EU Project Pravo-Justice Held the Round Table on Recovery, Management, and Seizure of Foreign Assets of Sanctioned Persons

On May 31, the EU Project Pravo-Justice held the round table on the topic: “Foreign Assets of Sanctioned Persons: Recovery, Management, Seizure”. The event was attended by the MPs; representatives of the Ministry of Justice of Ukraine, the Ministry of Economy of Ukraine, and the Assets Recovery Management Agency; private enforcement officers; a district state prosecutor of the Specialized State Prosecutor’s Office of Slovenia; and international experts of the EU Project Pravo-Justice.

At the beginning of the event, Iryna Zharonkina, Lead of Property Rights and Enforcement Component of the EU Project Pravo-Justice, addressed the participants to the round table with an introductory speech. She briefly spoke about the evolution of the EU’s sanctions policy and drew attention to the need to study European practices in order to build an effective sanctions policy in Ukraine.

“"If one looks at the EU approach, which has been building its sanctions policy since the 1980s, one can trace the trends in the development of such a policy and the application of sanctions by subjects and sectors. Thus, the period from 2010 to 2014 is considered to be the period where sanctions were the most intensively appealed in the Court of Justice of the European Union. Until 2015, almost 50% of the cases considered by the European Court of Justice ended in decisions in favor of the complainants and against the Council of the European Union. Only since 2015, when the EU had built a better weighed sanctions policy, in particular, through paying greater attention to evidence and justification; this trend has changed,” said Iryna Zharonkina.

In his speech, Oleksii Movchan, Deputy Chairman of the Parliamentary Committee on Economic Development, focused on the newly-introduced legal rules that regulate Ukraine’s sanctions policy and further legislative prospective in this area.

“Until we demonstrate a good track of working with sanctioned assets, we will probably have few arguments for foreign partners as to the need to confiscate the property of persons included in the sanctions lists,” said Oleksii Movchan. The MP emphasized that the assets of the sanctioned persons recovered to the state budget should be quickly sold, and the received funds should be directed to the restoration of the country, the fast liquidity principle being applied.

“Such an approach is envisaged in draft law No. 8250. Let us see how it will be implemented. We understand that reforms do not happen immediately; we will need to improve procedures over time. Moreover, as long as Russian aggression continues, we will be constantly improving approaches in order to speed up the search for and management of such assets,” said MP Movchan.

Oleksii Soboliev, Deputy Minister of Economy, spoke about the role of the Ministry of Economy of Ukraine in the formation and implementation of Ukraine’s sanctions policy. He noted that it was extremely important to make sure that Ukrainian novelties and steps in the field of search, recovery, managing, and selling assets of the sanctioned persons are as transparent, clear as possible and do not give grounds for challenging respective decisions in courts.

“Today, no one in the world can say: look, this is how the sanctions policy should be implemented; just follow our example. There is no such thing. We are pioneers. Ukraine gives an example showing that it is normal when Russian assets are being recovered now rather than sometime in the future, and are used for the benefit of Ukraine – to restore damaged social infrastructure, etc.” said Oleksii Soboliev.

Valentyn Shevchuk, Head of the Department for Detection and Search of Assets of sanctioned and other entities that create real and/or potential threats to national interests, ARMA, presented current statistics on the ARMA’s work efficiency in his speech at the round table.

“Since the beginning of January 2022, as of May 30, ARMA processed 7,566 requests regarding assets of sanctions persons. A number of assets have been det4ected: 2 aircrafts; 130 cars; some 1,200 objects of residential real estate; 72 units of railway transport; 1,500 land plots; 50 units of property and intellectual property rights; shares in the authorized capital – total worth being some 4 billion UAH. We have been sharing all this information with the Ministry of Justice so that they could take further measures to block these assets and confiscate them to the state revenue,” said Valentyn Shevchuk. He also noted the high level of cooperation the ARMA had with international partners.

Inna Bohatyh, Director of the Department of Sanctions Policy of the Ministry of Justice of Ukraine, spoke in detail about the evolution of the emergence and implementation of the mechanism of recovery of assets of sanctioned persons to the state revenue.

“Such a sanction appeared on May 24, 2022 and was a response to the unprecedented steps taken by the Russian Federation against Ukraine – launching a full-scale war,” said Inna Bohatyh and emphasized that the Ministry of Justice of Ukraine interpreted that type of sanction not as a punishment or the responsibility of an individual, but as a certain countermeasure, the response of the Ukrainian State to the behavior of a specific person, taking into account the actions of such a person. She specified that the procedure for recovery of assets was exclusively court-based and implied proper informing of all parties to the process; evidence being submitted; openness of the trial being ensured, and equality of arms being in place.

“Ukraine ensures the legality of the processes of recovery of assets of sanctioned persons to the state revenue. This is why, we do not live up to the society’s expectations as to the speediness of implementation of such processes; however, we try to go before the HACC once properly prepared, with a full evidence base, in order to obtain a court decision, which will then be confirmed if challenged before an appellate or an international court,” said Inna Bohatyh. She added that the draft laws are being considered in the Verkhovna Rada, providing for the introduction of a register of sanctions alongside criminal liability for the evasion of sanctions.

Marjana Pokorn Grašič, district state prosecutor of the Specialized State Prosecutor’s Office of Slovenia, shared her experience of working with the assets of sanctioned persons in her country. According to her, the process of recovery of such assets takes place in five stages. At the first stage, a financial investigation takes place, that is, assets of the sanctioned persons are detected. At the second stage, the relevant assets are seized (since 2018, it has been carried out without a court decision). The third stage involves the confiscation of assets. The next step is recovery. The final stage is the sale of assets.

“At each of these stages, we try to comply not only with the letter, but also with the spirit of the law. However, almost always, the sanctioned persons find reasons to challenge the decision on confiscation of their assets. Most often, they refer to the violation of Article 1 and the First Protocol to the Convention on the property, together with Article 8 of the Convention on the right to private and family life,” said the Slovenian prosecutor.

Vitaly Chepurnyi, Head of the Association of PEOs of Ukraine, explained how the search for the debtor’s foreign assets takes place within the framework of enforcement proceedings and what difficulties EOs face when seizing the property of sanctioned persons located in Ukraine.

“Today, there is an issue of harmonizing the national legislation on sanctions and the regulation of enforcement proceedings. There should be a statutory framework for taking of measures to foreclose on the property of a sanctioned debtor in favor of the creditor, if there is a court decision on the seizure of the assets of such a person to the state revenue, as a sanction provided for in the Law of Ukraine “On Sanctions”, said Vitaliyi Chepurnyi. He also voiced the idea of expanding the powers of EOs so that they could detect the debtor’s assets abroad and deliver respective services.

Arne Engels, International Expert of the EU Project Pravo-Justice, German insolvency practitioner and lawyer, spoke about the peculiarities of implementation of the sanctions policy in EU countries, in particular, in Germany.

“Over the past year, many changes have been made to the legislation aimed at expanding the possibilities of searching, detecting, and confiscating assets of sanctioned persons. These changes make it possible to more quickly and effectively establish economic relations, and thus, find out who is the ultimate beneficiary of the companies. In the future, it is extremely important to distinguish in law between the regulation of criminal and civil sanctions. Otherwise, the sanctioned persons will have many opportunities to appeal the seizure and confiscation of their assets,” said Arne Engels.

Video record of the round table available here