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24 May 2022

Assets of individuals and legal entities can be forcibly seized  

On 12 May 2022, the Ukrainian Parliament adopted the Law of Ukraine “On Amendments to Certain Laws of Ukraine on Improving the Effectiveness of Sanctions Related to the Assets of Certain Persons” (Draft Law No. 7194 of 23 March 2022)[1] (the “Law”). The Law was published on 24 May 2022 and will enter into force on 25 May 2022.

The Law amends the following laws:

  • the Law of Ukraine “On Sanctions”;
  • the Law of Ukraine “On Prevention and Counteraction to Legalization (Laundering) of Proceeds from Crime, Financing of Terrorism and Financing of the Proliferation of Weapons of Mass Destruction”
  • the Law of Ukraine “On the legal regime of martial law”;
  • Ukrainian Code of Administrative Procedure;
  • the Law of Ukraine “On the Supreme Anti-Corruption Court” and the Law of Ukraine “On Judicial Fees”.

The Law amends the sanction “assets freeze”, which provided for a temporary restriction of the right to use and dispose of property by defining it as temporarily deprivation of the right to use and dispose of (1) assets owned by individuals and legal entities and (2) assets that such persons could manage. Such assets are to be forcibly seized by the state.

The Law stipulates that this type of sanction shall apply to individuals and legal entities whose actions have created a significant threat to the national security, sovereignty, and territorial integrity of Ukraine and applies to residents, legal entities, founders, or beneficiaries of which is the Russian Federation. The Law clearly defines the actions that will serve as grounds for the application of this sanction, for example, participation in illegal elections, assistance in armed aggression against Ukraine, payment of taxes to the aggressor state, etc.

The Law provides that this sanction will be applied only during martial law, provided that the relevant legal entity or individual has already been sanctioned in the form of an “assets freeze”. The National Security and Defence Council of Ukraine decides to impose a sanction in the form of an “assets freeze”.

The actual application of the sanction, i.e., forcible seizure of such assets to the state revenue, will take place when the Supreme Anti-Corruption Court reviews a claim to sanction an individual or legal entity. The Law also provides for a possibility to appeal the relevant court decision. The Supreme Anti-Corruption Court is entitled to consider the relevant disputes in the first instance, while the appeal chamber thereof – in the appeal instance. Notably, the value of the seized assets will not be compensated.

After the decision is made, the court sends it to the Cabinet of Ministers of Ukraine, which in its turn determines the subject, procedure, and manner of execution of the court decision on the seizure of assets.

[1] https://itd.rada.gov.ua/billInfo/Bills/Card/39275

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