly or indirectly controlled organizations” and the Federal Laws “On limited companies liability" and "On joint stock companies", defining a controlled organization as a legal entity under the control of a controlling person who has the right to directly or indirectly (through persons controlled by him) dispose of:
- due to participation in a controlled organization and (or)
- on the basis of property trust management agreements, and (or)
- simple partnership, and (or)
- instructions, and (or)
- shareholder agreement, and (or)
- another agreement, the subject of which is the exercise of rights certified by shares (stakes) of a controlled organization,
more than 50 percent of the votes in the highest management body of a controlled organization, or the right to appoint (elect) a sole executive body and (or) more than 50 percent of the composition of the collegial management body of a controlled organization.
Or, to determine whether an organization is controlled, one should be guided by the definition of “control” contained in Article 3 of Federal Law No. 57-FZ of April 29, 2008 “On the procedure for making foreign investments in business entities of strategic importance for ensuring the defense of the country and the security of the state.”
Based on proposals from the Ministry of Finance of the Russian Federation, the Government of the Russian Federation can:
- provide temporary permits to carry out certain operations in relation to certain legal entities to which special economic measures are applied;
- make changes to the lists of individuals and legal entities contained in Resolution No. 1300;
- cancel this resolution in the event of the lifting of restrictive measures introduced by Ukraine in relation to citizens and legal entities of the Russian Federation.
